As the cost of college skyrockets and employees increasingly turn to their employers for help managing their financial health, more companies are offering their employees the opportunity to invest in 529 college savings plans. In fact, the percentage of companies offering 529 plans as part of their benefits package increased from 6% to 11% from 2014 to 2015.
Many companies work with their state’s 529 plan, who pitch it as a no-cost, low-hassle employee benefit. And it’s true, rolling out one of these plan comes at no cost to the employer. But, setting one up in this manner could come at a high cost to the employee. Just how high a cost?
Range of Fees
First, each state’s 529 plan has a different range of fees that the employee will pay on their investments. These fees can vary so widely that someone contributing $100 a month could lose out on $3,500 over 18 years!
Employees in Different States Require Unique Advice
Next, there is a potential tax implication depending on the employees’ state of residence. 27 states currently offer a tax deduction for 529 plan contributions. Sounds great, right? It is, but there’s a catch. The employee must be a resident and invest in their home-state 529 plan in order to take the deduction on their state income taxes.
For example, if any employer was based in Georgia and rolled out the Georgia 529 plan to their employees, an employee living in New York would lose out on a potential $10,000 deduction in their state by investing in their employer-sponsored 529 plan.
That’s why we created Gradvisor, to remove the complications for employers and ensure employees are getting the best, low-cost, unbiased advice that is specific for their family’s situation. Our platform has been getting rave reviews and even caught the attention of the Wall Street Journal recently.
“Employees can go to Gradvisor’s website for customized advice on which direct-sold 529s might best suit their needs and how much to save per paycheck. They also can track their investments, adjust contributions and speak with a financial adviser for no additional charge.”
America is at a tipping point. Student debt now stands at $1.3 trillion and is growing every day. We need to stop this bubble at its source. One way we can do that is to get parents to start savings and get them saving in the most efficient manner possible.