Even though they were introduced a relatively short time ago, 529 college savings plans have already been embraced by the public, according to a new study.
The survey released by American Century Investments found that a majority of Americans want a key benefit of the plans to be extended beyond its scheduled expiration in six years.
Like other provisions of the 2001 Economic Growth and Tax Relief Reconciliation Act, the ability to make tax-free withdrawals from 529 plans is scheduled to expire at the end of 2010 unless Congress specifically removes the sunset provision.
"Since their introduction in the late 1990s, 529 plans quickly have become one of the most popular ways to save for a college education," says Doug Lockwood, vice president of shareholder education at American Century.
American Century is program manager for the Kansas 529 programs.
Lockwood notes that with the pending sunset provision, those investors who are just starting a 529 plan may see the savings plans disappear before their children reach college.
The survey of 2,023 adults found that 76% support making permanent the tax-free withdrawal benefit of 529 college savings plans. The support, according to survey, cut across different groups. Among people with no children under the age of 18, for example, 73% supported making the provision permanent. Among those with children under 18-a group that comprised 36% of those surveyed-81% were in support of lifting the sunset provision.
The sentiment also cut across political lines, with 75% of Democrats supporting the tax-free withdrawals, 80% of Republicans and 77% of Independents.
"Almost half of the parents surveyed state that the uncertainty of the federal tax treatment of withdrawals from 529 plans is a major concern," Lockwood says.