We’ve all heard of a win-win. But right now, we need more than that, we need a win-win-WIN.
Federal Policy
Federal LiLA Legislation
With policy leaders recognizing the need to invest in a competitive workforce, LiLAs continue to gain traction on Capitol Hill.
LiLA Legislation Introduced in 2010
On July 13, 2010, Congressman John B. Larson (D-01/CT), Chairman of the House Democratic Caucus, along with Congressman Peter Roskam (R-06/IL), Jared Polis (D-02/CO), and Erik Paulsen (R-03/MN) announced the introduction of new legislation to help American workers succeed in the global job market by saving money for education and job training. Among the legislation provisions:
- Individuals and employers may contribute a total of $2,500 per year into a Lifelong Learning Account.
- As much as $750 of that could be refunded through a tax credit (50% of the first $500 contribution and 25% of the next $2,000).
- Principal and earnings in the accounts can grow tax-free, and will be taxed as ordinary income when they are withdrawn. (A 10% penalty for unqualified expenses would be waived at age 71.)
- Employers would receive a tax credit for 25% of their contribution to the accounts.
- Small employers could get a tax credit of up to $500 per year to cover administrative start-up costs.
For more information, please see the press release, bill summary, and the policy overview.
“The Lifelong Learning Accounts Act is a simple, common-sense way to help Americans grow and excel in their jobs by giving them the resources and tools they need to further their education while they work. Our economy is only as strong as the hard-working Americans who build it.” John Larson
LiLA Legislation Introduced in 2008
During the second Session of the 110th Congress, former Representative Rahm Emanuel (D-IL), then Chair of the House Democratic Caucus, with former Representative Jim Ramstad (R-MN), introduced legislation (H.R. 6036) that would make permanent changes in US tax law to incent and facilitate LiLA accounts for all workers as a part of Rep. Emanuel’s New Deal for a New Economy. Both Representative Emanuel and Representative Ramstad were members of the House Ways and Means Committee, the Committee of jurisdiction, during the 110th Congress.
“Without highly-skilled, highly-educated workers, it won’t matter whether we put up walls or hammer out new trade agreements. And without the skills to compete with emerging competitors from abroad, millions of Americans will be consigned to the bottom rungs of the new economy – without the hope or opportunity for advancement that is the cornerstone of our democracy.” Rahm Emanuel
For more information, please see the press release, bill summary, and bill text for HR 6036.
LiLA Legislation Introduced in 2007
On January 4, 2007, Senators Maria Cantwell (D-WA) and Olympia Snowe (R-ME) introduced the Lifelong Learning Accounts Act of 2007 to establish a national demonstration. Representative Tom Allen (D-ME) introduced similar legislation in the House in June 2007.
The proposed federal program is designed to demonstrate multiple approaches to Lifelong Learning Account tax benefits and targets tax incentives to lower and middle-income earners and their employers to contribute to workers and spend for education and training to improve their career related skills and knowledge. The demonstration would have the following features (subject to amendments and technical corrections):
- The demonstration would serve up to 200,000 individual workers in 10 states. States would be selected in a competitive process as prescribed by the Secretary of Treasury.
- In the selected demonstration states, any person who is employed could contribute up to $5,250 (adjusted annually for inflation) to an account owned by that individual.
- The LiLA owner would receive a tax credit for contributions up to $500 per year and withdrawals would be tax free.
- The individual credit would be phased-out for contributions by the LiLA owner for those with modified adjusted gross incomes over $55,000 ($75,000 for joint filers).
- Employers would have an option to match individuals' contributions to LiLAs and would get a credit for each dollar matched, up to $500 per year.
- An individual can use the funds in his or her account at any time, and funds can be used to pay for all expenses and courses of instruction described in Section 127(c)(1) of the tax code, which includes tuition, fees, books, and supplies. The funds also can be used for additional expenses that the Secretary of the Treasury prescribes after consultation with the Secretary of Labor, including tools, equipment, information technology devices, and training and apprenticeship programs.
For more information, please see the CAEL press release, the bill text for S26, the bill text for HR2901, the Bill Summary for HR2901 and the Bill Summary for S26.
How LiLAs Compare to Other Federal Policy
- Extended Expiration. LiLAs do not expire at age 30, unlike Coverdell Education Savings Account (formerly Education IRA).
- Employment Status Has No Effect. A LiLA program participant may use their LiLA for education and training whether or not the taxpayer is employed at the time of expenditure, unlike an employee education expense tax deduction.
- Increased Employer Participation. LiLAs offer an employer matching option, unlike a Hope Scholarship, Lifetime Learning Credit, or Coverdell ESA.
- Portability. LiLA accounts are portable, unlike Section 127 employer plans. Individuals do not have to be at least a half-time student, unlike with Hope Scholarships.
- Lifelong Contributions. LiLA employee and employer contributions may be made at any time during the employee's life, unlike Coverdell ESA contributions which must be made before the beneficiary is age 18.
LiLAs in the US Department of Labor WIRED Project
The regions of Coastal Maine and Greater Kansas City regions both won three-year $15 million grants from the United States Department of Labor to integrate workforce development, higher education and economic development as part the WIRED (Workforce Innovation in Regional Economic Development) initiative. Both regions' WIRED proposals included LiLAs as one of the core strategies for economic and workforce development, promising continued momentum for LiLAs in those states.
“The Lifelong Learning Accounts program will give millions of Americans an opportunity to develop the skills necessary to compete in an increasingly knowledge-based economy. Creating savings accounts to finance education and training for career development will enable millions of hard working men and women to advance their careers and earnings.” Senator Olympia Snowe, Republican, Maine