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Overview

The session examined major legislative and product developments in 529 education savings plans and introduced insights into the proposed Trump Account initiative, a new type of savings vehicle focused on education, workforce training, and first home purchases.

The State of 529 Plans in 2025

Scott Morrison provided an update on the growth and structure of the 529 plan industry:

• 16–17 million accounts nationwide holding $500–550 billion in assets.
• 60% of assets are now in direct-sold programs, up from less than 50% five years ago.
• Advisor-sold plans are shrinking slightly due to older accounts aging out and the decline of commission-based programs.
• Over 90 active 529 plans exist across the U.S., with dedicated pages for each available on Savingforcollege.com.
• Prepaid plans have largely disappeared except in states like Florida and Pennsylvania.
• Approximately 15% of all U.S. households own a 529 plan, and among households saving for education, the adoption rate is now nearly 50%.

Morrison emphasized bipartisan support for the continued expansion of 529 plan flexibility.

Legislative and Policy Changes

Expanded Qualified Expenses

Recent legislation—including the Opportunity and Business Prosperity (OBP) Act—broadened the definition of qualified expenses:

• K–12 Tuition: Federal tax-free distributions doubled from $10,000 to $20,000 per year starting January 1, 2026.
• Apprenticeships and Workforce Training: 529s now cover vocational programs, trade schools, and accredited apprenticeship programs.
• Books, Supplies, Computers, and Room & Board: Continue to qualify for higher education.
• Tutoring and Standardized Test Fees (K–12): Newly qualified expenses for PSAT, SAT, ACT, and prep programs.
• Professional Licensing and CE Credits: Includes professional certifications such as CPA, CFP®, Bar exams, and continuing education for licensed professionals — including financial advisors.

State conformity varies:
Not all states automatically align with federal qualified-expense rules. Advisors must verify with their state treasury or plan administrator whether expanded uses (especially K–12 and professional CE) qualify for state tax-free treatment.

Leftover Funds and Roth IRA Rollovers

The SECURE 2.0 Act (2022) introduced the ability to roll over unused 529 funds into a Roth IRA for the same beneficiary, effective January 1, 2024. Morrison explained:

• The 529 account must be at least 15 years old.
• Contributions (and earnings on them) made within the last 5 years cannot be rolled over.
• The lifetime rollover cap is $35,000 per beneficiary.
• Annual limit: $7,000, reduced by any other Roth contributions made that year.
• The beneficiary must have earned income equal to or exceeding the rollover amount.
• The rollover must be done trustee-to-trustee—funds cannot pass through the account owner.

Despite some IRS clarification still pending, Morrison reported significant interest and activity since this option became available.

FAFSA Simplification Act Impacts

FAFSA changes, effective for the 2024–2025 academic year, reduced the impact of 529 savings on financial aid eligibility:

• Parent-owned 529s are still considered parental assets (max 5.64% counted).
• Sibling 529s no longer count toward aid calculations.
• Grandparent-owned 529s no longer affect student aid, as distributions are no longer reported as student income.
• Strategy tip: Families can open multiple 529s—one for each child and one for the parent—to allow flexibility and transferability between accounts for ongoing or continuing education use.

The Trump Account: Concept and Implementation

Legislative Background

Morrison explained that the Trump Account emerged rapidly through 2025 legislation. Early drafts (nicknamed the “MAGA Account”) caused concern within the 529 industry because they appeared to compete directly with state-run 529 programs. The final version, influenced by Senate revisions, more closely resembled a “baby IRA.”

Core Features

Administration and Open Questions

• The Treasury Department will select one or more administrators; potential custodians are still unknown.
• Investment limits and administrative costs are under review, with concerns that the 0.10% cap may not be sustainable.
• Employer match provisions exist, but Morrison expressed skepticism that many corporations will adopt them, citing limited tax incentives.
• Companies like Dell and Charter Communications have expressed early interest in supporting the program.
• Seed funding ($1,000 per eligible child) is expected to be distributed via the IRS tax filing process once account registration opens.

529 Plan Features and Tools

Morrison highlighted modern improvements designed to enhance user experience and advisor efficiency:

Key Features for Investors

• Mobile Apps: Increase engagement and allow users to track progress; the first app, ReadySave 529, launched in 2020.
• Direct-to-School Distributions: Streamlined payments directly to college billing systems to reduce mailing errors and IRS mismatches.
• Auto-Increase Contributions: Automatically raise contributions annually to boost long-term savings.
• Gifting Platforms: Enable relatives to contribute electronically, which can add thousands of dollars over time and generate advisor referrals.

Tools for Financial Advisors

• Pro Dashboard & 529 Evaluator — available at https://www.savingforcollege.com:
  • Compare up to 50 plan features (fees, performance, state tax deductions).
  • Access superfunding calculators, K–12 savings tools, and state tax comparison data.
  • Financial Experts Network members can use discount code YEARLYGOLDPLATINUMFEN for 35% off a Gold Financial Pro subscription (reducing $299/year to under $200).

Continuing Education and Lifetime Learning

• CE-Eligible Uses: Financial professionals can use 529 funds for legitimate continuing education courses tied to recognized professional designations (e.g., CFP®, CPA).
• State approval may vary—some programs must appear in state Workforce Innovation and Opportunity Act (WIOA) directories.
• Reimbursements: Withdrawals for CE can go directly to the account owner; proper documentation (e.g., invoices, receipts) is recommended to substantiate expenses for IRS purposes.

Action Items

• Contact Scott Morrison at scott@savingforcollege.com for plan or tool questions.
• Explore Pro 529 Evaluator and Dashboard tools: https://www.savingforcollege.com/pro
• Verify state-level qualified expense conformity for clients using https://www.savingforcollege.com/529_state_tax_deduction.
• Monitor Treasury guidance on Trump Account administration (expected 2026).