NU Online News Service, Feb. 11, 1:27 p.m. – U.S. employers are excited about voluntary “Section 529″ payroll deduction savings programs.
Hewitt Associates L.L.C., Lincolnshire, Ill., found that 19% of the 163 U.S. employers it surveyed in late 2001 were already planning to set up voluntary college savings programs, and another 46% were thinking about adding the programs.
Section 529 of the Internal Revenue Code lets taxpayers in states with college savings programs defer income taxes on thousands of dollars in contributions each year. Beneficiaries who use the accounts to pay for college tuition, books, living expenses and related expenses can withdraw funds without paying federal income taxes on the distributions.
Program rules are so flexible that, in some states, taxpayers might be able to use the accounts to finance a few years of retirement spent taking college courses.
Hewitt also asked employers about their reaction to the new, increased “catch-up” contribution limits for workers over age 50 who participate in defined contribution retirement plans.
Congress included the higher catch-up limits in the Economic Growth and Tax Relief Reconciliation Act of 2001, to give older workers who have put off saving for retirement a chance to make up for lost time.
Eighty percent of the employers surveyed plan to let older workers make catch-up contributions, but 76% have decided against matching the catch-up contributions, Hewitt says.