Lawmakers approve 529 college savings plan

OLYMPIA — Washington residents would have a new way to save for college with a state controlled savings plan that received final approval from the Senate on Tuesday.

Lawmakers agreed the Washington State Investment Board should set up a 529 College Savings Plan, which would allow a person to put money into an account with investment options like stocks and bonds. The accounts have tax advantages similar to 401(k) or Individual Retirement Accounts, and the gains are not taxable if they are used for qualified college expenses.

The plans are popular with investors, and Washington is one of only two states not offering a 529 savings plan.

The 529 plan will be separate from the state’s Guaranteed Education Tuition program, which allows participants to prepay for future tuition at current rates. The GET program was frozen last year when the Legislature passed a law that reduced tuition at the state’s public colleges. It is scheduled to reopen in July, and the bill passed Tuesday says it can’t be discontinued without a vote of the Legislature.

Under the bill, which passed 45-2, the committee that oversees the GET program will set up the 529 savings plan and develop limits on contributions and the uses of benefits, and establish incentives and agreements with employers for automatic payroll deductions. It will also create a way to convert a GET account to the 529 account, and vice versa.

The committee would begin setting up the account this summer if the governor signs the bill and the supplemental budget sets aside the $515,000 estimated staff costs. If the money isn’t in the budget, the bill is void.