<p>BREMERTON, Wash. – Financial institutions throughout the U.S. are participating in a pilot program to help low-income individuals save money to purchase a first home, attend college or vocational school or to start or expand a small business. Under the Individual Development Account (IDA) program, participants maintain a dedicated savings account at a credit union or bank. Individual contributions from earned income are then matched using both private and public funds. Participants also are required to attend "financial literacy" classes to learn how to managing their money. At the Kitsap Community Federal Credit Union here, 26 people have already completed the training program. Another 36 people are enrolled in the IDA program at the credit union, currently the only one in the state participating in the program. A second credit union, Twin County in Thurston County, is expected to soon start holding IDA accounts, according to Janet Abbett, IDA program manager for the state Office of Trade and Economic Development. At Kitsap, matching funds come primarily from the Bremerton Housing Authority, which launched the program to assist residents living in low-income housing. The state program allows up to a 2-to-1 match of funds to a maximum of $4,000; participants have three years in which to save and use the money in their account. The Housing Authority receives its funding from the state, which gets the money from the federal welfare program. The city of Bremerton will also match an individual's earned funds, up to a maximum of $2,000, if the account holder opts to use the money to purchase a home in the city. In order to participate in the program, residents must have household incomes at or below 175 percent of the federal poverty level and be eligible to receive Temporary Assistance for Needy Families (TANF). Participants who withdraw their contributions for purposes other than purchasing a home, education or business lose the matching funds. There are provisions to allow for the temporary withdrawal of funds for emergency purposes. The Washington Legislature, meantime, is considering a measure (HB 2827) to provide $250,000 to help fund the program, a move that is supported by the Washington Credit Union League. (The state had initially proposed $500,000 in funding, but a substitute bill cut that amount in half. The measure has been sent to the House Appropriations Committee.) "I think this bill is good public policy," said Mitch Lucas, general counsel for the league during a recent hearing before the House Trade and Economic Development Committee. "It builds relationships with financial institutions. It also creates future opportunities for the educational system, small businesses and the real estate industry because once these monies are finally put to use, those industries benefit too." Dave Willis, vice president at Kitsap Community FCU, also urged support for the bill at the hearing. "In Kitsap County alone, we've already impacted about 100 individuals through the process in less than a year," he said. "Without a doubt, based on the information and experience we've had with this program, we strongly urge you to support this bill." Jennifer Quillin of the Bremerton Housing Authority estimated that some 2,600 families in Kitsap County were eligible for the program. At the federal level, Congress is looking at tax incentives to spur greater interest in the program. Under the proposed Savings for Working Families Act of 2002, nearly 1 million individuals nationwide would have access to IDA accounts. The act, sponsored in the Senate by Sens. Joseph Lieberman (D-Conn.), and Rick Santorum (R-Pa.), and in the House by U.S. Reps. Joe Pitts (R-Pa.), and Charlie Stenholm (D-Texas), was part of a broad charitable giving package called the Charity, Aid, Recovery and Empowerment (CARE) Act. President Bush supports the measure and has included $1.7 billion in tax credits in his 2003 budget. Federal Reserve Chairman Alan Greenspan called the IDA program an "innovative mechanism for saving." According to the Treasury Department, "one-third of all Americans have no assets available for investment, and another fifth have only negligible assets. "The United States household savings rate lags far behind other industrial nations, constraining national economic growth and keeping many Americans from entering the economic mainstream by buying a house, obtaining an adequate education or starting a business," the agency said. Under the proposed federal plan, financial institutions would receive a dollar-for-dollar tax credit up to $500 per person per year for matching IDA savings and an annual $50 per account credit to maintain the account and provide financial education. There would be no limit on individual contributions into an IDA. The federal program would be open to people between the ages of 18 and 60, except students, whose federal adjusted gross income does not exceed $20,000 (single), $30,000 (head of household) or $40,000 (married). Currently, credit unions and banks in more than 40 states are involved in IDA programs. IDAs were initially authorized under the Personal Work and Responsibility Act of 1996, according to the Treasury Department. The Assets for Independence Act of 1998 established a five-year IDA demonstration program with an annual appropriation of $25 million, it noted. Under the program, administered by the Department of Health and Human Services, an IDA can be opened by individuals who meet a net worth test and are eligible for the Earned Income Tax Credit or for TANF, the successor to Aid to Families with Dependent Children. Individual contributions do not receive any tax preference but are matched by contributions from a program run by a state or a participating non-profit organization. The matching contributions and their earnings are not taxable to the individual. Withdrawals can be made for higher education, first-home purchase or small business capitalization. Matching amounts are typically held separately and withdrawals must be paid directly to a mortgage provider, university or business capitalization account at a financial institution. Match rates chosen by the state or non-profit can range between 50 and 400 percent. Carolyn Young, vice president of operational services at Kitsap Community FCU said the program was a "perfect fit" for the credit union. She noted that timing of the IDA program here coincided with the credit union's desire to open a branch in the housing authority's area. That branch was opened last year. "Individual Development Accounts embody the credit union philosophy of helping people," noted John Annaloro, president and chief executive officer of the Washington Credit Union League. "Sustainable personal economic self-sufficiency is the objective of the program and every credit union in Washington State." -</p> <p>[email protected]</p>