For many families, education savings and retirement savings are closely connected. Parents may wonder what happens if a child does not use all the money in a 529 plan. Young professionals with student loans may feel they need to prioritize debt repayment before they can start saving for retirement.

SECURE 2.0 created two planning opportunities that address these common concerns: limited 529-to-Roth IRA rollovers and optional employer retirement matching contributions tied to qualified student loan payments.

Both rules can be useful, but both are technical. The details matter.

1. Unused 529 Funds May Be Eligible for Roth IRA Rollovers

A 529 plan, also called a qualified tuition program, is a tax-advantaged account generally used for education expenses. When used for qualified education costs, earnings can generally be withdrawn tax-free. The IRS also notes that 529 funds may be used for certain student loan repayments, subject to limits. (IRS)

Beginning with distributions made after December 31, 2023, SECURE 2.0 allows certain unused 529 plan assets to be rolled into a Roth IRA for the 529 beneficiary. This can help address a common question for families: “What if we save more than the beneficiary needs for education?”

This rule does not make 529 plans a substitute for retirement accounts. Instead, it provides a limited path for certain unused education savings to move into a Roth IRA when specific requirements are met.

2. Key Requirements for 529-to-Roth IRA Rollovers

For a 529-to-Roth IRA rollover to be tax-free, the IRS states that several requirements apply:

The rollover must be completed through a direct trustee-to-trustee transfer. The Roth IRA must be maintained for the 529 plan beneficiary. The rollover is subject to the annual Roth IRA contribution limit and a $35,000 lifetime limit. The 529 account must satisfy the 15-year holding period requirement. The rollover also cannot include contributions, or earnings on those contributions, made within the five-year period ending on the date of the distribution. (IRS)

For 2026, the IRA contribution limit is $7,500. Individuals age 50 or older may contribute an additional $1,100, for a total of $8,600, subject to taxable compensation limits. (IRS)

That means the $35,000 lifetime maximum generally cannot be moved all at once. For example, if a beneficiary is under age 50, has at least $7,500 of taxable compensation in 2026, and makes no other IRA contributions for the year, the maximum 529-to-Roth IRA rollover for 2026 would generally be $7,500.

3. Roth IRA Income Limits and the SECURE 2.0 Special Rule

Regular Roth IRA contributions are subject to income phase-outs. For 2026, the Roth IRA income phase-out range is $153,000 to $168,000 for single filers and heads of household. For married couples filing jointly, the range is $242,000 to $252,000. (IRS)

However, SECURE 2.0 provides a special rule for eligible 529-to-Roth IRA rollover amounts that waives the Roth IRA income limitation. The rollover is still subject to the annual IRA contribution limit, the beneficiary’s taxable compensation, the 15-year 529 holding period requirement, the five-year contribution lookback, and the $35,000 lifetime cap.

Because operational procedures may vary by 529 program and Roth IRA custodian, families should confirm eligibility and documentation requirements before requesting a transfer.

4. State Tax Treatment May Differ

The federal rules do not necessarily determine state tax treatment.

Some states offer deductions or credits for 529 contributions. Depending on the state, certain distributions or rollovers could affect prior state tax benefits or create different reporting requirements. Families should review their state’s 529 plan rules and consult a tax advisor before initiating a 529-to-Roth IRA rollover.

This is especially important for families who received a state income tax deduction or credit when contributing to the 529 plan.

5. Employers Can Match Certain Student Loan Payments

SECURE 2.0 also created a retirement plan provision for employees repaying student loans.

For plan years beginning after December 31, 2023, employers may make matching contributions based on employees’ qualified student loan payments, often referred to as QSLPs. This feature may be used in 401(k), 403(b), SIMPLE IRA, and governmental 457(b) plans. (IRS)

This provision is intended to help employees who are repaying student debt but may not be contributing enough to their workplace retirement plan to receive a traditional employer match. If an employer adopts the feature, eligible student loan payments may allow the employee to receive an employer retirement contribution even if the employee is not making regular elective deferrals at the same level.

The key point: this is optional. Employers are not required to offer a student loan match.

