WASHINGTON, D.C. – Today, Congress gave final approval to legislation that makes important enhancements to 529 college savings plans. The three provisions, which were contained in H.R. 529 and S. 335, were included as part of a Congressional proposal to restore expired tax provisions.
Betty Lochner, chair of the College Savings Plans Network (CSPN)—the nation’s leading source of information about Section 529 College Savings Plans and Prepaid Tuition Plans—issued the following statement:
“This year D.C. policymakers have taken an active role in enhancing and improving 529 college savings plans for the benefit of American families – and their children’s college education.
H.R. 529/S. 335 provides critical elements to help middle class families cope with the rising costs of college and take full-advantage of their savings for future higher education expenses. With 12 million accounts open and nearly $250 billion invested, 529 plans are a consistent and powerful savings tool for families across the country.
This important legislation will make 529 plans more flexible by making computers an eligible education expense; allowing the redeposit of college refunds without negative tax implications in certain circumstances and updating outdated accounting rules.
The College Savings Plans Network applauds the inclusion of H.R. 529 and S. 335 in the tax extenders bill. We congratulate Representatives Lynn Jenkins (R-KS) and Ron Kind (D-WI), Senators Chuck Grassley (R-IA), Bob Casey (D-PA), Richard Burr (R-NC), Mark Warner (D-VA), Pat Roberts (R-KS), and Ben Cardin (D-MD), and all the other Congressional supporters of this legislation for their hard work to help ease the financial burden for families trying to cover escalating college tuition costs.”
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The State Treasurer is responsible for receiving, depositing, investing and distributing State funds, anticipating the cash-flow needs of the State and, on behalf of the Board of Public Works, conducting bond sales several times a year to ensure the State’s financial ability to meet its fiscal obligations. The State Treasurer also provides lease-purchase financing of capital equipment for State agencies and handles insurance needs for State government.
U.S. state treasurers will ask banks and private equity firms to help lobby federal policymakers in their push to categorize municipal bonds as high quality liquid assets under new banking rules, Washington State Treasurer James McIntire said on Thursday.
Federal rules approved in September 2014 aim to ensure that big banks will be able to access enough cash during a financial crisis. But the rules excluded muni bonds from the types of securities that count as high quality liquid assets, or HQLAs.
States, cities and investors fear that the exclusion would deter banks from buying muni debt, hurting municipalities’ ability to fund everything from schools and bridges to water treatment plants and hospitals.
The National Association of State Treasurers (NAST) and several other organizations have been pushing for inclusion of munis. The rule, due to take effect in January 2017, requires that large banks hold high-quality assets that can be quickly and easily converted into cash within 30 days of a financial stress period.
NAST plans to ask for help from its corporate partners, including financial institutions, in its ongoing effort to secure muni bonds a place at the table, said McIntire, the group’s incoming president.
“They might bring a little bit more firepower to the table,” McIntire said of the banks in an interview.
The decision by the regulators has been “very challenging,” McIntire said. “It’s been hard to get their attention.”
Congressional action has begun to help, McIntire said. Last month the House Committee on Financial Services passed a bill that would qualify muni bonds as HQLA.
Some studies have shown munis, especially general obligation bonds issued by states, to be at least as liquid as their corporate counterparts.
Cumberland Advisors wrote in a commentary last month that yields on muni bonds rose 20 percent in the second half of 2008, while investment-grade corporate yields shot up by 50 percent.
A study last year by Washington State compared its own general obligation bonds to senior unsecured bonds from Microsoft Corp, one of the state’s most well known companies.
During the bond market selloff in mid-2013, more than $3.2 billion of Washington State’s bonds traded, compared to about $2.14 billion of Microsoft’s bonds, the study said. (Reporting by Hilary Russ)
One of the country’s top performing college savings plans, which recently celebrated its 18th anniversary, is now called ScholarShare 529. Business..