HOUSE DOCKET, NO. 2835        FILED ON: 2/18/2021

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 1099

The Commonwealth of Massachusetts

_________________

PRESENTED BY:

Carmine Lawrence Gentile

_________________

To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
Court assembled:

The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:

An Act relative to savings enabling prosperity.

_______________

PETITION OF:

HOUSE DOCKET, NO. 2835        FILED ON: 2/18/2021

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 1099

The Commonwealth of Massachusetts

_______________

In the One Hundred and Ninety-Second General Court
(2021-2022)

_______________

An Act relative to savings enabling prosperity.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
 

SECTION 1. The General Court hereby finds and declares that:

(1) the problem of poverty will not be solved solely by government programs and income subsidies;

(2) family economic well-being does not come solely from income, spending or consumption, but instead requires savings, investment and the accumulation of assets;

(3) it is appropriate for the commonwealth to institute an asset-based anti-poverty strategy;

(4) the commonwealth has an opportunity to become a key player in the asset-based anti-poverty strategy through the use of state revenue, including, but not limited to, any future federal dollars set aside for matched savings programs;

(5) it is important to note that a robust asset-based anti-poverty network of community-based organizations has existed in Massachusetts since the late 1990s and that they have built successful matched savings programs increasing the wealth of commonwealth residents using available federal dollars;

(6) in September 2020, funding from the federal Assets for Independence  program funding finished;

(7) many community-based organizations across the commonwealth continue to serve their constituents through limited yet unsustainable private funding;

(8) this network is poised to use their existing expertise to expand their matched savings programs in order to assist more lower-income households to recover and rebuild after this once-in-a-lifetime economic crisis; 

(9) investment in a statewide matched savings program will enable lower-income households to obtain the assets they need to succeed and thrive. The commonwealth will benefit from the resultant economic and social benefits of investing in lower-income households to build wealth through investments in small business development, higher education, first-time home ownership, existing home repair, rental housing, vehicles to assist with employment attainment, adaptive technology and retirement savings ; and

(10) it is desired that the commonwealth enact legislation that enables an authorized fiscal intermediary sufficient flexibility to receive federal, state and local monies for matched savings accounts. The general court should periodically review the provisions of this act to ensure that the commonwealth maximizes the receipt of available federal monies for matched savings accounts.

SECTION 2. The General Laws are hereby amended by inserting after chapter 167J the following chapter:-

CHAPTER 167K.  Savings Enabling Prosperity

Section 1 . As used in this chapter, the following words shall, unless the context clearly requires otherwise, have the following meanings:

“Account holder ”, an eligible individual pursuant to subsection (b) of section 2.

“Approved savings goal”, an approved savings goal, pursuant to section 3, developed as part of a savings plan.

“Community-based organization”, a public or private nonprofit organization that is exempt from taxation under 26 USC § 501(c)(3) with a demonstrated effectiveness in representing a community or a significant segment of a community, as determined by the division of banks,  and providing educational or related social services to individuals in that community.

“Fiscal intermediary”, a public or private  nonprofit organization that is exempt from taxation under 26 USC § 501(c)(3), as amended and in effect on January 1, 1999, with a demonstrated effectiveness in matched-savings account management, as determined by the division of banks pursuant to section 6 .

“Financial institution”, a bank, credit union, any association or corporation chartered by the commonwealth  pursuant to chapter 168, 170, 171 or 172 or an individual, association, partnership or corporation incorporated or doing a banking business in the commonwealth subject to the supervision of the commissioner of banks .

“Lower-income household”, a household earning equal to or  less than 80 per cent of the area median income, as determined by the United States Department of Housing and Urban Development.

“Matched savings account”, a contract between an account holder and a fiscal intermediary, for the deposit of funds into a designated account at a financial institution by the account holder, and the deposit of matching funds into a second designated account at the financial institution, to allow the account holder to accumulate savings for use towards achieving a specific wealth-building purpose.

“Savings plan”, a plan developed by a person and community-based organization for the purposes of establishing an approved savings goal, pursuant to section 3, and providing the person with financial education, counseling and training designed to increase wealth. 

Section 2. (a) A person who qualifies to become an account holder may enter into a contract  with a community-based organization to establish a matched-savings account.

