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Recent Federal News
SEC defers decision on MSRB's 529 data collection proposal
(October 1, 2013) - The SEC has expressed concerns relating to the MSRB's proposed data collection proposal (proposed MSRB Rule G-45) for underwriters of 529 plans, and has initiated a process for a period of additional consideration and public comment ("disapproval proceeding"). The comment period is 45 days, with an additional 15 days to rebut submitted comments.
IRS says bonus paid to open a 529 is a 1099 event
(March 15, 2013) - In PLR 201310043, the IRS informs a financial services company that an account opening bonus of $600 or more paid by the company into the 529 account of a customer must be reported to the customer on Form 1099.
The IRS views the bonus payment as a two-step transaction: (1) payment of cash to the customer (income subject to 1099 reporting), followed by (2) customer funding of his or her 529 account.
A similar type of bonus paid to a customer opening an IRA is not subject to 1099 reporting. The IRS distinguishes an IRA from a 529 plan and cites statutory authority for exempting the IRA bonus from 1099 reporting requirements.
H.R. 529 changed and re-introduced in Congress
(February 8, 2013) - H.R. 529 has been re-introduced in Congress by Rep. Lynn Jenkins (R-KS) but consists of only two of the changes that were included in the bill introduced in the prior Congress.
H.R. 529 would provide an expansion of the Saver's Credit to include contributions to 529 plans, and it would allow employers to make up to $600 per year in tax-free contributions to the 529 account of each eligible employee.
A separate bill will be introduced to increase the number of investment changes from once to four times in a year, and to expand the definition of qualified higher education expenses to include computers and computer technology.
Presumably, the second bill has a better chance of adoption even if H.R. 529 is not passed, since its tax revenue impact is modest.