Young American Savers Act of 2021
Bill: S.2206 | Sponsor: Sen. Casey, Robert P., Jr. (D-PA)
Policy area: Taxation

Summary:
Young American Savers Act of 2021
This bill directs the Department of the Treasury to establish as a permanent program the Federal Child Savings Account Program not later than December 31, 2022. A program account shall be tax-exempt and distributions from an account shall be excludible from a child's gross income.
The program allows the parent or guardian of a child under the age of 18 and a U.S. resident to make contributions to an account for the child's educational expenses. An account may also fund a Roth Individual Retirement account and an ABLE (i.e., Achieving a Better Life Experience) account for disabled individuals. Distributions from such accounts may begin on the earlier of the date such child attains the age of 26, receives an associate's or bachelor's degree, or enlists in active duty miliary service.

To create Federal child savings accounts, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Young American Savers Act of 2021''.

SEC. 2. ESTABLISHMENT OF CHILD SAVINGS ACCOUNT PROGRAM.

    (a) Establishment of Program.--The Secretary of the Treasury shall, 
not later than December 31, 2022, establish a permanent program, to be 
known as the ``Federal Child Savings Account Program'', which meets the 
requirements of this section to establish and maintain a savings 
account meeting the requirements of subsection (c) on behalf of 
eligible individuals.
    (b) Program Specifications.--
            (1) In general.--
                    (A) Savings accounts.--The Federal Child Savings 
                Account Program established under this section shall--
                            (i) permit the parent or guardian of an 
                        eligible individual to establish a savings 
                        account which meets the requirements of this 
                        subsection and subsection (c) on behalf of the 
                        individual;
                            (ii) establish a savings account which 
                        meets the requirements of this subsection and 
                        subsection (c) on behalf of--
                                    (I) eligible individuals who are in 
                                foster care, in coordination with the 
                                Administration for Children and 
                                Families; and
                                    (II) other eligible individuals on 
                                whose behalf no account has been 
                                established by a parent or guardian 
                                under clause (i) as of the time the 
                                first deposit under paragraph (4)(A) is 
                                due to be made on behalf of such 
                                individuals,
                        and notify such individuals of the 
                        establishment of such accounts;
                            (iii) require the assets of each savings 
                        account established under the program to be 
                        held by the designated custodian;
                            (iv) within the limitations of paragraph 
                        (3), permit contributions to be made 
                        periodically to such savings accounts by direct 
                        deposit through payroll deduction or by 
                        electronic means, and by methods that provide 
                        access for the unbanked;
                            (v) provide for the annual deposit under 
                        paragraph (4) and the matching contributions 
                        under paragraph (5) to be made to such savings 
                        accounts, if applicable;
                            (vi) as provided in subsection (c), permit 
                        distributions and rollovers from such savings 
                        accounts upon request of the parent or guardian 
                        of the individual on whose behalf the account 
                        is established before the individual has 
                        attained age 18, or upon request of such 
                        individual after such individual has attained 
                        age 18;
                            (vii) include procedures to consolidate 
                        multiple accounts established for the same 
                        individual and return excess contributions on 
                        an annual basis, with notice provided to the 
                        parent or guardian of the individual (or, if 
                        appropriate, to the individual) and a procedure 
                        for resolution of disputes; and
                            (viii) ensure that such savings accounts 
                        are invested solely in United States Treasury 
                        bonds.
                    (B) Regulations, etc.--The Secretary of the 
                Treasury shall have authority to promulgate such 
                regulations, rules, and other guidance as are necessary 
                to implement the Federal Child Savings Account Program, 
                and are consistent with this section and section 529B 
                of the Internal Revenue Code of 1986, including--
                            (i) rules regarding the provision of 
                        periodic notices to individuals and parents or 
                        guardians of individuals, as appropriate, on 
                        whose behalf accounts are established under the 
                        program, including information on account 
                        balances and activity;
                            (ii) rules regarding beneficiary 
                        designation in the case of the death of the 
                        individual on whose behalf an account was 
                        established; and
                            (iii) coordination rules permitting savings 
                        accounts to be established under the Federal 
                        Child Savings Account Program in connection 
                        with State and local laws that provide 
                        contributions to savings accounts for 
                        residents.
