In a recent Savingforcollege.com article, Peg Creonte, SVP of business development for Ascensus Government Savings, discusses the ways in which beneficiaries can maximize college savings through gifting tools. Crowdfunding through programs such as Ascensus’ Ugift, the largest 529 plan gifting platform, has become increasingly popular among families saving for education. When asking for 529 plan gifts, Creonte suggests discussing 529 plan gifting opportunities with friends and family during a non-gift-giving season: “We’ve found that disconnecting the ask from the event can get people more comfortable.”
Principal Enters 529 Investment Space in Partnership with Ascensus, the Nation’s Leading 529 Program Manager, to Offer Savers Solutions to Meet Their Education Goals
Santa Fe, New Mexico—After a competitive Request for Proposals process, The Education Trust Board of New Mexico has selected Ascensus and Principal as managers for The Education Plan® and the Scholar’s Edge® 529 plans. This marks the entrance of Principal into the 529 savings account market.
Ascensus, whose technology and expertise helps millions of people save for retirement, education, and healthcare, will provide program management, recordkeeping, administrative services, and investment oversight for The Education Plan.
Principal Global Investors, which leads asset management at Principal, will provide all aspects of investment management services for the Scholar’s Edge plan. Principal Funds Distributor will provide marketing and distribution services for the Scholar’s Edge plan, highlighting the new investment capabilities. Principal will leverage its robust retirement and investment expertise to support participants in achieving their educational savings goals.
“The New Mexico Education Trust Board selected Ascensus and Principal as partners not only because of their compelling proposal but also because it believed that these firms share the Board’s vision that higher education improves the lives of our children and ultimately benefits the citizens and the economy of New Mexico,” said Sandy Liggett, chairwoman.
“All of us at Ascensus are thrilled to have been selected to support the State of New Mexico and its 529 plan savers,” said David Musto, president of Ascensus. “We welcome the opportunity to partner with our colleagues at Principal to deliver best-in-class user and service experiences that can help the program’s participants—along with their families and beneficiaries—achieve their educational savings goals.”
“We understand that funding education can weigh on the minds of many, so we are pleased to be selected by the State of New Mexico to work with Ascensus and support 529 plan participants through this critical planning milestone,” said Dan Houston, chairman, president, and chief executive officer, Principal. “Our mission is to help investors save enough, have enough, and protect enough throughout their life, so it is a natural fit for us to be able to help individuals with yet another life goal: education. Our extensive retirement and asset allocation foundation will allow us the ability to assist families and individuals in achieving their financial educational goals regardless of their timeline.”
About the New Mexico Education Trust Board
The Board administers New Mexico’s 529 college savings program. The program consists of two plans. The Education Plan is sold directly to investors. Scholar’s Edge is sold through financial advisors. The combined program has 125,000 accounts and nearly $2.4 billion in assets.
Ascensus is the largest independent recordkeeping services provider, third-party administrator, and government savings facilitator in the United States. The firm delivers technology and expertise to help millions of people save for what matters most—retirement, education, and healthcare. For more information about Ascensus, visit ascensus.com. View career opportunities at careers.ascensus.com.
About Principal Global Investors®
Principal Global Investors® leads global asset management at Principal®. As a multi-boutique firm, we bring a focused perspective and offer expertise across a host of asset classes.
At our core, we are driven by our purpose to help investors and businesses achieve their financial goals. Our global investment professionals deliver investment solutions for public and private pension funds, foundations and endowments, central banks, insurance companies, sub-advisory arrangements, sovereign wealth funds and individual portfolios.
Principal Global Investors manages approximately $442.4 billion in assets on behalf of over 800 institutional clients located in over 80 countries as well as retirement plans and individual clients, reflecting our worldwide market reach and experience and our commitment to high-quality research and service (as of March 31, 2019).
In a recent article from The Wall Street Journal, head of government savings Kevin Cox answers questions related to 529 accounts, specifically about grandparent-owned 529s and their effect on financial aid. He also discusses important tax credit and withdrawal considerations. “Many grandparents use their funds in the later years of a beneficiary’s education to minimize the impact on need-based financial aid,” Cox says.
