New Tax Credit For Employers Who Boost Employees’ College and Disability Savings
Source: State Treasurer Stacy Garrity, Guest Post for the PA Chamber of Business and Industry
This year’s state budget included an innovative new tax credit that will benefit Pennsylvania businesses, which help their employees save for education costs and disability-related expenses!
Starting in 2025, employers who contribute to a 529 account, like a PA 529 College and Career Savings Program account, belonging to their employees are eligible for a 25 percent tax credit on up to $500 in matching contributions per employee per year. The tax credit also applies to contributions to an employee’s ABLE (Achieving a Better Life Experience) account. PA ABLE helps Pennsylvanians with disabilities and their families save for disability-related expenses without impacting other benefits.
This new credit was originally introduced as House Bill 1745, which was co-prime sponsored by state Rep. Paul Friel (D-Chester) and state Rep. Kristin Marcell (R-Bucks) as means to incentivize employers to contribute to education and disability savings. Senate Majority Leader Joe Pittman (R-Indiana) sponsored the amendment that incorporated the credit into the omnibus Tax Code bill signed this summer by Governor Josh Shapiro.
When an employer contributes to an employee’s education or disability savings account, they’re showing their support for employees and their families by investing in their futures. Any contributions made by employers also support workforce development by encouraging employees to save for their child’s future education. By saving more for higher education now, families will have a smaller financial burden as their child embarks on their career path. For employees with a disability, additional contributions to an ABLE account will increase financial independence and help build wealth.
Pennsylvania continues to see a need for highly skilled workers, and this tax credit supports saving for the education needed to fill these positions. PA 529 accounts can help pay for expenses associated with most technical and career schools, community colleges, four-year universities, and apprenticeship programs, as well as some K-12 expenses.
Our PA 529 program has been helping families save and pay for post-high school education for more than 30 years. The program is incredibly flexible and offers two plans to save with – the PA 529 Guaranteed Savings Plan (GSP) and the PA 529 Investment Plan (IP). Currently, more than 300,000 families have more than $7.7 billion saved in PA 529 accounts.
The PA 529 IP earned a Gold Rating from Morningstar – naming it one of the top two 529 plans in the entire country. PA 529 IP account earnings are dependent on financial market performance. Account owners can choose from a variety of investment options, including target enrollment date portfolios that automatically reallocate portfolios as a child approaches post-high school education enrollment to best manage risk.
PA 529 GSP accounts let families save at today’s tuition rates to cover tomorrow’s tuition expenses – meaning if they save enough for a credit today, it will be enough to pay for a credit years from now regardless of how much tuition actually increases.
PA ABLE accounts can help Pennsylvanians with qualifying disabilities and their families save and pay for disability-related expenses without impacting their eligibility for important benefits like Medicaid and SSI. PA ABLE can be used to save for things like groceries, rent, education, adaptive vehicles, assistive technology and more. PA ABLE is one of the largest ABLE programs in the country with more than 9,500 accounts and more than $130 million saved.
As businesses use this new tax credit in the coming year by contributing to PA 529 and PA ABLE accounts, the added benefit to their employees will make them a more attractive place to work and help keep Pennsylvania employers competitive in the job market.
I encourage business leaders across the Commonwealth to consider being one of the first businesses to take advantage of this fantastic opportunity. This tax credit will be good for your employees and your business, and it will help empower the next generation of our workforce to embark on the training and education they’ll need to keep Pennsylvania competitive.
Stacy Garrity, a businesswoman and retired U.S. Army Reserve Colonel, is the Pennsylvania State Treasurer. As Treasurer, she is the custodian of more than $150 billion in state assets and leads the efforts to return more than $4.5 billion in unclaimed property to Pennsylvanians. She also oversees Treasury’s savings programs, including the PA 529 College and Career Savings Program, Keystone Scholars, and PA ABLE. Learn more at patreasury.gov.
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Founded in 1916, the Pennsylvania Chamber of Business and Industry is the state's largest broad-based business association, with its membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of BusinessTM.