(b) A person shall be eligible to become an account holder if the person is a member of a lower-income household and has assets of no more than $75,000, indexed annually by the commissioner of banks  for inflation at 2.5 per cent per annum , at the time of program entry.

(c) A person applying to establish a matched savings account shall create a savings plan to achieve approved savings goals pursuant to section 3. The savings plan shall be developed by the person with the assistance of a  community-based organization.  The plan shall provide the person with the appropriate financial education, counseling and asset-specific training designed to increase the wealth of the person’s household.  

Section 3. (a) Approved savings goals, created as part of a savings plan, shall include, but shall not be limited to:

(1) The acquisition of post-secondary education or job training;

(2) If the account holder has established the account for the benefit of a household member who is under the age of 18, the payment of extracurricular non-tuition expenses designed to prepare the member for post-secondary education or job training;

(3) If the account holder has established an account for the purpose of meeting qualified higher education expenses as authorized pursuant to 26 USC § 529  or prepaid tuition plan on behalf of a designated beneficiary, the account holder  shall provide accurate account statements to the fiduciary organization to earn matching funds;

(4) The purchase of a primary residence. In addition to payment on the purchase price of the residence, account moneys may be used to pay any usual or reasonable settlement, financing or other closing costs. The account holder shall not have owned or held any interest in a residence during the 3-year period prior to making the purchase ; provided, however, that the 3-year period shall not apply to displaced homemakers or other individuals who have lost home ownership because of divorce; 

(5) The rental of a primary residence. Account moneys may be used for security deposits, first and last month’s rent, application fees and other expenses, including, but not limited to, major appliances when not included in the lease and  necessary to move into the primary residence;

(6) The capitalization of a small business. Account moneys may be used for capital, plant, equipment and inventory expenses, and to hire employees upon capitalization of the small business or for working capital pursuant to a business plan. The account holder shall develop the business plan with a financial institution, nonprofit microenterprise program or other qualified agent demonstrating business expertise. The business plan shall include a description of the services or goods to be sold, a marketing plan and projected financial statements;

(7) Improvements, repairs or modifications to a home already owned by the account holder;

(8) The purchase of equipment, adaptive technology or specialized training required to become competitive in obtaining or maintaining employment, to start or maintain a business or to increase the economic independence of the account holder;

(9) The purchase or repair of a vehicle, as specified in the account holder’s savings plan for increasing the economic independence of the person;

(10) The saving of funds for retirement, as specified in the account holder’s savings plan;

(11) The payment of debts owed while  the account holder is saving for another allowable purpose, as specified in the account holder’s savings plan, and where credit counseling is provided by a nonprofit organization demonstrating this expertise; and

(12) The creation or improvement of a credit score by obtaining a secured credit-builder loan or a financial product that is designed to improve credit, as specified in the account holder’s savings plan for increasing the economic independence of the person.

(b)(1) If a financial emergency  occurs, an account holder may withdraw all or part of the account holder’s deposits to a matched savings account for a purpose not described in subsection (a). As used in this subsection, a financial emergency shall include making payments: (i) for necessary medical expenses, (ii) to avoid eviction of the account holder from the account holder’s residence and (iii) for necessary living expenses following a change in circumstances.

(2) The account holder shall resume contributions to their savings account once the financial emergency has been resolved, as determined by the account holder. The account holder may choose to continue to pursue their savings plan through the appropriate financial education, counseling and asset-specific training in coordination with their community-based organization during the financial emergency.

(c) If an account holder withdraws moneys from a matched savings account for a purpose not approved in this section, the fiscal intermediary may remove the account holder from the program.

(d)(1) If the account holder of an account established for the purpose set forth in clause (3) or (10) of subsection (a) has achieved the account’s approved purpose in accordance with the savings plan developed by the account holder, the account holder may withdraw, or authorize the withdrawal of, the remaining amount of all deposits, including matching deposits, and interest in the account as follows:

(i) For an account established for the purpose set forth in clause (3) of subsection (a), by rolling over the entire withdrawal amount into one or more savings plans authorized under 26 USC § 529, the establishment of which is the purpose of the matched savings account; or

(ii)  For an account established for the purpose set forth in clause (10) of subsection (a), by rolling over the entire withdrawal amount into an individual retirement account, a retirement plan or a similar account or plan established pursuant to the federal Internal Revenue Code.

