Individual Development Accounts (IDAs)

An Individual Development Account (IDA) is a type of account in which the money you save is matched with money supplied by the program’s sponsor or financial institution. The match may be anywhere from 1 – 4 times the amount of the deposit you make. For example, if you’re enrolled in an IDA program with a 2:1 match and you deposit $50 into your account, the program will add an additional $100 towards your savings goal, so that your total savings for that month will be $150!

To open an IDA:

  • Your annual income must be within 200% of the Federal Poverty Guidelines ($24,280 per year for individuals)
  • You must have some form of earned income from a job or your own business (it doesn’t matter if your work is part-time or full-time)
  • You have to take financial literacy classes about things like money, debt reduction, developing a savings plan, credit, and investing
  • Depending on the program, you may also need to be a U.S. citizen or permanent resident

You also have to choose an approved goal to save for and use the IDA to save money towards meeting that goal. Most IDA programs allow you to save money for the following goals:

  • Buying a first home
  • Paying for education or training costs
  • Funding a small business

Most IDA programs only let you save a limited amount of money in your account, usually $4,000 to $6,000. This includes the money you deposit, as well as the matching funds. Once you reach the limit, you won’t be allowed to deposit any more money into the account. IDA programs also have a limit on how long you can save, usually 3 years.

Important information about IDAs if you are on public benefits

Funding for IDAs comes from a variety of places, including government agencies, private companies, nonprofits, and individual people. Depending on how an IDA program is funded, the money you save in that program may or may not count against the resource limit for programs like Supplemental Security Income (SSI) and MO HealthNet.

If you get benefits from a public program, it is very important to find an IDA program that will not count against the resource limits for that program. Otherwise, you may lose your benefits. Before you open an IDA, be sure to talk to a Benefits Specialist about this issue.

Finding and Applying for an IDA

Once you’ve decided to do an IDA, you must take several steps to enroll in an IDA program:

  1. Decide how much money you plan to save up and what you are going to do with it. You could use the money for something that will help you with your education, with your small business, or with buying a home.
  2. Locate an IDA program in your area. There are good IDA program directories at Prosperity Now and the Assets for Independence Resource Center (AFI).
  3. Find out as much as you can about the IDA program you are considering.
    • What is the source of the program’s funding? Is it federally funded?
      • If the IDA program is federally funded, money deposited and matched in that account will not be counted by SSI or MO HealthNet. That means it will not impact your benefits.
      • If you enroll in an IDA that is not funded by the federal government (for example, an IDA funded by a nonprofit or private company), money deposited and matched in your IDA may jeopardize your SSI and MO HealthNet benefits.
    • Does the program fund the goal you decided upon in step 1?
      • Federally funded programs only allow you to save for small business developments, higher education expenses, and the purchase of a first home.
      • Some privately funded IDAs may allow you to save for other goals, like buying a new computer or car.
  4. Once you have found an IDA program that is suitable for you, attend an orientation meeting to learn more about it.
  5. If you decide to enroll, supply the required personal and financial information to verify your eligibility for the program.

Once you have enrolled and been accepted into the IDA program, you will be assigned an IDA caseworker who will help you with your account. You’ll open a savings account with a bank or credit union that is tied to your IDA program. Depending on the program, you may need to deposit a certain amount of money into your account each month.

I've saved my goal amount and am ready to spend my money! Now what?

For some IDAs, there is a minimum amount of time that you must be enrolled before the matching funds start to add up. For example, the minimums could be 6 months for a business or educational goal or 10 months if you want to buy a home. Once you have fulfilled the minimum requirements — you’ve saved the agreed on amount every month for 6 or 10 months and you’ve taken the financial literacy workshops — you can spend your money.

Some IDAs will put money directly into your savings account for you to spend. Other IDAs don’t put money directly into your savings account. Instead, they calculate how much they owe you in matching funds and make a payment directly to the school, business, bank, or whomever you need to pay to achieve your goal. This is to avoid any illegal or fraudulent behavior.

In any case, the matching amount will not be available until you have met all requirements, are in good standing, and are ready to make your purchase.

Be sure to ask plenty of questions about your IDA before enrolling. Each one is different.

Integration with Other Benefits Programs

IDAs and Supplemental Security Income (SSI)

Because SSI has income limits and resource limits, working and saving money in an IDA could risk your eligibility. Generally, IDA programs that are federally funded will not impact your benefits. Be sure to talk to a Benefits Specialist about the details.

Note

When you enroll in an IDA program, you can ask your IDA caseworker to write a letter saying that you can be in the IDA program without losing your SSI benefits, just in case. The letter should mention the “Exclusions Under Other Federal Statutes” clause. Take that letter to Social Security, give a copy to your local Family Support Division (FSD) office, and keep a copy for yourself.

IDAs and Plans to Achieve Self-Support (PASS)

A Plan to Achieve Self-Support (PASS) is an SSI program that lets you set aside money for a specified work goal, such as:

  • Starting a new career
  • Going back to school

The money you set aside in a PASS does not count against SSI's income limits and resource limits. This means you can save money towards a career goal in a PASS and continue to use SSI benefits for basics, like food and rent.

An IDA can be a part of your PASS plan; the only requirement is that your goal for each program be the same. As long as the money you save in your IDA is part of a PASS plan, it will not be counted by SSI and won’t jeopardize those benefits.

IDAs and Social Security Disability Insurance (SSDI)

People on Social Security Disability Insurance (SSDI) may enroll in any IDA program for which they are eligible. There are no restrictions.

IDAs and the Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) is a federal tax program that lowers the amount of income tax owed by low- to moderate-income workers and families. Money you get from an EITC can be put into an IDA and matched, helping you to reach your savings goal faster.