New Legislation Boosts Pennsylvania Savings Programs with Employer Tax Credits and Flexibility

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HARRISBURG, PA — Treasurer Stacy Garrity praised the Senate Finance Committee this week for unanimously approving House Bill 1745. The legislation, designed to enhance Pennsylvania’s PA 529 College and Career Savings Program and PA ABLE Savings Program, offers new incentives for families to invest while benefiting businesses.

House Bill 1745, sponsored by Rep. Paul Friel (D-26), introduces tax credits for employers who provide matching contributions to their employees’ PA 529 and PA ABLE accounts. An amendment also allows excess funds in a PA 529 plan to be rolled over to a Roth IRA without state taxes. This provision was initially put forward in House Bill 2119 by Rep. Greg Scott (D-54) and Rep. Steve Samuelson (D-135).

“This is great news – we’re one big step closer to strengthening PA 529 and PA ABLE for Pennsylvania families,” said Treasurer Garrity. “Giving employers the option of receiving a tax credit for providing matching funds will give families more power to save while benefiting our great business community. This will also encourage more Pennsylvanians to save for the future with these great tax-advantaged programs, especially with the increased flexibility for PA 529 savings that this bill provides.”

House Bill 1745 amends the Tax Reform Code of 1971, further detailing personal income tax provisions and establishing a 25 percent tax credit for employers who match up to $500 of employee contributions per participating employee per year. This applies to contributions made to any 529 or ABLE account owned by a Pennsylvania resident.

Sen. Scott Hutchinson (R-21) highlighted the importance of the bill given the rising costs of higher education. “Given the ever-increasing cost of higher education and the need to ensure postsecondary education, in all its forms, is accessible and affordable, House Bill 1745’s incentive for employers to support their employees’ educational goals will help alleviate some of the financial burden of education for both employees and their families.”

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Sen. Nick Miller (D-14) emphasized the bill’s broad benefits. “This bill would encourage more employers to match their employee contributions, giving our hardworking commonwealth employees more incentive to invest in the future. I have been an advocate for advancing educational opportunities for a long time, which will help develop our students into future leaders. I’m not surprised by its bipartisan support; it is a bill that benefits both our businesses, our employees, and most importantly, our students.”

The bill also eliminates state tax penalties on PA 529 accounts if a beneficiary dies or becomes disabled, offering additional financial protection to account holders. Moreover, HB 1745 ensures state law will automatically adapt to any future federal tax changes related to 529 accounts, maintaining consistency and ease for savers.

Rep. Paul Friel (D-26) expressed satisfaction with the bill’s progress. “The PA 529 program has helped so many Pennsylvania families save for their child’s or grandchild’s future education. I’m pleased that the PA 529 tax credit bill passed out of the Senate Finance Committee with bipartisan support.”

This legislation represents a significant step in making higher education more attainable for Pennsylvania families. By incentivizing employer contributions, the bill aims to expand the reach and effectiveness of existing savings programs. It also highlights the state’s commitment to adjusting its policies in response to evolving federal tax laws, ensuring residents can maximize their savings potential.

If enacted, House Bill 1745 could set a precedent for other states looking to enhance their educational savings programs. The bill’s mix of tax incentives, flexibility, and protections addresses current gaps and anticipates future needs, positioning Pennsylvania as a leader in promoting financial security and educational advancement.

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HB 1745 now moves to the full Senate for consideration. Its impact on families, businesses, and the broader community will be closely watched as lawmakers decide its future.

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