NCUA Says College Plans Are Tax Deductible
NCUA said tax-deductible college tuition savings plans, such as the offered under Section 529 of the IRS Code, are eligible for federal deposit insurance under the NCUSIF, as long as they are structured properly.
"Our view," said NCUA in a new legal opinion letter issued to the Wisconsin Credit Union League, "is that NCUA's current insurance rule provides this coverage as long as the account owner is a member of a federally insured credit union where the account is maintained and the account is properly titled."
Careful titling of the share certificates, reminded NCUA, is necessary to ensure each investor receives individual account coverage.
In April, the State of Wisconsin contacted NCUA about insurance coverage of share certificates purchased at credit unions under its 529 college savings plan.
The Plan, is similar to an escrow account where the state acts as an escrow agent. NCUA concluded the state holds the funds as an agent or custodian for the owner and that the rule governing custodial accounts would apply, providing insurance coverage without a change in the agency's insurance regulation.
NCUA said it will consider adopting a formal rule to cover such college savings accounts but believes the current rule adequately covers the issue, as long as the account owner is a member of a federally insured credit union where the account is maintained and account is properly titled.
Ed Roberts can be reached at eroberts