6. What Plan Sponsors Should Know

IRS Notice 2024-63 provides implementation guidance for qualified student loan payment matches. The notice confirms that SECURE 2.0 applies to contributions made for plan years beginning after December 31, 2023, and provides guidance designed to help plan sponsors implement these programs. (IRS)

Plan sponsors should carefully evaluate the administrative requirements before adopting the feature. Considerations may include payroll coordination, recordkeeper capabilities, employee certification procedures, plan amendments, nondiscrimination testing, vesting, match formulas, and participant communications.

IRS guidance allows employers to establish reasonable procedures for employees to certify qualified student loan payments. It also allows employers to set an annual deadline for employees to claim the match, but that deadline generally cannot be earlier than three months after the close of the plan year. (IRS)

Because this is an ERISA and plan-design issue for many employers, plan sponsors should coordinate with their retirement plan advisor, recordkeeper, payroll provider, third-party administrator, and ERISA counsel.

Planning Takeaways for 2026

For families, the 529-to-Roth IRA rule may reduce some concern about overfunding education savings. However, it should not be treated as a simple workaround for Roth IRA contribution rules. The annual IRA contribution limit, taxable compensation requirement, $35,000 lifetime cap, 15-year holding period, five-year lookback, and state tax considerations all need to be reviewed.

For employers, the student loan match can be a meaningful financial wellness and retirement readiness feature, particularly for employees early in their careers. It may also add administrative complexity, so the decision to adopt it should be made carefully.

For employees, the most practical question is: “Does my employer offer this benefit, and what steps do I need to take to qualify?” Employees with student loans should review plan communications and ask whether qualified student loan payments can be certified for matching contribution purposes.

SECURE 2.0 did not eliminate the need to make thoughtful decisions about education savings, student debt, and retirement planning. But it did create new ways to coordinate those decisions.

FAQ: 529-to-Roth IRA Rollovers and Student Loan Matches in 2026

Can unused 529 money be rolled into a Roth IRA in 2026?
Yes, if the requirements are met. The rollover must generally be a direct trustee-to-trustee transfer to a Roth IRA maintained for the 529 beneficiary. It is also subject to the annual Roth IRA contribution limit, a $35,000 lifetime limit, the 15-year 529 holding period requirement, and the five-year contribution lookback. (IRS)

How much can be rolled from a 529 plan to a Roth IRA in 2026?
The lifetime limit is $35,000 per beneficiary. However, annual rollovers are limited by the IRA contribution limit. For 2026, that limit is $7,500, or $8,600 for individuals age 50 or older, subject to taxable compensation. (IRS)

Does the 529 beneficiary need earned income for a 529-to-Roth IRA rollover?
Yes. The rollover is subject to the annual Roth IRA contribution limit, which means the beneficiary must have enough taxable compensation to support the rollover amount for the year. (IRS)

Can a parent roll a child’s unused 529 funds into the parent’s Roth IRA?
Generally, no. The Roth IRA must be maintained for the 529 plan beneficiary. Families should confirm account ownership and beneficiary details with the 529 plan provider and Roth IRA custodian before initiating a rollover.

Do Roth IRA income limits apply to 529-to-Roth IRA rollovers?
SECURE 2.0 provides a special rule that waives the Roth IRA income limitation for eligible 529-to-Roth IRA rollover amounts. However, other limits still apply, including the annual IRA contribution limit, taxable compensation requirement, 15-year holding period, five-year contribution lookback, and $35,000 lifetime cap.

Will a 529-to-Roth IRA rollover be treated the same way for state taxes?
Not necessarily. State tax treatment may differ from federal treatment. Some states may have rules related to prior deductions, credits, or recapture. Families should review their state’s rules before taking action.

Are employers required to match student loan payments?
No. SECURE 2.0 allows employers to make matching contributions based on qualified student loan payments, but the feature is optional. It may be adopted by certain 401(k), 403(b), SIMPLE IRA, and governmental 457(b) plans. (IRS)

What should employees with student loans ask their employer?
Employees should ask whether the retirement plan offers a student loan match, which payments qualify, how payments must be certified, and what deadline applies for submitting information.

What should plan sponsors consider before adding a student loan match?
Plan sponsors should evaluate plan design, recordkeeping, payroll coordination, employee certification, nondiscrimination testing, vesting, participant communications, and required plan amendments. They should also coordinate with their retirement plan advisor, recordkeeper, payroll provider, third-party administrator, and ERISA counsel.

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