Updated: Mar 30
We all know that 529 plans can be valuable college education savings tools. What we might not realize is that CollegeInvest, the folks that sponsor Colorado's four different 529 plan options, offers two programs to help investors get more out of their contributions.
Matching Grant Program
Starting on October 15th, 2019, parents can complete a short application to enroll each of their kids in a program that matches contributions, dollar for dollar, up to $500 per kid.
According to a rep at CollegeInvest I spoke to, this is a first come first serve program. Only a set number of total applications will be considered, i.e., money available for the program is finite.
If accepted, all you have to do is contribute to your kid's 529 plan account in 2020 and CollegeInvest will match your contributions. Not only is this free money, but your contributions are deductible on your Colorado state income tax return.
As with anything, there are a few rules governing the program.
You must be a Colorado resident.
Your 2018 tax return must show you meet the income eligibility. Note that the income is based on Adjusted Gross Income. For most folks, this is essentially total income minus workplace retirement plan contributions.
You must be able to claim the kid(s) on your taxes as a dependent. Sorry grandparents, unless your grandkid lives with you and you claim them on your return, you're out.
At the time of application, your kid cannot be 9 years or older.
Matching contributions will be added to the Stable Value Plus 529 Plan. This plan doesn't invest per se. It's more of a savings vehicle with a guaranteed fixed return of 2.49%. I'm assuming you can move Stable Value Plus money to one of the other plans, but I'm not positive on that just yet. Worst-case scenario, I'll take free money earning 2.49% over no money.
Employer Contribution Program
This is for employers looking to offer enhanced benefits to their employees while generating a sizeable tax break. Any business of any size in Colorado is eligible to participate. This is a brand new incentive program. My firm, Aspen Leaf Wealth Management, joined the program yesterday.
The way it works is employers can make up to a $2,500 contribution to any of their employee's 529 plans. Note that the $2,500 is a per employee threshold, not a per 529 account threshold. For example, I have two kids, so I'll have to decide if my $2,500 gets split equally or not based on behavior. :)
Any business with payroll for at least one employee is eligible. According to the rep at CollegeInvest I spoke with, even if the business pays some of their employees as 1099 contractors, those 1099 contractors can receive 529 plan contributions from the employer.
With this program, business owners benefit from employee gratitude, which manifests itself in loyalty and retention. Additionally, businesses receive a 20% deduction on their taxes.
Here's how the numbers work.
The employer can contribute any amount, but the 20% deduction is capped at $2,500 worth of contributions. For example, if the business contributed $2,500, that's $500 off the corporate tax return. If the business contributed $10,000, that would be $2,000 off the tax return.
Contributions can be structured however the business chooses; a match, monthly deposits, or a lump sum. There is no limit on the number of employees the business can contribute on behalf of.
To learn more about this incentive program, please click HERE.
If you have any questions about either of these fantastic 529 plan related programs, please contact us. We'll walk you through your specific eligibility, 529 plan setup(s), and even remind you about contributions.
To get in touch, just click the Contact link in the upper right corner of this page.