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Brady Floats Revised Universal Savings Account Proposal


The ranking Republican member of the House Ways & Means Committee has put forward a new Family Savings Account proposal that seeks to support the needs of families, but would fall outside the employer-based savings system. 

Rep. Kevin Brady (R-TX), the top Republican on Ways & Means, along with Rep. Jackie Walorski (R-IN), the top Republican on the Ways & Means Subcommittee on Worker and Family Support, on May 27 released a discussion draft of the “Protecting Worker Paychecks and Family Choice Act.”

“Our package is based on the premise that strong economic growth is the foundation for ensuring flexible options for families through better jobs, lower unemployment, and higher wages—not one-size-fits mandates that put Washington in control and result in lower paychecks for workers,” Brady and Walorski noted in a summary of the legislation. 

Family Savings Accounts

In general, the proposal calls for creating a new tax-advantaged account designed to be a flexible savings vehicle for families to use to pay for school expenses, child care and elder care, and to provide for wage replacement during periods of parental or medical leave. 

The accounts would be set up via the Federal Retirement Thrift Investment Board. In addition to individual contributions, contributions to the accounts could come from a number of different sources, including the following: 

  • Federal funding would provide a one-to-one match for every dollar up to $1,000 for individuals with an adjusted gross income of $50,000 or less. 
  • Employers could contribute to support their employees as a supplement to existing employee benefit plans (though there would be a penalty for the failure of an employer to make comparable family savings account contributions). 
  • States could contribute to eligible accounts and count state contributions as Temporary Assistance for Needy Families maintenance of effort. 
  • Non-profits and other community-based organizations serving low-income families could contribute as a supportive service. 

Contributions would be tax deductible, and earnings and distributions would be tax-free. In addition, there would be an annual contribution limit of $5,000 and contributions would roll over from year to year.

Once an individual turns 65, any funds remaining in the accounts would be rolled over into a retirement account that would be subject to ordinary retirement and tax rules.

In addition to the new savings accounts, the proposal calls for increasing access to paid family and medical leave by expanding the employer-provided child care tax credit and modifying the employer credit for paid family and medical leave, among other things. 

Brady Priority

The proposed new Family Savings Accounts appear to build off an earlier proposal by Brady to create Universal Savings Accounts (USAs) that would have served as more of a general savings vehicle outside the employer-based savings system in which account holders could withdraw both contributions and earnings at any time, and for any reason, without tax penalties.

During the 2017 debate over the Tax Cuts and Jobs Act (TCJA), when he was still Chairman of the Ways & Means Committee, Brady floated the idea of enacting USAs as a way to promote family savings. And following enactment of the TCJA, Brady released a framework Tax Reform 2.0 in 2018 that called for universal savings accounts. Shortly thereafter, the Ways & Means Committee approved legislation creating USAs, but the legislation was never enacted. 

In the meantime, Brady announced in April that he plans to retire at the end of this Congress. He has emphasized his intent to work across the aisle to support working families, and that was on display during Ways & Means’ consideration of the SECURE Act 2.0. That said, it remains to be seen whether such a proposal can pick up traction in the current Congress. 

A section-by-section summary of the legislation is online here, and a full discussion draft text of the legislation is here