SECURE Act Enhances 529 Plans

Passed in late December 2019 with bipartisan support, the Setting Every Community Up for Retirement Enhancement (SECURE) Act is the most sweeping retirement bill in more than a decade. In addition to changes to retirement planning, the new law includes enhancements for 529 college savings plans.

529 Plan Withdrawals for Apprenticeship Programs

The definition of 529 plan qualified higher education expenses now include expenses for fees, books, supplies, and equipment required for the participation in a registered apprenticeship program.

529 Plan Withdrawals Used to Pay Student Loans

The definition of qualified higher education expenses for 529 plans is expanded to include student loan repayment (principal or interest) on any qualified education loan of a designated beneficiary or a sibling of the designated beneficiary (i.e., those amounts would be withdrawn tax-free). The amount is treated as a qualified expense for loans of any individual and is subject to a lifetime limit of $10,000. A designated beneficiary and a sibling would each be allowed up to $10,000 of qualified education loan repayments as 529 plan qualified distributions.

Siblings may include a brother, sister, stepbrother or stepsister. A 529 plan account owner may change the 529 plan beneficiary at any time without tax consequences. The provision does not appear to directly encompass the repayment of student loan debt incurred by parents on behalf of the designated beneficiary.

Note: Distributions outlined under these provisions are considered qualified under Kansas state statutes. Per KSA 75-643(h) “Qualified higher education expenses” means any qualified higher education expense included in section 529 of the federal internal revenue code of 1986, as amended. Consult a tax advisor about how these changes may impact your personal situation.