What's on the 529 horizon?

http://www.savingforcollege.com/articles/what-is-on-the-529-horizon

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The future of 529 plans will be determined in part by what happens, or does not happen, in Washington D.C. over the next several months. It's for this reason that I particularly enjoy traveling to Washington to attend board meetings of the College Savings Foundation (CSF), and why I look forward to Strategic Insight's 529 Conference this September.

Here is what I have learned about where things currently stand.

Basically, no one can really be too sure about future changes to laws impacting 529 plans. The attorneys at Davis & Harman LLP, CSF's lobbying firm, remarked at last week's board meeting on the considerable degree of dysfunction and distrust in Congress, making a consensus on any major tax issue difficult to imagine. Davis & Harman should know: they closely track 529 legislative developments and their offices are only a three-iron away from the White House.

At front and center in Congress right now is a concerted push toward comprehensive federal tax reform by the leaders of the House and Senate tax-writing committees. This effort could ultimately end with a bang--a vast re-write of the Internal Revenue Code--or a whimper (with the obligatory finger-pointing and accusations of stonewalling).

In the meantime, there's little chance that standalone legislation directly impacting 529 plans will be considered in Congress, much less be passed into law. Bills to "fix" the expiration of favorable interest rates on subsidized student loans at the end of this month will receive a lot of attention, and a proposal to consolidate the various education tax credits and deductions (H.R. 2253) is being given some consideration, simply because it makes so much sense.

But any other 529-related bills that get introduced--with the possible exception of the ABLE bill that would make 529 plans an investment tool for disabled Americans--are not likely to receive much attention until comprehensive tax reform has been settled one way or the other.

In a way, the situation could be good for 529 plans. One of the bills recently introduced (H.R. 2006) would raise the annual contribution limit on Coverdell education savings accounts from $2,000 to $10,000.

My own opinion is that, with or without comprehensive tax reform, Congress and the President are not going to pull back on the tax benefits and accessibility of 529 plans. A recent blog post explains my thinking.

What do you think? Is there anything more that can be done--by the federal government, by the states, or by the investment industry--to encourage the use of 529 plans by American families? Please take this one-question survey recently posted on Savingforcollege.com.