II 

109TH CONGRESS 

1ST SESSION S. 868 

To encourage savings, promote financial literacy, and expand opportunities 

for young adults by establishing KIDS Accounts. 

IN THE SENATE OF THE UNITED STATES 

APRIL 21, 2005 

Mr. SANTORUM (for himself, Mr. CORZINE, Mr. SCHUMER, and Mr. DEMINT) 

introduced the following bill; which was read twice and referred to the 

Committee on Finance 

A BILL 

To encourage savings, promote financial literacy, and expand 

opportunities for young adults by establishing KIDS Accounts. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘America Saving for 

5 Personal Investment, Retirement, and Education Act of 

6 2005’’ or the ‘‘ASPIRE Act of 2005’’. 

7 SEC. 2. KIDS ACCOUNT FUND. 

8 (a) ESTABLISHMENT.—There is established in the 

9 Treasury of the United States a KIDS Account Fund. 
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1 (b) AMOUNTS HELD BY FUND.—The KIDS Account 

2 Fund consists of the sum of all amounts paid into the 

3 Fund under subsections (d) and (e), increased by the total 

4 net earnings from investments of sums held in the Fund 

5 or reduced by the total net losses from investments of 

6 sums held in the Fund, and reduced by the total amount 

7 of payments made from the Fund (including payments for 

8 administrative expenses). 

9 (c) USE OF FUND.— 

10 (1) IN GENERAL.—The sums in the KIDS Ac11 count Fund are appropriated and shall remain avail12 able without fiscal year limitation— 

13 (A) to invest under section 5, 

14 (B) to make distributions under section 6, 

15 (C) to pay the administrative expenses of 

16 carrying out this Act, and 

17 (D) to purchase insurance as provided in 

18 section 9(c)(2). 

19 (2) EXCLUSIVE PURPOSES.—The sums in the 

20 KIDS Account Fund shall not be appropriated for 

21 any purpose other than the purposes specified in this 

22 section and may not be used for any other purpose. 

23 (d) GOVERNMENT CONTRIBUTIONS.— 
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1 (1) IN GENERAL.—The Secretary of the Treas2 ury shall make transfers from the general fund of 

3 the Treasury to the KIDS Account Fund as follows: 

4 (A) AUTOMATIC CONTRIBUTIONS.—Upon 

5 receipt of each certification under section 3(b), 

6 the Secretary of the Treasury shall transfer 

7 $500. 

8 (B) SUPPLEMENTAL CONTRIBUTIONS.— 

9 Upon receipt of each certification under section 

10 4(a), the Secretary of the Treasury shall trans11 fer the supplemental amount. 

12 (C) MATCHING CONTRIBUTIONS.—Upon 

13 receipt of each certification under section 4(b), 

14 the Secretary of the Treasury shall transfer the 

15 matching amount. 

16 (2) ADJUSTMENT FOR INFLATION.— 

17 (A) IN GENERAL.—For each fifth calendar 

18 year beginning after 2006, the $500 amount in 

19 paragraph (1)(A) shall be increased by such 

20 dollar amount multiplied by the cost-of-living 

21 adjustment determined under section 1(f)(3) of 

22 the Internal Revenue Code of 1986 determined 

23 by substituting ‘‘calendar year 2005’’ for ‘‘cal24 endar year 1992’’ in subparagraph (B) thereof. 
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1 (B) ROUNDING.—If any amount adjusted 

2 under subparagraph (A) is not a multiple of 

3 $50, such amount shall be rounded to the next 

4 lowest multiple of $50. 

5 (e) PRIVATE CONTRIBUTIONS.—The Executive Di6 rector shall pay into the KIDS Account Fund such 

7 amounts as are contributed under section 3(f). 

8 SEC. 3. KIDS ACCOUNTS. 

9 (a) ESTABLISHMENT.—The Executive Director shall 

10 establish in the KIDS Account Fund a Kids Investment 

11 and Development Savings Account (hereafter in this Act 

12 referred to as a ‘‘KIDS Account’’) for each eligible indi13 vidual certified under subsection (b). Each such account 

14 shall be identified to its account holder by means of the 

15 account holder’s social security account number. 

