PA employers who match contributions to their workers’ 529 plans may soon be eligible for tax credits

10 June 2024- Treasurer Stacy Garrity has commended the Senate Finance Committee for unanimously approving legislation which will give families even more reasons to invest in Pennsylvania’s successful PA 529 College and Career Savings Program and PA ABLE Savings Program.

House Bill 1745, sponsored by Rep. Paul Friel (D-26), will create tax credits for employers who provide matching contributions to their employees’ PA 529 and PA ABLE accounts. The bill was also amended to allow excess funds in a PA 529 plan to be rolled over to a Roth IRA without any state taxes. That provision had been introduced in House Bill 2119, sponsored by Rep. Greg Scott (D-54) and Rep. Steve Samuelson (D-135).

“This is great news – we’re one big step closer to strengthening PA 529 and PA ABLE for Pennsylvania families. Giving employers the option of receiving a tax credit for providing matching funds will give families more power to save while benefiting our great business community. This will also encourage more Pennsylvanians to save for the future with these great tax-advantaged programs, especially with the increased flexibility for PA 529 savings that this bill provides.”
 Pennsylvania State Treasurer Stacy Garrity

“Given the ever-increasing cost of higher education and the need to ensure postsecondary education, in all its forms, is accessible and affordable, House Bill 1745’s incentive for employers to support their employees’ educational goals will help alleviate some of the financial burden of education for both employees and their families.”
 Sen. Scott Hutchinson (R-21)

“The PA 529 program has helped so many Pennsylvania families save for their child’s or grandchild’s future education” I’m pleased that the PA 529 tax credit bill passed out of the Senate Finance Committee with bipartisan support.”
 Rep. Paul Friel (D-26)

“HB 1745 is a crucial step in addressing the skills gap and strengthening our workforce through better access to education. By providing a tax credit for employers who contribute to their employees’ PA 529 and PA ABLE accounts, we are not only supporting Pennsylvania families but also investing in a more skilled and educated workforce. I am proud to see this important legislation advancing with bipartisan support.”
 Rep. Kristin Marcell (R-178)

As amended, HB 1745 will establish a 25 percent tax credit for employers who match up to $500 of employee contributions per participating employee per year. This would apply to matching contributions made to any 529 or ABLE account owned by a Pennsylvania resident.

The bill also eliminates any state tax penalties associated with a PA 529 account in the event a beneficiary dies or becomes disabled.

HB 1745 was also amended to clarify that state law will automatically conform to any future federal tax changes related to 529 accounts.

HB 1745 is now before the full Senate for consideration. Treasurer Garrity thanked Sen. Hutchinson, Sen. Miller, Rep. Friel, Rep. Marcell, Rep. Scott and Rep. Samuelson for their roles in advancing the legislation in a strong, bipartisan fashion.

The PA 529 College and Career Savings Program helps families steadily and strategically save for future educational expenses like tuition, fees, books, equipment, room and board and more at qualifying technical, collegiate and apprenticeship programs. PA 529 plans also offer significant state and federal tax advantages, and saving with PA 529 does not impact Pennsylvania state financial aid eligibility.

There are two options to invest with PA 529: the PA 529 Guaranteed Savings Plan, which allows families to save at today’s tuition rates to meet tomorrow’s tuition costs, and the PA 529 Investment Plan, which allows families to choose from a variety of investment options. The PA 529 Investment Plan received a Gold Rating from Morningstar in 2023, making it one of the top two 529 plans in the nation.

The PA 529 program has been helping families save and pay for education for more than 30 years. There are currently almost 300,000 PA 529 accounts with assets of nearly $7.5 billion.

Visit pa529.com to learn more about the PA 529 College and Career Savings Program.

PA ABLE (Achieving a Better Life Experience) accounts are a tax-free way for Pennsylvanians with disabilities, and their families, to save without affecting eligibility for important benefits.