REPORT TITLE:
IDA


DESCRIPTION:
Establishes an Individual Development Account to promote
entrepreneurship, education, and self-sufficiency for welfare
recipients and low-income individuals.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
HOUSE OF REPRESENTATIVES                H.B. NO.487        
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO INDIVIDUAL DEVELOPMENT ACCOUNTS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that an individual
 
 2 development account is a special savings account program to
 
 3 shelter interest income and allow low-income individuals to
 
 4 accumulate capital for business start-up, education, or job
 
 5 training.  It is modeled after the federal individual retirement
 
 6 account (IRA) program, which promotes tax incentives to encourage
 
 7 individuals to save for retirement, thus reducing potential
 
 8 dependence on public funds.  Similar to the IRA, the individual
 
 9 development account is designed to promote individual savings for
 
10 personal financial development, including entrepreneurship.
 
11      The purpose of this Act is to establish an individual
 
12 development account program to encourage both welfare recipients
 
13 and low-income individuals to pursue education, job training, or
 
14 to build capital to become an entrepreneur.
 
15      SECTION 2.  Chapter 346, Hawaii Revised Statutes, is amended
 
16 by adding a new section to be appropriately designated and to
 
17 read as follows:
 
18      "§346-     Individual development account.  (a)  There is
 
19 established a financial instrument known as an individual
 
20 development account.
 

 
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 1      (b)  An individual development account shall be in the name
 
 2 of an individual account holder:
 
 3      (1)  Who is receiving public assistance as defined in
 
 4           section 361-1, Hawaii Revised Statutes; or
 
 5      (2)  Whose household income is   per cent or less of the
 
 6           federal poverty level.
 
 7      (c)  Deposits to an individual development account may be
 
 8 made by:
 
 9      (1)  The individual account holder;
 
10      (2)  A nonprofit organization; or
 
11      (3)  Individual contributors.
 
12      (d)  The department shall:
 
13      (1)  Adopt rules regarding:
 
14           (A)  The establishment and administration of the
 
15                individual development accounts;
 
16           (B)  The criteria a nonprofit organization must satisfy
 
17                before making deposits to individual development
 
18                accounts; and
 
19           (C)  Penalties for fraud or abuse with respect to the
 
20                individual development account;
 
21      (2)  Issue a request for proposals to financial institutions
 
22           to establish and, together with the department,
 
23           administer individual development accounts;
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (3)  Not approve an individual development account for any
 
 2           recipient who has been found by either the department
 
 3           or a court of law to have committed any act or fraud or
 
 4           abuse with respect to any public assistance program;
 
 5           and
 
 6      (4)  Investigate all cases for possible fraud or abuse when:
 
 7           (A)  There is evidence or other reason to believe that
 
 8                income sources for an account holder's deposits
 
 9                were previously available to the account holder
 
10                but undeclared during application or subsequent
 
11                redetermination for public assistance; or
 
12           (B)  Individual contributions to an account should have
 
13                been declared as income or child support payments
 
14                or represent proceeds from illegal activities.
 
15      (e)  Individual development accounts shall be administered
 
16 by a financial institution that is licensed by the state banking
 
17 departments.  These accounts shall earn interest at rates that
 
18 are competitive with saving account rates.
 
19      (f)  The balance of an individual development account at any
 
20 one time may not exceed $    .  Total deposits to an individual
 
21 development account over the life of the account shall not exceed
 
22 $    .  Deposits from income earned by an individual account
 
23 holder may not exceed $   per month.
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (g)  The account holder receiving public assistance from the
 
 2 department may withdraw moneys from the individual development
 
 3 account for:
 
 4      (1)  Educational costs at an accredited institution of
 
 5           higher education that are paid directly to the
 
 6           institution;
 
 7      (2)  Training costs for an accredited, licensed, or
 
 8           certified training program that are paid directly to an
 
 9           eligible education institution;
 
10      (3)  Purchase costs for a first home to be used as a
 
11           qualified principal residence by the account holder.
 
12           These costs shall be paid directly to the persons or
 
13           organizations to which the amounts are due; or
 
14      (4)  Business capitalization expenses paid directly to a
 
15           business capitalization account, which is held in a
 
16           federally-insured financial institution.  The business
 
17           capitalization account shall be restricted to use
 
18           solely for qualified capitalization expenses.
 
19      (h)  Unless the moneys would have been otherwise disregarded
 
20 from an income calculation, the department shall consider
 
21 withdrawals from an individual development account, for purposes
 
22 other than those established in subsection (g), by an account
 
23 holder as income in the month that it is withdrawn.
 

 
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 1      (i)  The department shall disregard from an account holder's
 
 2 earned income calculation    per cent of a deposit made to an
 
 3 individual development account from the proceeds of an account
 
 4 holder's earned income.  The maximum monthly disregard under this
 
 5 subsection shall not exceed $   .
 
 6      (j)  Subject to the limitations prescribed in this section,
 
 7 deposits made into an individual development account and the
 
 8 account balance, including interest earned, shall be disregarded
 
 9 by the department in determining the account holder's eligibility
 
10 for public assistance or any other assistance.  If an account
 
11 holder with an individual development account experiences any
 
12 break in eligibility for public assistance, and then subsequently
 
13 reapplies for public assistance, the department shall consider
 
14 any remaining account moneys, unless otherwise excludable, as
 
15 countable assets and shall not disregard, for purposes of
 
16 eligibility, future deposits into an individual development
 
17 account.
 
18      (k)  The account holder shall name contingent beneficiaries
 
19 at the time the account holder establishes the account and may
 
20 change beneficiaries at any time after the account is
 
21 established.  If the named beneficiary is deceased or otherwise
 
22 cannot accept the transfer, the moneys shall be deemed unclaimed
 
23 property.
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (l)  A holder of an individual development account who is no
 
 2 longer receiving public assistance from the department may
 
 3 withdraw deposited moneys from the account for any purpose.  The
 
 4 account holder is responsible to abide by any regulations or
 
 5 guidelines regarding the use of any moneys contained in the
 
 6 account which were from a nonprofit or governmental
 
 7 organization."
 
 8      SECTION 3.  New statutory material is underscored.
 
 9      SECTION 4.  This Act shall take effect upon its approval.
 
10 
 
11                           INTRODUCED BY:  _______________________