16 (b) CERTIFICATION OF ACCOUNT HOLDERS.—On the 

17 date on which an eligible individual is issued a social secu18 rity account number under section 203(c)(2) of the Social 

19 Security Act, the Commissioner of Social Security shall 

20 certify to the Executive Director and the Secretary of the 

21 Treasury the name of, and social security number issued 

22 to, such eligible individual. 

23 (c) ACCOUNT BALANCE.—The balance in an account 

24 holder’s KIDS Account at any time is the excess of— 

25 (1) the sum of— 
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1 (A) all deposits made into the KIDS Ac2 count Fund and credited to the account under 

3 subsection (d), and 

4 (B) the total amount of allocations made 

5 to and reductions made in the account pursuant 

6 to subsection (e), over 

7 (2) the amounts paid out of the account with 

8 respect to such individual under section 6. 

9 (d) CREDITING OF CONTRIBUTIONS.—Pursuant to 

10 regulations which shall be prescribed by the Executive Di11 rector, the Executive Director shall credit to each KIDS 

12 Account the amounts paid into the KIDS Account Fund 

13 under subsections (d) and (e) of section 2 which are attrib14 utable to the account holder of such account. 

15 (e) ALLOCATION OF EARNINGS AND LOSSES.—The 

16 Executive Director shall allocate to each KIDS Account 

17 an amount equal to the net earnings and net losses from 

18 each investment of sums in the KIDS Account Fund 

19 which are attributable, on a pro rata basis, to sums cred20 ited to such account, reduced by an appropriate share of 

21 the administrative expenses paid out of the net earnings, 

22 as determined by the Executive Director. 

23 (f) PRIVATE CONTRIBUTIONS.— 

24 (1) IN GENERAL.—The Executive Director shall 

25 accept cash contributions for payment into the 
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1 KIDS Account Fund if such contribution is identi2 fied (in such manner as the Executive Director may 

3 require) with the account holder of a KIDS Account 

4 to whom it is to be credited at the time the contribu5 tion is made. 

6 (2) ALTERNATIVE METHODS OF CONTRIBU7 TION.— 

8 (A) PAYROLL DEDUCTION.—Under regula9 tions prescribed by the Executive Director and 

10 at the election of the employer, contributions 

11 under paragraph (1) may be made through pay12 roll deductions. 

13 (B) TAX REFUNDS.—Under regulations 

14 prescribed by the Secretary of the Treasury, 

15 contributions under paragraph (1) may be made 

16 by an election to contribute all or a portion of 

17 the tax refund of the contributor. 

18 (3) ANNUAL LIMITATION.— 

19 (A) ACCOUNT HOLDERS UNDER AGE 18.— 

20 In the case of an account holder who has not 

21 attained age 18 at the end of a calendar year— 

22 (i) the limitation under section 

23 219(b)(1) of the Internal Revenue Code of 

24 1986 shall not apply, and 
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1 (ii) the Executive Director shall not 

2 accept any contribution identified with 

3 such account holder if such contribution, 

4 when added to all other contributions made 

5 under this subsection during such calendar 

6 year with respect to such account holder, 

7 exceeds $1,000. 

8 (B) ACCOUNT HOLDERS AGE 18 OR

9 OLDER.—In the case of an account holder who 

10 is age 18 or older at the end of a calendar year, 

11 any contribution identified with such account 

12 holder shall be taken into account under section 

13 219(b)(1) of the Internal Revenue Code of 

14 1986 for such year. 

15 (C) ADJUSTMENT FOR INFLATION.— 

16 (i) IN GENERAL.—For each fifth cal17 endar year beginning after 2006, the 

18 $1,000 amount under subparagraph (A)(ii) 

19 shall be increased by such dollar amount 

20 multiplied by the cost-of-living adjustment 

21 determined under section 1(f)(3) of the In22 ternal Revenue Code of 1986 determined 

23 by substituting ‘‘calendar year 2005’’ for 

24 ‘‘calendar year 1992’’ in subparagraph (B) 

25 thereof. 
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1 (ii) ROUNDING.—If any amount ad2 justed under clause (i) is not a multiple of 

3 $50, such amount shall be rounded to the 

4 next lowest multiple of $50. 

