cgewin How States Are Enticing Employers to Help Their Workers Save for College

As higher education becomes ever more expensive, some states are giving employers incentives to contribute to 529 college savings accounts for their workers.

Fifteen percent of employers with 500 or more employees now help workers fund 529 plans, either by letting them deposit their own money through paycheck deductions or by providing employer contributions or matching funds as well, according to the Employee Benefit Research Institute. Still, college savings accounts have a way to go before they become as common as other workplace benefits. By comparison, about a quarter of such employers offer help with managing student loans.

But at least eight states now offer tax credits or deductions for employers that contribute to workers’ 529 accounts, and some have recently fattened their incentives to make them more enticing.

Wisconsin, for instance, this year revised the way it calculated a tax credit available to employers for contributing to employees’ state 529 accounts. Previously, the maximum credit was about $240 per employee; now, it’s $800 per employee. (The credit is 50 percent of the employer’s contribution. An employer could contribute $1,600, for example, and get the maximum credit. The employer could contribute more, but the credit wouldn’t increase.)

And Pennsylvania this year approved a new 25 percent tax credit, effective next year, on employers’ 529 contributions of up to $500 (meaning that an employer contributing $500 would get a $125 tax credit).

Other states offering employer tax perks for 529 contributions include Arkansas, Colorado, Idaho, Illinois, Nebraska and Nevada.

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