                    (C) Pilot program for deposits made with federal 
                partners.--The Secretary of the Treasury may, in 
                fulfillment of subparagraph (A)(iv), establish a pilot 
                program which would allow grocery stores, pharmacies, 
                banks, and other similar businesses to partner with the 
                Federal Government to accept cash deposits from 
                customers and to remit such deposits to the Treasury 
                for payment into savings accounts under the Federal 
                Child Savings Account Program.
            (2) No fees.--No fees shall be assessed on participants in 
        the Federal Child Savings Account Program.
            (3) Limitations.--
                    (A) Contribution minimum.--The Secretary of the 
                Treasury may establish minimum amounts for initial and 
                additional contributions to a savings account under the 
                Federal Child Savings Account Program, not to exceed 
                $5.
                    (B) Contribution limitation.--
                            (i) In general.--Contributions to a savings 
                        account under the Federal Child Savings Account 
                        Program during any taxable year (other than the 
                        contribution made under paragraph (4)) shall 
                        not be accepted to the extent such 
                        contributions exceed $2,500.
                            (ii) Phaseout.--The $2,500 amount under 
                        clause (i) shall be reduced (but not below 
                        zero) by $125 for each $2,000 (or fraction 
                        thereof) by which the taxpayer's modified 
                        adjusted gross income for the taxable year 
                        exceeds $200,000.
                    (C) Limitation on participation.--Within a 
                reasonable amount of time before the date an eligible 
                individual attains age 17, the designated custodian 
                shall provide notice to the eligible individual and the 
                parent or guardian of the eligible individual that--
                            (i) no deposits under paragraph (4) or (5) 
                        will be made for calendar years after the year 
                        in which the individual attains age 17;
                            (ii) no further contributions made by any 
                        person will be accepted after the date the 
                        individual attains age 26; and
                            (iii) the individual (or, as provided, the 
                        individual's parent or guardian) may elect to 
                        have the account balance rolled over or 
                        distributed as provided, and at the time 
                        specified, in subsection (c).
            (4) Annual deposit.--
                    (A) In general.--Within a reasonable amount of time 
                (not to exceed 60 days) after the filing of the return 
                of tax for each taxable year by a taxpayer claiming an 
                eligible individual as a dependent, the Secretary of 
                the Treasury shall deposit $500 into the savings 
                account established for such individual under the 
                Federal Child Savings Account Program.
                    (B) Phaseout.--The $500 amount under subparagraph 
                (A) shall be reduced (but not below zero) by $25 for 
                each $1,000 (or fraction thereof) by which the 
                taxpayer's modified adjusted gross income for the 
                taxable year exceeds $100,000.
                    (C) Deposit on behalf of children in foster care.--
                At an appropriate time each year as determined by the 
                Secretary of the Treasury in coordination with the 
                Administration for Children and Families, such 
                Secretary shall deposit $500 into the savings account 
                established under such Program for any eligible 
                individual in foster care in any State with respect to 
                whom no deposit was made for such year under 
                subparagraph (A).
            (5) Matching contributions.--If a credit is allowed under 
        section 32 of the Internal Revenue Code of 1986 to the parent 
        or guardian or an eligible individual for a taxable year, with 
        respect to contributions made by such parent or guardian to the 
        savings account of such eligible individual under the Federal 
        Child Savings Account Program during the succeeding taxable 
        year, the Secretary of the Treasury shall deposit into such 
        savings account an amount equal to so much of such 
        contributions as does not exceed $250. Such deposit shall be 
        made in addition to the deposit under paragraph (4).
            (6) Designated custodian.--For purposes of this section, 
        the designated custodian is the person designated by the 
        Secretary of the Treasury to act as custodian of the savings 
        accounts established on behalf of participants in the Federal 
        Child Savings Account Program.
            (7) State.--For purposes of this section, the term 
        ``State'' includes the District of Columbia, any possession of 
        the United States, and any Indian tribe (as defined in section 
        45A(c)(6) of the Internal Revenue Code of 1986).