(2) Upon withdrawal of all moneys in the matched savings account as provided in paragraph (1), the matched savings account shall terminate .

(e) If an account holder moves from the commonwealth to another state  or is otherwise unable to continue in the program, the fiscal intermediary may remove the account holder from the program. 

(f) If an account holder is removed from the program pursuant to subsection (b), (c) or (e), all matching deposits in the account and all interest earned on matching deposits shall revert to the fiscal intermediary. The fiscal intermediary shall use the reverted funds as a source of matching deposits for other matched savings accounts.

Section 4. (a) A fiscal intermediary may qualify as the recipient of account contributions pursuant to subsection (f) of section 3 , if:

(1) the fiscal intermediary matches amounts deposited by the account holder according to a formula established by the fiscal intermediary; provided, however, that the fiscal intermediary shall deposit at least  $4 into the account for each $1 deposited by the account holder;

(2) the matching deposits by the fiscal intermediary to the matched savings account are deposited in a savings account that is controlled by the fiscal intermediary and is separate from the matched savings account of the account holder; and 

(3) the total amount paid into a matched savings account during its existence, including amounts from participant deposits and matching deposits shall not exceed $20,000, equivalent to $4,000 deposited by the account holder and $16,000 in matching funds deposited by the fiscal intermediary.

Section 5. The division of banks  may select no more than 2 fiscal intermediaries to administer moneys directed by the commonwealth to matched savings account purposes. In making the selections, the division of banks shall consider factors including, but not limited to:

(1) the ability of the fiscal intermediary to implement and administer the matched savings program, including its ability to verify account holder eligibility, certify that matching deposits are used only for approved purposes and exercise general fiscal accountability;  

(2) the capacity of the fiscal intermediary to convene and provide professional development opportunities that increase the capacity of community-based organizations to provide financial education, counseling and asset-related training to account holders; and

(3) the partnerships that the fiscal intermediary maintains with like-minded community-based organizations, government agencies and other entities that support asset-building and wealth creation among lower-income households across the commonwealth.

Section 6. (a) Subject to the division of banks, a fiscal intermediary shall have sole authority over, and responsibility for, the administration of matched savings accounts. 

(b) A fiscal intermediary may use not more than 5 per cent  of the allocated moneys to the matched savings program for account management, compliance and participation in audits.

(c) A fiscal intermediary selected to administer moneys directed by the commonwealth to matched savings account purposes shall provide the division of banks with an annual report of the fiscal intermediary's matched savings account program activity. The report shall be filed no later than 90 days after the end of the fiscal year of the fiscal intermediary.

The report shall include, but not be limited to:

(1) The number of matched savings accounts administered by the fiscal intermediary;

(2) The amount of deposits and matching deposits for each account;

(3) The purpose of each account;

(4) The number of withdrawals made; and

(5) Participant demographics and any other information the division of banks may require for the purpose of making a return-on-investment analysis.

(d) The division of banks shall promulgate all reasonable and necessary regulations to ensure fiscal intermediary compliance with this chapter.

Section 7. (a) Subject to regulations promulgated by the division of banks, community-based organizations shall be responsible for all aspects of operating the matched savings program, including marketing and outreach, verification and enrollment of participants, financial education, one-on-one counseling, conducting asset-specific training, indirect costs and other required verification and compliances activities.

(b) There shall be no limit to how many community-based organizations may work with a selected fiscal intermediary if they meet the required qualifications.

(c) Community-based organizations shall receive no more than 25 per cent of the allocated monies  for providing all activities listed in subsection (a).

(d) A community-based organization may act in partnership with other entities to comply with this section.

  SECTION 3. The division of banks shall determine the eligibility criteria for the selection of fiscal intermediaries to administer funds directed by the commonwealth for matched savings account purposes no later than 90 days after the effective date of this act.  Commonwealth agencies shall render all necessary cooperation to the division, and the fiscal intermediaries selected by the division, to expedite the process of preparing the fiscal intermediary to administer matched savings accounts.