An Individual Development Account (IDA) is a savings account for low-income workers that can be used to fund a small-business development, get a higher education, or buy a first home.

There are more than 250 IDA programs nationwide. Each one is unique and has slightly different eligibility requirements and operating procedures. One of the biggest benefits of setting up an IDA account is the matching funding that is offered under the program; IDA programs match your total savings when you reach your agreed-upon savings goal. In general, for every dollar you deposit into your account, your IDA program will match your deposit with somewhere between $1 and $4, depending on the program.

For example, if you have an IDA with a 3:1 match and you deposit $25, your IDA program would contribute an additional $75 towards your goal. You would have a total of $100! This makes the program a very effective way to save for a specific goal.

Program Eligibility

Each IDA program is different and eligibility requirements vary from program to program. Generally, most have the following requirements:

• Your annual income must be 200% of the Federal Poverty Guidelines ($31,300 for a single person, $42,300 for a couple) or less.
  • Exception: In some cases, you may qualify if your income is 65% – 85% of the median income in your area.
• You must have earned income from a job.
  • Exception: Some IDAs that are not funded by the federal government may have slightly different earned income requirements and allow you to have income from other sources.
• You must attend free financial literacy training. These classes usually cover topics such as money management, debt reduction, developing a savings plan, credit, and investing.

Some programs also have additional restrictions:

• Asset limits
• Based on your credit history
• Based on whether or not you are a U.S. citizen or qualified alien

IDA Savings Limit

Most IDA programs only allow you to have a certain amount of money be matched by your IDA account. For example, your program may only match $1,000 you save. The exact amount you can get matched will depend on the program you are using. You can deposit more money into your savings account, but only the goal amount will be matched.

How to Apply for an IDA

If you are interested in starting an IDA, find an IDA program in your area. You can find good IDA program directories at the Family Assets for Independence in Minnesota (FAIM) program, the Prosperity Now, and the Assets for Independence Resource Center.

Some programs may have waiting lists. Even so, you may be able to begin the process by taking financial literacy training while waiting for a space to open up.

Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.

If you have any questions, Chat with a Hub expert.

Once you’ve decided to do an Individual Development Account (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 the Family Assets for Independence in Minnesota (FAIM) program, Prosperity Now, and the Assets for Independence Resource Center.

   • Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.

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 in that account and the match money will not be counted by Supplemental Security Income (SSI) or Medical Assistance (MA). That means it will not impact your benefits. The importance of this is explained in detail here.
     • If you enroll in an IDA that is not funded by the federal government (one funded by a nonprofit or private company, for example), money deposited and matched in your IDA may jeopardize your SSI and MA benefits.
   • Does the program fund the goal you decided upon in the first step?
     • Federally funded programs only allow you to save for small-business development, 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.

In most programs, there is a minimum amount of time that you must be enrolled before the matching funds start to accumulate: 6 months for a business or educational goal, 10 months if you want to buy a home. Once you have fulfilled the minimum requirements, you’ve saved the agreed-upon amount every month for 6 or 10 months, and you’ve taken the financial literacy workshops, you can start to spend your money. At that point, the IDA program will calculate your matched amount and make a payment to your goal. Some IDAs don’t put money directly into your savings account. This is to avoid any illegal or dishonest behavior. The matching amount will not be available until you have met all requirements, are in good standing, and are ready to make your purchase.

Most people keep using their IDA accounts for 1 – 3 years, but some programs allow you to keep your account open up to 5 years.

Supplemental Security Income (SSI) and Medical Assistance (MA)

If you are getting Supplemental Security Income (SSI) or Medical Assistance (MA) and plan to enroll in an Individual Development Account (IDA), it is very important that you find out who funds that IDA program.

If you are on SSI or MA, it is highly recommended that you enroll in a federally funded IDA rather than an IDA funded by some other source. The 2 federal programs that fund IDAs are Temporary Assistance for Needy Families (TANF) and the Assets for Independence Act (AFIA). You do not need to be enrolled in those programs to have an IDA funded by them.

If you choose an IDA program that is federally funded, federal law clearly states your SSI and MA will not be affected by the assets you save in your IDA account. Additionally, any earned income you set aside in a federally funded IDA account is not counted as income when your SSI benefits amount is figured out.

If the IDA program you choose is not federally funded, you may become ineligible for your SSI or disability-based MA benefits because your IDA account could cause you to go over their assets limits. There are only a couple of exceptions:

• It is possible to have a nonfederally funded IDA if you do it as part of a Plan to Achieve Self-Support (PASS) (explained below).
• If you are planning to use a nonfederally funded IDA without doing a PASS, Chat with a Hub expert to find out about an additional strategy that may be used so nonfederally funded IDAs are not counted as assets for SSI or MA.

Note: Not all people who get MA have asset limits for their MA coverage. People who get MA based on having a disability do have an asset limit. However, some people with disabilities get MA coverage due to having income below 138% of the Federal Poverty Guidelines (FPG), and people who get MA for this reason do not have an asset limit. If you are not sure whether there is an asset limit for your MA coverage, Chat with a Hub expert.

