Treasurer Stacy Garrity: House Committee Advances Bill to Allow Tax-Free Rollovers from PA 529 plans to Roth IRAs
HB 2119 will allow more flexibility for PA 529 plans and align state and federal tax policy
Harrisburg, PA - Treasurer Stacy Garrity today commended members of the Pennsylvania House Finance Committee for unanimously advancing House Bill 2119, which will allow rollovers of PA 529 College and Career Savings Program account balances into a beneficiary’s Roth IRA free of state taxes. HB 2119 is sponsored by Rep. Greg Scott (D-54) and Rep. Steve Samuelson (D-135).
“Our PA 529 program is a tremendous tool to help families save for higher education. Families sometimes find themselves with leftover funds in a PA 529 account after their child finishes their education, and as part of SECURE 2.0, Congress made it possible to rollover funds from 529 plans to Roth IRAs free of any federal taxes or penalties. This bill eliminates state taxes on those rollovers as well – an important benefit for Pennsylvanians who used a 529 account to save for education.”
Pennsylvania State Treasurer Stacy Garrity
The SECURE 2.0 Act took effect January 1, 2024, and includes a provision allowing 529 account owners to transfer funds into a Roth IRA without incurring federal income tax or penalties, with a lifetime limit of $35,000. In Pennsylvania, rollovers from a 529 account to a Roth IRA currently remain taxable at the state level. HB 2119 would exempt such rollovers, giving Pennsylvanians more flexibility for using 529 funds while adding another option to save for their retirement.
“About ten percent of families have leftover funds in their 529 accounts. This can be due to a variety of factors, including a student receiving grants or scholarships, not finishing school, or transferring to a less expensive university or degree program. Whatever the reason, it makes good sense to give them the option of transferring those funds to a Roth IRA without paying taxes.”
Representative Greg Scott (D-54)
This is an important update to state law that will help thousands of Pennsylvanians save for retirement.
Representative Steve Samuelson (D-135)
HB 2119 now advances to the full House.
The PA 529 College and Career Savings Program helps families steadily and strategically save for future educational expenses like tuition, fees, books, equipment, room and board and more at qualifying technical, collegiate and apprenticeship programs. PA 529 plans also offer significant state and federal tax advantages, and saving with PA 529 does not impact Pennsylvania state financial aid eligibility.
The PA 529 program has been helping families save and pay for education for more than 30 years. There are currently almost 300,000 PA 529 accounts with assets of nearly $7.5 billion.
There are two options to invest with PA 529: the PA 529 Guaranteed Savings Plan, which allows families to save at today’s tuition rates to meet tomorrow’s tuition costs, and the PA 529 Investment Plan, which allows families to choose from a variety of investment options and received a Gold Rating from Morningstar in 2023, making it one of the top two 529 plans in the nation.
Visit pa529.com to learn more about the PA 529 College and Career Savings Program.
