The Shriver Brief : Poverty Law Commentary & Insights : Sargent Shriver National Center on Poverty Law : Affordable Housing, Healthcare Reform

There are many different types of poverty, but the Asset Opportunity Unit at the Shriver Center focuses on asset poverty. Asset poverty means having insufficient funds to meet one’s needs for three months if income were to disappear for those three months. Focusing on asset poverty is important because assets are the building blocks for economic mobility and financial stability. While income poverty looks at whether people have enough to get by, asset poverty looks at whether people have enough to get ahead.

One way to measure the asset poverty level of a family of four, for example, is to multiply the Federal Poverty Level (FPL) by three months. Based on this calculation, an Illinois family of four would need $5,762.50 in savings to live for three months if they had no other source of income. Putting aside whether the current FPL is a sufficient measure of poverty, the question is whether most families, let alone low-income families, have even this much set aside.

For low-income families receiving public benefits the answer is likely no. This is because asset limits in public benefit programs prevent such families from building a level of resources necessary for future needs. For instance, in Illinois, the asset limit for Temporary Assistance to Needy Families (TANF) is $2,000. Thus, if a family has more than $2,000 in savings, they are not eligible for TANF. In other words, Illinois’s TANF asset limit is only about one third of what a family would need to stay above the asset poverty level. Given such archaic limits, it is no wonder that families remain in poverty and reliant on public benefit programs.  

For years, advocates have argued that states should either eliminate their public programs’ asset limits entirely or, at a minimum, increase them to limits more reflective of today’s economic realities. As advocates correctly note, asset limits are a relic of entitlement program policies that no longer exist. Cash welfare programs, for example, now focus on quickly moving individuals and families to self-sufficiency, rather than allowing them to receive benefits indefinitely. Since personal savings and assets are precisely the kinds of resources that allow people to move off public benefit programs, continuing to utilize asset limits runs counter to this policy.

Nevertheless, states have been reluctant to reform asset limits. Although most states have eliminated asset limits in the Supplemental Nutrition Assistance Program (SNAP), and some states have eliminated them in Medicaid, the majority of states still have them in TANF. Most often, fear about increased numbers of people who have significant assets enrolling in public benefit programs is given as a reason for not changing such limits. Yet, a recent study from the New America Foundation shows that in states where asset limits have been eliminated no such increases have occurred. Moreover, the study shows that eliminating asset limits actually reduces administrative costs and time per cases, which allows caseworkers to take on more cases, without increasing workload or administrative costs.

The report, which analyzed the results of interviews and surveys of public benefit administrators in eight states, confirmed previous research that found that most applicants to SNAP and TANF have very few assets anyway and that eliminating asset tests would not significantly increase eligibility. In fact, currently in the majority of states studied very few families were denied program participation due to excess assets anyway. In Idaho, only 2.2% of SNAP application denials were due to excess assets. Thus, an overwhelming increase in cases is unlikely. This is true despite widespread belief that eliminating asset tests will allow wealthy individuals to “game” the system. 

The report also noted that eliminating asset limits reduces administrative costs, and the fiscal benefits to the state can outweigh any costs incurred. In Iowa, for instance, direct state costs for eliminating asset limits in its SNAP program were estimated at $702,202, but the overall benefit to the state would be $12.3 million from additional SNAP benefits and increased state employment. Oklahoma determined that eliminating the Medicaid asset limit in 1997 saved approximately $1 million in administrative costs.

The study provides powerful data that advocates can use to convince policy makers that their perceptions about the benefits of asset limits are incorrect. Additionally, these data support advocates’ assertions that, despite what states such as Pennsylvania and Michigan apparently believed when they reinstated asset limits in their public benefit programs, eliminating asset limits is not only necessary for the economic stability of low-income families, but also cost effective for. As the economy begins to improve, now is not the time for states to regress in important policy reforms that will help families become financially self-sufficient.

This blog post was coauthored by Alex Hoffman. 

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Families must be able to save money in order to achieve self-sufficiency and prosper. Unfortunately, the federal government often forgets this common-sense principal. 