5 (g) ELIGIBLE INDIVIDUAL.—For purposes of this 

6 Act, the term ‘‘eligible individual’’ means any individual 

7 who is— 

8 (1) a United States citizen or a person de9 scribed in paragraph (1) of section 431(b) of the 

10 Personal Responsibility and Work Opportunity Rec11 onciliation Act of 1996, 

12 (2) born after December 31, 2006, and 

13 (3) less than 18 years of age. 

14 (h) REPAYMENT OF AUTOMATIC CONTRIBUTION.— 

15 Beginning with the year in which an account holder of 

16 a KIDS Account attains the age of 30, such account hold17 er shall repay, in such form and manner as the Executive 

18 Director shall prescribe by regulation, the amount trans19 ferred under section 2(d)(1)(A) and credited to the ac20 count of the account holder under subsection (d). 

21 (i) RIGHTS OF LEGAL GUARDIAN.—Until the account 

22 holder of a KIDS Account attains age 18, any rights or 

23 duties of the account holder under this Act with respect 

24 to such account shall be exercised or performed by the 

25 legal guardian of such account holder. 
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1 SEC. 4. CERTIFICATIONS RELATED TO GOVERNMENT CON2 TRIBUTIONS. 

3 (a) SUPPLEMENTAL GOVERNMENT CONTRIBU4 TIONS.— 

5 (1) IN GENERAL.—Upon such showing as the 

6 Executive Director may require to establish the basis 

7 for certification, the Executive Director shall, with 

8 respect to each eligible account holder, certify to the 

9 Secretary of the Treasury the supplemental amount 

10 with respect to such account holder. 

11 (2) ELIGIBLE ACCOUNT HOLDER.—For pur12 poses of this subsection, the term ‘‘eligible account 

13 holder’’ means an account holder of a KIDS Ac14 count who, for the last taxable year ending before 

15 such account holder’s certification under section 

16 3(b), has a modified adjusted gross income which is 

17 below the applicable national median adjusted gross 

18 income amount. 

19 (3) SUPPLEMENTAL AMOUNT.— 

20 (A) IN GENERAL.—For purposes of this 

21 Act, the term ‘‘supplemental amount’’ means 

22 $500. 

23 (B) INCOME PHASE-OUT.—With respect to 

24 any account holder who has a modified adjusted 

25 gross income for the last taxable year ending 

26 before such account holder’s certification under 
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1 section 3(b) which is in excess of 50 percent of 

2 the applicable national median adjusted gross 

3 income amount, the $500 amount in subpara4 graph (A) shall be reduced (but not below zero) 

5 by an amount which bears the same ratio to 

6 $500 as such excess bears to 50 percent of the 

7 applicable national median adjusted gross in8 come amount. 

9 (C) ADJUSTMENT FOR INFLATION.— 

10 (i) IN GENERAL.—For each fifth cal11 endar year beginning after 2006, each of 

12 the $500 amounts under subparagraphs 

13 (A) and (B) shall be increased by such dol14 lar amount multiplied by the cost-of-living 

15 adjustment determined under section 

16 1(f)(3) of the Internal Revenue Code of 

17 1986 determined by substituting ‘‘calendar 

18 year 2005’’ for ‘‘calendar year 1992’’ in 

19 subparagraph (B) thereof. 

20 (ii) ROUNDING.—If any amount ad21 justed under clause (i) is not a multiple of 

22 $50, such amount shall be rounded to the 

23 next lowest multiple of $50. 

24 (b) GOVERNMENT MATCHING CONTRIBUTION.— 
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1 (1) IN GENERAL.—Upon such showing as the 

2 Executive Director may require to establish the basis 

3 for certification, the Executive Director shall, with 

4 respect to each private contribution to the account 

5 of an account holder which is made before such ac6 count holder attains age 18, certify to the Secretary 

7 of the Treasury the matching amount with respect 

8 to such contribution. 

9 (2) MATCHING AMOUNT.— 

10 (A) IN GENERAL.—For purposes of this 

11 subsection, the term ‘‘matching amount’’ 

12 means, with respect to the first $500 of private 

13 contributions to an account during any calendar 

14 year, an amount equal to 100 percent of such 

15 contribution. 

