The pressure is on for employers to beef up their
"529 plans are a savings vehicle that families can use with several tax benefits," says Uhlar, a college savings specialist at the Michigan Education Savings Program. "When families are ready to take the money out for their kids' education costs, it's going to be tax-free."
Employees can open a 529 account for a child, grandchild, friend or even themselves if they have plans to pursue higher education in the future. 529 plans grow tax-free, and their funds can go towards everything from tuition costs for kindergarten through college, to room and board, as well as books and computers for college students. The money can even be used for federal student loans and apprenticeship programs registered and certified with the Secretary of Labor.
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Notably, under Secure 2.0, money from a 529 account can also be transferred to a Roth IRA, meaning whatever funds didn't go towards a child's education can go towards their
With the help of an employer match, 529 plans could be a very valuable way for workers to save.
"Employees are stressed — they may be dealing with high child care costs and their own student loans, and they're thinking about how they can save for their child's future," says Uhlar. "This is one way employers can help relieve financial stress."
Uhlar considers 529 plans vastly underrated, despite the ongoing benefit conversations around how companies can better support working parents and families. Just 15% of employers with 500 or more employees offer 529 plans, according to the Employee Benefit Research Institute.
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Companies in several states are also eligible for a state income tax credit or deduction for matching employee 529 plan contributions, notes Uhlar. This includes employers based in Arkansas, Colorado, Illinois, Nebraska, Nevada, Wisconsin and Utah.
Uhlar advises employers to integrate 529 plans into their benefits similarly to 401(k) plans — workers can opt into the benefit and choose the amount they want to contribute from each paycheck.
"When employees contribute through their pay, it allows them to make more regular contributions," she says. "People tend to save more."
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If employers want to go the extra mile, they can partner with 529 plan providers who also offer financial education consultants and webinars for workers. For example, the Michigan Education Savings Program will build a year's worth of educational opportunities for a company, including on-site events where employees can learn how to get the most out of their 529 plans.
Uhlar believes 529 plans are a relatively easy benefit add that can make an employer stand out. While student loan repayment assistance is already on many employers' radars, 529 plans can help pave a family member's path to success.
"529 plans show a dedication to financial wellness," says Uhlar. "It's a great tool to attract and retain talent, and it puts employers ahead of the curve."
