Child Savings Account Proposal Introduced
Senator Bob Casey (D-PA) and several co-sponsors have introduced S. 3716, the 401Kids Savings Account Act. A companion bill, H.R. 7162, has been introduced by Representative Don Beyer (D-VA) and several co-sponsors in the House. The proposal would create children’s savings accounts that would be built on state 529 college savings platforms. The accounts would be established for all newborns and kids under age 18, and could accept individual contributions of up to $2,500 per year (subject to COLAs) on top of any State contributions. Additionally, a Federal annual deposit and matching contribution to these accounts would be made for certain eligible low-income individuals until the year the eligible individual attains age 18. Any contributions after an individual attains age 18 will be treated as Roth IRA contributions.
After the individual attains age 18, the funds can be used for qualified expenses, transferred to an ABLE account, distributed in cash, or retained in the 401Kids savings account. Qualified expenses include the following.
- As collateral for certain small business loans
- For purchase of a primary residence
- For higher education expenses
- Or for any purpose after attaining age 59½
