With the tax benefits of 529 college savings plans set to expire in 2010 several financial services firms have announced the creation of a lobbying group to make sure that Congress does the right thing – making the tax-free savings programs permanent. "The goal is to preserve the integrity of this product," says Eric Nottonson, vice president of college planning at Fidelity Investments and co-founder of the new Washington-based group, the College Savings Foundation (CSF).
In addition to Fidelity, founding members of the non-profit CSF include 529 vendors Franklin Templeton, Manulife Financial, Merrill Lynch, Morgan Stanley, Strong Financial and T. Rowe Price.
The CSF plans to lobby individual states to create uniform tax policies that ensure equal treatment of the various plans. For example, it would like to extend deductibility of contributions from state income tax for all programs, not just the home state’s.
That, the CSF says, would allow investors to focus on the plan’s management and make it easier for advisors to explain to their clients. "Advisors understand the importance of tax parity," says Nottonson. "It provides more choices for their customers."
Joseph Hurley, founder of Savingforcollege.com, points out that a similar organization representing the state plan sponsors, The College Savings Plan Network, was founded in 1991. But the CSF will represent vendors and not owners, so Nottonson believes the two organizations will complement each other. "Any time you can get more people to support an industry the better you are," he says.
Hurley agrees. "Any type of lobbying is important to get legislation passed that will extend or make permanent the exclusion on withdrawals," he says.
Another goal of the organization is to position itself as the source for information regarding 529 plans. Nottonson says that the group plans to build a database of background information and analysis for consumers.
The popularity of 529 plans has steadily risen as parents and students deal with soaring education costs. According to CSF projections, by 2012 the cost of an education at a four-year public institution will exceed $90,000. For private colleges that figure doubles, reaching an estimated $192,000.
According to Boston-based Financial Research Corp. assets in 529 savings plans reached $19.2 billion in 2002, a 108 percent increase over 2001.