With growing bipartisan momentum that has lent new optimism for eventual enactment, comprehensive retirement legislation has been passed by the House of Representatives and now moves on to the U.S. Senate. The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 passed in the House on May 23 with only token opposition, its 417-3 margin a demonstration of overwhelming support.
Even before the SECURE Act’s passage just prior to the start of the Memorial Day recess, Senate Finance Committee Chairman Chuck Grassley (R-IA) indicated his eagerness to follow the House’s lead and tackle retirement enhancement legislation. Though the timing of congressional action is always difficult to predict, it is widely expected that the Senate will now take up a similar bill—the Retirement Enhancement and Savings Act of 2019, or RESA.
Any differences between the House and Senate retirement bills would have to be resolved in a conference committee process. Barring any irresolvable policy differences or unforeseen procedural obstacles, comprehensive retirement enhancements are thought to have the best chance of enactment in many years.
A Few Last-Minute Changes
Like many bills, the SECURE Act underwent changes between its initial committee mark-up and when the legislation was passed by the House. These changes are described below.
- The final House version removed a provision under which certain home schooling and elementary and secondary private school expenses would be treated as eligible 529 plan expenses. (Provisions treating certain apprenticeship expenses and student loan repayments as eligible 529 plan expenses remain in the SECURE Act.)
- The final version also increased penalties for certain retirement plan reporting failures.
Other Provisions Remain the Same
All other SECURE Act provisions related to retirement and education savings remain the same. To review the details of this proposed legislation, see Ascensus’ previous Washington Pulse on the SECURE Act.
Count on Ascensus for the Latest Updates
Ascensus will closely monitor the progress of retirement legislation in the U.S. Senate and any further action taken by the House that may lead to enactment. Watch Ascensus’ Latest News for future updates.
In a recent article from The New York Times, Ascensus’ 529 Ugift donation program was featured. As 529 day is quickly approaching, the article seeks to answer savers’ basic questions, such as “Can I donate money to the 529 account of a relative or friend?” Ugift, which is offered in 20 states plus the District of Columbia, allows parents to share a unique code with friends and family that can be used for an electronic donation to a beneficiary’s 529 account.
Arizona Governor Doug Ducey (R) signed SB 1349 into law on May 22, 2019. This bill amends the Arizona state statutes relating to the Family College Savings Program, aligning them with the federal changes to 529 plans that resulted from the Tax Cuts and Jobs Act of 2017.
Amongst a few clerical changes, this bill amends the definition of qualified higher education expenses to include the following.
- The purchase of a computer, peripheral equipment, or computer software or Internet access and related services—as long as the computer, equipment, and software or services are used primarily by the beneficiary during the years that the beneficiary is enrolled at an eligible educational institution. These items must also meet the definition of qualified higher education expenses in Internal Revenue Code Section (IRC Sec.) 529.
- Tuition to enroll in or attend an elementary or secondary public, private, or religious school pursuant to IRC Sec. 529.
The definition of a qualified withdrawal is also amended to include the tuition of less than $10,000 for the designated beneficiary to enroll in or attend an elementary or secondary public, private, or religious school pursuant to IRC Sec. 529, provided the withdrawal is made in accordance with the statutes.
Additionally, the bill provides that through December 31, 2025, upon direction of an account owner, up to $15,000 of an account may be rolled over to an Achieving a Better Life Experience Act (ABLE) account, established pursuant to 26 U.S. Code Section 529A.
Arizona SB 1349 passed the House of Representatives, as amended, on April 30, 2019, and was transmitted back to the state senate for concurrence. On May 16, 2019, the Arizona Senate concurred, passing SB 1349 to be sent to Governor Doug Ducey (R) for signature.
This bill amends the Arizona state statutes relating to the Family College Savings Program, aligning them with the federal changes to 529 plans that were a result of the Tax Cuts and Jobs Act of 2017.
Amongst a few clerical changes, this bill amends the definition of qualified higher education expenses to include the following.
