Creating Economic Security: Using Progressive Savings Matches to Counter Upside-Down Tax Incentives

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Creating Economic Security

Using Progressive Savings Matches to CounterUpside-Down Tax Incentives

By Joe Valenti and Christian E. Weller November 21, 2013

Having savings is key o basic economic securiy. In ac, a 2010 Urban Insiue analysis

ound ha in nonelderly households, even a small amoun o savingsless han $2,000

in liquid assesmakes amilies significanly less likely o ace economic hardships such

as ood insecuriy, orgone docor visis, missed housing or uiliy paymens, and shu-

off uiliies, compared o hose who have zero savings. For households holding beween$2,000 and $10,000 in liquid asses, his effec was wice as large.1

Coming up wih even small amouns o savings, however, poses a challenge or many

Americans, especially hose wih lower incomes. Abou wo in five American ami-

lies repor ha hey would probably no or cerainly no be able o come up wih

$2,000 in 30 days o deal wih an emergency such as a car repair, according o he

FINR Invesor Educaion Foundaions 2012 Naional Financial Capabiliy Sudy.2For

low-income amilies, young people, and people o color, he lack o economic securiy

is even greaer. Among he botom hird o American amilies by income, 68 percen

repor ha hey would be unable o come up wih $2,000 in 30 days. Fory-nine perceno hose Americans ages 18 o 34, 50 percen o Arican Americans, and 47 percen o

Lainos also repor ha hey would be unable o come up wih $2,000 in 30 days.

Many ederal and sae policies already include ways o encourage more savings rom

lower-income households. Tere are also a number o proposals o do more o help

lower-income households ge more economic securiy. Our review o exising policies

and proposals shows ha he mos effecive savings maches ypically ollow a ew

basic principles:

Tey are progressive, wih he lowes-income savers receiving he larges incenives. Tey are srucured o creae meaningul incenives. Tey are available or a wide variey o savings goals. Tey are delivered hrough reundable ax crediscredis ha do no depend on he

amoun o ederal income ax a saver owes.

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Tese policies and proposals aim o make he ederal ax code more progressive, coun-

ering he upside-down naure o curren savings incenives ha disproporionaely

avor high-income earners, who need he leas help in saving more.

Te problem o households no accumulaing more savings or emergencies and longer-

erm goals such as reiremen is no due o a lack o ax incenives o save more. On

he conrary, he ederal governmen annually orgoes billions o dollars o encouragepeople o save more hrough various provisions in he ax codes. Many o hese incen-

ives, however, do no reach hose who would benefi he mos. Indeed, an esimaed

$158 billion in orgone ax revenue goes oward reiremen savings plans, o which he

vas majoriy o incenives80 percenflow o he op 20 percen o income earn-

ers.3Anoher $2 billion goes oward college savings plans,4ye 70 percen o amilies

wih hese educaion savings accouns earn more han $100,000 annually, placing hem

among he op 22 percen o U.S. households in erms o earnings.5

One main reason why exising ax incenives ail o reach mos working amilies is

ha as deducions, raher han credis, heir benefis are ar lower han hey wouldbe or higher-income earners. For example, a married couple earning $53,000 per

yearroughly he naional medianis in he 15 percen ax bracke, so each $1 saved

in a 401(k) plan reduces ha amilys ax burden by 15 cens. Bu or a couple earning

$200,000in he 28 percen ax brackeeach $1 saved reduces heir ax burden by

28 cens. ax filers in he highes bracke see heir ax burden reduced by 39.6 cens

or every $1 hey save. In oher words, he middle-class amily earning $50,000 needs

o save nearly $7 o lower heir axes by $1, bu he amily earning $200,000 only has

o save abou $3.57, and he amily in he highes bracke only abou $2.53 o ge he

same ax benefi.

Some poenial low-income savers also ail o benefi rom exising ax provisions

because hey are no reundablein oher words, he ax incenives are no available i

hey exceed he ederal income ax ha he axpayer owes. Only abou $1 billion annu-

ally goes oward he low-income Savers Credi, designed o boos reiremen savings

or working amilies earning up o $57,000 per yearand many amilies are ineligible

or receive only a racion o he maximum credi.6Some working amilies pay no ederal

income ax a allhough hey do pay payroll axesand are hence no eligible or he

Savers Credi. Low-income amilies who sruggle daily o ge by should no be orced o

pay ederal axes beyond heir means. A he same ime, however, hese amilies do no

benefi rom ax breaks designed o help hem build economic securiy because heir

marginal ax bracke is 0 percen.

