To exclude certain assets in determining eligibility under the food stamp program, the temporary assistance for needy families (TANF) program, the Supplemental Security Income (SSI) program, and the State children's health insurance program (SCHIP).

SECTION 1. SHORT TITLE; FINDINGS.

    (a) Short Title.--This Act may be cited as the ``Freedom To Save 
Act of 2007''.
    (b) Findings.--Congress finds the following:
            (1) Under current law applicable to the food stamp program, 
        a household may not have assets that exceed $2,000 (or $3,000 
        in the case of a household that includes an elderly or disabled 
        member). The program is federally funded, but States can modify 
        or eliminate assets through categorical eligibility (automatic 
        benefits through qualifications for other assistance programs). 
        Benefit levels can be reduced by unearned income, which arise 
        from interest on past savings accounts, retirement accounts, or 
        educational accounts. States count the amount that exceeds the 
        fair market value of $4,650 of a household vehicle, unless they 
        follow TANF rules. States have the discretion to exclude some 
        assets that are excluded in TANF or Medicaid.
            (2) For low-income families who may need to rely on 
        government assistance in the face of an emergency, saving is 
        actively discouraged by asset limit policies, especially in 
        formal financial institutions. Recent qualitative research 
        indicates that asset limits serve to discourage low-income 
        families from saving, especially in formal financial 
        institutions. These men and women realize that saving is 
        penalized in the current welfare system and if they choose to 
        save, their benefits will be reduced or eliminated.
            (3) Without a safety net of personal savings, it is more 
        difficult for low-income families to graduate from government 
        assistance and achieve true self-sufficiency--the goal of the 
        1996 welfare reform. Forcing individuals to ``spend down'' 
        personal savings in order to qualify for assistance leaves 
        families vulnerable to temporary income shocks due to emergency 
        or temporary unemployment. Precautionary savings will reduce 
        overall dependence on public assistance.
            (4)(A) SSI is federally administered with asset limits of 
        $2,000 for individuals and $3,000 for couples. Assets may be 
        reduced by unearned income from interest on past savings 
        accounts or other assets. One household vehicle is excluded 
        from the asset tests, but the value of any other vehicles is 
        counted as assets.
            (B) Individuals with disabilities who receive SSI benefits 
        and are able to work for short periods of time are penalized 
        for saving any money they earn with a complete loss of 
        benefits.
            (5) TANF is a cash assistance block grant program whose 
        policies are set by individual States. The 1996 welfare reform 
        law gave states the discretion to set asset limits for TANF, or 
        waive the limit entirely. Today, States' asset limits vary from 
        $1,000 to no limit, with most set from $1,000 to $3,000. A 
        number of States have reformed their asset limits:
                    (A) Virginia and Ohio have already eliminated the 
                asset limit for TANF. To date, Virginia reports 
                administrative savings due to streamlining the 
                eligibility process and has experienced no increase in 
                fraud.
                    (B) 16 States have liberalized the financial asset 
                limit for TANF to allow assets of more than $2,000. 29 
                States have liberalized their vehicle allowances by 
                either eliminating the value of at least one vehicle, 
                or by raising the allowable value of a household 
                vehicle.
            (6)(A) Within broad Federal guidelines for the SCHIP 
        program, each State determines the design of its program, 
        eligibility groups, benefit packages, payment levels for 
        coverage, and administrative and operating procedures. States 
        have substantial flexibility in setting asset criteria in 
        public health insurance plans for children under Medicaid and 
        the State Children's Health Insurance Program (SCHIP).
            (B) 49 States waive asset tests altogether; 2 states 
        (Oregon and Texas) have asset limits in their separate SCHIP 
        programs.
            (C) Parents applying for public health insurance face more 
        restrictive eligibility criteria than children. 19 States have 
        waived the asset test for parents; 6 states continue to limit 
        assets to $1,000 per household; and 26 States have asset limits 
        that range from $2,000 to $30,000.
            (7) The personal savings rate was negative in 2005 and 2006 
        according to the Department of Commerce, meaning that spending 
        outstripped disposable income for the first time since the 
        Great Depression.
            (8) Asset limits are inefficient and, in some programs, 
        entirely unnecessary. According to the Federal Reserve, most 
        poor and near-poor families hold little to no wealth: in 2004, 
        17 percent of all households had zero or negative net worth, 
        while 29.6 percent had a net worth of less than $10,000. Few 
        families who meet the low income eligibility thresholds that 
        govern eligibility for major income support programs have any 
        significant asset holdings. For people with disabilities, 38 
        percent live on less than $15,000 annually, and that 58 percent 
        are asset poor.
            (9) A consistent segment of the American population remains 
        outside the financial mainstream where they rely on costly 
        check cashing and lending institutions: 11 percent of 
        households do not have a checking account and 9 percent do not 
        have a transaction account of any kind. 54 percent of people 
        with disabilities have no savings accounts, and 69 percent have 
        no checking accounts. Low-income families who rely on public 
        assistance are less likely to use a formal financial 
        institution, in part out of fear that any account balance will 
        be penalized by a reduction in benefits.
            (10) According to the Center for Social Development, the 
        presence of savings and even small asset holdings by a 
        household is associated with a range of positive outcomes, 
        including increased economic stability, educational attainment 
        and performance, and health and psychological well-being.
            (11) Increasing the number of households that save and the 
        amounts that they save will allow more Americans to achieve 
        greater control, security, independence, and choice in their 
        lives.

