Yesterday, Congresswoman Lynn Jenkins (KS-02) introduced H.R. 5193, the 529 and Able Account Improvement Act,  to enhance 529 college savings plans and ABLE accounts. This legislation would encourage better access to 529 and ABLE accounts - tax incentive savings plans designed to help folks better prepare for the future. After introducing the bill, Congresswoman Jenkins released the following statement:

“Hard working families dream of sending their children to college or want to save money to help their children with special needs. Yet too often they struggle to deal with these spiraling costs. 529 and ABLE accounts help families save so that they can overcome these challenges. This legislation would open up greater access to these savings accounts, improve the usability of the funds within them and ensure fair treatment of the accounts by the Internal Revenue Service. This is a common sense measure that will aid folks striving to secure greater opportunities and a better life for their children.”

H.R. 5193 provisions:

• Encourage employers to contribute to 529 college savings plans and ABLE accounts through tax incentives. These incentives also aid employer start-up costs for these accounts.
• Removes penalties for using 529 funds to pay student loans and contribute to charity, as well as for transfers directly from 529 accounts to IRA accounts.
• Repeal an IRS interpretation of a rule that restricts 529 and ABLE account holders from effectively dictating their account investment strategy.
• Allow tax-free rollovers from 529 to ABLE accounts.

Congresswoman Jenkins also testified today about how H.R. 5193 would improve 529 college savings plans. Click here to watch her testimony.

Congresswoman Jenkins’ Testimony As Prepared For Delivery

“As you may recall, the President used his 2015 State of the Union to propose taxing 529 college savings plans distributions. In response, my colleague Congressman Ron Kind and I worked closely on legislation to protect 529 plans, which ultimately became law at the end of last year. 

“H.R. 5193 builds upon this success and further improves 529 accounts in a variety of ways. 

“First, it takes common-sense steps to encourage more employers to provide access to 529 and ABLE Plans by encouraging employer “seed money” and extending the current $500 tax credit for small employer retirement plan start-up costs to small employers establishing new employee payroll deduction programs for 529 or ABLE accounts.

“The legislation also removes barriers that discourage 529 account savings. I have heard from many families that do not set up these accounts because of the 10% penalty tax that occurs when someone makes a nonqualified distribution.  This bill addresses those concerns by expanding the current exception from the 10% penalty tax to transfers made directly from 529 accounts into IRAs, transfers made from 529 or ABLE accounts to charity, and withdrawals from 529 accounts to pay for student loans.  

“Finally, the legislation would repeal the unnecessary IRS interpretation of the investment direction limitation on these accounts, as well as allow tax-free rollovers from 529 Accounts to ABLE Accounts. 

“I encourage my colleagues to support this legislation.  As a mom with a son currently in college, I understand its importance and urgency.”

Items To Note:

• Congresswoman Jenkins introduced H.R. 529 during the 114^th Congress to modernize, expand and strengthen 529 college savings plans. This measure passed in the House by 401 votes to 20 after the President was forced to drop his proposal to tax 529 plans.
• H.R. 529 became law as part of the tax extenders package passed by Congress in December and signed into law by the President.

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