Plans to Achieve Self-Support (PASS)

A Plan to Achieve Self-Support (PASS) is an SSI program that allows you to save up money for a specified period of time and for a specific work goal. Your goal may be to start a new business, get a job, or boost how many hours you work. The goal must help you significantly reduce your need for SSI benefits or end your need for Social Security Disability Insurance (SSDI) benefits. The money you save in a PASS does not count against SSI's income and asset limits. If SSA approves your PASS, they will not count the money you spend on your PASS goal (such as business equipment or education expenses) when they figure out if you qualify for SSI benefits. If you are already eligible for SSI benefits, you will get a higher SSI benefits amount, which will replace all of the money you spend on your PASS.

This means that 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. To do this, your goal must be the same for both programs. One of the benefits of using the programs together is that it allows you to set up a nonfederally funded IDA without threatening your SSI or MA benefits. As long as the money you save in your IDA is part of a PASS plan, it will not be counted by SSI or MA and you won’t lose those benefits.

IDAs and Social Security Disability Insurance (SSDI)

If you get SSDI benefits, you can enroll in any IDA program that you choose. There are no restrictions.

The Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) is a federal tax program that reduces the amount of income tax owed by low- to moderate-income workers and families. If you get the EITC, you can deposit that money into your IDA and your money will get matched, helping you reach your goal more quickly.

Another Way to Save: An ABLE Account

If your disability began before you turned 26, you can open an ABLE account where over time you can save up to $100,000 in assets and not have them counted by SSI and most other programs with asset limits. The money in an ABLE account gets tax advantages similar to the way retirement accounts work, but can only be spent on approved disability expenses, such as education, housing, or transportation. To learn more, read DB101's article on ABLE Accounts.

Jennifer’s Story

Jennifer was working and earning $500 per month at a part-time job. Her only other income came from her monthly Supplemental Security Income (SSI) benefits.

Jennifer used DB101’s Chat with a Hub expert feature because she wanted to learn more about how her work income impacted her SSI benefits. She also mentioned that she hoped to be able to save up some money to go back to school, but was worried about going above SSI’s asset limit.

Jennifer's expert helped explain to her how her SSI benefit was currently being calculated.

Jennifer's SSI Benefit Calculation (before starting an IDA):

Jennifer's Monthly Earned Income	$500.00
Minus the $20 SSI General Income Exclusion	- $20.00
Minus the $65 SSI Earned Income Exclusion	- $65.00
Subtotal
Divide by two	÷ 2
Jennifer's Countable Earned Income
SSI Maximum Benefit	$967.00
Minus Total Countable Income	-
Jennifer's SSI Benefit

So, at the end of each month, Jennifer had the $500 she made at work and the $759.50 she got from SSI.

The expert told Jennifer that Individual Development Accounts (IDAs) could help her save up for education, buying a home, or for starting a business. When she saved up some of her earnings, the IDA program would give her matching funds to help her reach her goal. She also learned that if she used a federally funded IDA, her IDA account wouldn’t count toward the SSI asset limit, and the earnings she set aside in the IDA would not be counted when figuring out her SSI benefits amount. In other words, she could keep making the same amount of money at work, but be allowed to save more than SSI’s asset limit, get matching money for free to help pay for her goal, and SSI would also give her more money. That sounded like it was a win-win-win for her!

Jennifer learned more about IDAs and decided that she wanted to go to school and get training that would help her get a job that paid more. Eventually, she found a federally funded IDA program that supported educational goals. So she signed up and began saving $40 per month of her earnings in her IDA. Her IDA program gave a 3:1 match, meaning that for every $40 she saved to pay her school’s tuition, the nonprofit would contribute $120 to her tuition. She thought this was a great deal!

Jennifer told the Social Security Administration (SSA) about her federally funded IDA program to make sure that they wouldn’t count the money she put into her IDA as income and that they wouldn’t count the IDA account as an asset. They noted her IDA in their records, excluded the account from the asset limit, and excluded the $40 per month she put into the IDA when figuring out Jennifer’s earnings. As a result, her SSI benefits amount actually went up by $20, even as she saved up money and got lots of matching funds for her tuition.

Jennifer's SSI Benefit Calculation (AFTER starting an IDA):

Jennifer's Monthly Earned Income	$500.00
Minus Jennifer's IDA Contribution	- $40.00
Minus the $20 SSI General Income Exclusion	- $20.00
Minus the $65 SSI Earned Income Exclusion	- $65.00
Subtotal
Divide by two	÷ 2
Jennifer's Countable Earned Income
SSI Maximum Benefit	$967.00
Minus Total Countable Income	-
Jennifer's SSI Benefit (With IDA)

Each month Jennifer set aside $40 of her earnings in her IDA account. For her monthly expenses, she had $460 left from what she made at work and $779.50 she got from SSI. The $40 she had saved in her IDA would become available to her when it was time for her to pay for her educational expenses. At that point, the IDA program would chip in an additional $120.

By the time she had finished her IDA program a year later, she had saved up $480 of her own money for her school’s tuition and the IDA program also paid $1,440 for her tuition.

The bottom line: By contributing $40 to an IDA, her SSI benefits amount went up by $20 and the IDA program gave her Jennifer an additional $120. That meant that each month, she actually had a total of an extra $140 thanks to doing the IDA program!