Many public benefits programs—like cash welfare or Medicaid—limit eligibility to those with few or no assets. If a family has assets over the state’s limit, it must “spend down” longer term savings in order to receive what is often short-term public assistance. These asset limits are a relic of entitlement policies that no longer exist, since cash welfare programs now focus on quickly moving families to self-sufficiency rather than allowing them to receive benefits indefinitely. In other words, although personal savings and assets are precisely the kind of resources that allow families to move off—and stay off—public benefit programs, asset limits actually discourage anyone receiving public benefits from saving for the future.

States have full discretion in setting or eliminating asset limits for Temporary Assistance to Needy Families (TANF), Medicaid, and the State Children’s Health Insurance Program (SCHIP). They also have some flexibility to address asset limits for the Supplemental Nutrition Assistance Program (SNAP, formerly known as Food Stamps). Several states have eliminated asset limits in TANF, Medicaid and SCHIP, and 38 states have eliminated asset tests in SNAP.

Pennsylvania is one of these states. In 2008, when the recession hit and unemployment soared, it dropped asset limits in its SNAP program. Unfortunately, Pennsylvania’s Department of Public Works (DPW) recently announced that it wants to reinstate these tests. Under the proposal, individuals under 60 could have no more than $2,000 in assets, and individuals over 60 could have no more than $3,250, not including retirement accounts and homes. This is devastating news for the state’s 850,000 families currently receiving SNAP benefits. It would also be a blow to Pennsylvania’s economy since research shows that every $1 in SNAP benefits generates $1.73 in economic activity.

This proposed policy reversal is highly unusual because the trend among states has been to eliminate asset tests. So what is different about Pennsylvania? According to Anne Bale, a spokesperson for the DPW, Pennsylvania residents have complained about fraud and abuse in the SNAP program. DPW’s hope is that reinstituting asset limits would eliminate this waste, without requiring the state to spend money on fraud detection and prosecution. However, the state recently won an award for running the most efficient state SNAP program and has one of the lowest rates of SNAP fraud in the nation: 1/10 of 1%. Moreover, the state would not really save any money since it’s likely that more caseworkers would need to be hired and all caseworkers would need to receive training on the new limits and how to apply them. Added to the cost of software to computers, asset limits and the extra workload of understaffed offices, any cost savings would be slim. It would be a no-win situation: both bad for the state’s economy and bad for people trying to escape poverty’s cycle.

This proposed policy sends entirely the wrong message: Do not pull yourself up out of poverty; rather remain in the cycle of poverty, dependent on government benefits. It’s simply bad public policy to require people to spend all their assets in order to ensure a meal on the table then tell them that they need to save and become self-sufficient!

It time to do away with asset limits once and for all. Grab your fork and tell Pennsylvania and other states to stop sticking it public benefit recipients.

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Accumulating savings and building assets is the precursor to going from just getting by to getting ahead. Unfortunately federal and state public benefit programs actually discourage and penalize applicants and recipients who try to save and become economically mobile. 

Most states impose both income and asset or resource tests to ensure that benefit programs serve only those who truly need them. Income and asset tests vary from program to program and from state to state, and few caseworkers, not to mention applicants or recipients, completely understand what is allowed and what is not.

In terms of public policy, asset tests send the wrong message—that having assets is a bad thing. Specifically, asset limits lower the net worth of potentially eligible low-income individuals and families and discourage savings, thus serving as a barrier to financial security and upward mobility. Imposing and administering asset tests to a group largely without assets is also a waste of state resources that could be better spent on expanding benefit amounts. Finally, asset tests are unfair in that they often treat similar types of assets differently. All states, for instance, exclude defined benefit retirement savings, but most do not exclude 401(k) plans or individual retirement accounts (IRAs), even though all are retirement savings. For these reasons, there is a growing push, through legislation or administrative rule changes, on both the federal and state level, to eliminate asset tests completely, raise the amount of permissible assets, and/or expand the categories of excluded assets. 

On the federal level, the United States Department of Agriculture recently issued proposed rules to exclude retirement and education accounts from countable resources under the Supplemental Nutrition Assistance (SNAP) program. Asset tests under the federal Supplemental Security Income (SSI) program have also been targeted for reform. Like most public benefit programs, SSI is limited to those who have no more than $2,000 in assets for an individual and $3,000 for a couple. All resources deemed accessible to an individual, including defined-contribution retirement accounts, such as 401(k)s and IRAs are counted. To address this situation, the proposed federal SSI Savers Act of 2011 would increase asset limits from $2,000 (single) and $3,000 (married) to $5,000 and $7,500 respectively, index those limits to inflation and for recipients younger than 65, and exclude retirement accounts, education savings, and individual development accounts from counting against the limit.

