The New Saver’s Act would introduce a series of new, innovative and low-cost initiatives to increase access to financial services and savings for all Americans. Specifically, these initiatives would facilitate access to financial services during tax preparation; expand funding for low-income tax clinics; establish national savings performance measures; improve electronic transfer accounts; expand financial education; create children’s savings accounts; expand the types of financial products eligible for the Saver’s Credit; promote and facilitate access to U.S. Savings Bonds; and improve state qualified tuition programs and 529 plans.
Financial Services during Tax Preparation
Any taxpayer who qualifies for a federal income tax refund, but does not request to directly deposit it into an existing account would have the option of having it electronically deposited into a new account. Instead of receiving their refund in the form a paper check, they would receive an electronic debit card, with the same protections and many of the same features as a traditional checking account. Taxpayers would also be able to reload their debit card with wages or public benefits.
Low-Income Tax Clinics
The Treasury Secretary could provide up to $25 million in grants to nonprofit tax clinics that assist low-income taxpayers. Low income tax clinics serve as major provider of financial services and wealth building opportunities for low-income families.
National Savings Performance Measures
The Treasury Secretary would establish performance measures to evaluate the savings activities of Americans. These measures will then be used to develop performance goals for increasing savings rates among Americans.
Electronic Transfer Accounts
The Treasury Department would undertake a study to increase the use of Electronic Transfer Accounts and other forms of electronic payments. A working group will be created to lead this study and make recommendations for improvements in these areas. Electronic Transfer Accounts are similar to basic, low-fee checking accounts and are targeted toward low-income Americans. Participating financial institutions receive a small subsidy to cover the cost of providing the accounts.
Financial Education
The Treasury Secretary would develop and promote a program to expand access to financial services. Part of this program would involve financial education for both institutions and individuals regarding the availability and use of financial services.
Children’s Savings Accounts
The tax code would be amended to create a tax-advantaged children’s savings account, similar to a Roth IRA, called a Young Saver’s Account. Parents would be allowed to make tax-advantaged contributions to these accounts on behalf of their children. Contributions to these accounts would apply towards the parent’s annual limit for Roth IRA contributions ($5000 in 2008).
Saver’s Credit
The Saver’s Credit provides a financial incentive for low- and moderate-income families to save for retirement. The New Saver’s Act would expand this incentive to other important non-retirement savings products, such as a qualified tuition program or Coverdell education savings account.
U.S. Savings Bonds
The New Saver’s Act would expand efforts to market and promote access to U.S. Savings Bonds. In addition, it creates a tax credit for employers to encourage the purchase of U. S. Savings Bonds at the workplace via a payroll savings plan. Taxpayer would also have the option of purchasing such bonds when they file their federal income tax returns.
Qualified Tuition Programs
Detailed information on the operation and performance of each state’s qualified tuition plan or 529 College Savings Plans would be made available each year in the form of an annual report. A grant program would also be created to support innovation by states in increasing participation in their programs.