Rolling over 529 College funds to Roth IRAs could soon be tax free in PA

22 March 2024- Treasurer Stacy Garrity today commended members of the Pennsylvania House Finance Committee for unanimously advancing House Bill 2119, which will allow rollovers of PA 529 College and Career Savings Program account balances into a beneficiary’s Roth IRA free of state taxes. HB 2119 is sponsored by Rep. Greg Scott (D-54) and Rep. Steve Samuelson (D-135).

“Our PA 529 program is an tremendous tool to help families save for higher education. Families sometimes find themselves with leftover funds in a PA 529 account after their child finishes their education, and as part of SECURE 2.0, Congress made it possible to rollover funds from 529 plans to Roth IRAs free of any federal taxes or penalties. This bill eliminates state taxes on those rollovers as well – an important benefit for Pennsylvanians who used a 529 account to save for education.”
 Pennsylvania State Treasurer Stacy Garrity

The SECURE 2.0 Act took effect January 1, 2024, and includes a provision allowing 529 account owners to transfer funds into a Roth IRA without incurring federal income tax or penalties, with a lifetime limit of $35,000. In Pennsylvania, rollovers from a 529 account to a Roth IRA currently remain taxable at the state level. HB 2119 would exempt such rollovers, giving Pennsylvanians more flexibility for using 529 funds while adding another option to save for their retirement.

“Our PA 529 program is an tremendous tool to help families save for higher education. Families sometimes find themselves with leftover funds in a PA 529 account after their child finishes their education, and as part of SECURE 2.0, Congress made it possible to rollover funds from 529 plans to Roth IRAs free of any federal taxes or penalties. This bill eliminates state taxes on those rollovers as well – an important benefit for Pennsylvanians who used a 529 account to save for education.”
 Representative Greg Scott (D-54)

This is an important update to state law that will help thousands of Pennsylvanians save for retirement.
 Representative Steve Samuelson (D-135)

HB 2119 now advances to the full House.

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.