Why a College Savings Plan Could Be the Next Big Employee Perk

Why a College Savings Plan Could Be the Next Big Employee Perk

Imagine a world where 529 plans — tax-advantaged accounts that help make it easier for parents or other family members to save for a child's future college costs — were a standard part of your job benefits package.

Maybe your employer could kick in some funds to help you get started, or match the cash you put into an account via payroll deductions, much the way it works for a 401(k) matching program. Even better, imagine if you could use that money not only to help pay your child's future tuition, but also to help pay down your own outstanding student debt.

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Sound like a pipe dream? Not if two bills introduced into Congress this year get passed into law.

The first bill, H.R. 529, also known as the 529 and ABLE Account Improvement Act of 2017, was introduced in January by Rep. Lynn Jenkins, R-Kan., and Rep. Ron Kind, D-Wis. The bill would tweak the tax code to make it easier for employers to add 529 plans to their benefits packages. While some companies have already started offering 529 plans to their employees, the proposed legislation aims to make them more widely available.

H.R. 529 would also encourage companies via tax breaks to contribute to an employee's 529 plan, and it would permit 529 money to be used for a few other purposes besides college costs. (Currently, if you withdraw money from a 529 for something other than qualified education expenses, you pay penalties.)

“With this bill, [an] employer may take advantage of new incentives that encourage them to give employees $100 in seed money to open a 529,” says Michael Byerly, communications director for Rep. Jenkins, “or use leftover 529 funds to pay down any student loans or donate to charity.” The bill’s proposals also apply to ABLE accounts, which help people with disabilities save and pay for disability-related expenses.

A second bill, H.R. 1656, would give tax credits to companies that offer educational assistance programs through their benefits package. It encourages companies to contribute up to $5,250 per year either into a 529 set up by an employee or toward helping an employee pay down their student loan debt.

Dubbed the Higher Education Loan Payments (HELP) for Students and Parents Act, it was introduced last week by Rep. Patrick Meehan, R-Pa., and Rep. Suzan DelBene, D-Wash. "By incentivizing employers to offer these benefits to their employees, we can enable more students and families to access them," stated Rep. Meehan in a press release. "Ultimately it will help Americans graduate with less debt and get out from underneath their debt faster."

Making 529s more accessible and flexible will likely earn legislators high fives from Millennials, many of whom are just beginning to have kids of their own while still trying to dig out from their own student loans. And with four years at a private college projected to run almost $350,000 by 2030, according to The College Board’s college cost calculator, parents are going to need all the help they can get.

RELATED: 9 Mistakes Not to Make With 529 Savings Plans

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