Scherer-Backed Bill to Allow More Flexibility with Savings

SPRINGFIELD, Ill. – Young people and their families would have more flexibility with savings and could avoid unplanned taxes under a new measure backed by state Rep. Sue Scherer, D-Decatur, allowing additional or unused 529 college savings account funds to be transferred to other savings accounts.

“Families sacrifice so much to save for college, so when education savings accounts have additional or unused funds, they shouldn’t be penalized with unplanned taxes,” said Scherer. “Additionally, a child who grows up and doesn’t attend college should have the flexibility to divert the funds to their savings plan.”

The Scherer-backed House Bill 5005 would allow funds deposited into a 529 college savings account to be transferred to their Roth IRA account, without taxes or penalties. Currently, unused funds in a college savings account must be withdrawn, incurring a 10 percent tax. Transferring funds directly into a Roth IRA would give beneficiaries the option of saving for retirement and delaying tax liabilities until the funds are needed.