Crapo: College Savings Plans Good Addition to Pension Reform
529 savings plans offer tax advantage for college expenses
Washington, DC â?? Idaho Senator Mike Crapo is optimistic that a tax-free college savings plan included in the pension reform bill will remain. Tax benefits for families saving for college in 529 College Savings Plans were included in H.R. 4, which passed the U.S. House of Representatives late Friday night and has been sent back to the Senate. Crapo, a member of the Senate Finance Committee and a leader in supporting 529 plans, has lobbied in support of extending the tax benefits of 529 plans permanently. The pension reform bill is scheduled to come before the Senate by the end of the week.â??These college savings plans are an important tool for families and individuals who want college in their futures,â?? Crapo said. â??Families need all the help they can get to pay for college; this will help them to plan and save for their childrenâ??s future. Since Congress made withdrawals for higher education tax-free, the participation in 529 plans has been growing steadily, which means more of us are using this plan to help with college costs. We ought to do all we can to encourage higher education and to help cover the costs of it. I strongly support the provision in the pension reform measure because many people dip into their pension and retirement accounts to pay for college. I will continue to advocate aggressively for it.â??A 529 College Savings plan is a state-sponsored, tax-advantaged savings plan for higher education. Under changes made to tax law in 2001, education-related withdrawals from these accounts are tax-free. Prior to 2001, withdrawals were taxed at the studentâ??s rate. Making the tax advantage permanent would continue the preferential tax treatment.In 2000, contributions to 529 plans totaled about $2.6 billion. After the 2001 change, that amount exploded to $14 billion in 2001; some estimates place the investment in 529 plans at more than $350 billion by 2010, when the tax-free withdrawal status is set to expire.Stand-alone legislation to make the 529 plan advantages permanent has garnered 72 co-sponsors in the Senate; Crapo is among those co-sponsors. The plans also have support from a number of national groups, including the National Association of State Treasurers, the College Savings Foundation and investments organizations like TIAA-CREF, the Vanguard Group, Fidelity Investments, Merrill Lynch, and American Century, as well as many major mutual fund companies.