HHS News Release

HHS Secretary Donna E. Shalala today approved a major welfare demonstration submitted by the state of Iowa. Elements of the plan will encourage recipients of Aid to Families with Dependent Children to take jobs and accumulate assets through a new program of "Individual Development Accounts."

"Last February in Washington, President Clinton met with the nation's governors to talk about his commitment to welfare reform. As part of this process the president made it clear he wanted to encourage state creativity and flexibility in the administration of public assistance programs," Secretary Shalala said.

"Our action today in approving Iowa's demonstration is further evidence of our support for this concept. We look forward to working closely with the state of Iowa as it tests a number of new strategies for promoting independence and responsibility for those families now on welfare."

Under the demonstration, Iowa's AFDC program will be restructured in several major ways:

*AFDC recipients will be able to accumulate and build assets by establishing Individual Development Accounts. Funds deposited in the accounts will not be counted as ordinary income and can be withdrawn only to pay for education, training, home ownership, business start-up or family emergencies.

*Recipients will be encouraged to take jobs under a new formula which disregards 50 percent of their earnings in the calculation of welfare payments. During the first four months of employment, all income will be disregarded for individuals who do not have significant work histories.

*The current law limiting each family's assets to $1,000 will be substantially changed to enable each member of an AFDC family to possess up to $5,000 in assets. The vehicle asset ceiling will also rise from $1,500 to $3,000 per automobile.

*A Family Investment Program is created for most AFDC parents, who will be eligible for enhanced training and support services in exchange for an agreement that welfare receipt will be temporary or time-limited.

HHS' action today clears the way for the state to begin operation of the program immediately. The demonstration will operate for a period of five years and will include a rigorous evaluation utilizing random assignment to control and experimental groups.

Note: All HHS press releases, fact sheets and other press materials are available at http://www.hhs.gov/news.

Contact: David Siegel (202) 401-9215