In terms of state initiatives, states have the authority to reform asset rules in state-administered assistance programs, including Temporary Assistance for Needy Families (TANF), SNAP, Medicaid, and the state’s children’s health insurance program (SCHIP), to make the rules simple, efficient, and fair, and to encourage saving and asset building. Thus, states may set their own asset limits, exempt categories of assets, or eliminate asset limits altogether, and an increasing number of states have utilized this authority. 

At least three states, Ohio, Louisiana, and Virginia, have eliminated asset tests entirely in their TANF programs. Ohio was the first state to abolish asset limits in TANF; it did so in 1997. Although Ohio budget analysts predicted a small increase in the TANF caseload as a result of eliminating the asset test, no caseload increase or political fallout occurred. In 2003, Virginia adopted administrative rules that eliminated asset limits in the TANF and family and child medical programs, evaluated only liquid assets in the Food Stamp Program, and eliminated the TANF lump-sum rule, which made recipients ineligible for cash assistance after receiving a lump-sum payment such as retroactive SSI benefits or a personal injury settlement. Even more states have eliminated asset limits in their SNAP and Medicaid programs.

Several states that have not eliminated asset tests have nonetheless reformed their asset rules by increasing the amount of cash resources that recipients are permitted to have and by exempting certain forms of assets entirely. In 2005, Illinois excluded retirement accounts from asset tests in TANF and General Assistance. In 2006, Colorado passed legislation that raised TANF asset limits from $2,000 to $15,000 and exempted retirement, education, and health savings accounts and one vehicle per household. California passed a law exempting retirement and educational accounts from consideration as assets for recipients (but not applicants) in CalWORKs (California Work Opportunity and Responsibility to Kids, the state’s TANF program) and recently introduced a bill to exclude the value of a licensed motor vehicle from consideration when determining or re-determining CalWORKs eligibility.

Abolishing asset limits sends a clear message that saving and building assets are encouraged. While complete elimination of asset rules may not always be politically feasible, advocates can pursue substantially raising asset ceilings and exempting additional categories of assets, with the ultimate goal of removing them entirely at a later date.

For more information about reforming asset limits read the Shriver Center’s article on “Reforming State Rules on Asset Limits: How to Remove Barriers to Saving and Asset Accumulation in Public Benefit Programs,” in the March-April 2007 issue of Clearinghouse Review.

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Congressman Tom Petri (R-WI) and Congresswoman Niki Tsongas (D-MA) introduced a bill that would reform asset limit tests in the Supplemental Security Income (SSI) program on June 2. HR 2103 would enable people with disabilities to open bank accounts, work, and save.

One of the most common policy barriers to asset building and self-sufficiency for people with disabilities are asset limit tests. In general, eligibility for SSI is limited to those who have no more than $2,000 in assets for an individual and $3,000 for a couple. This SSI asset test generally counts all resources deemed accessible to an individual, including defined-contribution retirement accounts, such as 401(k)s and IRAs.

Such asset limits are painfully low, and haven’t been raised since 1989. SSI beneficiaries are allowed little emergency savings, which leaves them vulnerable to predatory lenders and requires them to ultimately rely on greater government assistance. To address this situation the SSI Savers Act of 2011 would:

• Increase asset limits from $2,000 (single) and $3,000 (married) to $5,000 and $7,500 respectively, and index those limits to inflation;

• For recipients younger than 65, exclude retirement accounts, education savings, and individual development accounts from counting against the limit; and

• For recipients 65 and older, allow retirement accounts up to $50,000 (single) and $75,000 (married) and reduce SSI benefits accordingly instead of creating an immediate cut off.

The bill is similar to HR 4937 introduced last session by Representatives Petri and Tsongas.

Click here to take action and send a message to your legislators urging them to support SSI asset limit reform, then follow-up with a call. The switchboard's number is 202.224.3121. The operator can connect you to your legislator's office.

For more information on asset building for people with disabilities, please visit the Sargent Shriver National Center on Poverty Law’s web resource pages to review our webinar series on asset building for people with disabilities: Accessible Assets, Part 1 (November 2009) and Accessible Assets, Part 2 (February 2011).

This blog post was coauthored by Ji Won Kim.

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