Nine States That Reward Employers for Helping Employees Save for College

College savings shouldn't be a burden that families shoulder alone. And a growing number of states are recognizing this, offering tax incentives to employers that help their workers save for education. As of this writing, nine states (and counting) provide tax credits or deductions to businesses that match employee contributions to 529 plans. 

Hadley tracks this state legislation closely. As new states are added to the list, we’ll keep you updated on our blog. We’ll also publish a blog series detailing the specifics of each state’s 529 employer matching program (with examples!), so stay tuned.

The States Leading the Way

Without further ado, here are the nine states: Arkansas, Colorado, Idaho, Illinois, Nebraska, Nevada, Pennsylvania, Utah, and Wisconsin (hooray!). Leaders in these states have all enacted legislation to encourage employer participation in 529 savings programs. These states understand that when employers contribute to education savings, everyone benefits—employees gain valuable financial support, employers strengthen their benefits packages, and communities build a more educated workforce.

How the Incentives Work

While the specifics vary by state, the general framework is similar. In Colorado, for example, employers receive a tax credit equal to 20% of their contributions, with a maximum of $500 per employee annually. Pennsylvania offers a 25% tax credit on employer contributions of up to $500 per participating employee per year. Idaho provides a 20% state tax credit, capped at $500 per employee per year.

These credits apply to direct contributions employers make to their workers' 529 accounts, whether as matching contributions, performance bonuses, or even gifts for new parents. The key requirement is that employers generally must contribute directly to the employee's 529 account.

Again, we’ll get into the state-by-state specifics in future blog posts, so hold your questions if you can (or contact us at support@gohadley.com if you just can’t wait!).

A Cutting Edge Benefit… and Getting Paid to do it!

Employers offering a 529 benefit today can really set themselves apart. According to a survey by SHRM, only 11% of HR professionals work at companies that allow 529 plan contributions through payroll deduction, and just 2% work for employers who offer 529 plan matching contributions. These state tax credits aim to change that equation by making employer participation financially attractive. And as we’ve previously reported, national 529 plan adoption is nowhere near where it should be.

Students with any amount saved for higher education are six-to-seven times more likely to attend a four-year institution than those without any savings, according to the College Savings Plans Network. Employer contributions can make the difference between families who save consistently and those who struggle to set aside funds on their own. 

For businesses weighing whether to add 529 matching to their benefits package, these state tax credits sweeten the deal considerably. A company contributing $2,500 per employee in Colorado, for instance, would receive $500 back in tax credits—effectively reducing their true cost while providing a differentiated and unique employee benefit that helps attract and retain talent, and motivate the workforce.

Taking Action

If you're an HR or benefits professional in one of these nine states, adding 529 matching to your benefits package is worth exploring. Hadley specializes in helping companies implement 529 employee benefits programs, making it simple for businesses to take advantage of these state tax credits while providing valuable support to their workforce.

Visit www.gohadley.com/employers to learn how easy it is to set up employer-sponsored 529 benefits. Our team handles the administrative details and helps you maximize available tax incentives, allowing you to focus on what matters most—supporting your employees and their families.

For employees, it's worth asking your HR department whether your company participates in these programs. If they don't, sharing information about available tax credits and resources like Hadley could help make the case for adding this benefit.

As more states recognize the value of employer-supported education savings, we may see this list grow (and you can bet we’ll let you know when we do!). For now, businesses in these nine states have a unique opportunity to invest in their employees' futures while benefiting from meaningful tax incentives.

Questions or comments? Shoot us at a note at info@gohadley.com. We’re always open to chat.