- The purchase of a computer, peripheral equipment, or computer software or internet access and related services—as long as the computer, equipment, and software or services are used primarily by the beneficiary during the years the beneficiary is enrolled at an eligible educational institution. These items must also meet the definition of qualified higher education expenses in section 529 of the Internal Revenue Code.
- Tuition to enroll in or attend an elementary or secondary public, private, or religious school pursuant to section 529 of the Internal Revenue Code.
The definition of a qualified withdrawal is also amended to include the following.
- Tuition of less than $10,000 for the designated beneficiary to enroll in or attend an elementary or secondary public, private, or religious school pursuant to section 529 of the Internal Revenue Code, provided the withdrawal is made in accordance with the statutes.
Additionally, the bill provides that through December 31, 2025, on direction of an account owner, up to $15,000 of an account may roll over to an Achieving a Better Life Experience Act (ABLE) account, established pursuant to 26 U.S. Code section 529A.
In a vote on December 20, the U.S. House of Representatives passed H.R. 88, titled the “Retirement, Savings, and Other Tax Relief Act of 2018.” The bill underwent an amendment in mid-December, which added several tax-deferred savings arrangement provisions.
Should the Republican-controlled Senate take up the bill, it would need the support of at least nine Senate Democrats to pass Congress and move to the President for signature or veto. With the holidays quickly approaching and the specter of a partial government shutdown looming, consideration by the Senate before year-end may be unlikely. In addition, although some components of the amended bill are viewed favorably by both parties, there remains contention over several of the provisions.
Thus passage, even after the holidays (but before the end of the current session), may not be likely. It is likely, however, that the bill—or at least some of its popular components—may be considered at a later date by the 116th Congress (including newly-elected members), which convenes on January 3, 2019.
Watch Ascensus.com News for any future developments.
The House Ways and Means Committee released an amended version of H.R. 88, the “Retirement, Savings, and Other Tax Relief Act of 2018,” on December 10. It contains a few notable changes from the bill’s first release late in November.
Generally, the retirement-related provisions in the amended bill are the same as the previous iteration. The majority of the new tax-deferred savings arrangement-related provisions are for Qualified Tuition Programs (commonly referred to as “529 plans”). Following are some of the changes to the amended bill in comparison to the late November release.
- Disaster relief is amended to now include relief for victims of severe storms and flooding in Wisconsin, Texas, North Carolina, Indiana, and Alabama, and also for victims of Tropical Storm Gita in American Samoa.
- An automatic 60-day extension would be granted for any tax filing for taxpayers with a principal abode or place of business located in a disaster area (effective for disasters declared after December 31, 2017).
- Qualified higher education expenses in 529 plans now would include expenses for fees, books, etc. of a designated beneficiary in an apprenticeship program registered and certified by the Secretary of Labor (effective for distributions taken after December 31, 2018).
- Qualified higher education expenses in 529 plans would now include expenses for materials, books, etc. of a designated beneficiary for homeschooling (effective for distributions taken after December 31, 2018).
- Qualified higher education expenses in 529 plans would now include reference to amounts paid as principal or interest on any “qualified education loan” (i.e., indebtedness incurred by a taxpayer to pay qualified higher education expenses), capped at $10,000 over an individual’s lifetime (effective for distributions taken after December 31, 2018).
- Unborn children (i.e., children in utero) would now be allowed to be named as 529 plan account beneficiaries (effective for contributions made after December 31, 2018).
- Several provisions were added in an attempt to restructure and modernize the IRS, including provisions related to online filings.
- Several provisions were added that relate to health and medical excise taxes.
The updated version of the bill is seen by many as having a reasonable chance of passing, although there is certainly opposition in both houses of Congress to the bill in its current form. Watch this ascensus.com news for further developments.
The IRS has released the 2019 Form 1099-Q, Payments from Qualified Education Programs (Under Sections 529 and 530), and the associated detailed instructions for this form. The form is used by entities that administer funds in IRC Sec. 529 qualified tuition programs (“529 plans”) and Coverdell education savings accounts (ESAs).
A notable change is the ability to roll over certain amounts from 529 plans to Achieving a Better Life Experience (ABLE) accounts of special-needs individuals, based on a provision of the Tax Cuts and Jobs Act of 2017.