Tax reform this year expanded the way 529 plans can be used, but one plan advocate says more policy changes are needed to bring in more college savers.
“For the most part, the tax bill did not address 529 issues,” Randy Hardock, partner at Davis and Harman LLP in Washington, D.C., and counsel to the College Savings Foundation, said at the foundation’s annual conference in Phoenix on Wednesday. “We’re still working on all those ideas.”
The tax reform packaged signed into law by President Trump earlier this year allowed 529 plans to be used towards K-12 tuition and rolled over into ABLE accounts.
But Hardock argued more changes are needed for 529 plans to be more widely accepted.
He expressed support for proposed legislation in Congress that would allow employers to contribute to their workers' 529 plans and allow account holders to use 529 funds to repay student loans and make charitable contributions.
Changes are also needed so that college savers don't get penalized for having a 529 plan when they apply for student financial aid, he said.
As it stands now, A 529 college savings plan account that is owned by a student or a student's parent must be reported as an investment asset on the Free Application for Federal Student Aid (FAFSA). That usually results in the family getting less needs-based financial aid.
Hardock argued that some portion of the 529 plan assets should be excluded from calculating financial aid because, otherwise, people may be discouraged from saving.
"They’re just not assets in the same way that parents retirement savings are not assets,” said Hardock. “The fact that you saved money is a good thing and you shouldn’t be penalized for that.”