16 (B) INCOME PHASE-OUT.—With respect to 

17 any account holder who has a modified adjusted 

18 gross income for the last taxable year ending 

19 before such contribution which is in excess of 

20 100 percent of the applicable national median 

21 adjusted gross income amount, the $500 

22 amount in subparagraph (A) shall be reduced 

23 (but not below zero) by an amount which bears 

24 the same ratio to $500 as such excess bears to 
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1 5 percent of the applicable national median ad2 justed gross income amount. 

3 (C) ADJUSTMENT FOR INFLATION.— 

4 (i) IN GENERAL.—For each fifth cal5 endar year beginning after 2006, each of 

6 the $500 amounts under subparagraphs 

7 (A) and (B) shall be increased by such dol8 lar amount multiplied by the cost-of-living 

9 adjustment determined under section 

10 1(f)(3) of the Internal Revenue Code of 

11 1986 determined by substituting ‘‘calendar 

12 year 2005’’ for ‘‘calendar year 1992’’ in 

13 subparagraph (B) thereof. 

14 (ii) ROUNDING.—If any amount ad15 justed under clause (i) is not a multiple of 

16 $50, such amount shall be rounded to the 

17 next lowest multiple of $50. 

18 (3) PRIVATE CONTRIBUTION.—For purposes of 

19 this subsection, the term ‘‘private contribution’’ 

20 means a contribution accepted under section 3(f). 

21 (c) DEFINITIONS AND RULES RELATING TO MODI22 FIED ADJUSTED GROSS INCOME.—For purposes of this 

23 section— 

24 (1) SPECIAL RULE FOR ACCOUNT HOLDERS

25 WHO CAN BE CLAIMED AS DEPENDENTS.—In the 
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1 case of an account holder of a KIDS Account for 

2 whom a deduction is allowable under section 151 of 

3 the Internal Revenue Code of 1986 to another tax4 payer, any reference in this section to the modified 

5 adjusted gross income of the account holder for any 

6 taxable year shall be treated as a reference to the 

7 modified adjusted gross income of such other tax8 payer. 

9 (2) MODIFIED ADJUSTED GROSS INCOME.—The 

10 term ‘‘modified adjusted gross income’’ has the 

11 meaning given such term in section 221(b) of the In12 ternal Revenue Code of 1986. 

13 (3) APPLICABLE NATIONAL MEDIAN ADJUSTED

14 GROSS INCOME.— 

15 (A) IN GENERAL.—The term ‘‘applicable 

16 national median adjusted gross income’’ means, 

17 with respect to any calendar year, the median 

18 amount of adjusted gross income (as defined in 

19 section 62 of the Internal Revenue Code of 

20 1986) for individual taxpayers for taxable years 

21 ending in the prior calendar year as determined 

22 by the Secretary of the Treasury. 

23 (B) JOINT RETURNS.—The applicable na24 tional median adjusted gross income shall be 
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1 calculated and applied separately with respect 

2 to joint returns and all other returns. 

3 SEC. 5. RULES GOVERNING KIDS ACCOUNTS RELATING TO 

4 INVESTMENT, ACCOUNTING, AND REPORT5 ING. 

6 (a) DEFAULT INVESTMENT PROGRAM.—The KIDS 

7 Account Fund Board shall establish a default investment 

8 program under which, in a manner similar to a lifecycle 

9 investment program, sums in each KIDS Account are allo10 cated to investment funds in the KIDS Account Fund 

11 based on the amount of time before the account holder 

12 attains the age of 18. Each account holder of a KIDS 

13 Account shall be enrolled in such program unless such ac14 count holder, in such form and manner as prescribed by 

15 the Executive Director, elects otherwise. 

16 (b) OTHER RULES.—Under regulations which shall 

17 be prescribed by the Executive Director, and subject to 

18 the provisions of this Act, the provisions of— 

19 (1) section 8438 of title 5, United States Code 

20 (relating to investment of the Thrift Savings Fund), 

21 (2) section 8439(b) of such title (relating to en22 gagement of independent qualified public account23 ant), 
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1 (3) section 8439(c) of such title (relating to 

2 periodic statements and summary descriptions of in3 vestment options), and 

4 (4) section 8439(d) of such title (relating to as5 sumption of risk), shall apply with respect to the 

6 KIDS Account Fund and accounts maintained in 

7 such Fund in the same manner and to the same ex8 tent as such provisions relate to the Thrift Savings 

9 Fund and the accounts maintained in the Thrift 

10 Savings Fund. For purposes of this subsection, ref11 erences in such sections 8438 and 8439 to an em12 ployee, Member, former employee, or former Member 

13 shall be deemed references to an account holder of 

14 a KIDS Account in the KIDS Account Fund. 

