Invest in Your Child's Future with the Connecticut 529 Higher Education Trust Savings Plan
by Chris Perone
June 24, 2006

As any parent can attest, the challenges of providing for a child can be daunting. From food, to shelter, to saving for college, the expenses pile up quickly. One of the tools the State of Connecticut provides all parents is the opportunity to save for college in the Connecticut Higher Education Trust (CHET), a 529 plan that allows parents to invest in their child's future. CHET has been around since 1997, but this past session, a bill that I co-sponsored and helped guide through the house was a change to that law which added a new benefit - a tax deduction!

In tense last minute negotiations of the legislative session, the 529 College Savings Plan bill that was introduced by State Treasurer Denise Nappier, was kept in the original legislative finance package, which was passed and signed into law. And as of July 1, this proposal to help Connecticut families save for college through a tax deduction on contributions to the state college savings program will be a reality. The legislation allows individuals to deduct up to $5,000 of contributions, while joint filers can deduct as much as $10,000.

This is a win-win for families who are trying to save for their children's college education. What parent does not want to give their child a solid educational background? As a member of the Higher Education Committee, and through listening to parents who tell me they want to invest in a better savings plan to send their kids to college, this legislation was a long time coming. If parents start saving with the Connecticut Higher Education Trust (CHET) 529 savings plan in 2006 for their newborns, in 2024 when it is time to send that teenager off to school, parents will have the necessary amount of money with which to do so.

The advantages of the CHET program are numerous, including when you open an account. To start investing in your child's future, all you need is a $25 minimum contribution; there are no applications fees, sales or brokerage charges for your CHET account. There are several low fees associated with the operation of the account, but these are affordable. Two other advantages of a CHET account include tax-free withdrawals for higher education and tax-deferred earnings.

CHET offers three different investment options: the managed allocation option, the high equity option, and the principal plus interest option. The managed allocation option distributes your contributions among a combination of the equity, real estate, fixed-income and money market mutual funds. In the earlier years of this investment, most of your contributions are placed into the equity/real estate investments, but as times passes, more of your money is placed in fixed income (bond) and money market investments. The high equity option places your contributions and earnings into a combination of equity and fixed-income TIAA-CREF Institutional Mutual Funds. The principal plus interest option allocates your contributions and earnings to the funding agreement issued by TIAA-CREF Life to the Program Trust, not to the account owner or beneficiary. An account owner can transfer existing funds from one of these investment options to another once per calendar year.

The CHET program offers flexibility in that there are no income restrictions or annual contribution limits, CHET funds can be transferred to another eligible family member if your primary beneficiary decides not to attend college, and your beneficiary can use these funds for colleges nationwide and abroad as well as for books, school supplies, and other required fees or certain room and board costs.

More information about the CHET program can be found at www.aboutchet.com or by calling 1-888-799-CHET.

This legislation is about making you and your child's dream of going to college a reality. In forums that I've been holding on the topic of college savings the one theme that comes up over and over again has been that it is never too late to begin planning for your child's future. And now with the CHET 529 deduction, parents have one more tool in their arsenal to make college a reality for their children.

Christopher Perone is serving his first term as State Representative from the 137th Assembly District. He is a member of the Environment, Higher Education and Transportation committees. Rep. Perone can be reached at the Hartford Legislative Office Building at (860) 240-8585.

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