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Sens. Ted Cruz and Lisa Blunt Rochester have proposed the 529 Retirement Enhancement Act of 2026, which would remove the $35,000 lifetime cap on rollovers from 529 plans to Roth IRAs. The proposal would retain existing eligibility rules, including annual Roth contribution limits, a 15-year account requirement and the beneficiary’s earned-income limit. It has been proposed, not enacted.
Sens. Ted Cruz and Lisa Blunt Rochester have proposed legislation to remove the $35,000 lifetime cap on rollovers from 529 education savings plans to Roth IRAs, a change that could give families another option for savings left over after education plans change. The measure, called the 529 Retirement Enhancement Act of 2026, is a proposal; it has not become law.
The bill would eliminate the lifetime dollar cap established under current law while keeping the other requirements for eligible rollovers, according to the source report. Those rules limit transfers in any tax year to the beneficiary’s Roth IRA contribution limit and require the beneficiary to have earned income at least equal to the amount transferred that year. For 2026, the Roth IRA contribution limit is $7,500 for people under 50, the report says.
Other existing conditions would also remain. The 529 account must have been open for at least 15 years, the Roth IRA must belong to the 529 beneficiary, and transferred funds must come from contributions and earnings deposited at least five years before the transfer. Removing the lifetime cap would not make the full balance immediately transferable: annual limits and eligibility rules could still spread rollovers across multiple years.
Under the current rules described in the report, up to $35,000 in total can move from a 529 plan to a Roth IRA if the requirements are met. Money used for nonqualified expenses instead may be subject to ordinary income tax and a 10% federal penalty on earnings. Account holders can also keep unused funds for future qualified education costs or change the beneficiary to an eligible family member.
More Options for Unused College Savings
If enacted, the proposal could reduce the risk that families see a 529 balance as difficult to use when a beneficiary receives a scholarship, attends a less expensive school or does not attend college. The change would give eligible beneficiaries a path to move more unused savings into a Roth IRA over time, where qualified withdrawals can be tax-free under applicable rules.
The practical effect would depend on the beneficiary’s circumstances and the existing restrictions. Someone without sufficient earned income, for example, could not transfer more than their earnings allow in a given year. And because the annual Roth limit would continue to apply, lifting the lifetime ceiling would not permit an unrestricted one-time transfer.
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How Current Rollover Rules Work
Congress authorized 529-to-Roth IRA rollovers through the SECURE Act 2.0, passed at the end of 2022, according to the report. That law allows a qualifying beneficiary to move up to $35,000 over a lifetime, subject to account-age, timing, annual contribution and earned-income requirements.
529 plans are funded with after-tax contributions, and their investments grow tax-deferred. Federal law does not set an annual contribution cap for these plans, though states set maximum account balances. The report says that in 2026, gifts of up to $19,000 per person per beneficiary qualify for the annual gift-tax exclusion; contributors may also use the five-year election to front-load up to $95,000 per person, subject to applicable rules.
““One of the biggest impediments to people saving money in a 529 was the risk that the money was going to just go to waste (and be subject to taxes and penalties) if the kid didn’t go to college.””
— Paul Stanley, wealth adviser at Arca
Passage and Eligibility Remain Open
The source material does not establish whether the bill has advanced, when it might receive a hearing or vote, or whether its provisions could change during the legislative process. The proposal should not be treated as current law.
Even if enacted as described, outcomes would depend on beneficiaries meeting the retained conditions. The source also does not specify an implementation date or explain how any future changes would interact with individual state 529 plans. Families should check current federal rules before acting on a rollover.
Congressional Action Would Set the Timeline
The next milestone is congressional consideration of the 529 Retirement Enhancement Act of 2026. The source material provides no committee schedule, vote date or projected enactment timeline. Until lawmakers pass a change and it takes effect, the reported $35,000 lifetime limit and the existing rollover conditions remain the applicable framework.
Key Questions
Has the bill removed the 529-to-Roth IRA lifetime cap?
No. The $35,000 lifetime cap remains under the current rules described in the report. The bill proposes removing it but has not been reported as enacted.
Would the bill allow an entire 529 balance to move into a Roth IRA at once?
No. The proposal would remove the lifetime cap while keeping the annual Roth contribution limit and other conditions. Transfers may therefore take multiple years.
What conditions apply to a 529-to-Roth IRA rollover?
The account must be at least 15 years old; the Roth IRA must belong to the beneficiary; transferred funds must meet the five-year timing rule; and the beneficiary must have enough earned income. The annual transfer is also subject to the applicable Roth contribution limit.
What happens to 529 money that is not used for education?
Under the report’s description of current rules, account holders may retain it for future qualified education expenses, change the beneficiary to an eligible family member, or use an eligible rollover. A nonqualified withdrawal may result in ordinary income tax and a 10% federal penalty on the earnings portion.
Source: rss
