• Overview
  • Saving for Education (PDF)
  • Are You Saving Enough for College Costs?
  • Tax Benefits for 529 Plans
  • Mutual Funds for Education
  • Four Advantages of 529 College Savings Plans (PDF)
  • Private Colleges Make Prepaid Tuition Plan Available (PDF)

TAX BENEFITS FOR 529 PLANS: THE PENSION PROTECTION ACT OF 2006

The law governing the federal income tax treatment of qualified withdrawals from 529 plans has changed — for the better. The Pension Protection Act of 2006 makes permanent the federal income tax exclusion for qualified withdrawals from 529 plans. 

Higher education costs are steadily on the rise and a college savings strategy is no longer a consideration, but a requirement for today's parent. The Pension Protection Act of 2006 provides the assurance you need to know that tax incentives will remain available.

Take advantage of this convenient way to save money for future college expenses for a child, grandchild or even yourself.

Background:

• The 2001 Economic Growth and Tax Relief Reconciliation Act created provisions for federal tax-free withdrawals from 529 plans for qualified expenses
• The provisions were set to expire on December 31, 2010
• The passage of the Pension Protection Act means the provisions won’t expire, so you can continue to make tax-free withdrawals for qualified expenses

The Pension Protection Act also:

• Provides for the creation of prepaid tuition programs
• Allows rollovers from one account to another every 12 months
• Allows same-beneficiary rollovers
• Eliminates the mandated state-imposed penalties on nonqualified distributions
• Makes first cousins eligible members of the family for purposes of rollover and change of beneficiary rules
• Preserves the income tax exclusion at the state level in states that follow the federal tax treatment of 529 plans