Inclusion and College Savings Plans: Results from Survey and Potential for Future Margaret Clancy Center for Social Development November 11, 2003

Authorized by federal legislation in IRC Section 529 Established and maintained by states Used for post-secondary education Require small initial contributions College Savings Plans

Earnings are free from federal tax Most states offer tax-free growth of earnings Many offer state tax deduction Tax Benefits

$2.5 billion December 2000 $7 billion December 2001 $19 billion December 2002 Growth in Assets

Whose Wealth is Growing? Significant tax benefits Large, lump sum deposits reap higher benefits Marketing to high-wealth individuals by tax planners

Who is Participating? Few states track demographics Tax incentives benefit people in higher tax brackets Brokers and tax planners market to high-wealth individuals

State Innovations for Inclusion Match for low- to moderate-income savers (5 states) Link college savings plans with IDAs: facilitate rollovers or use plan as investment vehicle for IDA (3 states) N=40

State Innovations for Inclusion 501(c)3 registration (31 states) Assets not counted for state tuition grant purposes (18 states) N=40

State Innovations for Inclusion Creditor protection (17 states) Scholarships and awards (9 states) Gear Up programs (4 states) N=40

Community-based Partnerships 76% agree or strongly agree that partnership with community-based organizations provides opportunities to reach low-moderate income participants. N=38

86% agree or strongly agree that plans should include more low- income participants Include Low-Income Savers N=36

Majority disagrees that plan rules and regulations discourage participation by low-moderate income group Plan Rules not a Hindrance N=37

95% agree or strongly agree that the effort to introduce 529 plans into the workplace provides an opportunity to reach participants of all incomes Workplace Enrollment N=37

How Is This Relevant to IDA Field? Available match funds Tracking after IDA program ends Broad outreach Centralized accounting

Potential for Partnership Non-profits may wish to: Facilitate outreach and enrollment Provide financial education sessions Encourage deposit of EITC refunds Allow for rollover of balances into college savings plan

Long-term Vision Asset-accumulation by people of all income levels

Publications and Resources Center for Social Development George Warren Brown School of Social Work Washington University in St. Louis Website: Phone: (314)