Te Cener or American Progress recenly released a repor on reorming he

muliude o ax deducions or savings wih a single, fla, and reundable credi

a Universal Savings Credi.7Tis would equalize he playing field or savers o all

incomes by offering he same credi o everyone. In he above example, insead o he

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high-income amily saving $1 in ax liabiliy or every $2.50 saveda ar beter deal

han he $1 o ax reducion or every $7 saved by a middle-income amilyall ami-

lies would receive he same ax benefi.8

Te exising evidence suggess ha shifing ax incenives o lower-income earners rela-

ive o he curren sysem o ax incenives will increase savings among lower-income

savers. I hence sands o reason ha srenghening savings incenives or lower-incomesavers beyond a fla credi or all hrough progressive maches could help hem save even

more. Bu even in he exising ax code, Congress could add progressive savings maches

as a firs sep o couner he upside-down naure o curren savings incenives.

Tis issue brie consequenly summarizes exising maches and novel proposals o

expand hem o inorm he discussion around making savings incenives work beter or

he lower-income households who need hem he mos.

The landscape of ex isting savings matches

Maching provisions already exis in several amiliar savings vehicles: employer-based

reiremen plans and college savings plans. Tese plans, however, are ofen less acces-

sible o low-income savers. wo-hirds o workers making $75,000 or more per year

paricipae in an employer-sponsored reiremen plan, bu less han one-hird o workers

earning less han $30,000 paricipae.9And hey ofen ail o share in he ax benefis

because heir incomes are lower.

Employer-based retirement plans

eiremen plans wih maching eaures are only available o a subse o American

workers, bu hey represen a major preceden. According o he 2010 Survey o

Consumer Finances, only abou hal o all American amilies have a reiremen accoun,

and only 35 percen o amilies have an employer-based accoun such as a 401(k)

plan.10Te vas majoriy o reiremen plans, however, offer some ype o mach. For

example, our ou o five plans adminisered by Vanguard, he worlds larges muual-

und company, offer some ype o mach; 95 percen o paricipans in Vanguard plans

receive a mach, since he plans ha offer a mach end o be larger han hose ha do

no.11Similarly, a survey by consuling firm Aon Hewit o 141 plans o large companies

employing more han 3.5 million people ound ha 96 percen o plans offered some

ype o maching conribuion in 2012.12

Maches generally range rom a 25 percen mach o a 100 percen mach on he firs

3 percen o 6 percen o pay ha is saved in a plan; he median maching plan offers

a 50 percen mach on he firs 5 percen saved, according o he U.S. Bureau o Labor

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Saisicss 2010 Naional Compensaion Survey.13On average, maching provisions add

a maximum o 3.5 percen o ones income o a reiremen plan.14Over ime, his can

boh incenivize savings behavior and grealy increase accoun balances.

Maching unds have generally succeeded in increasing employee paricipaion in

reiremen savings plans and have, o some exen, increased conribuions. Fideliy

Invesmens repored in 2009, or example, ha inroducing an employer mach canboos employees paricipaion in reiremen plans by up o 9 percenage poins.15Te

maching limi uncions as a ype o behavioral arge: Consumers are likely o save

up o he maximum amoun ha is mached bu are less likely o save above ha level.

Indeed, Fideliy ound ha abou 30 percen o paricipaing employees save a he

maximum mach level.16Tis means ha in companies wih relaively low maching

limis, savings may be encouraged, bu overall savings may decrease.