            (8) Deposit of matching contributions into roth ira.--If a 
        parent or guardian of an eligible individual is eligible to 
        receive any matching contribution under paragraph (5), such 
        parent or guardian may elect either to have such matching 
        contribution paid to the savings account of such eligible 
        individual under the Federal Child Savings Account Program or 
        to a Roth IRA of such parent or guardian. The Secretary of the 
        Treasury shall establish a permanent program that creates and 
        maintains a Roth IRA (within the meaning of section 408A of the 
        Internal Revenue Code) on behalf of a parent or guardian who 
        elects for the matching contribution to be made to his or her 
        Roth IRA and who either affirmatively chooses to participate in 
        the program or does not identify a Roth IRA for receipt of the 
        matching contribution. The permanent program shall provide for 
        investment of account balances solely within United States 
        Treasury bonds and shall not charge any fees to account owners.
            (9) Inflation adjustments.--
                    (A) In general.--In the case of any calendar year 
                after 2023, the $2,500 amount in paragraph (3)(B), the 
                $500 amount in paragraphs (4)(A), (4)(B), and (4)(C), 
                and the $250 amount in paragraph (5) shall each be 
                increased by an amount equal to--
                            (i) such dollar amount; multiplied by
                            (ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) of the 
                        Internal Revenue Code of 1986 for the calendar 
                        year, determined by substituting ``calendar 
                        year 2022'' for ``calendar year 2016'' in 
                        subparagraph (A)(ii) thereof.
                    (B) Rounding.--If any dollar amount increased under 
                subparagraph (A) is not a multiple of $5, such dollar 
                amount shall be rounded to the nearest multiple of $5.
            (10) Accounts may not be assigned.--An account established 
        on behalf of an individual under the Federal Child Savings 
        Account Program may not be pledged or assigned to any other 
        person.
            (11) Modified adjusted gross income.--For purposes of this 
        subsection, the term ``modified adjusted gross income'' means 
        adjusted gross income (as defined in section 62 of the Internal 
        Revenue Code of 1986) increased by--
                    (A) any amount excluded from gross income under 
                section 911 of such Code,
                    (B) any amount of interest received or accrued by 
                the taxpayer during the taxable year which is exempt 
                from tax, and
                    (C) an amount equal to the portion of the 
                taxpayer's social security benefits (as defined in 
                section 86(d) of such Code) which is not included in 
                gross income under such section 86 for the taxable 
                year.
    (c) Distributions From Savings Account.--
            (1) In general.--After the earlier of--
                    (A) the date the individual on whose behalf the 
                savings account under the Federal Child Savings Account 
                Program was established attains age 26; or
                    (B) the date such individual receives a bachelor's 
                degree or associate's degree, or enlists in active duty 
                military service of the United States,
        amounts in such account may be contributed in a direct transfer 
        to a Roth IRA (as defined in section 408A(b) of the Internal 
        Revenue Code of 1986) or a designated Roth account (within the 
        meaning of section 402A of such Code) according to the rules of 
        the Internal Revenue Code of 1986, or distributed to the 
        individual in cash.
            (2) Distributions for higher education expenses.--Without 
        regard to the date requirements of paragraph (1), a portion of 
        the amount in a savings account established under the Federal 
        Child Savings Account Program may be distributed in cash to the 
        individual or to the parent or guardian of the individual for 
        the payment of qualified higher education expenses of the 
        individual at an eligible educational institution. The 
        aggregate amount so distributed shall not exceed 50 percent of 
        the amount in such account as of the due date for the first 
        payment of tuition for the enrollment of the individual on 
        whose behalf the account is established as an eligible student 
        at such eligible educational institution.
            (3) Contribution to able account.--Without regard to the 
        date requirements of paragraph (1), all or a portion of the 
        amount in a savings account established under the Federal Child 
        Savings Account Program may be contributed in a direct transfer 
        to an ABLE account established for the benefit of the 
        individual under section 529A of the Internal Revenue Code of 
        1986 (if the individual is eligible for purposes of section 
        529A(e)(1) of such Code).
            (4) Definitions.--Any term used in this subsection which is 
        also used in section 529 of the Internal Revenue Code of 1986 
        has the same meaning as when used in such section.
    (d) Eligible Individual.--For purposes of this section, the term 
``eligible individual'' means a child who has not attained age 18 and 
is a resident of the United States.
