House members agreed Tuesday by a voice vote to approve H.R. 4178, a bill that would let states offer 529 college savings plans incorporating Federal Deposit Insurance Corp.-insured bank accounts.
The bill, the Deposit Restricted Qualified Tuition Programs Act, was sponsored by Rep. Emanuel Cleaver II, D-Mo.
Under current law, 529 college savings plans can invest participants’ money only in mutual funds and other products backed by securities.
H.R. 4178 “gives more flexibility to people who want to invest for college,” says Dan Rotert, a spokesman for Cleaver. “If you’re saving for retirement, you can put [money] tax-free into savings. But current law does not allow you to put a 529 into a savings account.”
In 2008, when the stock market tanked, some 529 plan investors saw the value of their kids’ college savings plunge 50%, Rotert says.
H.R. 4178 enjoyed bipartisan support, winning backing from both Rep. Barney Frank, D-Mass., and Rep. Ron Paul, R-Texas.