Qualified Tuition Plans, commonly called “529 plans” after the
applicable section of the federal tax code, were implemented in their
present form in 2001. These state-sponsored plans can help families
save for their children’s college education, or an adult can open an
account to use for their own post-secondary expenses. Under current
law, earnings and qualified withdrawals are exempt from federal income
tax liability. Because these tax incentives are scheduled to expire
after 2010, Congress intends to act to make these provisions permanent.
This reauthorization of the federal incentives for 529 college savings
plans presents an opportunity to improve upon these accounts and make
them a better option for those low-income families who have the
greatest need to save for and attend college.
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