Bill Would Allow 529 Savings to Be Spent on Training Instead of College

House to vote on 529 Options Act Thursday

U.S. Capitol
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• May 23, 2019 5:00 am


Congress will vote on bipartisan legislation that would allow families to invest in jobs training through funds that were previously limited to college education.

Reps. Donald Norcross (D., N.J.) and Mike Kelly (R., Pa.) sponsored the 529 OPTIONS Act as a vehicle for parents of young Americans to set aside money in investment accounts designed to cover the costs of tuition. The 529 system allows investors to cash out tax-free to pay for education expenses, but the reform will expand it to include the costs of apprenticeship. The tax reform bill enacted by the Trump administration in 2018 expanded access to 529 funds to include primary education, such as private and parochial schools. Rep. Norcross, the only electrician in Congress, said those tax breaks need to be expanded beyond the narrow bubble of college education.

"Right now, students and families can use 529 tax-free savings accounts for college, but they can't use those same savings accounts for registered apprenticeships," Norcross said in an email. "This exclusion is unfair and counterproductive."

The 529 reform has since been rolled into the SECURE Act, a bill aimed at shoring up multi-employer pension plans by easing access for small employers. It would allow 529 accounts to be used to pay for registered apprenticeship programs, as well as the materials, including books and equipment, necessary for the job. Offsetting these costs would help young people to enter the workforce with adequate training without the barriers and debt that have saddled recent generations. Norcross said policymakers should support all kids equally, not just the college-bound.

"It sends the wrong message to youth and our families, since education should never be ‘one-size-fits-all,'" he said. "We need electricians and computer programmers, just like we need doctors and judges—and this bill levels the playing field for the students and future workers who start out in apprenticeships."

Rep. Kelly told the Washington Free Beacon that lawmakers have "oversold the idea that a four-year college is the only way to get ahead." Young Americans have taken out more than $1.5 trillion in student loans and default rates dwarf those the mortgage crisis that triggered the Great Recession in 2007. That problem has emerged in the midst of an ever-widening skills gap in the trades. Kelly spent his career in the automobile business and witnessed the high degrees of training necessary in the workforce. Congress needs to "take the blinders off" and see the "great salaries, wages, and benefits" available to young people who can learn a trade that does not require a college degree. Rather than pushing students into college to enjoy the benefits of 529 funds, lawmakers should encourage "family sustaining, community building occupations."

"We used to call these guys grease monkeys, but they are highly-trained electronic technicians," he said. "We should show [young people] that not only can they go to college, but there are other opportunities out there that don't require a tax or debt burden."

Kelly linked 529 reform to the Trump administration's push for an infrastructure bill. Lawmakers should be preparing a future workforce capable of getting projects done quickly. The easier it is for entry-level workers to enter apprentice programs, the more efficient and effective any infrastructure bill can be.

"There's a wall, a bubble around Washington, just look at the skyline—who do you think is running these cranes, doing HVAC and electrical work?" he said. "We're hunting for skilled labor, trying to find ways to fill the jobs that are already there."

Congress will vote on the SECURE Act, which includes the 529 expansion reform, on Thursday.