15 SEC. 6. DISTRIBUTIONS FROM KIDS ACCOUNTS. 

16 (a) IN GENERAL.—Under regulations prescribed by 

17 the Executive Director, amounts in a KIDS Account shall, 

18 at the request of the account holder, be distributed to the 

19 account holder if such distribution is a qualified distribu20 tion (within the meaning of section 408A(d)(2) of the In21 ternal Revenue Code of 1986). 

22 (b) AGE LIMITATION.—No distribution shall be made 

23 under subsection (a) with respect to any account holder 

24 of a KIDS Account before such account holder attains age 

25 18. 
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1 (c) MINIMUM BALANCE.—No amount shall be dis2 tributed under subsection (a) to the extent such distribu3 tion would cause the balance of such account to be less 

4 than the amount transferred to such account under sec5 tion 2(d)(1)(A) before the account holder— 

(1) attains age 591 6 ⁄2, 

7 (2) dies, or 

8 (3) becomes disabled (within the meaning of 

9 section 72(m)(7). 

10 SEC. 7. TAX TREATMENT OF KIDS ACCOUNTS. 

11 (a) IN GENERAL.—Except as otherwise provided in 

12 this Act, for purposes of the Internal Revenue Code of 

13 1986— 

14 (1) each KIDS Account shall be treated in the 

15 same manner as a Roth IRA (within the meaning of 

16 section 408A of such Code), and 

17 (2) any distribution from such account shall be 

18 treated in the same manner as a distribution from 

19 a Roth IRA. 

20 (b) QUALIFIED ROLLOVERS CONTRIBUTIONS.— 

21 (1) IN GENERAL.—Except as provided in para22 graph (2), no qualified rollover contribution (as de23 fined in section 408A(e) of the Internal Revenue 

24 Code of 1986) shall be allowed with respect to a 

25 KIDS Account. 
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1 (2) QUALIFIED ROLLOVERS.— 

2 (A) IN GENERAL.—Under regulations pre3 scribed by the Secretary of the Treasury in con4 sultation with the Executive Director, after an 

5 account holder of a KIDS Account attains the 

6 age of 18, such account holder may elect to 

7 make a rollover contribution from such account 

8 holder’s account to— 

9 (i) a Roth IRA, or 

10 (ii) a qualified tuition program (within 

11 the meaning of section 529 of the Internal 

12 Revenue Code of 1986). 

13 (B) LIMITATION.—No rollover contribution 

14 may be made under this paragraph to the ex15 tent that such rollover contribution would cause 

16 the balance of such account holder’s account to 

17 be less than the amount of the contribution 

18 transferred to such account under section 

19 2(d)(1)(A) before such account holder— 

(i) attains age 591 20 ⁄2, 

21 (ii) dies, or 

22 (iii) becomes disabled (within the 

23 meaning of section 72(m)(7). 

24 (c) 100 PERCENT TAX ON GOVERNMENT CONTRIBU25 TIONS.— 
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1 (1) KIDS ACCOUNTS.— 

2 (A) IN GENERAL.—In the case of any 

3 amount distributed from a KIDS Account 

4 which is attributable to contributions made 

5 under section 2(d) and which would be includ6 ible in gross income (but for this paragraph)— 

7 (i) such amount shall not be includible 

8 in gross income, and 

9 (ii) the tax imposed under chapter 1 

10 of the Internal Revenue Code of 1986 on 

11 the distributee for the taxable year in 

12 which such amount is distributed shall be 

13 increased by 100 percent of such amount. 

14 (B) ORDERING RULES.—For purposes of 

15 this paragraph, distributions from KIDS Ac16 counts shall be treated as made from amounts 

17 attributable to contributions made under sec18 tion 3(f) and from earnings before made from 

19 amounts attributable to contributions made 

20 under section 2(d). 

