With tax code changes making qualified withdrawals from Section 529 plans free from federal income tax as of Jan. 1, employers are exploring new options to make saving for college easier on working parents.
Fidelity Investments, for example, Wednesday announced a new Workplace 529 College Investing Program, a stand-alone product that will allow payroll deductions to be directly deposited in a separate account, rather than creating an account through a financial advisor.
"Payroll deductions are one of the most important features that encourage saving in 401(k) plans," says Fidelity VP Kathryn Hopkins. "We expect that by enabling workers to use direct deposits to save in 529 plans, these plans will become as popular for college savings as 401(k)s are for retirement."
Fidelity also offers employees a choice among eight age-based portfolios and two static portfolios, composed primarily of equity funds. The plan places a $233,240 cap on account contributions.