Illinois Helps Employees Save for College — Through the Workplace

The state of Illinois recently passed a bill, SB 77, creating a state income tax credit for employers making matching contributions to their employees’ 529 college prepaid and savings accounts. The credit is a 25% match of the employee contribution, not to exceed $500 per employee. The provision is effective for the current tax year and runs through December of 2020.

This is an important step forward to involve employers in helping employees save for their children’s or even their own higher education expenses. Most of us don’t learn about saving and investing until we begin fulltime employment. This is typically when we begin contributing to 401K accounts. So why not encourage greater savings discipline for college at the same time employees are investing for retirement?

Employers have the capacity to encourage better academic participation by making it easier for employees to contribute to savings plans. Offering payroll deduction and providing financial support in the form of matching contributions are two important ways that employers can support their workers. The workplace is often an important classroom for learning about saving and investing.

In the current economic environment, individuals with post-secondary education and training have fared better than those without. Employers have a vested interest in facilitating participation in these plans in order to encourage better educated workers including their own workers.

The Illinois proposal had been around before the legislative session that saw SB 77 enacted. Sometimes it takes time for a good idea to find traction. The Illinois Legislature took an important step forward by enacting this provision. Hopefully other states will follow their lead.