529 News

Recent Legislative News

Proposed GOP tax bill includes provisions affecting education savings

The Tax Cuts and Jobs Act bill introduced by House Republicans on November 2nd includes a few provisions that could directly affect college savers. The bill proposes to eliminate Coverdell Education Savings Accounts (ESAs) and end all contributions to these accounts after 2017. The provision allows for tax-free rollovers of existing Coverdell ESAs into 529 plans. Another provision expands the list of qualified expenses allowed for 529 plans to include $10,000 per year of private elementary or high school expenses, as well as costs of apprenticeship programs.

For more information, click here

H.R. 529 (115th Congress) would improve 529 plans

H.R. 529 was introduced in Congress by Reps. Lynn Jenkins (R-KS) and Ron Kind (D-WI). These are the same representatives that introduced H.R. 529 of the 114th Congress, which was eventually rolled into and passed via the Protecting Americans from Tax Hikes Act in 2015. H.R. 529 offers the following improvements to 529 plans:

  1. Provide businesses with tax incentives to offer 529 plans, including ABLE accounts, to their employees by creating, "Qualified Payroll Deduction Contribution Programs," allowing:
    1. Employees to exclude up to $100 in contributions to the accounts annually, adjusted annually after 2017 for cost-of-living
    2. Expansion of the tax deduction to small employers for setting up retirement plans to include payroll deduction programs to fund 529 plans, up to $1,000
  2. Remove the twice-per-year annual reallocation restriction on 529 accounts, including ABLE accounts
  3. Would allow rollovers between 529 and ABLE accounts for the same beneficiary
  4. Allow withdrawals used to pay qualified student loans (within 90-days of withdrawal) to be excluded from the additional penalty tax
  5. Allow withdrawals to be donated to charity (subject to restrictions) to be excluded from the additional penalty tax

For more information, click here

Senate Finance Committee Approves 529 legislation

The Senate Finance Committee has approved 529 legislation authored by Senator Charles Grassley (R-IA), S. 335. The bill contains provisions to allow computer technology and equipment expenses to be included as qualified expenses for 529 purposes, to eliminate the distribution aggregation requirement for 529 tax reporting purposes, and to allow a tax-free recontribution of funds to a 529 plan should the student withdraw from an educational institution. The next step for the bill is to be brought to the Senate floor for consideration.