Should Our Business Offer a 529 College Savings Plan to Employees?
Looking to improve employee benefits? How about offering a benefit to your employees that:
- The majority of employees want…
- Is no cost to you…
- AND no added admin/work for you.
How do I know?
- According to ISS Market Intelligence, 81% Employees are likely to open a 529 account if one was offered at work
- SHRM (The Society of Resource Management) did a study and found that only 10% of businesses offer their employees a 529.
So not only do employees want one but your competitors are probably not offering it. What a great way to stand out! This can help you attract and retain employees in a very competitive job market.
Why Consider a 529 College Savings Plan?
A 529 is a tax-advantaged savings plan that can help employees save and pay for educational costs for their loved ones (their children, grandkids, anyone) and themselves.
Not only will I help you set this 529 plan up and I’ll help your employees invest, but the earnings on the account are tax-free when used for educational purposes like:
- Tuition and related fees including colleges, trade and vocational schools, community colleges, theological seminaries, international schools, study abroad programs run through U.S. eligible schools and an elementary or secondary private or religious school (kindergarten through 12th grade) up to a maximum of $10,000 incurred during the taxable year per beneficiary. Qualified education expenses also includes expenses for fees, books, supplies and equipment required by a designated beneficiary for certain apprenticeship programs.
- Books, computers and other supplies, such as textbooks, paper, pens, laptops, printers, educational software and internet services. (Excludes expenses related to K–12.)
- Student loans — qualified education expenses includes amounts paid as principal or interest (up to a $10,000 lifetime maximum) on any qualified student loans of a designated beneficiary or the designated beneficiary’s sibling.
What are the tax advantages of a 529 College Savings Plan?
Tax-advantaged treatment applies to savings used for qualified education expenses. State tax treatment varies. If withdrawals are used for purposes other than qualified education expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. States take different approaches to income tax treatment of withdrawals. For example, withdrawals for K–12 expenses may not be exempt from state tax in certain states. Tax deductions may be disallowed in the event of non-qualified withdrawals.
Benefits to your business
- Tax-advantaged investment to help attract, motivate and retain employees
- Easy setup and maintenance with no cost to employers
- Wide eligibility for both employers and employees
Benefits to your employees
- Low costs and low minimum investments
Disclosures, Sources, and Footnotes
1 529 Industry Analysis (2021 edition), ISS Market Intelligence.
2 Employee Benefi ts 2020 Report: Overall, The Society for Human Resource Management (SHRM).
Disclosure
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing. Non-qualified withdrawals may result in federal income tax and a 10% federal tax penalty on earnings.
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