College savings plans

Te ederal governmen offers ax incenives or educaion savings hrough wo plans:

Secion 529 plans, which are adminisered by individual saes o suppor higher-

educaion expenses Coverdell accouns, which are available on he privae marke o suppor a amilys

expenses or boh K-12 and higher-educaion coss

Boh o hese plans are used predominanly by higher-income savers. According o he

2010 Survey o Consumer Finances, less han 3 percen o amilies have an educaion

savings accoun such as a Secion 529 or Coverdell accoun.17

Te median income oamilies using 529 plans or Coverdell accouns is abou $142,400nearly hree imes

as high as he naional median. Whas more, amilies saving hrough hese plans have

median wealh 25 imes as high as ha o amilies who are no using hese plans.18

Over he pas decade, saes have begun o mach working amilies conribuions o

Secion 529 plans as a way o encourage broader paricipaion in hese plans; so ar, 11

saes have inroduced maching provisions ino heir Secion 529 plans.19Louisiana

offers a modes mach, called an earnings enhancemen, o is 529 plan, rom 14 per-

cen o conribuions or amilies earning less han $30,000 o 2 percen o savings or

amilies earning more han $100,000.20Generally, oher saes offer maching conribu-

ions or he firs $300 o $500 ha low- and moderae-income residens conribue o

heir saes college savings plan, wih income phaseous ranging rom approximaely

$40,000 o $100,000 o annual income. Tese phaseous may also vary by amily size.

hode Island and Arkansas have he mos atracive mach raes, offering up o a 2-1

mach.21While $500 is a significan amoun or a low-income amily o save during

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he yearwih he average Earned Income ax Credi, or EIC, reund exceeding

$2,000conribuing $500 o a 529 plan using a ax reund would be a modes way o

leverage he addiional $1,000 in maching unds oward ha amilys college savings.22

Susainable unding o maching programs can be a major barrier o saes looking o

mach conribuions o heir 529 plans. Because he sae legislaure mus appropriae

maching unds in advance o he money being spen, some saes have a cuoff or henumber o residens who can apply or a mach; in Kansas, or insance, only he firs

1,200 paricipans are eligible.23Tis also means ha maches may no be predicable or

savers rom one year o he nex.

In some cases, privae or nonprofi-unded maches have helped overcome his chal-

lenge. In San Francisco, he privaely unded Kindergaren o College iniiaive also

offers maching unds or children in he ciys public schools. Since 2011, enering

kindergareners have been auomaically enrolled in he program. For he firs $100

saved, an addiional $100 is deposied in he accoun, wih an addiional $100 bonus or

amilies ha save a minimum o $10 per monh or six monhs.24

Individual Development Accounts

For nearly wo decades, Individual Developmen Accouns, or IDAs, have demon-

sraed ha low-income amilies can save when given he righ incenives and sruc-

ures. Te American Dream Demonsraionhe firs large-scale pilo program o

hese accounsdelivered hese mached savings accouns o 2,350 paricipans in 14

locaions naionwide beween 1997 and 2003. Paricipaing amilies wih incomes no

exceeding wice he ederal povery lineroughly $39,000 or a amily o hree odaywere offered a leas a dollar-or-dollar mach on heir savings oward goals such a down

paymen or a firs home, some orm o higher educaion, or saring a small business.25

More han hal o all paricipans saved a leas $100 while in he program, wih abou

15 percen o paricipans receiving he maximum 1-1 mach$2,050 on averageby

coninuing o save regularly over a wo- o hree-year period.26

Nonprofi organizaions receive ederal unding or IDA programs hrough he Asses

or Independence, or AFI, compeiive gran process a he U.S. Deparmen o Healh

and Human Services.27

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Why progressive matches are the right way forward

A lack o savings can lead o greaer economic hardship, magniying he effecs o losing

a job, dealing wih a car breakdown, or recovering rom a medical condiion. A he

same ime, saving can be quie difficul. Abou 26 percen o American households lack

sufficien resources o ge by a he povery line or hree monhs in he even o job

loss or oher sudden financial shock.28Excluding he value o homes and vehicles, hisnumber increases o 44 percenroughly hree imes he ederal povery line.29Indeed,

