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Why Adding "Claiming" Provisions to State CSA Legislation is a Bad Idea

In 2017, Nevada’s legislature passed a bill that requires the 200,000+ households in the Nevada College Kick Start (CKS) Program—one of three statewide, universal Children’s Savings Account (CSA) programs that automatically enrolls participants—to take action to receive the benefits of participating in CKS. Although children were automatically enrolled in the program in kindergarten, each child’s family would now need to “claim” his or her CKS account before that child enters 5th grade to ultimately access its funds. This would require parents to sign onto a designated portal and input specific information (such as the student’s date of birth, zip code, and the email address of a parent or guardian) before they could access their account. Since then, Colorado, Illinois and Washington have introduced their own “claiming” provisions to proposed or final CSA legislation.

However, requiring families to claim CSA benefits is a bad idea that will undermine the purpose of CSAs. Before I explain why, let’s first examine why some states are adopting these provisions in the first place. Based on conversations with bill sponsors and advocates, there appear to be at least two reasons:

  • Cost savings. As behavioral economics (or pure common sense) teaches, any requirement for action by program participants creates barriers that ultimately reduce participation. From a budgetary perspective, this results in some proportion of accounts that go unclaimed, which in turn reduces the total cost of the CSA program. For state policymakers considering large-scale or universal CSA programs, including a claiming provision can reduce the amount of funds needed to sustain a program over the long run. 
  • “Skin in the game.” From a more theoretical perspective, some would argue that if parents or guardians do not take action to engage with their child’s CSA (which could include claiming an account), then the child would not likely know that the account exists. This argument builds on research that points to the power of CSAs in building postsecondary educational expectations or “college-bound identities” among children and youth. According to this line of thinking, if a child does not know that a CSA exists for them, then how can the account change expectations? 

But there are at least three problems with claiming provisions that will cause harm to families that should benefit from CSAs:

  • Claiming provisions violate one of the key principles of the CSA movement: universality.Starting with the SEED Policy Council—the initial policy brain trust that helped to establish many of the core principles of the CSA movement—and continuing with the “Ten Key Policy Design Elements” outlined by the Center for Social Development in 2018, universal eligibility (ideally paired with automatic enrollment) has been a key principle for ensuring that all children enjoy the benefits of CSAs. Claiming provisions in CSA legislation essentially transform universal CSA programs with automatic enrollment into opt-in programs, contravening the key goal of broad inclusion in CSAs.
  • Claiming provisions work against another key principle of CSAs: progressivity (the notion that more resources should be directed to children most in need). With claiming provisions, it’s almost inevitable that kids with the greatest need are also most likely to lose out and have college funds go unclaimed. For example, research by the Center for Social Development[1] found that parents with more resources were more likely to participate in an opt-in CSA program that offered a $500 initial deposit for all parents who opened a 529 account for a child born in Maine. Specifically, parents with more education, other investments and/or a financial advisor were more likely to enroll their children in the program than parents with fewer financial assets.
  • There is no consensus on how to define “claiming.” In Colorado, it means opening an account. In Nevada’s proposed regulations, it means signing up online. And in draft legislation in Illinois and Washington, it is not defined at all. CSA advocates should be worried that claiming provisions are, at best, vague and poorly defined, and at worst, a blunt instrument that is badly designed for its intended purpose. For example, if the goal of account claiming is to make sure that parents have skin in the game and are engaging their children in conversations about education beyond high school, what’s to say that parents who are unable to open an account (as in Colorado) aren’t having meaningful conversations with their children about college? As leading CSA programs across the country have demonstrated, there are better ways to promote parent and child engagement in CSA programs than simplistic claiming provisions.   

CSA advocates across the U.S. should be aware of the recent advent of claiming provisions in CSA legislation and should be prepared to act in two ways. First, CSA advocates should work hard to make sure that account claiming language is not included in or added to any CSA legislation or program.  Second, if claiming language is added to CSA legislation, regulations or program guidelines, despite strong efforts to oppose such language, advocates should act to make claiming periods as long as possible and the definition of claiming as broad as possible.       

[1] Margaret Clancy and Michael Sherraden, “Automatic Deposits for All at Birth:  Maine’s Harold Alfond College Challenge,” Center for Social Development, Washington University in St. Louis, CSD Policy Repot 14-05, March 2014.