Lott and Brewer Testify in Support for Greater MET and MESP Flexibility
Office of Postsecondary Financial Planning Bureau Administrator Robin Lott and Michigan Education Trust (MET) Executive Director Diane Brewer testified in front of state House Higher Education Committee on June 12 regarding possible state law changes that would better serve Michiganders by granting greater flexibility with their 529 saving plans.
The bulk of the changes would amend some definitions to expand the programs to apprenticeships and allow funds to be applied to outstanding student loans or rolled into MiABLE or IRA accounts.
“Our legislation concerns the Michigan Education Trust and Michigan Education Savings Program,” said state Rep. Sharon MacDonell (D-Troy) during the hearing. “In 2019, the federal government updated Section 529 of the IRS code to include qualified apprenticeships to the definition of eligible educational institution. This meant that students choosing a career in the trades could pay for trade school education through these accounts.”
Despite federal rule changes five years ago, these changes have not been applicable to the state’s 529 plans because the Michigan Constitution prohibits laws that conform to federal rule changes automatically.
A state law change would be required to allow Michigan’s 529 plans to be applicable to the trades and assist with other federal program changes and federal definition alignment.
House Bill 5782 would allow a MET contract to be terminated and refunded in lump sum under certain conditions, like death, not being admitted to an institution, or attending a recognized apprenticeship. It would also change a definition to match the Internal Revenue Code as of Jan. 1, 2024.
House Bill 5783 would change the Michigan Education Saving Program Act to expand the definition of “qualified higher education expenses” to include expenses for fees, books, supplies and equipment related to an apprenticeship program and principal and interest on federally qualified education loans. It would also change a definition to match the Internal Revenue Code as of Jan. 1, 2024.
States are individually allowed to individually set up prepaid and investment-based college savings programs. Michigan oversees MET, MESP and the Michigan 529 Advisor Plan (MAP). MET is the first prepaid plan in the nation and has grown to 135,000 contracts with nearly $1.1 billion in assets.
“We’re looking to expand the flexibility of MET,” Brewer said. “They’re going to have minimal financial impact on the status of the program and state. This is being fairer and more just and able to accommodate special programs for our purchasers and beneficiaries.”
Lott provided institutional knowledge — having been with Treasury when MET began in the mid-1980s and helped set up MESP — and specifically spoke about aligning state law to amend the definition of the Internal Revenue Code to mean “in effect for Jan. 1, 2024.” The definition currently means the code is in effect for Jan. 1, 2002.
“Adding that reference to Section 529 to refer to 2024 would allow the program to provide changes since 2019, specifically apprenticeships,” Lott said. “We would love to apply the program to apprenticeships and allow account holders to apply leftover funds to student loans or have the ability to rollover into a MiABLE or IRA account.”
MESP currently serves 315,000 account owners with $8 billion in assets.
“Michiganders are interested in saving for college and minimizing the amount of student loan debt they hold,” Lott added.
Treasury’s Office of Legislative Affairs Director Amanda West facilitated the testimony. Both bills currently remain in committee.
