State Treasurer Riley Moore today informed West Virginia residents of recent changes in federal law that now allow beneficiaries to roll over certain unused SMART529 funds into a Roth IRA to help boost their retirement savings.

“We’ve always told people, ‘It’s never too early to start saving for your child’s future,’” Treasurer Moore said. “Now, thanks to recent changes in federal law, families can not only ensure they’re preparing for their child’s future education, but potentially their child’s future retirement as well.”

The change was included in the SECURE 2.0 Act of 2022 that was passed by Congress and signed into law at the end of that year. The SECURE Act, which stands for “Setting Every Community Up for Retirement Enhancement,” contained dozens of reforms to improve and encourage additional use of retirement savings plans. Its provisions allowing tax- and penalty-free 529 plan rollovers into Roth IRAs under certain conditions went into effect Jan. 1, 2024.

“This change will allow SMART529 beneficiaries who may not spend all of their funds – such as students who receive scholarships or those pursue lower-cost community college programs – to roll over those savings into something they can use for their future retirement once certain criteria are met,” Treasurer Moore said.

A Roth IRA is a tax-advantaged type of individual retirement account that normally allows after-tax contributions to grow tax-free and be withdrawn tax-free after the age of 59-and-one-half, provided the account has been open for more than five years.

The new 529-related provisions will allow families to benefit from the tax deductions provided for their contributions to the SMART529 plan while also providing the beneficiary the tax-free income when they retire later in life.

“This new rollover option helps families who sacrifice and save early for their child’s education the ability to avoid certain taxes and penalties on unused SMART529 funds, should their child find an alternative way to pay for college or pursue more affordable education pathways,” Treasurer Moore said.

The SECURE 2.0 Act does lay out certain criteria the funds must meet before they are eligible to be rolled over into a Roth IRA. Those include:

• The 529 account must have been open for more than 15 years.
• The eligible rollover amount must have been in the 529 account for at least 5 years.
• The annual rollover limit is subject to Roth IRA annual contribution limits (currently $7,000 a year for individuals under 50; $8,000 for individuals age 50 and older).
• There is a lifetime rollover limit of $35,000 for each 529 account beneficiary.
• Rollovers can only be made to the Roth IRA account owned by the named 529 account beneficiary.

The law also provides that Roth IRA income limits do not apply for this type of contribution.

SMART529 is a qualified tuition program issued by the Board of Trustees of the West Virginia College and Jumpstart Savings Programs and administered by Hartford Funds.

The SMART529 WV Direct Plan has consistently been ranked among the top in the nation in 5- and 10-year performance popular nationwide college planning website SavingForCollege.com.

Complete information about SMART529 is available at www.SMART529.com.