SEC. 2. MODIFICATION OF ASSET TEST UNDER FOOD STAMP PROGRAM.

    (a) Financial Resources.--Section 5(g) of the Food Stamp Act of 
1977 (7 U.S.C. 2014(g)) is amended--
            (1) by striking ``(g)(1) The Secretary'' and inserting the 
        following:
    ``(g) Allowable Financial Resources.--
            ``(1) Total amount.--
                    ``(A) In general.--The Secretary'';
            (2) in subparagraph (A) (as designated by paragraph (1)--
                    (A) by striking ``$2,000'' and inserting ``$6,000 
                (as adjusted in accordance with subparagraph (B))''; 
                and
                    (B) by striking ``$3,000'' and inserting ``$8,000 
                (as adjusted in accordance with subparagraph (B))'' ; 
                and
            (3) by adding at the end the following:
                    ``(B) Adjustment for inflation.--
                            ``(i) In general.--Beginning on October 1, 
                        2007, and each October 1 thereafter, the 
                        amounts in subparagraph (A) shall be adjusted 
                        to the nearest $100 increment to reflect 
                        changes for the 12-month period ending the 
                        preceding June in the Consumer Price Index for 
                        All Urban Consumers published by the Bureau of 
                        Labor Statistics of the Department of Labor.
                            ``(ii) Requirement.--Each adjustment under 
                        clause (I) shall be based on the unrounded 
                        amount for the prior 12-month period.''.
    (b) Definition Required.--Section 5(g)(6)(B)(iii) of the Food Stamp 
Act of 1977 (7 U.S.C. 2014(g)(6)(B)(iii)) is amended by inserting ``(as 
defined by the Secretary)'' after ``available''.
    (c) Exclusion of Retirement Accounts From Countable Financial 
Resources.--
            (1) In general.--Section 5(g)(2)(B)(v) of the Food Stamp 
        Act of 1977 (7 U.S.C. 2014(g)(2)(B)(v)) is amended by striking 
        ``or retirement account (including an individual account)'' and 
        inserting ``account''.
            (2) Mandatory and discretionary exclusions.--Section 5(g) 
        of the Food Stamp Act of 1977 (7 U.S.C. 2014(g)) is amended by 
        adding at the end the following:
            ``(7) Exclusion of retirement accounts from countable 
        financial resources.--
                    ``(A) Mandatory exclusions.--The Secretary shall 
                exclude from financial resources under this subsection 
                the value of any funds in a plan, contract, or account, 
                described in sections 401(a), 403(a), 403(b), 408, 
                408A, 457(b), and 501(c)(18) of the Internal Revenue 
                Code of 1986 and the value of funds in a Federal Thrift 
                Savings Plan account as provided in section 8439 of 
                title 5, United States Code.
                    ``(B) Discretionary exclusions.--The Secretary may 
                exclude from financial resources under this subsection 
                the value of any other retirement plans, contracts, or 
                accounts (as determined by the Secretary through 
                regulation).''.
    (d) Exclusion of Education Accounts From Countable Financial 
Resources.--Section 5(g) of the Food Stamp Act of 1977 (7 U.S.C. 
2014(g)) (as amended by section 3) is amended by adding at the end the 
following:
            ``(8) Exclusion of education accounts from countable 
        financial resources.--
                    ``(A) Mandatory exclusions.--The Secretary shall 
                exclude from financial resources under this subsection 
                the value of any funds in a qualified tuition program 
                described in section 529 of the Internal Revenue Code 
                of 1986 or in a Coverdell education savings account 
                under section 530 of that Code.
                    ``(B) Discretionary exclusions.--The Secretary may 
                exclude from financial resources under this subsection 
                the value of any other education programs, contracts, 
                or accounts (as determined by the Secretary through 
                regulation).''.
    (e) Exclusion of Vehicles From Countable Financial Resources.--
Section 5(g)(2)(B)(iv) of the Food Stamp Act of 1977 (7 U.S.C. 
2014(g)(2)(B)(iv)) is amended to read as follows:
                            ``(iv) subject to subparagraphs (B) and 
                        (C), any licensed vehicle that is not used for 
                        household transportation or to obtain or 
                        continue employment.''.