21 (2) ROTH IRAS.—Section 408A(d) of the Inter22 nal Revenue Code of 1986 (relating to distribution 

23 rules) is amended by adding at the end the following 

24 new paragraph: 
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1 ‘‘(8) 100 PERCENT TAX ON DISTRIBUTIONS RE2 LATED TO CERTAIN GOVERNMENT CONTRIBU3 TIONS.— 

4 ‘‘(A) IN GENERAL.—In the case of any dis5 tribution which is attributable to contributions 

6 made under section 2(d)of the America Saving 

7 for Personal Investment, Retirement, and Edu8 cation Act of 2005 and which would be includ9 ible in gross income (but for this paragraph)— 

10 ‘‘(i) such amount shall not be includ11 ible in gross income, and 

12 ‘‘(ii) the tax imposed under chapter 1 

13 on the distributee for the taxable year in 

14 which such amount is distributed shall be 

15 increased by 100 percent of such amount. 

16 ‘‘(B) ORDERING RULES.—For purposes of 

17 this paragraph, distributions shall be treated as 

18 made from amounts attributable to other con19 tributions and from earnings before made from 

20 amounts attributable to contributions made 

21 under section 2(d) of the America Saving for 

22 Personal Investment, Retirement, and Edu23 cation Act of 2005.’’. 

24 (3) QUALIFIED TUITION PROGRAMS.—Section 

25 529(c)(3) of the Internal Revenue Code of 1986 (re-
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1 lating to distributions) is amended by adding at the 

2 end the following new subparagraph: 

3 ‘‘(E) 100 PERCENT TAX ON DISTRIBU4 TIONS RELATED TO CERTAIN GOVERNMENT

5 CONTRIBUTIONS.— 

6 ‘‘(i) IN GENERAL.—In the case of any 

7 distribution which is attributable to con8 tributions made under section 2(d) of the 

9 America Saving for Personal Investment, 

10 Retirement, and Education Act of 2005 

11 and which would be includible in gross in12 come (but for this subparagraph)— 

13 ‘‘(I) such amount shall not be in14 cludible in gross income, and 

15 ‘‘(II) the tax imposed under 

16 chapter 1 on the distributee for the 

17 taxable year in which such amount is 

18 distributed shall be increased by 100 

19 percent of such amount. 

20 ‘‘(ii) ORDERING RULES.—For pur21 poses of this paragraph, distributions shall 

22 be treated as made from amounts attrib23 utable to other contributions and from 

24 earnings before made from amounts attrib25 utable to contributions made under section 
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1 2(d) of the America Saving for Personal 

2 Investment, Retirement, and Education 

3 Act of 2005.’’. 

4 SEC. 8. KIDS ACCOUNT FUND BOARD. 

5 (a) IN GENERAL.—There is established in the execu6 tive branch of the Government a KIDS Account Fund 

7 Board. 

8 (b) COMPOSITION, DUTIES, AND RESPONSIBIL9 ITIES.—Subject to the provisions of this Act, the provi10 sions of— 

11 (1) section 8472 of title 5, United States Code 

12 (relating to composition of Federal Retirement 

13 Thrift Investment Board), 

14 (2) section 8474 of such title (relating to Exec15 utive Director), 

16 (3) section 8475 of such title (relating to in17 vestment policies), and 

18 (4) section 8476 of such title (relating to ad19 ministrative provisions), shall apply with respect to 

20 the KIDS Account Fund Board in the same manner 

21 and to the same extent as such provisions relate to 

22 the Federal Retirement Thrift Investment Board. 

23 SEC. 9. FIDUCIARY RESPONSIBILITIES. 

24 (a) IN GENERAL.—Under regulations of the Sec25 retary of Labor, the provisions of sections 8477 and 8478 
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1 of title 5, United States Code, shall apply in connection 

2 with the KIDS Account Fund and the accounts main3 tained in such Fund in the same manner and to the same 

4 extent as such provisions apply in connection with the 

5 Thrift Savings Fund and the accounts maintained in the 

6 Thrift Savings Fund. 

7 (b) INVESTIGATIVE AUTHORITY.—Any authority 

8 available to the Secretary of Labor under section 504 of 

9 the Employee Retirement Income Security Act of 1974 

10 (29 U.S.C. 1134) is hereby made available to the Sec11 retary of Labor, and any officer designated by the Sec12 retary of Labor, to determine whether any person has vio13 lated, or is about to violate, any provision applicable under 

14 subsection (a). 

