SECURE 2.0 and 529s: What we know

Like you, we are awaiting answers from the IRS about SECURE 2.0. We strive to be a valued resource and assist you and your clients in their higher education savings journeys. We will share any information with you as soon as the IRS issues guidance, to help you inform your clients on their my529 account.

On December 29, 2022, the SECURE Act 2.0 was signed into law as part of the federal Consolidated Appropriations Act of 2023 (the CAA). The goal of the SECURE Act—an acronym for Setting Every Community Up for Retirement—is to encourage saving toward retirement and to expand employee participation in retirement plans.

How will SECURE Act 2.0 affect 529 plans?

Beginning in January 2024, SECURE 2.0 allows funds from an established 529 account to be transferred tax-free to a Roth IRA for the same beneficiary. Now, unused educational funds have the potential to kickstart a beneficiary’s Roth IRA savings. This change, however, comes with limitations. Here is what we know so far.

The 529 account must have been open for at least 15 years.
The beneficiary of both the 529 account and the Roth IRA must be the same person.
The amount of the rollover is limited:
- Annual rollovers are subject to yearly IRA contribution limits, minus any other IRA contributions that have already been made.
- There is a lifetime aggregate rollover limit of $35,000 per beneficiary.
- Rollovers may not include contributions (or earnings on those contributions) made in the last five years.

Still have questions? We do, too! The 529 industry submitted a letter to the IRS in September 2023 seeking answers on this matter. It is unclear when the IRS will provide such guidance.

We will continue to update our website, but you are always welcome to reach out to my529’s Professional Service Team at 888.529.1886. We understand it feels frustrating to not have a complete picture of SECURE 2.0, but we will work hard to make this process as smooth as possible.