A. A financial instrument known as an individual development account is established. An individual development account shall be in the name of an individual account holder who is a member of an assistance unit that is receiving cash assistance benefits.

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B. Deposits to an individual development account may be made by:

1. The individual account holder.

2. A member of the individual account holder’s assistance unit.

3. A nonprofit organization.

4. Individual contributors.

C. The department shall:

1. Adopt rules regarding:

(a) The establishment and administration of the individual development accounts. These rules shall include provisions that stipulate that the department may not qualify an assistance unit for benefits by prospectively budgeting the availability of an individual development account.

(b) The criteria a nonprofit organization must satisfy before making deposits to individual development accounts.

(c) Penalties for fraud or abuse with respect to the individual development account.

2. Not approve more than one individual development account per assistance unit.

3. Issue a request for proposals to financial institutions to establish and, together with the department, administer individual development accounts.

4. Not approve an individual development account for any recipient who has been found by either the department or a court of law to have committed any act of fraud or abuse with respect to any cash or in-kind benefit program including aid to families with dependent children, food stamps or medicaid.

5. Investigate all cases for possible fraud or abuse when there is evidence or other reason to believe that income sources for an account holder’s deposits were previously available to the account holder but undeclared during application or subsequent redetermination for assistance, or that individual contributions to an account should have been declared as income or child support payments or represent proceeds from illegal activities.

D. The individual development accounts shall be administered by a financial institution that is licensed by the department of insurance and financial institutions. These accounts shall earn interest at rates that are competitive with savings account rates.

E. The balance of an individual development account at any one time may not exceed $9,000. Total deposits to an individual development account over the life of the account shall not exceed $12,000. Deposits from income earned by a member or members of an assistance unit may not exceed $200 per month.

F. The account holder whose assistance unit is receiving cash assistance benefits from the department may withdraw monies from the account holder’s individual development account for:

1. Educational costs at an accredited institution of higher education that are paid directly to the institution.

2. Training costs for an accredited, licensed or certified training program that are paid directly to an eligible education institution.

3. Purchase costs for a first home to be used as a qualified principal residence by the account holder. These costs shall be paid directly to the persons or organizations to which the amounts are due.

4. Business capitalization expenses paid directly to a business capitalization account, which is held in a federally insured financial institution. The business capitalization account shall be restricted to use solely for qualified business capitalization expenses.

G. Unless the monies would have been otherwise disregarded from an income calculation, the department shall consider withdrawals from an individual development account, for purposes other than those established in subsection F of this section, by an account holder whose assistance unit is receiving cash assistance or both cash assistance and food stamp program benefits, as income to the assistance unit in the month that it is withdrawn.

H. The department shall disregard from an assistance unit’s earned income calculation fifty per cent of a deposit made to an individual development account from the proceeds of an account holder’s or assistance unit member’s earned income. The maximum monthly disregard under this subsection shall not exceed $100.

I. Subject to the limitations prescribed in this section, deposits made into an individual development account and the account balance, including interest earned, shall be disregarded by the department in determining the account holder’s and the assistance unit’s eligibility for the cash assistance and food stamp programs as well as any other assistance or services in which eligibility for receipt is directly linked to eligibility for the cash assistance and food stamp programs. If an assistance unit with an individual development account experiences any break in eligibility for cash assistance, and then subsequently reapplies for either cash assistance or food stamp program benefits, the department shall consider any remaining account monies, unless otherwise excludable, as countable assets and shall not disregard, for purposes of eligibility in either program, future deposits into an individual development account.

J. The account holder shall name contingent beneficiaries when the account holder establishes the account and may change beneficiaries at any time after the account is established. If the named beneficiary is deceased or otherwise cannot accept the transfer, the monies shall be deemed unclaimed property.

K. A holder of an individual development account whose assistance unit is no longer receiving cash assistance benefits from the department may withdraw the holder’s deposited monies from the holder’s account for any purpose. The account holder is responsible to abide by any regulations or guidelines regarding the use of any monies contained in the account that are from a nonprofit or governmental organization.

L. For the purposes of this section "department" means the department of economic security.

M. The legislature intends by this section to address the problem faced by many assistance beneficiaries of being unable to either achieve educational goals or accumulate resources during a stay on welfare due to the effects of financial eligibility criteria. The inability to meet educational goals or accumulate some financial resources is a significant reason why many beneficiaries do not permanently transition off of welfare programs and instead shuttle back and forth between periods of eligibility and ineligibility. The purpose of the individual development accounts is to provide an additional tool to assist beneficiaries to use during and after a stay on welfare, in order to help facilitate a permanent transition off of welfare programs and into self-sufficiency.