Compliance December 24, 2008

IRS Permits More Frequent Investment Changes for 529 Plan Investors

December 24, 2008 (PLANSPONSOR.com) - The Internal Revenue Service (IRS) has set forth a special rule under which a Section 529 program may permit investments in a section 529 account to be changed during 2009 on a more frequent basis than under current rules.
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Notice 2009-01 modifies Notice 2001-55, 2001-2 CB 299, which permitted a change in the investment strategy selected for a Section 529 account once per calendar year, and upon a change in the designated beneficiary of the account.The guidance provides that a Section 529 program does not violate the investment restriction under Section 529(b)(4) if it permits a participant to change investment strategy selected for a Section 529 account twice during calendar year 2009. 

“In response to concerns that have been caused by the recent condition of the financial markets, commentators have requested more flexibility in this special rule, specifically the ability to change the investment strategies more frequently. Those commentators expressed concern that the inability to do so may interfere with the preservation of the value of a section 529 account in the face of changes in the markets,” the Notice says.

Notice 2009-1 is here and will appear in Internal Revenue Bulletin 2009-2, dated January 12, 2009.

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