A bill that would create two college savings programs advanced from the second round of debate May 21 after lawmakers amended it to include a proposal to open an account for each Nebraska resident when he or she is born.
As amended on general file, LB610, introduced by Omaha Sen. Brett Lindstrom, would create a cash fund administered by the state treasurer to provide incentive payments to employers that make matching contributions to employees’ college savings accounts established under the Nebraska educational savings plan trust.
The trust provides tax-advantaged 529 accounts meant to encourage saving for postsecondary education costs. Contributions grow tax-deferred, and withdrawals are exempt from state and federal taxes as long as they are used for a beneficiary’s qualified higher education expenses such as tuition, books, supplies and room and board.
LB610 was amended on general file to include provisions of LB547, introduced by Sen. Anna Wishart of Lincoln. Under her proposal, the state would match contributions to NEST accounts made on behalf of beneficiaries who meet certain income requirements.
Wishart introduced an amendment on select file, adopted 45-0, that would replace the bill. It would modify the Wishart and Lindstrom proposals and include provisions of LB544, sponsored by Elkhorn Sen. Lou Ann Linehan.
Linehan’s proposal would create a program under which each enrolled child would have a NEST account opened for him or her.
Under the program, the state treasurer would send a notification explaining the program to the parent or legal guardian of each Nebraska resident born on or after Jan. 1, 2020. The parent or legal guardian could choose to exclude his or her child from the program. Any child not excluded would be deemed enrolled.
Each year the state treasurer would distribute the previous year’s investment income from an associated trust fund, also administered by the treasurer, to the accounts opened during the previous year. The fund would consist of private contributions and any funds transferred or appropriated by the Legislature. The amendment would bar the transfer of state general funds to the trust fund.
If funds from an account opened under the program are not disbursed before the qualified individual reaches age 30, they would be transferred to the trust fund. Disbursed funds could be used only to pay the qualified higher education expenses associated with attending a college or university in Nebraska.
The amendment also would add to an existing definition of nonqualified withdrawals the distribution from a NEST account to pay the costs of attending kindergarten through grade 12.
Sen. Patty Pansing Brooks of Lincoln supported the amendment, saying it includes additional changes meant to ensure that the new programs could not be used to pay private K-12 education expenses.
She said a recent federal change allows 529 distributions to be used to pay expenses associated with attending a private elementary or secondary school, which current state law does not allow. The amendment would ensure that a future Legislature could not make a simple change to match the federal statute, Pansing Brooks said.
Linehan supported Wishart’s amendment, saying 529 accounts are in wide use among the wealthy but not among low-income Nebraskans. She said her proposal would give more Nebraska children hope for their future.
After adopting the Wishart amendment, senators advanced LB610 to final reading by voice vote.