As employers look for low-cost and innovative employee benefit plans to retain and recruit employees in our current competitive job marketplace, AccuPay and the Indiana College Choice 529 Program have partnered to provide employers with a no-cost payroll deduction for the Section 529 college savings program. The purpose of our business alliance is to make it easy for employees to save money for college in a tax-wise manner.
Significant Tax Benefits
An Indiana resident who participates in the Indiana College Choice 529 college savings program receives the following significant tax benefits:
- Indiana provides an annual income tax credit of 20% of the first $5,000 contributed to the College Choice program. Thus, if a household contributes $5,000 to the program, Indiana credits your state tax bill by $1,000. This tax credit was broadened by the Indiana Legislature in 2018 to include contributions for grades K-12 public, private or religious school education:
- Once you contribute to the program, the investment earnings compound on a tax-deferred basis – all your money goes to work for you; and
- If the College Choice funds are used for educational purposes (including technical and trade schools), no Federal or State taxes are ever imposed on the College Choice funds.
OBSERVATION – Think of the income tax benefits like a Roth IRA “on steroids” – you never pay income tax on your investment income PLUS you receive a 20% up-front tax credit every year!
The Program is Easy
Ascensus, the program manager, makes investing easy with targeted “year of enrollment” investment programs. You can also use your own financial planner to help you design your own investment portfolio instead of the “year of enrollment” model plans based on beneficiary ages. AccuPay will handle your payroll deductions and remit funds to your 529 accounts with the Indiana College Choice program. Employees will find it’s easy to save for college and save taxes. You can learn more about Indiana’s College Choice Direct program by reviewing the FAQ’s on the program’s website at collegechoicedirect.com.
Free Administration and Reporting by AccuPay
AccuPay has agreed to provide assistance to employers and employees in setting up and monitoring this program. We will withhold each employee’s savings amounts and make sure they are promptly transferred to each employee’s personal College Choice 529 accounts.
We will also compile each employee’s 529 funding amounts and report the total funding amount in “information box 14” of their annual W-2’s – as a reminder that they should claim the Indiana tax credit on their personal income tax returns.
Who Should Consider an Indiana College Choice 529 Plan?
- An adult who is currently attending a college or trade school. Fund your Indiana 529 plan, withdraw funds for school, and earn the Indiana tax credit;
- Parents wishing to save for their children’s education; and
- Grandparents, uncles, aunts, etc. who wish to help fund college for loved ones
To get started, the employee will need to open a CollegeChoice 529 Plan Account(s). Please contact AccuPay for a paper application, or employees may enroll here. Once enrolled, simply return your employee’s direct deposit information to AccuPay, and we will take care of the rest – at no cost to the employee or employer. Other states offer similar college savings programs. AccuPay can accomodate any state program that offers a direct deposit option. Contact your payroll specialist for more information.
Because we passionately believe in the program! Indiana has helped our state’s very largest employers implement payroll deduction programs but does not have the resources to meet with small-medium sized employers. Our CPP/CPA/SPHR teams at AccuPay want to offer this same service to small and medium-sized employers.
For more information on how to offer this benefit to your employees, contact your payroll specialist at 317-885-7600.
PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques. You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.