November 14, 2000  
Dear State Health Official:  
I am writing to you as part of an interagency effort to assure that the policies applied under 
Federal needs-based programs do not negatively affect Individual Development Accounts (IDAs) 
funded under the Assets for Independence Act (AFIA), Public Law 105-285. The purpose of 
these IDAs is to improve the economic independence and stability of individuals and families 
and to promote and support the transition to economic self-sufficiency.  
Individual Development Accounts under AFIA provide Federal funds to match the amount of 
earnings that low-income working individuals and families put into savings for a first home, 
post-secondary education, or to start a new business. There are currently 65 grantees under the 
AFIA demonstration project in 33 States.  
Section 415 of the AFIA statute permits States to count any funds deposited by eligible 
individuals into IDAs (including interest accruing on those funds) for purposes of determining 
eligibility for any Federal or federally assisted program based on need such as Medicaid and 
State Children's Health Insurance Program (SCHIP). However, matching funds deposited into 
AFIA established IDAs (including interest accruing on these matching funds) must be 
disregarded. Therefore, funds deposited into an IDA by a sponsoring nonprofit organization or 
State or local government cannot be counted as income when determining eligibility for 
Medicaid and SCHIP and if retained, cannot be counted as resources. Absent a State plan 
provision to the contrary, income received by an individual (e.g., earnings) and deposited into an 
IDA is still counted as income and as a resource if retained in that IDA. In addition, interest 
earned on the funds deposited by the individual into an IDA is countable income.  
We encourage you to take advantage of the flexibility offered under Medicaid and SCHIP to 
enable individuals and families to take full advantage of IDAs. States have the option under title 
XXI to disregard income deposited into an IDA and all interest earned on an IDA for purposes of 
SCHIP eligibility. Using the authority in sections 1931 and 1902(r)(2) of the Social Security Act 
to adopt less restrictive methodologies, States may also disregard this income under many 
Medicaid eligibility groups described in title XIX. States need only file an amendment to their 
Medicaid and/or SCHIP State plan; no waiver is required. States may use the State Medicaid 
and/or SCHIP plan template page that accompanies this letter, indicating the State's desire to 
disregard this income for eligibility purposes, and return the page(s) to your Health Care 
Financing Administration (HCFA) Regional Office.   Please note that this letter primarily relates to IDAs funded under AFIA. There are also IDAs 
authorized by section 404(h) title IV of the Social Security Act which are related to Temporary 
Assistance for Needy Families (TANF). Funds retained in these TANF-related IDAs must be 
disregarded as resources, and interest earned on these IDAs must be disregarded as income, 
when determining eligibility under both Medicaid and SCHIP. There is no mandatory disregard 
of earned income that is deposited in a TANF-related IDA. Again, we encourage States to use 
the flexibility in Medicaid and SCHIP to disregard earned income that is deposited in a TANF-
related IDA for eligibility purposes and has included the required information on the attached 
template pages. We believe that it will simplify administration of your program if the treatment 
of IDAs under AFIA and title IV is the same.  
The Food and Nutrition Service and the Administration for Children and Families are 
preparing guidance on how States might disregard IDA funds under the Food Stamp 
and TANF programs.  
If you have any questions, please contact the following staff of HCFA's Center for Medicaid 
and State Operations: for questions about Medicaid, Judy Rhoades at (410) 786-4462 and for 
questions about SCHIP, Jennifer Ryan at (410) 786-1304.  
Sincerely,  
/s/  
Timothy M. Westmoreland Director  
Enclosures  
cc: All HHS Regional Directors All HCFA Regional Administrators All HCFA Associate 
Regional Administrators for Medicaid and State Operations Lee Partridge, Director, Health 
Policy Unit - American Public Human Services Association Joy Wilson, Director, Health 
Committee - National Conference of State Legislatures Matt Salo, Director of Health Legislation 
- National Governors' Association Brett Ewig, Association of State and Territorial Health 
officials   DRAFT  
Supplement 8a to Attachment 
2.6-A ADDENDUM  
 
State Plan Under Title XIX of the Social Security Act  
State: __________________________  
LESS RESTRICTIVE METHODS OF TREATING INCOME UNDER SECTION 1902(r)(2) 
OF THE ACT  
____ For all eligibility groups subject to 1902(r)(2) and not subject to the limitations on 
payment explained in 1903(f) of the Act: All otherwise countable income deposited in an 
IDA account funded under the Assets for Independence Act is excluded.  
____ For all eligibility groups subject to 1902(r)(2) and not subject to the limitations on payment 
explained in 1903(f) of the Act: All otherwise countable income deposited in an IDA account 
authorized under section 404 is excluded.  
____ For all eligibility groups subject to 1902(r)(2) and not subject to the limitations on 
payment explained in 1903(f) of the Act: All interest earned on an IDA account funded 
under the Assets for Independence Act is excluded.  
 
DRAFT  
Supplement  8b  to 
Attachment  2.6-A 
ADDENDUM  
  State Plan Under Title XIX of the Social Security Act  
State: __________________________  
LESS  RESTRICTIVE  METHODS  OF  TREATING  RESOURCES  UNDER  SECTION 
1902(r)(2) OF THE ACT  
____ For all eligibility groups subject to 1902(r)(2) of the Act: all funds in IDA accounts funded 
under the Assets for Independence Act are excluded.  
 
DRAFT  
Supplement 12 to 
Attachment 2.6-A 
ADDENDUM  
 
State Plan Under Title XIX of the Social Security Act  
State: __________________________ ELIGIBILITY UNDER SECTION 1931 OF THE ACT 
____ The agency uses less restrictive income and/or resource methodologies than those in effect 
as of July 16, 1996, as follows:  
____ All otherwise countable income deposited in an IDA account funded under the Assets for 
Independence Act is excluded from income. ____ All interest earned on an IDA account funded 
under the Assets for Independence Act is excluded  
from income.   ____ All funds in IDA accounts funded under the Assets for Independence Act are excluded 
from resources. ____ All otherwise countable income deposited in an IDA account funded under 
section 404 of the  
Social Security Act is excluded from income.  
 
DRAFT - ADDENDUM TO SECTION 4  
STATE  CHILDREN'S  HEALTH  INSURANCE 
PROGRAM STATE PLAN TEMPLATE  
 
Section 4. Eligibility Standards and Methodology (section 2102(b))  
4.1.3 ___ Income:  
____ All otherwise countable income deposited in an IDA account funded under the 
Assets for Independence Act is excluded from income.  
____ All interest earned on an IDA account funded under the Assets for Independence Act is 
excluded from income.  
____  All  funds  in  IDA  accounts  funded  under  the  Assets  for  Independence  Act  are 
excluded from resources.  
____ All otherwise countable income deposited in an IDA account authorized under section 404 
of the Social Security Act is excluded from income.