15 (c) EXCULPATORY PROVISIONS; INSURANCE.— 

16 (1) IN GENERAL.—Any provision in an agree17 ment or instrument which purports to relieve a fidu18 ciary from responsibility or liability for any responsi19 bility, obligation, or duty under this Act shall be 

20 void. 

21 (2) INSURANCE.—Amounts in the KIDS Ac22 count Fund available for administrative expenses 

23 shall be available and may be used at the discretion 

24 of the Executive Director to purchase insurance to 

25 cover potential liability of persons who serve in a fi-
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1 duciary capacity with respect to the Fund and ac2 counts maintained therein, without regard to wheth3 er a policy of insurance permits recourse by the in4 surer against the fiduciary in the case of a breach 

5 of a fiduciary obligation. 

6 SEC. 10. ASSIGNMENT, ALIENATION, AND TREATMENT OF 

7 DECEASED INDIVIDUALS. 

8 (a) ASSIGNMENT AND ALIENATION.—Under regula9 tions which shall be prescribed by the Executive Director, 

10 rules relating to assignment and alienation applicable 

11 under chapter 84 of title 5, United States Code, with re12 spect to amounts held in accounts in the Thrift Savings 

13 Fund shall apply with respect to amounts held in KIDS 

14 Accounts in the KIDS Account Fund. 

15 (b) TREATMENT OF ACCOUNTS OF DECEASED INDI16 VIDUALS.—In the case of a deceased account holder of a 

17 KIDS Account which has an account balance greater than 

18 zero, upon receipt of notification of such individual’s 

19 death, the Executive Director shall close the account and 

20 shall transfer the balance in such account to the KIDS 

21 Account of such account holder’s surviving spouse or, if 

22 there is no such account of a surviving spouse, to the duly 

23 appointed legal representative of the estate of the deceased 

24 account holder, or if there is no such representative, to 

25 the person or persons determined to be entitled thereto 
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1 under the laws of the domicile of the deceased account 

2 holder. 

3 SEC. 11. ACCOUNTS DISREGARDED IN DETERMINING ELIGI4 BILITY FOR FEDERAL BENEFITS. 

5 Amounts in any KIDS Account shall not be taken 

6 into account in determining any individual’s eligibility for 

7 any federally funded benefit, including student financial 

8 aid. 

9 SEC. 12. REPORTS. 

10 (a) ANNUAL REPORT.—The Executive Director, in 

11 consultation with the Secretary of the Treasury, shall an12 nually transmit a written report to the Congress. Such re13 port shall include— 

14 (1) a detailed description of the status and op15 eration of the KIDS Account Fund and the manage16 ment of the KIDS Accounts, and 

17 (2) a detailed accounting of the administrative 

18 expenses in carrying out this Act, including the ratio 

19 of such administrative expenses to the balance of the 

20 KIDS Account Fund and the methodology adopted 

21 by the Executive Director for allocating such ex22 penses among the KIDS Accounts. 

23 (b) REPAYMENT OF AUTOMATIC CONTRIBUTIONS.— 

24 Not later than 2 years before the issuance of any final 

25 regulation under section 3(h), the Executive Director shall 
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1 transmit a written report to the Congress. Such report 

2 shall include a draft of the proposed regulation to be 

3 issued under such section and a description of the conclu4 sions and recommendations of the Executive Director re5 garding the implementation of the following repayment op6 tions: 

7 (1) Repayment through service or employment 

8 in high-need professions or areas. 

9 (2) Increasing the Federal income tax liability 

10 of each account holder of a KIDS Account by $100 

11 per year for 5 years after the account holder attains 

12 age 30. 

13 (3) Repayment from the account or other 

14 sources before the account holder of a KIDS Ac15 count attains age 30. 

16 (4) Alternatives for individuals facing financial 

17 hardship, including deferred repayment and forgive18 ness. 

19 SEC. 13. PROGRAMS FOR PROMOTING FINANCIAL LIT20 ERACY. 

21 The Secretary of the Treasury, in coordination with 

22 the Financial Literacy and Education Commission, shall 

23 develop programs to promote the financial literacy of ac24 count holders of KIDS Accounts and the legal guardians 
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1 of such account holders who have the rights with respect 

2 to such accounts under section 3(i). 

Æ