    (e) Treatment of Accounts Under Certain Federal Programs.--
            (1) Account funds disregarded for purposes of certain other 
        means-tested federal programs.--Notwithstanding any other 
        provision of Federal law that requires consideration of one or 
        more financial circumstances of an individual, for the purpose 
        of determining eligibility to receive, or the amount of, any 
        assistance or benefit authorized by such provision to be 
        provided to or for the benefit of such individual, any amount 
        (including earnings thereon) in an individual's account 
        established under the Federal Child Savings Account Program, 
        any contributions to such account, and any distribution (or 
        portion thereof) which is exempt from the tax under section 
        529B(d)(3) of the Internal Revenue Code of 1986 shall be 
        disregarded for such purpose with respect to any period during 
        which such individual maintains, makes contributions to, or 
        receives distributions from such account, except that--
                    (A) a distribution for qualified acquisition costs 
                (within the meaning of section 529B(d)(3)(C)(ii) of 
                such Code) shall not be so disregarded; and
                    (B) any amount (including such earnings) in such 
                account shall be considered a resource of the 
                individual to the extent that such amount exceeds 
                $100,000.
            (2) Suspension of ssi benefits during periods of excessive 
        account funds.--
                    (A) In general.--The benefits of an individual 
                under the supplemental security income program under 
                title XVI of the Social Security Act shall not be 
                terminated, but shall be suspended, by reason of excess 
                resources of the individual attributable to an amount 
                in the account of the individual established under the 
                Federal Child Savings Account Program not disregarded 
                under paragraph (1).
                    (B) No impact on medicaid eligibility.--An 
                individual who would be receiving payment of such 
                supplemental security income benefits but for the 
                application of subparagraph (A) shall be treated for 
                purposes of title XIX of the Social Security Act as if 
                the individual continued to be receiving payment of 
                such benefits.
    (f) Disclosure of Taxpayer Information.--
            (1) In general.--Subsection (l) of section 6103 of the 
        Internal Revenue Code of 1986 is amended by adding at the end 
        the following new paragraph:
            ``(23) Disclosure of return information for purposes of 
        administration of the federal child savings account program.--
        The Secretary shall disclose to any officer or employee of the 
        Department of the Treasury, as necessary for the administration 
        of the Federal Child Savings Account Program established under 
        section 2(a) of the Young American Savers Act of 2021, return 
        information relating to taxpayer identity, dependents, adjusted 
        gross income, and whether the taxpayer has claimed the earned 
        income credit under section 32 for the taxable year.''.
            (2) Prohibition of redisclosure.--Paragraph (3) of section 
        6103(a) of the Internal Revenue Code of 1986 is amended by 
        striking ``or (21)'' and inserting ``(21), or (23)''.
    (g) Child Savings Account Program.--Part VIII of subchapter F of 
chapter 1 of the Internal Revenue Code of 1986 is amended by inserting 
after section 529A the following new section:

``SEC. 529B. CHILD SAVINGS ACCOUNT PROGRAM.

    ``(a) General Rule.--The Federal Child Savings Account Program 
shall be exempt from taxation under this subtitle.
    ``(b) Federal Child Savings Account Program.--For purposes of this 
title, the term `Federal Child Savings Account Program' means the 
program established under section 2(a) of the Young American Savers Act 
of 2021.
    ``(c) Treatment of Contributions and Earnings.--
            ``(1) In general.--No amount shall be includible in gross 
        income of an individual on whose behalf an account is 
        established under the Federal Child Savings Account Program, or 
        of any taxpayer claiming such individual as a dependent, with 
        respect to any earnings under the program.
            ``(2) Governmental and matching contributions.--Gross 
        income of an individual on whose behalf an account is 
        established under the Federal Child Savings Account Program, or 
        of any taxpayer claiming such individual as a dependent, shall 
        not include the amount of any deposit made to the individual's 
        account under the program pursuant to section 2(b)(4)(A), 
        2(b)(4)(C), or 2(b)(5) of the Young American Savers Act of 
        2021.
    ``(d) Treatment of Distributions.--
            ``(1) In general.--Gross income shall not include any cash 
        distribution from an account under the Federal Child Savings 
        Account Program permitted under section 2(c) of the Young 
        American Savers Act of 2021.
