529 News

Recent Federal News

Fidelity cuts index portfolio fees

(July 6, 2016) - Enhancements to Fidelity’s Index fund offerings have resulted in lower total asset-based fees for all Fidelity managed 529 plans, including the UNIQUE College Investing Plan, the U.Fund College Investing Plan, the Delaware College Investing Plan and the Fidelity Arizona College Savings Plan. Total fees for the 529 Index Portfolios now range from 0.11 to 0.20 percent of assets, down from 0.19 to 0.29 percent.

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New bills announced that would enhance ABLE Act

(March 18, 2016) - A new package of bills intended to strengthen the Achieving a Better Life Experience (ABLE) Act were recently introduced. These include the ABLE to Work Act, which will allow working people with disabilities to save a portion of their income in a 529 ABLE account, the ABLE Financial Planning Act, which will allow rollovers from a 529 college savings account to an 529 ABLE account, and the ABLE Age Adjustment Act, which will raise the age limit for ABLE accounts from 26 to 46.

President Obama signed the Protecting Americans from Tax Hikes (PATH) Act

(December 21, 2015) - President Obama signed the Protecting Americans from Tax Hikes (PATH) Act on December 18, 2015 which makes several changes affecting 529 plans, RETROACTIVE TO THE BEGINNING OF 2015.

1) Qualified higher education expenses (QHEE) includes expenses for the purchase of (1) computers and certain peripheral equipment under the control of the computer (e.g. printers); (2) Internet access and related services; and (3) computer software. Such purchases are only qualified if the items are to be used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible education institution. Expenses for computer software that is designed for sports, games, or hobbies is generally excluded, unless the software is predominantly educational in nature.

2) A refund by an eligible educational institution of qualified higher education expenses paid with funds from a 529 plan can be recontributed to a 529 plan for which the student is the beneficiary in order for distributions to avoid inclusion in income. A recontribution must be made no more than 60 days after the date of the refund, and the recontributed amount cannot exceed the amount of the refund. A special transition rule provides that refunds received after December 31, 2014, and before December 18, 2015, may be recontributed not later than 60 days after the date of enactment.

3) Multiple accounts in a 529 program with the same owner and beneficiary no longer must be aggregated for purposes of computing the earnings portion of a distribution. Instead, the earnings portion of a distribution will be computed by each 529 program on an account-by-account basis.

Also under the PATH Act, the American Opportunity Tax Credit, which was scheduled to revert to the old HOPE Scholarship credit at the end of 2017, is now permanent. The above-the-line deduction for qualified tuition and fees is extended through 2016.

A point of confusion concerns Section 529A ABLE accounts. The Joint Committee on Taxation description of the PATH Act refers to a provision that would permit limited rollovers from a 529 account to a 529A account without penalty. However, the rollover change does not appear to be part of the final PATH Act. The law does remove the requirement that ABLE accounts be established only in the state of residence of the ABLE designated beneficiary or a contracting state.

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