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Congress to consider bill improving 529 plans

(March 31, 2014) - Rep. Lynn Jenkins (R-KS) has introduced a bill into Congress (H.R. 4333) that would make 529 plans even more attractive. The bill would add computer technology to the list of qualified higher education expenses even when not required by the school, and it would allow four investment changes per year. These two changes have been part of previous bills.

The bill would also allow a 529 account owner to re-deposit withdrawn funds to the 529 account within 60 days if the beneficiary leaves college and receives a refund from the college. This change could help avoid tax and penalty when tuition and other expenses are paid in advance but then refunded due to the student leaving school.

Also, up to $25,000 in leftover 529 funds could be rolled to a Roth IRA under the bill provided the funds were in the 529 plan for at least 10 years.

Finally, the bill would eliminate the aggregation requirement in connection with 529 withdrawals from multiple plans. This would ease the administrative burden on 529 program managers.

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