Bringing College Savings Plans into the 21st Century
College Savings Plans, or “529’s”, are lifelines for many young adults looking to get a higher education. With the costs of post-secondary schools growing each year, having a “529” is just common sense.
I run the Wisconsin College Savings Plan out of my office. You know it by its common names, EdVest and Tomorrow’s Scholar. I just spent the past few days in Washington D.C. talking with members of the Wisconsin Delegation to garner support for a bill that will make our 529 plan better for Wisconsinites.
Wisconsin Representative Ron Kind and Representative Lynn Jenkins of Kansas have introduced a bill called the “Savings Enhancement for Education in College Act”, appropriately labeled H.R. 529. There are now 10 other co-sponsors including Wisconsin Representative Tammy Baldwin.
The proposed act allows four improvements to the more than 80 college savings plans offered by states and available to families throughout the country, under the rules of IRC section 529.
First, the bill encourages moderate income families to save for college by extending the Savers Credit to include “529” plans. Currently the Savers Credit only applies to retirement accounts like 401(k) and IRAs. Families in the $20-50,000 combined income range could get a tax credit ‘match’ on their federal income tax of ten to fifty percent on the first $2,000 contributed to a college savings account.
Second, employers would be allowed to match an employee’s college savings contributions, up to $600 each year. The employer gets a tax deduction and the money is tax-free to the employee and student.
Another provision of H.R. 529 brings us into the 21st century by allowing the tax-free 529 account withdrawals for computer purchases. Both hardware and school-related software would be allowed, but games and recreation devices will not get the tax break.
Finally, the current rule of permitting only one investment change per year in your 529 accounts will be increased to four. Some of the stress with recent market fluctuation or personal situations will be relieved.
The four changes would apply to both Wisconsin’s “529” plans, EdVest and Tomorrow’s Scholar. Combined they have about 250,000 accounts. The College Savings Plan Network reports about ten million 529 accounts nationwide, with about a million in the stage where withdrawals are being used for college expenses.
It’s now up to Congress to take the measure into consideration and, for the sake of Wisconsin families hoping to see their children graduate from college, I hope they will take it up soon and pass HR 529.