Assets in 529 Plans Reach $43 Billion

Assets in fast-growing 529 college savings plans reached $43 billion at the end of the second quarter, according to data collected by Boston-based Financial Research Corp.
The new peak for 529 plans represents a 7.4% jump in overall assets under management from the previous quarter and a sharp 66.9% spike from the second quarter in 2003, when plan assets only totaled $25.8 billion.
"Investors and families continue to embrace the 529 approach, recognizing, among other features, the powerful tax incentives that the plans offer for college savings," said Chuck Toth, chairman of the College Savings Foundation, an advocacy group for 529 plans.
But 529 plans are in danger of coming to an end in several years, according to Toth, when these investment vehicles lose their federal tax-free distribution status in 2010. Toth has called on members of Congress to help American families continue saving to meet educational funding goals by extending the current tax benefits of 529 plans into the next decade.
"Congress can do its part to support the savings efforts of American families – and the growing acceptance of 529 plans as an effective higher education savings tool – by making the tax-free treatment of qualified distributions from 529 plans a permanent plan feature, as soon as possible," he said.
FRC data also reveals that 529 net sales have slipped in recent months. Net new contributions receded in the second quarter to $2.9 billion from 4.1 billion in the first quarter. Overall 529 sales for the first six months of 2004 reached $7.0 billion, a 45.8% rise from the same period in 2003.