27 percen o Americans repor no having any emergency savings a all.30

Tere is evidence, however, ha low-income earners can indeed save money under

he righ circumsances. One o he larges mached savings experimens ook place a

H& Block offices in meropolian S. Louis, Missouri, in 2005. Te company randomly

offered 14,000 low-income ax filers no mach, a 20 percen mach, or a 50 percen

mach on heir savings i hey opened a reiremen savings accoun known as an Express

IR. Only 3 percen o hose no offered a mach opened accouns, bu 8 percen

opened accouns in he 20 percen mach group, and 14 percen opened accouns inhe 50 percen mach groupmaking hem nearly five imes as likely o save as hose

wihou a mach.31Savers offered a mach also conribued our o eigh imes as much

money o heir accouns as did savers no offered a mach.32

Beginning in 2010, a similar pilo program ook place in our ciies wih suppor rom

he U.S. Social Innovaion Fund. Low-income ax filers a voluneer ax preparaion sies

in New York; Newark, New Jersey; San Anonio, exas; and ulsa, Oklahoma, were

randomly offered a 50 percen mach on he firs $1,000 saved, provided ha hey did

no ouch heir savings or approximaely one year. Mos paricipans who were offered

a mach oped o save, and abou wo-hirds were able o hold ono he savings or a yearo receive he maching conribuion.33

Ye mos savings incenives are he resul o ederal ax deducions ha reduce ones ax-

able income, raher han direcly mach savings. Conribuions made o a ax-advanaged

reiremen accoun, or examplesuch as a 401(k) plan or an Individual eiremen

Arrangemen, or IRdo no coun as axable income, resuling in a smaller ax liabil-

iy. Te money in hese accouns also accumulaes wihou he earnings being axed,

hough axes mus be paid on he amoun wihdrawn or reiremen or oher permited

purposes.34Similar ax benefis exis or savings plans designed o cover healh care or

college coss.

Because hese incenives come rom ax deducions, he size o he incenive depends on

he savers ax bracke. axpayers earning more han $400,000 individually, or $450,000

joinly, are subjec o he highes ax bracke, 39.6 percen, or every $1 earned above

ha level.35Bu or every $1 placed in a ax-advanaged savings vehicle, heir ax liabiliy

is reduced by 39.6 cens. Lower-income workers are in a lower ax bracke, resuling

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in boh a smaller ax burden or each addiional $1 earned and a much smaller savings

incenive o 15 or 25 cens or every $1 saved, insead o 39.6 cens. And low-income

working amilies have no income ax liabiliy a all, hough hey do pay payroll axes.

While he curren ax sysem ensures ha hey are no unairly axed, i also leaves hem

wih no incenive o saveeven hough savings could poenially increase heir eco-

nomic securiy.

No only do higher-income workers have a greaer ax benefi, hey also have greaer

access o ax-advanaged savings vehicles. For example, 32.4 percen o workers earning

beween $20,000 and $30,000 annually paricipae in a reiremen savings plan a work,

and ewer han one in seven workers earning less han $20,000 paricipaes in such

plans, while wo-hirds o workers earning more han $75,000 paricipae.36Ulimaely,

hese ax incenives conribue o an imbalanced sysem o ederal effors o encourage

savings hrough he ax code: 80 percen o he benefis rom reiremen ax incenives

go o hose in he op fifh o he income disribuion.37

Despie greaer access and sronger incenives or higher-income earners, academicresearch shows ha hese incenives ofen ail o creae new savings. For low-wealh

households, 401(k) plans and oher ax-advanaged savings vehicles ofen represen

new savings, bu among higher-income earners, 401(k) plans and oher ax-advanaged

savings vehicles largely capure savings ha would have happened anyway even wihou

hese plans.38

Federal and sae policymakers have long considered savings maches an alernaive ha

could incenivize amilies o sar saving and o poenially save more han hey oher-

wise would. Afer all, working amilies may no benefi as much rom ax deducions or

savingi hey benefi a all.

Principles of matching incentives moving forward

Maching incenives already exis in some reiremen and college savings programs,

bu hese incenives have limiaions. Meanwhile, he ederal governmen coninues o

subsidize savings hrough ax expendiures, even hough hese benefis are no widely

shared. Te ollowing our principles would make mached savings a more effecive

piece o ederal savings policy:

Matching funds should be progressive so that savings incentives are greater for

those who need the greatest push. Te curren upside-down naure o ax incenives

provides greaer benefis o savers who do no generae new ne savings and litle o no

benefi o hose or whom small amouns o savings can be ransormaive.