SEC. 3. PROHIBITION ON USE OF ASSET TEST UNDER THE TEMPORARY ASSISTANCE 
              FOR NEEDY FAMILIES (TANF) PROGRAM.

    (a) Prohibition.--Section 408(a) of the Social Security Act (42 
U.S.C. 608(a)) is amended by adding at the end the following:
            ``(12) Prohibition on imposition of asset test.--A State to 
        which a grant is made under section 403 shall not consider the 
        level or types of assets or resources of an individual or 
        family in determining the eligibility of the individual or 
        family for, or the amount or types of assistance to provide to 
        the individual or family under the State program funded under 
        this part.''.
    (b) Penalty.--Section 409(a) of such Act (42 U.S.C. 609(a)) is 
amended by adding at the end the following:
            ``(16) Penalty for imposition of asset test.--
                    ``(A) In general.--If the Secretary determines that 
                a State to which a grant is made under section 403 in a 
                fiscal year has violated section 408(a)(12) during the 
                fiscal year, the Secretary shall reduce the grant 
                payable to the State under section 403(a)(1) for the 
                immediately succeeding fiscal year by an amount equal 
                to not less than 1 percent and not more than 5 percent 
                of the State family assistance grant.
                    ``(B) Penalty based on severity of failure.--The 
                Secretary shall impose reductions under subparagraph 
                (A) with respect to a fiscal year based on the degree 
                of noncompliance.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on July 1, 2008.

SEC. 4. ELIMINATION OF ASSET TEST FOR DISABLED PERSONS UNDER THE 
              SUPPLEMENTAL SECURITY INCOME (SSI) PROGRAM.

    (a) In General.--Section 1611(a) of the Social Security Act (42 
U.S.C. 1382(a)) is amended in each of paragraphs (1)(B) and (2)(B) by 
inserting ``in the case of an individual who is aged or blind,'' before 
``whose''.
    (b) Conforming Amendments.--
            (1) Section 1602 of such Act (42 U.S.C. 1381a) is amended 
        by inserting ``(in the case of an individual who is aged or 
        blind)'' before ``resources''.
            (2) Section 1621(a) of such Act (42 U.S.C. 1382j(a)) is 
        amended by striking ``an individual'' and inserting ``a blind 
        or disabled individual''.
            (3) Section 1631(b)(3) of such Act (42 U.S.C. 1383(b)(3)) 
        is amended by inserting ``(as in effect before the effective 
        date of section 4 of the Freedom to Save Act of 2007)'' after 
        ``section 1611(a)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to benefits for months beginning on or after July 1, 2008.

SEC. 5. ELIMINATION OF ASSET TEST UNDER STATE CHILDREN'S HEALTH 
              INSURANCE PROGRAM (SCHIP).

    Section 2102(b) of the Social Security Act (42 U.S.C. 1397bb(b)) is 
amended--
            (1) in paragraph (1)(A), by striking ``income and resources 
        (including any standards relating to spenddowns and disposition 
        of resources)'' and inserting ``and income''; and
            (2) in paragraph (1)(B)--
                    (A) by striking ``and'' at the end of clause (i);
                    (B) by striking the period at the end of clause 
                (ii) and inserting ``, and''; and
                    (C) by adding at the end the following new clause:
                            ``(iii) may not deny eligibility, or vary 
                        the amount of benefits under this title, based 
                        on assets or resources.''.

SEC. 6. EFFECTIVE DATE.

    Except as otherwise provided in this Act, the amendments made by 
this Act shall apply to assistance furnished on or after July 1, 2008.

Summary: Freedom to Save Act of 2007 - Amends the Food Stamp Act of 1977 to modify the asset test for food stamp program eligibility by increasing the amounts of allowable financial resources, with annual inflation adjustments, and excluding from countable financial resources any retirement accounts, education accounts, and licensed vehicles. Prohibits the use of any asset test under the temporary assistance for needy families (TANF) program under part A of title IV of the Social Security Act. Prescribes an administrative penalty for any state imposing such a test. Eliminates any asset test for disabled persons under title XVI (Supplemental Security Income (SSI)) of the Social Security Act (SSA) and for any eligible individual under SSA title XXI (State Children's Health Insurance Program (SCHIP)).