State's college savings program delayed

By Katherine Nichols
Advertiser Staff Writer

Parents looking to invest in their children's educational futures through the Hawai'i State College Savings Program are faced with yet another delay.

Originally scheduled to become operational by last July, the start date was pushed back to October. But October has come and gone, and the program is not in operation.

The new goal is the end of February, according to Scott Kami, an administrator in the financial administration division of the state Department of Budget and Finance.

Kami said questions about liability continue to stall the program's implementation.

The state needs to make sure "if there are any issues that arise as result of the program, that the state is protected," he said. Kami declined to be more specific.

The 529 college savings programs are federally authorized, but available for execution by individual states.

The programs are designed to make early investment in higher education affordable for families by allowing earnings on the investment to grow free of federal taxes as long as the money is used at a college in the United States.

State tax on these investments will also be deferred until the money is withdrawn for education, when it is taxed at a student rate.

Participants may be of any income level, and any relative may contribute to the plan. States set lower and upper limits to yearly contributions and may offer incentives to residents such as a reduction in state taxes.

"A lot of people are interested in the program," Kami said. "We're trying to get it going but also trying to balance the state's interest."

Reach Katherine Nichols at 525-8093 or knichols@honoluluadvertiser.com