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Progressive matches should be structured in a way that maximizes savings behav-

ior at targeted levels.o ac as a rue incenive, maches should be clear and sizable.Employer maches ypically range rom 25 percen o 100 percen o conribuions,

and sae maches in college savings plans range rom 50 percen o 200 percen.

Meanwhile, a 2011 sudy by William G. Gale, co-direcor o he ax Policy Cener,

ound ha a 30 percen reundable ax credi, delivered as a mach, would be revenue-

neural o curren law.39Maching levels will ulimaely depend on available unds,applicable eligibiliy ranges, and uure research.

Progressive matches should be available for a wide number of savings goals

rather than restricted to a specific purpose such as education or retirement. Many

Americans ap heir 401(k) reiremen accouns eiher by borrowing rom heir sav-

ings plans or wihdrawing money beore reiremen.40Ta is, savings objecives may

shif over ime as peoples siuaions change.

Progressive matches should be delivered through refundable tax credits to ensure

an automatic and consistent distribution of incentives.Curren maching provisionsare eiher volunary or dependen on annual budge appropriaions. Tis lack o con-

sisency limis heir useulness. eundable ax credis are an auomaic way o deliver

maching unds o all eligible Americans, including hose wih no income ax liabiliy.

And reundable ax credis are he only way o deliver credis consisenly hrough he

ax code and also reach he low-income earners who are mos financially vulnerable.

Various ederal maching proposals have incorporaed hese principles o some exen.

able 1 compares curren mached savings programs wih ederal proposals o il lusrae

how hese principles could beter be me.

Nearly wo decades ago, Presiden Bill Clinon proposed a new sysem o savings known

as Universal Savings Accouns, or USA Accouns, o provide an addiional basic level o

reiremen securiy in addiion o Social Securiy benefis. Workers could conribue up

o $1,500 per year o hese accouns, which would include an auomaic conribuion o

$400 per year or he lowes-income workers and 100 percen maching conribuions

o he firs $550 saved by workers.41Workers earning more han $50,000 annually would

only be eligible or maching unds i hey did no have access o a reiremen plan a

work.42Te annual cos o his savings iniiaive was esimaed o be abou $36 billion

abou $48 billion in odays dollars.

On a more modes scale, Presiden Barack Obamas fiscal year 2011 budge included a

proposal ha would expand eligibiliy or he Savers Credi o join ax filers earning as

much as $85,000raher han odays $57,500 limiand conver i o a reundable

credi so ha all ax filers, no jus hose wih a posiive ax liabiliy, could poenially

benefi.43Tese changes would cos an esimaed $3 billion annually, in place o he $1

billion cos o he exising Savers Credi.

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ecen proposals in Congress would similarly enhance savings incenives wih an

explici ocus on maching conribuions. Tis year, a bill sponsored by ep. ichard

Neal (D-MA)he Savings or American Families Fuure Ac, or H. . 837would

have also expanded eligibiliy or he Savers Credi and would have direcly deposied

he credi ino he axpayers reiremen accoun, effecively making i a mach.

Federal proposals have largely ocused on reiremen, hough wihdrawals rom reire-men accouns are permited in some circumsances or firs-ime homeownership or

higher-educaion expenses. Bu some proposals have looked o incenivize savings more

