To Help Families Get Ahead, Eliminate Savings Penalties

Last week, the House of Representatives passed a Farm Bill with damaging changes to SNAP (the Supplemental Nutrition Assistance Program) that could reduce or eliminate nutritional benefits for two million Americans. One critical change in the House bill is the elimination of states' ability to increase or remove savings penalties (sometimes known as asset limits), which require families to spend down their savings to a specified level before they can receive SNAP benefits. The Senate version of the bill does the opposite by protecting SNAP, including states’ abilities to increase or remove savings penalties.

To provide a better understanding of what savings penalties are and why they matter, Prosperity Now has released a new policy brief, Savings Penalties Push Families Deeper into Poverty, detailing how savings penalties in public benefits programs, including SNAP, force low-income households to choose between saving for their future and getting supports for their basic needs today.

How Savings Penalties Hurt Low-Income Families

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In some states, even as little as $1,000 saved disqualifies families from accessing nutrition, energy assistance and cash benefits. But savings help families get ahead and even small amounts can help families weather income volatility and financial shocks. Savings penalties get in the way of helping working families reach self-sufficiency. The House Farm Bill passed last week could leave low-income households with no choice but to pick between putting food on the table and saving for long-term assets such as homeownership and college.

Many states have made headway by eliminating savings penalties. For example, 34 states and Washington, DC have eliminated SNAP savings penalties. Eliminating these penalties can decrease caseloads for states and reduce administrative costs. But with the changes in the House Farm Bill, these savings penalties would no longer be determined by states. 

Congressional Actions to Help Families Escape Poverty

Beyond preserving states' flexibility to eliminate savings penalties, Congress can take other steps that would have a big impact of families' abilities to save. The most effective step is to remove savings penalties from TANF, LIHEAP and SNAP, and increase SSI asset limits to $10,000 (indexed to inflation). Through this federal action, families could feel more security about their long-term savings and less worry over whether their benefits will change depending on the state they live in. 

Another action Congress could take is to pass the bipartisan CSA Opportunity Act (H.R. 5738), reintroduced in the 115th Congress by Representative Matt Cartwright (D-PA-17) and former Representative Charlie Dent (R-PA-15). This bill exempts savings in children’s savings accounts (CSAs) and 529 accounts from savings penalties and would allow families to save for their children's higher education without losing access to critical benefits. 

Get Involved

For more information on savings penalties and how they affect families, please read our new policy brief, Savings Penalties Push Families Deeper into Poverty. Take action by telling your Senators to support the Senate Agriculture Committee version of the Farm Bill, which protects states’ abilities to increase or eliminate savings penalties.

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