Individual Development Accounts (IDAs)

Individual Development Accounts, also known as “IDAs,” are special savings accounts. You choose a goal to save for and use the IDA account to save money towards meeting that goal. IDA goals are usually buying a first home, education or training costs, or funding for a small business.

The money you put into the account will be matched by other sources. The match may be anywhere from one to four 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.

There are more than 250 IDA programs nationwide. Their eligibility requirements can be different. Generally, to qualify for an IDA:

  • Your annual income must be within 200% of the Federal Poverty Level ($24,980), and
  • You must have some form of earned income.

Once you’re enrolled in the program, you also need to take financial education classes.

To research and find an IDA program in California, check out the DB101 list of IDA resources and the Prosperity Now IDA directory.

Funding Sources

Funding for IDAs comes from a variety of places, including government agencies, private companies, non-profits, and individual people.

If you are getting Supplemental Security Income (SSI) and/or Medi-Cal benefits and plan to enroll in an IDA, it is very important that you find out the funding source for that IDA program:

  • If you enroll in a nonfederally funded IDA (for example, one funded by a nonprofit or private company), money deposited and matched in your IDA may put your SSI or Medi-Cal benefits at risk.

If you are on SSI or Medi-Cal, it is highly recommended that you enroll in a TANF or AFIA funded IDA, rather than one funded by some other source, so that you don’t risk losing your benefits.

Program Eligibility

Each IDA program is different and eligibility requirements may vary from program to program. Most require that:

  • Your annual income is within 200% of the Federal Poverty Level ($24,980 for an individual, $33,820 for a couple), and
  • You have earned income.

For an AFIA- or TANF-funded IDA, you must have income from work. It doesn’t matter if you’re working full-time or part-time, but you must be earning income from some sort of job. IDAs that are funded by other sources may have slightly different earned income requirements and allow for income from other sources.

Citizenship Requirements

IDA programs funded by the federal government may check on your citizenship or legal residency status when you apply. IDA programs funded by other sources may or may not do this. Be sure to ask about specific citizenship requirements when looking at IDA programs.

Financial Literacy Training

Once you’re enrolled in an IDA program, you must take their free financial literacy training. Financial literacy programs improve your ability to manage your personal finances, save more money, and do financial planning.

This training usually covers topics like:

  • Money
  • Debt reduction
  • Developing a savings plan
  • Credit, and
  • Investing.

IDA Savings Limit

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 2 or 3 years.

How to Apply

If you are interested in starting an IDA, contact an IDA program in your area, search the Prosperity Now IDA directory. Ask if the IDA program you are interested in is accepting applications. Some programs may have waiting lists. Even if they do, you may be able to start by taking financial literacy training while waiting for a space to open up. You can also look at the DB101 list of IDA resources.

Setting up an IDA is a multi-step process:
  1. You need to decide what goals you are trying to meet with your IDA.
  2. You need to find an IDA program in your area. You can use the IDA Directory to find one near you.
  3. You need to find out as much as you can about the IDA program you are thinking about, like:
  • Where does the program’s funding come from?
    • Is it federally funded through Temporary Assistance for Needy Families (TANF) or the Assets for Independence Act (AFIA)?
  • What goals does the program fund?
    • AFIA- and TANF-funded IDA programs only let you save for small business development, higher education expenses, and buying a first home.
    • Privately funded IDAs may let you save for other goals like buying a new computer or car.

Once you find an IDA program that fits your needs, you should go to an orientation meeting to learn more about it.

You will also need to provide information to prove your eligibility for the program. If you get into the program, you will have an IDA caseworker who will help with your account. You’ll open a savings account with a bank or credit union that is connected to your IDA program. Depending on the program, you may need to deposit a certain amount into your account each month.

Once you’ve reached your savings goal, you can take money out of the account to spend on your goal.

Integration with Other Benefits Programs

IDAs, Supplemental Security Income (SSI), and Medi-Cal

Because SSI and Medi-Cal have income and asset limits, working and saving money in an IDA account could risk your eligibility for those programs. Be sure to find out about the funding source before you enroll in a certain IDA:

  • If you enroll in an IDA program that is federally funded via Temporary Assistance for Needy Families (TANF) or the Assets for Independence Act (AFIA), you don’t need to worry about losing your benefits. Money deposited won't be counted as a resource and a portion of it will be excluded from income for SSI or Medi-Cal.
  • If you enroll in an IDA program that is funded by some other source, money deposited into your IDA may be counted as a resource and you could lose your SSI and Medi-Cal benefits.

If you are on SSI and Medi-Cal, you should enroll in an AFIA- or TANF-funded IDA.

Note

When you enroll in a TANF- or AFIA-funded IDA, ask your IDA caseworker to write a letter saying that you can be in the IDA program without losing your SSI benefits. The letter should mention the “Exclusions Under Other Federal Statutes” clause. Take that letter to Social Security, give a copy to the county to protect your Medi-Cal eligibility, and keep a copy of it 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 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. One of the benefits of using the 2 together is that it lets you to set up a non-federally funded IDA without risking your SSI or Medi-Cal 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 Medi-Cal and won’t jeopardize those benefits.

IDAs and Social Security Disability Insurance (SSDI)

People on SSDI can enroll in any IDA program they choose. There are no restrictions.

One thing to consider though, especially if you’re using an IDA to fund a small business: As your earned income increases, and particularly as you start earning above Social Security's Substantial Gainful Activity (SGA) level ($1,220/month for individuals in 2019), SSDI’s work rules will apply and your SSDI benefit may be affected. For details on how working can affect your SSDI, read DB101’s section on SSDI and Work.

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.