Congressman Tom Allen, photo by Ramona du Houx

Oped By Congressman Tom Allen

Tracey Perkins, 34, has been doing accounting work since she was in high school, but she has been able to take only a few course credits in that field from her local community college. But now she is on a path to her dream job — the chief financial officer of the company where she now works, Maine Oxy in Auburn. Her goal has become attainable because she and her employer are contributing to her Lifelong Learning Account (LiLA), to the costs of the classes she’ll need in order to acquire a BA in accounting. The program, with tax benefits that encourage savings, is now being tested in Maine and a few other locations. Because of LiLA’s huge potential to help others like Tracey afford continuing education, I have introduced legislation in the House of Representatives to extend this option for other Americans.

In our rapidly changing world, the skills and knowledge we acquired in high school, technical schools, college, or our first jobs can quickly become incomplete, out of date, or otherwise not in demand. But education is expensive, and many who have entered the work-force don’t have the resources to pay these costs. Because of their age, employment status, lighter course load, or other reasons, they may be ineligible for federal loans, grants, or tax breaks designed for more traditional students. Employers may be eager to help their workers go back to school, but are unable to afford a reimbursement program.

LiLAs, developed by the nonprofit Council for Adult Experiential Learning, are an innovative and flexible way for people to afford the training they need to stay current, advance to more challenging positions, or pursue new interests. My bill, H.R. 2901, would make LiLAs more widely available through demonstration projects in up to ten states, with accounts available for up to 200,000 workers. The entire Maine delegation has thrown its support behind LiLAs, with Rep. Mike Michaud cosponsoring my bill and Senator Olympia Snowe introducing a similar bill in the Senate (S.26) with Senator Susan Collins as a cosponsor.

LiLAs are similar in concept to 401(k) retirement accounts, but the funds — contributed by employees and matched by employers — can be used for education and training. Contributions are encouraged by attractive tax advantages for both employees and employers. Under my bill, middle-income Americans (individuals earning up to $55,000 a year after taxes, or $110,000 for joint returns) will be eligible to receive a tax refund on the first $500 they contribute to the account, and a tax deduction on savings thereafter. Low-income participants would receive a refundable tax credit. Employers also receive up to a $500 tax refund for their matching contributions; all distributions for eligible expenses are excluded from the employee’s taxable income. Self-employed persons can also reap the tax advantages accorded employees (although they cannot also claim the tax benefits for contributions made as an employer).

Like 401(k)s, the accounts are portable; if employees leave their jobs, they can take the funds (including the employer match) with them to other jobs or access them during periods of unemployment. Like Roth IRAs, LiLA can be established in a bank or, as in Maine, through a state’s 529 education savings plan. LiLAs can be used for a broad range of expenses related to education. These include tuition, fees, books, supplies, and if approved, tools, equipment, information-technology devices, training and apprenticeship programs.

LiLAs fill in gaps left by existing student financial assistance programs. Coverdell Education Savings Accounts, for example, are available only to Americans between the ages of 18 and 30, and the Hope Scholarship Tax Credit applies only to those who are currently attending school at least part-time.

Employers who have been participating in Maine’s pilot LiLA program have the foresight to understand that their support for continuing education increases efficiency and promotes retention and recruitment of quality workers. Maine Oxy’s Carl Paine, both an owner and an account holder, is enthusiastic about these prospects. For workers, it is a way to move up a career ladder or keep up with the dizzying pace of technological innovation and the sea changes ushered in by international trade. It makes sense for government to support these efforts, since such investments will yield greater productivity and wealth for the whole society.