SECURE Act - Federal Changes to Your 529 Plan
On December 20, 2019, the Further Consolidated Appropriations Act, 2020 (pdf) was signed into law as part of the federal spending bill. This bill included new 529 plan-specific provisions that allow 529 plan account owners to withdraw assets to pay for certain expenses associated with apprenticeship programs registered and certified by the Secretary of Labor under the National Apprenticeship Act, and to pay principal and interest on certain qualified education loans for the beneficiary of your account or any of the beneficiary’s siblings. The loan repayment provisions apply to repayments up to $10,000 per individual. This $10,000 is a lifetime amount, not an annual limit.
These provisions contain language that allows 529 account holders to request a distribution from their DreamAhead account, for qualified education loan payments or qualified apprenticeship program expenses (described above) made after December 31, 2018. Reimbursement requests must be made within the calendar year in which the expense was incurred. Because the Act was not signed into law until December 20, 2019, this created an extremely short window to request distributions for the 2019 calendar year for these new qualified higher education expenses.
According to the Act, the withdrawals described above will not be considered taxable distributions by the IRS. As always, we encourage account owners to consult a qualified tax professional about these new developments and how they relate to their personal situation. We also encourage you to read more about these new provisions here.
To request a distribution from your account for the 2019 tax year, we must have received your distribution request no later than 1:00 pm Pacific time on Tuesday, December 31, 2019.
If you have questions about your DreamAhead account, you can reach Customer Service by phone Monday – Friday at 844-529-5845 from 6am – 5pm Pacific Time, or 844-888-2253 (TTY) from 6am – 5pm Pacific Time.