College Savings Foundation

The 529 and ABLE Account Improvement Act of 2017

January 17, 2017

COLLEGE SAVINGS FOUNDATION APPLAUDS REPRESENTATIVES LYNN JENKINS AND RON KIND FOR INTRODUCING H.R. 529, the 529 and ABLE Account Improvement Act of 2017

Washington, DC, January 17 – The College Savings Foundation (CSF) applauds U.S. Representatives Lynn Jenkins (R-KS) and Ron Kind (D-WI) for their introduction of H.R. 529, known as the 529 and ABLE Account Improvement Act of 2017. H.R. 529 encourages saving by eliminating perceived barriers and providing flexibility for American families planning and saving for higher education.

“H.R. 529 will make important improvements to 529 college savings plans to encourage more American families to save for higher education,” said Richard Polimeni, Chair of CSF, a not-for-profit organization whose mission is to help families achieve their education savings goals. “Not only does college saving help students reduce their dependence on student debt, but it also prepares them to be more successful in a competitive workforce.”

Representative Lynn Jenkins has been a longtime and passionate champion of 529 plans and the families they help, going back to her years as Kansas State Treasurer with responsibility for college savings. Representative Kind also is a longtime advocate for families and encouraging saving for the future. CSF has worked closely with Representatives Jenkins and Kind throughout the years to ensure college savings proposals provide workable solutions for families facing the high costs of college. H.R. 529 builds upon a series of proposals introduced by Representatives Jenkins and Kind that have been enacted into law.

A more recent addition to the legislation is a focus on disability savings programs. “H.R. 529 also will enhance the programs now being developed by states to implement the Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act, one of the most significant pieces of disability legislation since the Americans with Disabilities Act, to assist individuals with disabilities and their families to save for qualified disability expenses,” noted Polimeni.

The key elements of the legislation are:

Excludes from income and payroll taxation, employer “seed money” contributions made to a 529 or ABLE account for which the designated beneficiary is the employee or a member of the employee’s family. To assist small employers in setting up a payroll deduction program for 529 and ABLE contributions, the current credit available for small employer retirement plan start-up costs would be extended to costs related to establishing a 529 and/or ABLE payroll deduction contribution program. Those changes would encourage more employers to offer direct payroll deduction into 529 and ABLE programs.
Removes real and perceived barriers to saving through a 529 plan by eliminating the penalty tax for: (1) using 529 funds to pay down student loans and (2) making charitable contributions.
Clarifies that 529 and ABLE account owners can rebalance their investments more often without violating current investment direction limitations, ensuring that families will be able to adjust their portfolios as needed.
Allows rollovers of funds between 529 accounts and ABLE accounts without incurring income or penalty tax liabilities.

“There is no greater investment this country can make than providing incentives and assistance in planning and saving for major goals including life-long education and increased self-sufficiency for persons with disabilities,” Polimeni said.

The College Savings Foundation (CSF) is a Washington, D.C.- based not-for-profit organization helping American families achieve their education savings goals. www.collegesavingsfoundation.org

Contact: Lynthia Romney, romneycom@gmail.com 914-238-2145/914-589-2140

Congress created 529 Education Savings Plans in 1996 under Section 529 of the Internal Revenue Code. They are state-sponsored, tax-advantaged vehicles for qualified post-secondary education expenses, such as tuition, fees, books, required supplies, equipment and room and board. There are two types of 529 Plans: savings plans, which allow families to save for expenses, and prepaid tuition programs, which generally allow families to make advance tuition payments to cover future attendance at a designated in-state public college or university system. Most states offer a 529 plan, and some states offer both savings and pre-paid plans.

A primary focus of CSF is building public awareness of and providing public policy support for 529 plans – an increasingly vital college-savings vehicle. CSF’s members include investment managers, broker-dealers, governmental bodies, law firms, accounting and consulting firms, and non-profit agencies that participate in the sponsorship or administration of 529 college savings plans.

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PRESERVING, ENHANCING 529 PLANS
CSF’s key program goals are specifically focused on promotion, protection and enhancement of 529 plans.

A FORUM FOR DISCUSSION AND ACTION:
CSF brings together the industry and consumers on policy questions and provides a means for unified action on issues of concern to 529 plan investors and the industry. CSF provides a framework to assist with the orderly development of the programs and, in particular, acts as a resource for policymakers who share CSF’s objective of helping families realize their educational goals.

Tax Benefits

Investments grow on a tax-deferred basis, and earnings are free of federal income tax.
Contributions are eligible for gift tax exclusion as long as certain conditions are met.
Generally, account owners can remove contributions and future earnings from their taxable estate.
Certain 529 plans offer some type of state tax deduction when residents invest in their own state’s plan.

Flexibility

There are currently no income limits. Any U.S. resident or citizen, regardless of income, can open an account.
Account owners can withdraw money at anytime.
Funds may be used to pay qualified education expenses at any qualified educational institution in the U.S. (and some schools abroad), including any accredited public or private college or university, graduate school, two-year community or junior college and vocational and technical schools.
Eligible educational institutions include most U.S. schools and some schools located abroad. The institution must be eligible to participate in the U.S. Department of Education student aid programs. To determine if a school is an eligible education institution, search for its federal school code at www.fafsa.ed.gov.
Most plans offer low initial investments and a variety of investment options fitting various levels of risk and time horizons.

Control

The account owner decides when and how money in the account is withdrawn.
Account owners can change beneficiaries and investment options, according to IRS guidelines.

Start planning for your child’s future today!