The Proposed "One, Big, Beautiful Bill" Act: Expanded 529 Plans and Extended ABLE Accounts

On May 18, 2025, the House Budget Committee advanced a comprehensive tax package under the ongoing reconciliation process. While the bill has been marked up and passed out of committee, further changes are likely, as it still must progress through several legislative stages before becoming law. At this stage, it serves as a strong signal of where federal tax policy may be headed.

Among the bill’s key proposals are an expansion of 529 education savings plans, the permanent extension of certain Achieving a Better Life Experience (ABLE) account provisions, a new savings account concept for children under age 8, and expanded access to Health Savings Accounts (HSA). Notably, there were no retirement-specific provisions included.

Learn more about the proposed updates to 529 and ABLE accounts to better understand the practical implications for savers and advisors.

Expanded 529 Plans: New Opportunities for Education Savings

The proposed enhancements to 529 plans reflect a broader shift toward recognizing diverse educational needs and career development pathways. Currently, 529 plan funds can be used tax-free for qualified higher education expenses and up to $10,000 annually for K–12 tuition. The proposed legislation seeks to expand this definition to include:

• Expanded K–12 Expenses: Costs for curriculum materials, books, online education resources, tutoring services, and standardized test fees.
• Support for Homeschooling: Expenditures like educational software and dual enrollment program fees.
• Educational Therapies: Expenses for students with disabilities, including educational therapy and related services.
• Postsecondary Credentialing Programs: Tuition and materials for certificate programs, trade schools, and other credentialing programs recognized under federal law.

These changes position 529 plans as more versatile tools for a variety of educational and training purposes.

Learn more about the basics of 529 plans.

Implications for 529 Savers and Advisors: Flexibility, But Potential Complexities

• For Savers: The expansion allows for more personalized educational planning, accommodating diverse learning paths such as vocational training.
• For Advisors: Financial professionals may need to adjust planning strategies and communication materials to reflect the broader scope of qualified expenses.
• State-by-State Considerations: While federal tax treatment is uniform, state conformity may vary. Advisors should guide clients through differing state tax implications for newly eligible expenses.

Permanent ABLE Account Provisions: Enhanced Savings for Individuals with Disabilities

In addition to the 529 plan updates, the proposed House tax bill also includes a notable provision for ABLE accounts. The legislation seeks to permanently extend the ABLE-to-Work provision, which is currently scheduled to sunset at the end of 2025.

The ABLE-to-Work provision allows eligible working ABLE account owners to contribute above the standard annual contribution limit, provided they earn income and meet specific eligibility requirements. By removing the expiration date, the proposal gives account holders more certainty and long-term savings flexibility.

Key Benefits for ABLE Account Holders

For individuals living with disabilities and their families, this change carries important implications:

• Greater Contribution Potential: Working individuals who qualify can continue to contribute additional income to their ABLE accounts beyond the standard annual limit.
• Support for Independence: The extension reinforces the value of employment and savings for people with disabilities by helping them retain more of their earnings in a tax-advantaged account.
• Long-Term Planning Confidence: By making the ABLE-to-Work provision permanent, families gain more clarity and stability when building long-term financial plans.

Legislative Pathway and What We’ll Watch

• House Passage: As of May 19, 2025, all 11 House committees of jurisdiction have passed their portions of the package, and the Budget Committee has compiled it all into one bill. Negotiations between leadership and key holdouts are still ongoing, though, so there may be some last-minute changes. Once a deal is reached, the Rules Committee will need to approve it before ultimately sending it to the floor for a vote. House leadership is aiming to have it passed by the end of the week.
• Senate Consideration: The Senate may introduce its own version or suggest modifications. Leadership has indicated that they are aiming to pass their bill by July 4, but delays could push the process later into July.
• Implementation Timeline: If enacted, the effective date of the 529 expansion provisions remains uncertain, pending guidance from the Treasury and IRS.

As a long-standing advocate for U.S. savers and offering access to workplace and tax-advantaged savings programs, Ascensus supports more than 16 million individuals saving for retirement, education, or disability-related expenses. This commitment includes not only monitoring legislative developments, but also actively empowering individuals and partners to navigate change with confidence and clarity. Learn how we support this mission on Our Story page, or explore our Education Savings and ABLE Solutions to see how we help savers and their families plan for even brighter futures.