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House Education committee pauses HB1085 to await fiscal impact on 529-to-Roth rollover
Summary
Lawmakers heard testimony that HB 1085 would allow unused funds in Arkansas— Brighter Future 529 accounts to roll into a Roth IRA. The Department of Finance and Administration said the change will reduce state revenue; committee members voted to postpone consideration until a fiscal impact statement is completed.
House Education Committee members on Tuesday heard testimony on HB 1085, a bill that would allow unused money from Arkansas— Brighter Future 529 college-savings accounts to be rolled into a Roth IRA for the same beneficiary.
The bill—s sponsor, Representative Carolyn Brown, told the committee the change would "bring Arkansas into sync with the federal 529 plan" and described the state—s Brighter Future account as "doing quite well," saying "we distributed $55,000,000 last year for higher education from 529 plan." Brown described the rollover to a Roth IRA as "another advantage," enabling beneficiaries to move unused college-savings funds into retirement accounts without recognizing income, if the bill allows it.
Why it matters: Committee members said the policy could reduce state tax revenue by changing the tax treatment of withdrawals that previously would have been taxable. Keith Linder, an attorney for the Department of Finance and Administration, told the committee, "This bill will cause a revenue reduction," and said DF&A was finalizing a fiscal impact statement and expected to have numbers by the committee's next meeting.
Committee discussion focused on fiscal clarity and timing. Representative Vaught asked whether the rollovers would be taxable; DF&A confirmed that, under the bill, withdrawals that would previously have been taxable could be rolled tax free into a Roth IRA. Representative Mayberry, who noted a separate ABLE Act bill with a $20,000 fiscal impact, cautioned that chairs on revenue questions have been reluctant to move measures without clear fiscal data. After additional questions about how the revenue effect would arise, Representative Beck recommended, and Representative Brown agreed, that the bill be pulled from consideration until DF&A completes its fiscal impact study.
Actions at the hearing were procedural: the committee passed an amendment to HB 1085 earlier in the session, then chose to postpone further action on the bill until the fiscal impact statement is available. No final passage of HB 1085 occurred at this hearing.
The committee recorded no roll-call tally for the postponement; members indicated support for delaying consideration until the state fiscal analysis is provided.
