May 21st, 2024 – The Illinois General Assembly passed a new initiative spearheaded by IIllinois Treasurer Michael Frerichs to allow parents who don’t use all the money in their child’s Illinois 529 College Savings Accounts (Bright Start and Bright Directions) to roll over the funds into a Roth IRA.

“One of the most common concerns parents have is what can be done with leftover money in an account. People worry that if their child doesn’t go to college or gets a scholarship, that their savings will be lost. This will give parents another option for using their extra savings, and they can help their child get an early start on saving for retirement.” said Illinois Treasurer Michael Frerichs.

The House passed SB3133 by a vote of 109-0 and the Senate 59-0. The bill will now go to the governor’s desk.

For the option to take effect in Illinois, lawmakers needed to change state law to allow the Roth IRA rollover option for Bright Start and Bright Directions 529 college savings account owners.

State law currently allows parents to leave leftover money in a Bright Start account for future use by another family member going to college or roll over the money into an Illinois ABLE account. The money also can be taken out as a nonqualified withdrawal, but there are tax implications, and people are encouraged to consult a tax professional.

By: Isaiah Bradford