Treasury Secretary Timothy Geithner was on the record last month about the effectiveness of 529 college savings plans and the need to encourage more moderate-income families to use them. Touring with Vice President Joe Biden’s Middle Class Task Force, Geithner told a crowd at Syracuse University that saving for college would spur economic growth in the U.S. and help the country regain competitiveness. That same day, the Treasury Department released a study about sparking broader participation in the savings vehicles.
Nationwide, there are about 9.1 million 529 accounts, with more than $98 billion invested. Only 5% of middle-income parents currently use them, while about 30% of the top 5% of earners participate. Named for the tax code under which they were created, 529 plans generally are run by states. Funds are withdrawn tax-free, provided the money is spent on education. Some programs also offer state-tax benefits, and a few cough up an additional match. Louisiana’s START savings program offers both, and it has been routinely recognized as one of the country’s best 529s by BankRate’s SavingforCollege.com. START’s match ranges between 2% and 14% depending on income.
The Treasury Department’s report suggested the use of more index funds over actively managed funds could help lower fees. The report also recommended capping overall contributions. Investors currently can spread funds over several 529 programs, effectively sheltering funds to avoid estate taxes. If the federal government reduces its tax-break commitment, it could potentially free up resources to help more low- to middle-income families, Geithner said.
The Treasury Department’s analysis followed a white paper released in July by Sallie Mae and Upromise Investments, the leading administrator of 529 programs. The report noted that 529 plans remain unclear to potential investors, and more public outreach is needed. Twenty-seven percent of parents surveyed said they didn’t have enough information on 529s, while 14% said the plans seemed complicated. Another 31% said they could lose their money if their children’s plans changed. In fact, 529 plans are transferable to other individuals, provided their ultimate use is still education-related. The report also proposed incentives for employers to offer 529 plans in benefits packages and suggested new legislation that would allow nontaxable employer matching contributions.
A call to action
Health rates are worse in Louisiana than almost every other state, and what’s most distressing is that we’re failing children in particular. Most parents would hit the roof if a child came home with a D, but that’s what the state earned in the latest evaluation of children’s health released last month by the Pennington Biomedical Research Center.
Louisiana’s Report Card on Physical Activity and Health for Children and Youth zeroed in on exercise, assessing the level of physical activity and sedentary behaviors in the state’s young people. It also examined barriers and social conditions, like physical-education curriculum in schools and the built environment. Louisiana’s grade means we have “insufficient appropriate physical activity opportunities and programs available to the majority of Louisiana’s children and youth.”
This is an issue that belongs to everyone, but it’s one in which women could have significant impact. Stereotype or not, women are still caregivers to the young and old, and from this vantage point, they can see preventable diseases like heart disease and diabetes at one end of the continuum, and junk food, video games and no sidewalks at the other. If mothers chose to put planning commissions, school cafeterias and their own lunchboxes in the crosshairs, there’s a good chance they could move the needle.
And when you’re at the bottom, even a little helps.
