I 

114TH CONGRESS 

2D SESSION H. R. 5193 

To amend the Internal Revenue Code of 1986 to make improvements in 

the rules related to qualified tuition programs and qualified ABLE programs. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 11, 2016 

Ms. JENKINS of Kansas introduced the following bill; which was referred to 

the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to make 

improvements in the rules related to qualified tuition 

programs and qualified ABLE programs. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘529 and ABLE Ac5 count Improvement Act of 2016’’. 

6 SEC. 2. EMPLOYER CONTRIBUTIONS TO QUALIFIED TUI7 TION PROGRAMS AND QUALIFIED ABLE PRO8 GRAMS. 

9 (a) IN GENERAL.—Subsection (a) of section 132 of 

10 the Internal Revenue Code of 1986 is amended by striking 


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1 ‘‘or’’ at the end of paragraph (7), by striking the period 

2 at the end of paragraph (8) and inserting ‘‘, or’’, and by 

3 adding at the end the following new paragraph: 

4 ‘‘(9) qualified tuition program and qualified 

5 ABLE program contributions.’’. 

6 (b) QUALIFIED TUITION PROGRAM AND QUALIFIED

7 ABLE PROGRAM CONTRIBUTIONS DEFINED.—Section 

8 132 of such Code is amended by redesignating subsection 

9 (o) as subsection (p) and inserting after subsection (n) 

10 the following new subsection: 

11 ‘‘(o) QUALIFIED TUITION PROGRAM AND QUALIFIED

12 ABLE PROGRAM CONTRIBUTIONS DEFINED.— 

13 ‘‘(1) IN GENERAL.—For purposes of this sec14 tion, the term ‘qualified tuition and qualified ABLE 

15 program contributions’ means contributions (includ16 ing matching contributions) made by an employer 

17 directly to a qualified tuition program (as described 

18 in section 529) or qualified ABLE program (as de19 scribed in section 529A) designated by an employee 

20 if— 

21 ‘‘(A) such contribution is made to an ac22 count under such program for which the des23 ignated beneficiary is the employee or a mem24 ber of the family of the employee (within the 

25 meaning of section 529(e)(2)), and 


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1 ‘‘(B) such contribution is made in connec2 tion with a qualified payroll deduction contribu3 tion program established by the employer. 

4 ‘‘(2) QUALIFIED PAYROLL DEDUCTION CON5 TRIBUTION PROGRAM.—For purposes of this sub6 section, the term ‘qualified payroll deduction con7 tribution program’ means a program established by 

8 an employer— 

9 ‘‘(A) under which employees may elect to 

10 make contributions to accounts described in 

11 paragraph (1)(A) which reduce the amount of 

12 wages received directly by such employee by the 

13 amount of such contribution, and 

14 ‘‘(B) which is made available on substan15 tially the same terms to each member of a 

16 group of employees which is defined under a 

17 reasonable classification set up by the employer 

18 which does not discriminate in favor of highly 

19 compensated employees (as defined in section 

20 414(q)). 

21 ‘‘(3) LIMITATION ON EXCLUSION.—The amount 

22 of qualified tuition and qualified ABLE program 

23 contributions which may be excluded from gross in24 come under subsection (a)(9) with respect to any 

25 employee shall not exceed $100 in any calendar year. 


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1 ‘‘(4) NONDISCRIMINATION RULE FOR EM2 PLOYER CONTRIBUTIONS.—Subsection (a)(9) shall 

3 only apply to contributions provided with respect to 

4 a highly compensated employee if such contributions 

5 meet the requirements of paragraph (2)(B). 

6 ‘‘(5) INFLATION ADJUSTMENT.— 

7 ‘‘(A) IN GENERAL.—In the case of any 

8 taxable year beginning in a calendar year after 

9 2016, the $100 amount contained in paragraph 

10 (3) shall be increased by an amount equal to— 

11 ‘‘(i) such dollar amount, multiplied by 

12 ‘‘(ii) the cost-of-living adjustment de13 termined under section 1(f)(3) for the cal14 endar year in which the taxable year be15 gins, determined by substituting ‘calendar 

16 year 2015’ for ‘calendar year 1992’ in sub17 paragraph (B) thereof. 

18 ‘‘(B) ROUNDING.—Any increase deter19 mined under subparagraph (A) shall be rounded 

20 to the nearest multiple of $25.’’. 

21 (c) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to contributions made after De23 cember 31, 2016. 


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1 SEC. 3. TAX CREDIT FOR SMALL EMPLOYER COSTS OF ES2 TABLISHING DIRECT PAYROLL DEDUCTION 

3 INTO QUALIFIED TUITION PROGRAMS AND 

4 QUALIFIED ABLE PROGRAMS. 

5 (a) IN GENERAL.—Section 45E of the Internal Rev6 enue Code of 1986 is amended by adding at the end the 

7 following new subsection: 

8 ‘‘(f) APPLICATION TO PROGRAMS FOR PAYROLL DE9 DUCTION CONTRIBUTIONS TO QUALIFIED TUITION PRO10 GRAMS AND QUALIFIED ABLE PROGRAMS.—In the case 

11 of a qualified payroll deduction contribution program (as 

12 defined in section 132(o)(2)) established by an employer— 

13 ‘‘(1) such program shall be treated as an eligi14 ble employer plan for purposes of this section, 

15 ‘‘(2) this section (including the limitation of 

16 subsection (b)) shall be applied separately with re17 spect to such programs and any other eligible em18 ployer plans of the employer, and 

19 ‘‘(3) subsection (d)(1)(A)(ii) shall be applied by 

20 substituting ‘education’ for ‘retirement-related edu21 cation’.’’. 

