NU Online News Service, Feb. 25, 4:42 p.m. – Financial services companies have organized a not-for-profit corporation, the College Savings Foundation, Washington, to build public awareness for 529 plans and give the plans public-policy support.
Founding members of the foundation include AIM Investments, Toronto; Fidelity Investments, Boston; Franklin Templeton, Toronto; Manulife Financial Corp., Toronto; Merrill Lynch, New York; Morgan Stanley, New York; Strong Financial, Menomonee Falls, Wis.; and T. Rowe Price, Baltimore, Md.
The 529 plans were created by Section 529 of the Internal Revenue Code, which exempts plan contributions and earnings from federal income taxes. The section also exempts distributions from federal income taxes when the beneficiaries use the distributions to cover qualified college costs.
The 529 college savings plans and their siblings, the 529 prepaid tuition programs, manage about $28 billion in assets, according to Financial Research Corp., Boston. The college savings plans alone ended 2002 managing $19 billion in assets, 108% more than they managed at the end of 2001. College savers contributed more than $10 billion to the plans, FRC estimates.
Many states now participating in the 529 plan program offer state tax breaks similar to the federal tax breaks.
The College Savings Foundation's goals include the promotion, protection and enhancement of 529 plans. The foundation wants to build a database that will include analysis and background information on all aspects of 529 plans, including prepaid tuition plans and other programs designed to help finance college tuition.
Eric Nottonson, co-founder of the foundation and vice president of college planning at Fidelity, says the group will serve as a voice for all program providers and managers, including insurers.