broadly. Te Financial Securiy Credi Ac, or H.. 2917, inroduced in Augus 2013 by

ep. Jos Serrano (D-NY), would offer a 50 percen mach on he firs $1,000 saved by

low- and moderae-income workerssingle filers earning less han $41,650 and join

filers earning less han $55,000in a reiremen accoun, educaion savings accoun,

U.S. savings bond, cerificae o deposi, or even some savings accouns, provided ha

amilies held ono he savings or a leas eigh monhs.44

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TABLE 1

Existing and proposed matched savings policies

Source Eligibility Match rate Restrictions

Existing policies

401(k)s and other

employer-based

retirement plans

Employers voluntary

tax-deductible

contributions

All employees are

eligible to participate

in plan

Varies; the median plan

matches 50 percent of

the first 5 percent of sal-

ary withheld

Generally limited to retirement,

with some exceptions*

States 529 college

savings plans

(11 participating states)**

State budget or plan

administrator fund

contributions, as

funds are available

Ten states in which

income cutoffs range

from $40,000 to

$100,000

Ten states that typically

match 50 percent to 200

percent of the first $300

to $500 in college savings

based on income***

Limited to higher-education

expenses, including tuition, room

and board, and books and supplies

Individual Development

Accounts

Government or

private contribu-

tions, as funds are

available

Generally, 200 per-

cent of the federal

poverty line, or

$47,000 for a family

of four

Varies; most typically,

programs match 100

percent to 200 percent of

savings, up to $1,000 to

$2,000 in total personal

savings

Generally limited to self-improve-

ment goals such as home purchase,

higher education, or starting a

business

Proposed policies

Universal Savings

Accounts (President

Clinton, 1999)

Refundable tax

credit to the account

Annual income

capped at $50,000

approximately

$70,000 todayif

worker has access

to retirement plan;

otherwise, no limit

One hundred percent

of the first $550 saved

per year

Generally limited to retirement,

with some exceptions

Savings for American

Families Future Act

(President Obamas FY

2011 budget; Rep. Neal)

Refundable tax

credit to the account

Annual income

capped at $32,250

for single filers and

65,000 for joint

filers for maximummatch, phasing

out completely at

$52,250 for single

filers and $85,000 for

joint filers

Fifty percent of the first

$500 saved in a retire-

ment account, increasing

annually by $100 to reach

50 percent of the first$1,500 saved in 2023

Generally limited to retirement,

with some exceptions

Financial Security Credit

Act (Rep. Serrano)

Refundable tax

credit to the account

Annual income

capped at $41,625

for single filers and

$55,500 for joint

filers for maximum

match, phasing

out completely at

$56,625 for single

filers and $70,500 forjoint filers

Fifty percent of the

first $1,000 saved in a

retirement or education

account, certificate of

deposit, savings bond, or

savings account

Matching funds must be retained

for eight months; no other restric-

tions aside from pre-existing

account rules

* No withdrawals are permitted without penalty until age 59.5, with some exceptions for first home purchase, education, and emergencies.

** Ten states all have similar provisions to the ones mentioned above. Louisiana offers an earnings enhancement ranging from 2 percent to 14 percent of contri-butions based on income that is available to all residents who contribute. See Louisiana Office of Student Financial Assistance, Start Saving Program FrequentlyAsked Questions (Revised 1-01-11).

*** States rules vary about how many years matching funds can be claimed and how matching-fund recipients are chosen if demand exceeds available funds. SeeCorporation for Enterprise Development, Resource Guide: College Savings Incentives.

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Conclusion

Te lack o savings among low- and moderae-income amilies hreaens boh heir abil-

iy o ge by in emergencies and heir poenial o plan or he uure. Ye he ax code

is largely ocused on incenives or high-income savershose who may no need help

saving in he firs place.

Te Universal Savings Credi, by equalizing ax benefis across all incomes and sav-

ings vehicles, would make saving simpler and more atracive or working amilies.

Inroducing a progressive mach or low-income savers in conjuncion wih he

Universal Savings Credi would urher help amilies sar saving and accumulae more

savings o build heir own financial securiy. Even under he curren ax code, adding

progressive maches would creae a airer ax sysem ha rewards saving by hose or

whom savings are mos imporan.

Insead o coninuing ax expendiures ha benefi he highes-income savers, his

approach would ensure ha orgone ax revenue goes o help build and expand hemiddle class.

Joe Valeni is he Direcor of Asse Building a he Cener for American Progress. Chrisian E.

Weller is a Senior Fellow a he Cener and a professor in he Deparmen of Public Policy and

Public Affairs a he Universiy of Massachusets Boson.

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Endnotes

1 Gregory Mills and Joe Amick, Can Savings Help OvercomeIncome Instability? (Washington: Urban Institute, 2010).

2 FINRA Investor Education Foundation, Financial Capabilityin the United States: Report of Findings from the 2012 Na-tional Financial Capability Study (2013), available at http://www.usfinancialcapability.org/downloads/NFCS_2012_Re-port_Natl_Findings.pdf.

