Employee Interest in 529 Rise with Limits

These plans allows parents and grandparents to set aside money for their children or grandchildren’s college tuition on a tax-deferred basis.

Employees are particulary interested in these programs if they’re funded using convenient payroll deductions.

Many 529 plans are increasing their contributions caps, to take advantage of the new savings limits that took effect at the start of the year.

For example, a USA TODAY report said that the average 529 limit is now $217, 729, up dramatically from the $160,000 in effect a year ago.

The same thing is showing up in many of the individual plans:

Tennessee’s plan, managed by TIAA-CREF, raised its contribution limit to $235,000 from $100,000, a 135% increase,

Michigan also boosted its TIAA-CREF-managed plan to $235,000, from $125,000,

Kansas boosted the maximum for its plan, managed by American Century, to $235,000 from $127,000,

while Rhode Island lets parents contribute up to $262,620

Analysts believe that more plans will follow suit to stay competitive.

Also contributing to the trend toward higher limits are:

that plans now allow parents to use the money at out-of-state schools. Administrators base contribution limits on the most expensive US school, rather than the priciest one in their state – graduate school included,

that plans are recognizing that a four-year degree in 18 years is expected to be a pricey $200,000-plus, and

college 529 plans are increasingly being promoted as an estate-planning device for wealthy grandparents, for example, a couple could contribute up to $110,000 this year.

Read more about 529 plans at the home page of the College Savings Plans Network