            ``(2) Treatment of rollovers.--
                    ``(A) Roth iras.--Any contribution from the Federal 
                Child Savings Account Program to a Roth IRA permitted 
                under section 2(c)(1) of the Young American Savers Act 
                of 2021 shall be treated--
                            ``(i) as a contribution from another Roth 
                        IRA as described in section 408A(e)(1)(A), and
                            ``(ii) as having been contributed to such 
                        Roth IRA in a direct trustee-to-trustee 
                        transfer within 60 days of the distribution for 
                        purposes of section 408(d)(3).
                    ``(B) Designated roth accounts.--Any contribution 
                from the Federal Child Savings Account Program to a 
                designated Roth account permitted under section 2(c)(1) 
                of the Young American Savers Act of 2021 shall be 
                treated--
                            ``(i) as a contribution from another 
                        designated Roth account for purposes of section 
                        402A(c)(3), and
                            ``(ii) as having been contributed to such 
                        designated Roth account in a direct trustee-to-
                        trustee transfer within 60 days of the 
                        distribution for purposes of section 402(c).
                    ``(C) ABLE accounts.--Any contribution from the 
                Federal Child Savings Account Program to an ABLE 
                account permitted under section 2(c)(3) of the Young 
                American Savers Act of 2021 shall be treated--
                            ``(i) as a contribution from another ABLE 
                        account as described in section 
                        529A(c)(1)(C)(i), and
                            ``(ii) as having been contributed to such 
                        ABLE account within 60 days of the distribution 
                        for purposes of such section.
            ``(3) Tax on nonqualified use.--
                    ``(A) In general.--The tax imposed by this title 
                for the taxable year shall be increased by an amount 
                equal to 20 percent of the amount of any distribution 
                other than a rollover described in paragraph (2) from 
                an account under the Federal Child Savings Account 
                Program during the taxable year, unless the qualified 
                expenses of the individual on whose behalf the account 
                was established paid or incurred during the taxable 
                year of the distribution are equal to or exceed the 
                amount of such distribution.
                    ``(B) Distributions from roth ira.--If any amount 
                is contributed to a Roth IRA in a rollover distribution 
                from an account under the Federal Child Savings Program 
                as provided in section 2(c)(1) of the Young American 
                Savers Act of 2021, the tax imposed by this title for 
                any taxable year shall be increased by an amount equal 
                to 20 percent of the amount of any distribution from 
                such Roth IRA within the 5-year period beginning on the 
                date of the rollover, to the extent that such 
                distribution from the Roth IRA, when aggregated with 
                all other distributions from such Roth IRA during such 
                5-year period, does not exceed the amount contributed 
                in such rollover distribution. The preceding sentence 
                shall not apply to the extent the qualified expenses of 
                the individual on whose behalf the account under the 
                Federal Child Savings Account Program was established 
                which are paid or incurred during the taxable year of 
                the distribution from the Roth IRA are equal to or 
                exceed the amount of such distribution.
                    ``(C) Qualified expenses.--For purposes of 
                subparagraphs (A) and (B), the term `qualified 
                expenses' means amounts paid or incurred by an 
                individual--
                            ``(i) as collateral required for a loan 
                        provided by the Small Business Administration,
                            ``(ii) as qualified acquisition costs (as 
                        defined in section 72(t)(8)(C)) with respect to 
                        a residence intended to be the primary 
                        residence of the individual, or
                            ``(iii) for qualified higher education 
                        expenses of the individual at an eligible 
                        educational institution.
            ``(4) Definitions.--Any term used in this subsection which 
        is also used in section 529 of the Internal Revenue Code of 
        1986 has the same meaning as when used in such section.''.
    (h) Clerical Amendment.--The table of sections for part VIII of 
subchapter F of chapter 1 of the Internal Revenue Code of 1986 is 
amended by inserting after the item relating to section 529A the 
following new item:

``Sec. 529B. Child Savings Account Program.''.
    (i) Appropriation.--There is hereby appropriated to the Secretary 
of the Treasury, to remain available until spent without fiscal year 
limitation--
            (1) $100,000,000 for technology and technology systems 
        necessary for the implementation and administration of the 
        Federal Child Savings Account Program;
            (2) $25,000,000 for each fiscal year beginning with fiscal 
        year 2022 for the administration of the Federal Child Savings 
        Account Program; and
            (3) such sums as are necessary to make contributions to 
        Federal Child Savings Accounts as required under paragraphs 
        (4)(A), (4)(C), and (5) of subsection (c).
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