3 U.S. Office of Management and Budget,Analytical Perspec-tives, Budget of the United States Government, Fiscal Year 2014(Executive Office of the President, 2013), available at http://www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/spec.pdf; Seth Hanlon, Tax Expenditure ofthe Week: Tax-Deferred Retirement Savings, Center forAmerican Progress, January 19, 2011, available at http://www.americanprogress.org/issues/open-government/news/2011/01/19/8862/tax-expenditure-of-the-week-tax-deferred-retirement-savings/.

4 U.S. Office of Management and Budget,Analytical Perspec-tives, Budget of the United States Government, Fiscal Year2014.

5 U.S. Government Accountability Office, Higher Education: ASmall Percentage of Families Save in 529 Plans, GAO-13-64(2012), available athttp://ww w.gao.gov/assets/660/650759.pdf; U.S. Census Bureau, Current Population Survey (CPS):Annual Social and Economic (ASEC) Supplement, Income

Distribution to $250,000 or More for Households: 2012,Table HINC-06, available at http://www.census.gov/hhes/www/cpstables/032013/hhinc/toc.htm (last accessedNovember 2013).

6 Joe Valenti, Helping Working Families Build Wealth at TaxTime (Washington: Center for American Progress, 2013),available at http://www.americanprogress.org/issues/econ-omy/report/2013/02/27/54845/helping-working-families-build-wealth-at-tax-time/.

7 Christian E. Weller, The Universal Savings Credit (Wash-ington: Center for American Progress, 2013), availableat http://www.americanprogress.org/issues/economy/report/2013/07/19/70058/the-universal-savings-credit/.

8 Ibid.

9 Craig Copeland, Employment-Based Retirement PlanParticipation: Geographic Differences and Trends, 2011(Washington: Employee Benefit Research Institute, 2012).

10 Jesse Bricker and others, Changes in U.S. Family Financesfrom 2007 to 2010: Evidence from the Survey of ConsumerFinances, Federal Reserve Bulletin98 (2) (2012): 180, avail-able athttp://www.federalreserve.gov/pubs/bulletin/2012/pdf/scf12.pdf.

11 Vanguard, How America Saves 2013: A report on Vanguard2012 defined contribution plan data (2013), available athttps://institutional.vanguard.com/iam/pdf/HAS13.pdf.

12 Aon Hewitt, 2013 Universe Benchmarks Highlights:Measuring Employee Savings and Investing Behavior inDefined Contribution Plans (2013), available at http://www.aon.com/attachments/human-capital-consulting/2013-Universe-Benchmarks-Highlights-vFinal.pdf.

13 U.S. Bureau of Labor Statistics, Table 26. Savings andthrift plans: Maximum employee contribution matched byemployer, private industry workers, National Compensation

Survey, 2010, available athttp://www.bls.gov/ncs/ebs/de-tailedprovisions/2010/ownership/private/table26a.pdf (lastaccessed November 2013).

14 Keenan Dworak-Fisher, Matching Matters in 401(k) PlanParticipation. Working Paper 434 (U.S. Bureau of LaborStatistics, 2010), available at http://www.bls.gov/ore/pdf/ec100020.pdf.

15 Eleanor Laise, The Incredible Shrinking 401(k) EmployerMatch, The Wallet, February 27, 2009, availab le at http://blogs.wsj.com/wallet/2009/02/27/the-incredible-shrink-ing-401k-employer-match/.

16 Ibid.

17 Bricker and others, Changes in U.S. Family Finances from2007 to 2010: Evidence from the Survey of ConsumerFinances.

18 U.S. Government Accountability Office, Higher Education: ASmall Percentage of Families Save in 529 Plans.

19 Corporation for Enterprise Development, Resource Guide:College Savings Incentives (2013), available at http://cfed.org/assets/scorecard/2013/rg_CollegeSavingsIncen-tives2013.pdf.

20 Louisiana Office of Student Financial Assistance, Start Sav-ing Program Frequently Asked Questions (Revised 1-01-11),available at http://www.startsaving.la.gov/savings/pdf/STARTFAQs.pdf(last accessed November 2013).

21 Corporation for Enterprise Development, Resource Guide:College Savings Incentives.

22 Internal Revenue Service, Statistics of Income 2010, Table3.3, available athttp://www.irs.gov/file_source/PUP/taxstats/indtaxstats/10in33ar.xls(last accessed November2013).

