Congress aims to improve and simplify 529 plans

http://www.savingforcollege.com/articles/congress-aims-to-improve-and-simplify-529-plans-943

Everybody dreams of a better future for their children. We want our children to have the opportunities they need to succeed and we are willing to do everything we can to make that happen.

The key often lies in higher education. However, tuition costs for college continue to spiral across the nation. Currently, student debt stands at over $1.2 trillion. The parents of a child born today would need to save $500 per month to be able to send that child to college debt-free.

That's where 529 college savings plans come in. These plans are tax-free savings accounts that can be used for college costs such as tuition and room and board. Since these plans became tax-free in 2001, there are now more than 12 million accounts.

In my home state of Kansas, I regularly hear stories from folks who have used these plans to help their children attend the higher education institution of their choice.

Just recently, I was talking to grandparents who had started 529 plans for all four of their grandchildren. The grandfather explained to me how he had attended college for just $900 a year – a cost dwarfed by today's astronomical numbers. For him 529 accounts meant that his grandchildren could dream big, knowing they would have the higher education opportunities they needed to succeed.

529 college savings plans have clear benefits for families nationwide and we need to do everything we can to ensure folks are able to take advantage of them.

RELATED: Proposed bill could change the college savings game 

This post was originally published on thehill.com

Unfortunately, red tape and outdated regulations still get in the way of parents looking to exploit these plans for their children. Because of this, 529 funds cannot always be used in the most effective way - which often discourages parents from starting an account in the first place.

That's why I first introduced H.R. 529 as a first step last year and now H.R. 5193, the 529 and Able Account Improvement Act. Thanks to a nationwide network of 529 advocates and users, we were able to get H.R. 529 signed into law over President Obama's objections and I'm optimistic we can tap into that same network to pass H.R. 5193 further simplifying and improving 529's. 

Right now, there is a penalty to withdraw 529 plan funds to pay student loans. Given the astronomical state of American student debt, my legislation gets rid of that unnecessary penalty.

My legislation also repeals a misguided Internal Revenue Service's interpretation of a rule that restricts 529 account holders from dictating their account investment strategy. The rule hurts families trying to save for their children's education. Additionally, this bill enables tax-free rollovers of 529 funds to ABLE accounts – which are tax incentive savings plans to help families with children with disabilities save money and be more prepared for their children's future.

Finally, my bill would encourage employers to set up and contribute to 529 plans through tax incentives. The more we can do to build these accounts, the better off our children will be.

The truth is that we are faced with a global marketplace that is increasingly competitive. Right now, America is falling behind in math, science and literacy.

We need to change that, and fast. 529 college savings plans give families the tools they need to help the next generation compete for the jobs and chances they deserve.

This post was originally published on thehill.com

RELATED: The ABLE Act and what it means for your 529 plan

About the author:

Congresswoman Lynne Jenkins is a Certified Public Accountant by profession and brings nearly 20 years of experience helping individuals and small businesses manage their finances to the House of Representatives. She currently serves on the House Committee on Ways and Means, the chief tax writing committee in the House of Representatives. As a member of the Ways and Means Committee, she serves on both the Health Subcommittee and Trade Subcommittee. She also served in the Kansas House and Kansas Senate and as the 37th Kansas State Treasurer.