As college financing plans evolve, so do the rules about selling them. The Deficit Reduction Act of 2005 is making prepaid college tuition plans more attractive. At the same time, as states add special features to their 529 plans to attract assets from both in-state and out, regulators want to make sure sellers disclose exactly what those bells and whistles entail. Meanwhile, the future of 529s may depend on extending the 2001 Economic Growth and Tax Relief Reconciliation Act (EGTRRA), which expires in 2010.
College saving 529 plans have been growing rapidly. According to Financial Research Corp., assets in 529s rose 30.8% in 2005, to $68.4 billion. This is good news for advisers, mostly those working with broker/dealers, who manage between 66% and 75% of 529 plan money. The plans got a big boost in 2001, when EGTRRA converted them from offering tax-deferred status for invested assets to tax-free status, as long as withdrawals pay for higher education.