23 Ibid.

24 City and County of San Francisco Kindergarten to Collegeprogram, The Kindergarten to College Program, availableathttp://www.k2csf.org(last accessed November 2013).

25 Mark Schreiner, Match Rates, Individual DevelopmentAccounts, and Saving by the Poor (St. Louis, MO: Centerfor Social Development, 2006), available at http://www.usc.edu/dept/chepa/IDApays/publications/match%20rates%20IDAs%20and%20saving%20by%20the%20poor.pdf.

26 Ibid.

27 Office of Community Services, Assets for IndependenceProgram Summary, available at http://www.acf.hhs.gov/programs/ocs/resource/assets-for-independence-program-summary(last accessed November 2013).

28 Corporation for Enterprise Development, Asset PovertyRate, available athttp://scorecard.assetsandopportunity.org/2013/measure/asset-poverty-rate (last accessed No-vember 2013).

29 Corporation for Enterprise Development, Liquid AssetPoverty Rate, available athttp://scorecard.assetsandop-portunity.org/2013/measure/liquid-asset-poverty-rate(lastaccessed November 2013).

30 Bankrate.com, June 2013 Financial Security Index charts,available at http://www.bankrate.com/finance/consumer-index/financial-security-charts-0613.aspx(last accessedOctober 2013).

31 Esther Duflo and others, Saving Incentives for Low- andMiddle-Income Families: Evidence from a Field Experimentwith H&R Block, The Quarterly Journal of Economics121 (4)(2006): 13111346.

32 Ibid.

33 Gilda Azurdia and others, Encouraging Savings for Low-and Moderate-Income Individuals: Preliminary Implemen-

tation Findings from the SaveUSA Evaluation (New York:MDRC, 2013), available athttp://www.mdrc.org/sites/default/files/SaveUSA_brief14.pdf.

34 Roth-style 401(k)s and IRAs have different tax advantages:Contributions are made with after-tax dollars, so savers donot receive an immediate tax benefit, but withdrawals andinvestment gains are not taxed.

35 American Taxpayer Relief Act of 2012, Public Law 240, 112thCong., 2nd sess. (January 1, 2013).

8/13/2019 Creating Economic Security: Using Progressive Savings Matches to Counter Upside-Down Tax Incentives

13/13

36 Copeland, Employment-Based Retirement Plan Participa-tion: Geographic Differences and Trends, 2011.

37 Hanlon, Tax Expenditure of the Week: Tax-Deferred Retire-ment Savings.

38 Eric M. Engen and William G. Gale, The Effects of 401(k)Plans on Household Wealth (Washington: National Bureauof Economic Research, 2000); Victor Chernozhukov andChristian Hansen, The Effects of 401(K) Participation on theWealth Distribution: An Instrumental Quantile RegressionAnalysis, Review of Economics and Statistics, 86 (3) (2004):735751.

39 William G. Gale, A Proposal to Restructure Retirement Sav-ing Incentives in a Weak Economy with Long-Term Deficits(Washington: Urban-Brookings Tax Policy Center, 2011),available at http://www.brookings.edu/~/media/research/files/papers/2011/9/08%20retirement%20incentives%20gale/0908_retirement_incentives_gale.pdf.

40 Christian E. Weller and Jeffrey B. Wenger, Easy money orhard times? Health and 401(k) loans,Contemporary Eco-nomic Policy30 (1) (2012): 2942; Robert Argento, Victoria L.Bryant, and John Sabelhaus, Early Withdrawals from Retire-ment Accounts During the Great Recession (Washington:Board of Governors of the Federal Reserve System, 2013).

41 Pamela Perun, Matching Private Saving with FederalDollars: USA Accounts and Other Subsidies for Saving(Washington: Urban Institute, 1999), available athttp://www.urban.org/uploadedPDF/BRIEF8.PDF.

42 Ibid.

43 Executive Office of the President, Budget of the United States,Fiscal Year 2011(2010), p. 102.

44 Rep. Jos E. Serrano, Serrano Introduces Bill to EncourageSavings, Press release, August 1, 2013, available at http://serrano.house.gov/press-release/serrano-introduces-bill-encourage-savings.