May 15, 2006 – Rep. Clay Shaw (R-Fla.) has introduced the 401Kids Family Savings Act of 2006 (H.R. 5314). This bill would rename IRC Sec. 530 Coverdell education swavings accounts as “401Kids” accounts, and would allow parents to contribute up to $2,000 annually on behalf of children, for multiple purposes that would include education and first-home expenses (by changing the definition of “qualified expenses”). Current ESA rules allow expenses for elementary, secondary, and certain noncollege post-secondary education programs. Like current ESAs, contributions would be after-tax, with earnings tax deferred. Earnings would be tax-free if withdrawn for any approved purpose. The assets would be allowed to roll to a Roth IRA for retirement purposes.
The bill would also extend through 2015 the federal income tax exclusion for contributions made to IRC Sec. 529 college savings plans. This exclusion is set to expire in 2010.