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Cascade: No. 61, Spring 2006

H&R Block Helps Customers Build Assets

Editor’s Note: H&R Block has offices throughout the country, including in many low- and moderate-income communities.

Some products of H&R Block and other tax preparers, such as refund-anticipation loans, are the subject of controversy among some consumer advocates. In addition, H&R Block’s Express IRA product, which is one of the subjects of this article, has recently been challenged in a lawsuit by New York State’s Attorney General. Nevertheless, participants in the asset-building field can benefit from learning what H&R Block is doing to conduct a range of large-scale experiments in this area. 

Some months ago, Cascade invited H&R Block to contribute an article describing these asset-building experiments and what it has learned in the process. 

H&R Block’s experience in helping families save and build assets began in 2001 with a pilot introduction of a product called the Express IRA.1 The product is opened by H&R Block tax preparers and the client and enables the client to send a portion of the refund to the Express IRA and provide the balance in the form of a check, direct deposit to his or her account, or a debit card. It has been available in all H&R Block offices for the past four tax seasons. There are currently over 430,000 active accounts with over $311 million in assets. However, the Express IRA product has yet to be profitable on its own for H&R Block.

The average Express IRA account holder is in his/her early forties, has children, and an annual income just over $30,000. A majority of the clients have not saved before, with over 40 percent not having any bank account at the time they started saving with H&R Block.

We have found:

  • Low- and moderate-income families want to save and will do so if presented with the opportunity and information at the right time. As Ray Boshara of the New America Foundation said, “People do not decide to save. Instead, they are presented with a formal structure and decide to participate in that structure. The structure leads them to start saving.” This concept is central to the success of the Express IRA.
  • Our clients may not have had positive examples or experience with saving and working with traditional financial institutions. Also, our clients’ tolerance for risk and complexity is generally quite low. We have worked hard to keep the product structure and processes of the Express IRA simple and straightforward for both the client and the tax preparer.
  • Over 42 percent of Express IRA contributions result in a Saver’s Credit 2 benefit to the client, with an average credit of over $170 per client. This incentive, while not yet perfect in design, is powerful in helping clients get started.
  • The role of the tax preparer, as agent and advocate, is important in the process. Being able to present the opportunity to the client and answer questions is critical.
  • We can’t give up on clients, even if they don’t succeed the first time. The financial pressures facing lower-income clients are significant, and it may take several attempts to get someone started and build momentum in saving behavior.
  • The business can ultimately be profitable, but it requires a long-term commitment, large scale, a low-cost distribution capability, efficient and cost-effective back-office operations, and a focus on customer service and support.

H&R Block has engaged in discussions with others in the asset-building field – nonprofits, community banks, credit unions, policy advocates, academics, and the federal government. As we participated, we understood there are already demonstrated, practical examples of how to be successful in helping lower-income families achieve their financial objectives, but those examples may have difficulty in reaching the operational scale necessary to make broad impact. This is an area where H&R Block’s assets may be able to play an important role in helping families across the country.

We worked with a team of economists from the Brookings Institution to conduct a large, randomized field experiment using the Express IRA to test the effects of offering different matched-savings incentives to H&R Block clients in predominantly low- and moderate-income neighborhoods in St. Louis. H&R Block paid for the matched funds, which totaled $500,000.

The evaluation, with about 15,000 clients, generated two broad findings.3 First, higher match rates significantly raise IRA participation and contributions. Second, professional tax assistance, information provision, and ease of saving can play important roles in encouraging IRA contributions among low- and middle-income families.

Matched Savings

The matched savings study is being continued and expanded in the current tax season with matched funds provided by foundations. The latest study, which is being conducted from January 20 to March 31, 2006, and will involve over 50,000 clients, continues to focus on the efficacy of different methods to stimulate saving among low- and moderate-income families. These include the match method similar to the ones tested in the prior season, a method simulating a refundable credit, and several methods to test the use of matches on future commitments and systematic monthly contributions. The results of the experiment will be available this summer.

In addition, we began to understand that in order to help create opportunities to save, we must start to address other aspects of our clients’ financial lives. Specifically, we can work to lower the cost of everyday financial transactions, and we can work on our clients’ behalf to help them become aware of and claim the benefits to which they may be entitled. Effective use of available benefits will allow clients more opportunity to save and accumulate assets.

Food Stamps

In San Francisco and Alameda counties in California, we are conducting a randomized experiment (expected to involve over 10,000 clients) to test the effectiveness of different methods of helping our clients enroll in the state-administered food stamp program. Depending on the treatment group, clients are presented with different marketing messages regarding the food stamp program and different methods. These methods range from simply making clients aware of the benefit to actually transmitting electronic applications to the counties. The experiment should significantly increase H&R Block’s understanding of how to develop services that help enroll clients in federal, state, and local benefit programs. In addition, the study’s published results should help inform the policy debate regarding delivery of government benefits.

In the first few months of the experiment, we have learned:

  • Delivery of benefits programs is complicated for tax preparers and requires dedicated training focus to ensure that the preparers understand the benefit, the current processes for enrollment, and the software involved in our in-house enrollment efforts. It’s tough work, but it can be done.
  • Client interest in the service is high – only about one in four eligible clients in San Francisco uses the food stamp benefit, and there are a variety of well-documented reasons for this situation. The clients’ interest in having an advocate help them through the process is strong and encouraging.


Also, in Detroit, Philadelphia, Boston, and Newark, N.J., we are undertaking a similar randomized experiment focused on testing the ways in which our low-income elderly clients become aware of and enroll in Extra Help, an income-eligible benefit under the Medicare Part D Prescription Drug Benefit program. The experiment will involve approximately 20,000 clients and begin in March 2006.

Our company’s mission is to help our clients achieve their financial objectives by being their tax and financial partner. We realize that achieving that objective for our low- and moderate-income clients will take innovation in product platforms, service delivery, and customer support. But we can’t wait for these solutions to magically appear. We must innovate on the ground with our clients and our associates and find out what works best. But if we are open to working with the external individuals and organizations that bring different experiences and expertise to the table, we can advance not only our understanding but also that of the country.

For information, contact John Thompson at

  • 1 A description of the Express IRA and its interaction with the Federal Retirement Saver’s Credit is available online at Click on the Issue Briefs link and select “Finding Common Ground: The Saver’s Credit Is Key to a Retirement Security Compromise.”
  • 2 For an excellent summary of the structure of the Saver’s Credit, go to and search for “The Saver’s Credit: Issues and Options” by William G. Gale, J. Mark Iwry, and Peter R. Orszag, “Retirement Security Project,” April 2004.
  • 3 For detailed data and findings, see