Key insights
- With a growing interest in professional certifications, Congress introduced a bill allowing 529 plans to fund those costs.
- During the pandemic, the demand for certifications increased, suggesting both individuals and employers view professional certifications as a pathway to new and/or continued employment.
- If the bill becomes law, it could help organizations offering professional certifications increase enrollment through a new funding source and greater awareness.
Looking to increase professional certification enrollment?
The 529 savings plan offers tax-savings benefits helpful in funding college (and some K-12) education. With a growing interest in professional certifications, Congress introduced a bill allowing 529 plans to fund those costs.
The bipartisan and bicameral Freedom to Invest in Tomorrow’s Workforce Act is still pending in both houses. If passed, it would be a big boon to students seeking professional certifications and the many associations providing them.
How the 529 savings plan works
The 529 savings plan was created in 1996 to encourage college savings. Contributions to a 529 plan grow tax-free, and withdrawals for qualified education expenses, such as tuition, fees, books, and room and board, are tax-free distributions. The 2017 Tax Cuts and Jobs Act allowed 529 plans to cover up to $10,000 per year in tuition expenses for K-12, with some exceptions.
A growing interest in professional certification programs
Employers are not only seeking individuals with high school diplomas or college degrees but are also in dire need of individuals with specialized training or professional credentials. Through these credentials, individuals can enhance their skills to meet the demands of the modern workforce.
During the pandemic, the demand for professional certifications increased, suggesting both individuals and employers view certifications as a pathway to new and/or continued employment.
Currently, expenses related to these credentials such as tuition, prep courses, testing and other fees to obtain and maintain the credentials are ineligible for the 529 savings plan. Obtaining professional credentials can be a financial burden for some and using tax-advantaged 529 funds could help more people afford them.
A push to allow 529 plan funding for professional certifications
The Freedom to Invest in Tomorrow’s Workforce Act (S. 722/H.R. 1477) — which would allow 529 savings funds to pay for expenses associated with obtaining and maintaining recognized professional credentials — has been introduced in both houses. It has bipartisan support and is also strongly advocated through Tomorrow’s Workforce Coalition.
The coalition includes more than 800 organizations operating in more than 50 industries. Organizations interested in joining the effort can learn more on the coalition’s website.
How new funding for certifications could help educational institutions
If the bill becomes law, it can benefit professional credential associations and institutions:
- More Americans may recognize the importance of postsecondary credentials and be eager to set aside funds to be used for these opportunities in the future, growing the student population.
- Individuals may find these opportunities to be less of financial burden and provide further motivations to engage with the professional credentialing associations and institutes.
- As these funds are directed into these organizations, they can use them to further strengthen their member communities and promote public awareness.
How we can help
CLA advises associations on many operational strategies, including ways to increase enrollment and revenue. Our professionals understand educational associations because we’ve been serving the industry for more than 50 years.
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