Happy National 529 College Savings Plan Day!
Here at the International Foundation, we keep a close eye on benefits-related holidays and today we’re celebrating National 529 Day! Celebrated each year on May 29, National 529 College Savings Plan Day serves to raise awareness to the benefits of 529 plans. With college tuition at an all-time high, any money saved before embarking on that higher education journey is a celebration-worthy feat.
What Are 529 Plans?
A 529 plan is a state-administered tuition program established under IRC section 529. Developed by state legislatures to encourage savings for postsecondary education, there are two specific types of 529 plans: savings plans and pre-paid tuition plans. Both allow tax-free earnings on investments for a child’s education.
The plans differ from state to state in the flexibility and degree of risk they impose on participants. According to forthcoming International Foundation data, 10% of U.S. organizations offer a 529 savings plan.
What Are the Challenges?
Employers are offering these plans to offset the rapidly escalating costs of higher education. According to 2018 figures from The College Board, the typical annual price of price of tuition and fees, room and board, books and supplies, transportation and other expenses for full-time undergraduate students averages:
- Two-year community colleges: $17,930
- Public colleges for residents: $25,890
- Private non-profit colleges: $52,500
In Financial Education in the Workplace: 2018 Survey Results, respondents communicated challenges that are affecting a significant portion of their participants. They include:
- Saving/paying for children’s education expenses—54.5%
- Paying off personal student loan debt (for past education)—37.3%
- Saving/paying for own current or future education expenses—14.3%
What Are Employers Doing About It?
In addition to establishing 529 plans, organizations are using methods to assist in funding educational costs for employees and their children. According to Employee Benefits Survey: 2018 Survey Results:
- More than one in three (33.7%) organizations offer educational assistance programs that partially or fully reimburse an employee for education and training expenses.
- One in nine (11.6%) respondents offer scholarships or paid tuition for employee’s children.
- Less than 4% of respondents offer student loan repayment programs to their workers.
Organizations are also including these topics in their financial education initiatives. According to Financial Education in the Workplace: 2018 Survey Results:
- Those who offer education address topics such as saving for education (20.7%) and student loan debt (12.5%).
- One in six responding organizations target their education initiatives to specific life events. Of those that do, 61.7% address funding an education for themselves, a spouse, or a child.
My wife and I are expecting our first child this fall and you can bet that setting up a 529 plan is on our to-do list!
[We Hope You Celebrated May the Fourth earlier this month! Check out: In a Benefits Plan Far, Far Away]
Justin Held, CEBS
Senior Research Analyst at the International Foundation
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