FOR IMMEDIATE RELEASE: April 21, 2005
Senators Santorum, Corzine, Schumer, and DeMint Introduce KIDS Accounts
Legislation Encourages Asset Building for Children
Washington, DC - U.S. Senators Rick Santorum (R-PA), Chairman of the Senate Republican Conference, Jon Corzine (D-NJ), Charles Schumer (D-NY), and Jim DeMint (R-SC), and today introduced the America Saving for Personal Investment, Retirement, and Education (ASPIRE) Act of 2005 which would provide every newborn with a savings account called a KIDS Account.
KIDS Accounts would be provided to every child born after December 31, 2006 and would provide children with a one-time $500 contribution. Children in households earning below the national median income will be eligible for a supplemental contribution of up to $500. The accounts will be supported by incentives designed to encourage savings, promote financial literacy, and expand asset-building opportunities.
“I believe that it is important that we offer asset building opportunities for children and families. As the father of six children I know how expensive it can be planning for future expenditures, such as college. A KIDS Account provides an automatic savings account for every child so families can begin to think about investing in their child’s future from the day they are born,” said Senator Santorum.
Once established, families and others will be allowed to contribute additional resources into these accounts. The Senate bill allows for contributions up to $1,000 a year. These voluntary contributions will be after-tax and will not be tax deductible, but account earnings will be tax-free. To further encourage investment, children in households earning below the national median income will be eligible to receive a dollar-for-dollar match on the first $500 contributed to the account. The automatic initial government contribution of $500 must eventually be paid back.
“The ASPIRE Act is a big, new idea based on simple, old-time values,” said Senator Corzine. “By giving every young person resources to get a start in life, it will help realize the American ideal of equal opportunity. And by making every young person an investor, it will encourage self-reliance, promote savings and give each family a personal stake in America’s economy.”
“One of the most amazing facts about our economy is that the vast majority of middle- and working-class Americans have no real assets beyond the value of their homes. We need to do more to help Americans save, both for continued education and for retirement, and we need to make it happen as quickly as possible for future generations. The ASPIRE Act will help all Americans do that by starting accounts at birth, and it will help moderate-income people build assets by providing a government match for part of their annual deposits. I look forward to working with my bipartisan cosponsors to make this bill a reality, and help middle-class Americans build assets and savings instead of more debt,” said Senator Schumer.
“This is an exciting and innovative way to help children save for their future. We have an opportunity as a nation to help children learn the power of savings so they can live independent lives. By the time these kids reach adulthood, they will have the funds they need to go to college, start a business, or increase their savings for retirement,” said Senator DeMint.
The ASPIRE legislation will establish the KIDS Account Fund within the Department of Treasury, which will be governed by a Board of Directors similar in structure to the Board that oversees the Thrift Savings Plan (TSP), the retirement program for federal employees. As with the TSP, investments will be managed by a private sector firm. After accountholders turn 18 they will be able to keep their accounts with this Fund or transfer them to a private sector Roth IRA provider or a Section 529 plan for post-secondary education.