22 (b) CLERICAL AMENDMENTS.— 

23 (1) The heading for section 45E of such Code 

24 is amended by striking ‘‘PENSION’’. 

25 (2) The table of sections for subpart D of part 

26 IV of subchapter A of chapter 1 of such Code is 


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1 amended by striking the item relating to section 45E 

2 and inserting the following new item: 

‘‘Sec. 45E. Small employer plan startup costs.’’. 

3 (c) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to costs paid or incurred in taxable 

5 years beginning after the date of the enactment of this 

6 Act. 

7 SEC. 4. EXEMPTIONS FROM ADDITIONAL TAX FOR CERTAIN 

8 DISTRIBUTIONS FROM QUALIFIED TUITION 

9 PROGRAMS. 

10 (a) IN GENERAL.—Section 529(c)(6) of the Internal 

11 Revenue Code of 1986 is amended by striking the last sen12 tence and inserting the following: ‘‘This paragraph shall 

13 not apply to the extent that— 

14 ‘‘(A) a payment or distribution is contrib15 uted to an individual retirement plan of the ac16 count owner or the designated beneficiary with 

17 respect to the calendar year in which the pay18 ment or distribution is received, 

19 ‘‘(B) a payment or distribution is used 

20 (within 90 days of the payment or distribution) 

21 to make a payment of interest or principal on 

22 a qualified education loan (as defined in section 

23 222(d)(1)) on behalf of the designated bene24 ficiary or a member of the family of such desVerDate Sep 11 2014 00:15 May 14, 2016 Jkt 059200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5193.IH H5193

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1 ignated beneficiary within the meaning of sec2 tion 529(e)(2)), or 

3 ‘‘(C) the recipient of a payment or dis4 tribution makes (within 90 days of the receipt 

5 of the payment or distribution) a contribution 

6 to an organization described in section 

7 170(b)(1)(A) (other than any organization de8 scribed in section 509(a)(3) or any fund or ac9 count described in section 4966(d)(2)), but only 

10 if— 

11 ‘‘(i) a deduction for the entire pay12 ment or distribution is allowable under sec13 tion 170, and 

14 ‘‘(ii) the total payments and distribu15 tions taken into account under this sub16 paragraph with respect to such recipient 

17 for any taxable year does not exceed 

18 $1,000.’’. 

19 (b) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to distributions after the date of 

21 the enactment of this Act. 


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1 SEC. 5. CLARIFICATION REGARDING INVESTMENT DIREC2 TION IN QUALIFIED TUITION PROGRAMS AND 

3 QUALIFIED ABLE PROGRAMS. 

4 (a) INVESTMENT DIRECTION IN QUALIFIED TUITION

5 PROGRAMS.—Paragraph (4) of section 529(b) of the In6 ternal Revenue Code of 1986 is amended by adding at the 

7 end the following: ‘‘For purposes of this paragraph, rebal8 ancing investments among broad-based investment strate9 gies established under the program shall not be treated 

10 as investment direction by a contributor or designated 

11 beneficiary unless the specific investments within those 

12 broad-based strategies are directed by the contributor or 

13 designated beneficiary.’’. 

14 (b) INVESTMENT DIRECTION IN QUALIFIED ABLE 

15 PROGRAMS.—Paragraph (4) of section 529A(b) of such 

16 Code is amended by adding at the end the following: ‘‘For 

17 purposes of this paragraph, rebalancing investments 

18 among broad-based investment strategies established 

19 under the program shall not be treated as investment di20 rection by a designated beneficiary unless the specific in21 vestments within those broad-based strategies are directed 

22 by the designated beneficiary.’’. 

23 (c) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply with respect to calendar years be25 ginning after the date of the enactment of this Act. 


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1 SEC. 6. ROLLOVERS BETWEEN QUALIFIED TUITION PRO2 GRAMS AND QUALIFIED ABLE PROGRAMS. 

3 (a) ROLLOVERS FROM QUALIFIED TUITION PRO4 GRAMS TO QUALIFIED ABLE PROGRAMS.—Clause (i) of 

5 section 529(c)(3)(C) of the Internal Revenue Code of 1986 

6 is amended by striking ‘‘or’’ at the end of subclause (I), 

7 by striking the period at the end of subclause (II) and 

8 inserting ‘‘, or’’, and by adding at the end the following 

9 new subclause: 

10 ‘‘(III) to an ABLE account (as 

11 defined in section 529A(e)(6)) of the 

12 designated beneficiary or a member of 

13 the family of the designated bene14 ficiary. 

15 Subclause (III) shall not apply to so much 

16 of a distribution which, when added to all 

17 other contributions made to the ABLE ac18 count for the taxable year, exceeds the lim19 itation under section 529A(b)(2)(B).’’. 

20 (b) ROLLOVERS FROM QUALIFIED ABLE PROGRAMS

21 TO QUALIFIED TUITION PROGRAMS.—Clause (i) of section 

22 529A(c)(1)(C) of such Code is amended— 

23 (1) by striking ‘‘such payment or distribution, 

24 into another’’ and inserting ‘‘such payment or dis25 tribution— 

26 ‘‘(I) into another’’; 


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1 (2) by striking the period at the end and insert2 ing ‘‘, or’’, and 

3 (3) by adding at the end the following new sub4 clause: 

5 ‘‘(II) to a qualified tuition pro6 gram (as described in section 529) for 

7 the benefit of the same designated 

8 beneficiary or a member of the family 

9 of such designated beneficiary.’’. 

10 (c) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to distributions after the date of 

12 the enactment of this Act. 

Æ 


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