Department of Human Services

Families First Online Policy Manual

Individual Development Account




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An Individual Development Account (IDA) is a special restricted savings account that a Families First participant can set up to assist in purchasing four different assets.IDAs can be set up with the assistance of the Tennessee Network for Community Economic Development (TNCED), an IDA non-profit sponsor, and a local bank. TNCED is the statewide, non-profit organization that operates the accounts for the IDA Project.


An IDA is different from a regular savings account because funds deposited by a participant are matched by a separate entity and there are restrictions on the use of these funds.An IDA will provide an opportunity for a participant to build assets to further support the transition to self-sufficiency.


The funds in an IDA (savings + match + interest), up to $5,000, will not be considered as a resource for Families First participants when computing the resource limit for initial or continued eligibility in the Families First, Medicaid, and Food Stamp programs, as long as the participant complies with IDA eligibility rules below.The amount of an IDA that is over $5,000 is counted toward the $2,000 resource limit.


The IDA can be used only for one or more of the following qualified purposes, as determined and verified by TNCED or the sponsoring PIC:


        Post-secondary education for the participant or the participantís children for career development:Payments for tuition, fees, books, supplies and equipment that are required for attendance and instruction courses at a post-secondary educational institution are permissible.


        Small business development: Amounts paid directly from an IDA to a financial account for the operation of the individualís business are restricted for use solely on qualified business expenses.These expenses are those specified in an approved business plan including: capital, plant, equipment, working capital and inventory expenses.


        Home ownership: Funds can be spent on a principal residence for a qualified first-time homebuyer. This means a taxpayer (and, if married, the taxpayerís spouse) who has no ownership interest in a principal residence during the three-year period ending on the date of acquisition of the principal residence.The acquisition costs of this residence cannot exceed 100% of the average area purchase price applicable to such residence.Qualified acquisition costs are the costs of acquiring, constructing or reconstructing a residence. This includes any usual or reasonable settlement, financing or other closing costs.


        Transportation Needs: Permissible purchases for transportation needs are the purchase of a vehicle, necessary car repairs and the purchase of alternative transportation vehicles (e.g. bicycle) to be used for employment or education purposes.If the Saver purchases a vehicle, the value of the new vehicle will then be looked at according to Families First resource policy.


No funds from IDA can be withdrawn for purpose other than those listed above, without penalty.The DHS penalty is that any withdrawal of funds by an IDA group member for unqualified purposes will cause the withdrawn funds to be considered a resource in determining eligibility for Families First.The resource consideration will be for the month of withdrawal and any subsequent months during which the funds may be available to the individual.If the individual is no longer a member of the IDA group, then all funds in the savings account are counted as a resource.The Saver will have the option to retain access to the match dollars (if they are used for qualified purposes) for up to two years.If the Saver takes this option, these match dollars will also be counted as a resource.


Qualified withdrawals will not affect an individualís resources or eligibility unless the withdrawal is for the purchase of a vehicle.The value of a vehicle purchased with IDA funds is considered when determining continued eligibility according to Families First and Food Stamp vehicle resource policy.


If the purchase is deemed unqualified by TNCED or the sponsoring PIC, resulting in the denial of the withdrawal request, the IDA participant may appeal in writing to the sponsoring agencyís staff member and TNCEDís executive director or the PIC director (whichever is applicable).The staff member and the director will review the appeal to determine if the purchase falls under any of the qualified purposes that are described above.If the purchase is still deemed unqualified, the individual may file an appeal with the Department of Human Services by following usual appeal procedures.The IDA contact is responsible for completing an appeal summary and forwarding the Appeal for Fair Hearing to Hearings and Appeals in the usual manner.Appeals regarding eligibility or benefit level will follow usual appeal procedures.


When a family stops receiving Families First cash grants, funds in the IDA account (savings + match + interest), and up to $5,000 are not counted as a resource when determining eligibility for the Medicaid and Food Stamp programs.




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