The section 529 college savings plan industry is getting its ducks in a row before an Aug. 14 deadline for comments to be considered before the Department of the Treasury's Office of Economic Policy issues a report on the programs next month.
The section 529 college savings plan industry is getting its ducks in a row before an Aug. 14 deadline for comments to be considered before the Department of the Treasury's Office of Economic Policy issues a report on the programs next month.
The Treasury Department was commissioned in April by the White House Task Force on the Middle Class to look into ways to make 529 plans more efficient and effective.
“The concern in the industry is what does that mean. It's really a fear of the unknown,” said James “Jamie” Canup, an attorney for industry consulting firm 529 Counsel PLC of Richmond, Va.
One possibility is that the report will conclude that 529 plans disproportionately benefit higher-income families while doing little to meet the needs of low- and middle-class families.
“It's difficult to get hard data regarding income levels,” said Joan Marshall, executive director of the Baltimore-based College Savings Plans of Maryland and a spokeswoman for the Lexington, Ky.-based College Savings Plan Network, an organization of state 529 administrators.
In response to the Treasury Department's request for comment, the network will note that 529 plans have low minimums for 529 accounts and “low fees that are very comparable with 401(k) plans and retail mutual fund plans.”
In addition, the network will point out that “states pursue dedicated outreach to families of all income levels, including matching grants and scholarships,” Ms. Marshall said.
States have historically been wary of Treasury Department proposals, said Joe Hurley, president and chief executive of Pittsford, N.Y.-based Savingforcollege.com LLC.
In the past, he noted, the Treasury Department has advocated a lifetime savings account that would allow families to open tax-advantaged accounts that could be used for any purpose, not just college savings.
“That's not what the states want,” Mr. Hurley said.
The Treasury Department is also expected to review the public policy merits of states that restrict state tax deductions and other benefits to their own 529 plans and don't give tax benefits to residents who enroll in another state's plan.
