The Federal Government Assures the Sun Will Never
Set on 529 Plan College Investors
On August 17, 2006 President Bush signed the Pension Protection Act of 2006 that included legislation making tax-free withdrawals from 529 plan college savings accounts permanent. The original ‘tax-free withdrawal’ provision was part of the Economic Growth and Tax Relief
Reconciliation Act of 2001, but the law was passed with an expiry date of December 31, 2010. The “sunset” clause, as it became called, would eliminate tax-free distributions as a benefit for 529 plan investors.
Prior to President Bush removing the sunset clause from 529 plans, the expiration of the tax benefit was becoming a major issue for investors. In focus groups people cited the disappearing tax benefit as a major concern when deciding whether to open a 529 plan account or put additional money into an existing account. Over the previous two years, with the shadow of 2010 getting closer, overall growth in 529
plan accounts began to flatten.
And while most industry experts generally agreed that the Federal
Government would make the tax benefits permanent, there was always a question for parents who had children scheduled to enroll in college after 2010.
“I did expect that Congress would eliminate the sunset and make the tax exclusion permanent,” said Joseph F. Hurley from savingforcollege.com. As of June 30, 2006, 529 plan accounts held nearly $93 billion in assets for more than 8.8 million account holders. College Savings Bank, program manager for both the Montana 529 program and the Arizona 529 program holds nearly $200 million in 529 plan assets for nearly 11,000 accounts.
When the Economic Growth and Tax Relief Reconciliation Act of 2001 was passed it was a breath of fresh air for the 529 plan market. In 2001 yearly contributions to 529 plans tripled to 9 billion and in 2002 investors added another $13 billion followed by $19 billion in 2003.
The Pension Protection Act of 2006 may result in the same caliber growth spurt for 529 plans in 2007 and beyond – except this time the sun may never set on this tax advantaged college savings plan.
The Federal Government Assures the Sun Will Never
Set on 529 Plan College Investors
On August 17, 2006 President Bush signed the Pension Protection Act of 2006 that included legislation making tax-free withdrawals from 529 plan college savings accounts permanent. The original ‘tax-free withdrawal’ provision was part of the Economic Growth and Tax Relief
Reconciliation Act of 2001, but the law was passed with an expiry date of December 31, 2010. The “sunset” clause, as it became called, would eliminate tax-free distributions as a benefit for 529 plan investors.
Prior to President Bush removing the sunset clause from 529 plans, the expiration of the tax benefit was becoming a major issue for investors. In focus groups people cited the disappearing tax benefit as a major concern when deciding whether to open a 529 plan account or put additional money into an existing account. Over the previous two years, with the shadow of 2010 getting closer, overall growth in 529
plan accounts began to flatten.
And while most industry experts generally agreed that the Federal
Government would make the tax benefits permanent, there was always a question for parents who had children scheduled to enroll in college after 2010.
“I did expect that Congress would eliminate the sunset and make the tax exclusion permanent,” said Joseph F. Hurley from savingforcollege.com. As of June 30, 2006, 529 plan accounts held nearly $93 billion in assets for more than 8.8 million account holders. College Savings Bank, program manager for both the Montana 529 program and the Arizona 529 program holds nearly $200 million in 529 plan assets for nearly 11,000 accounts.
When the Economic Growth and Tax Relief Reconciliation Act of 2001 was passed it was a breath of fresh air for the 529 plan market. In 2001 yearly contributions to 529 plans tripled to 9 billion and in 2002 investors added another $13 billion followed by $19 billion in 2003.
The Pension Protection Act of 2006 may result in the same caliber growth spurt for 529 plans in 2007 and beyond – except this time the sun may never set on this tax advantaged college savings plan.