Recommending 529 Plans: Meeting Reg. BI’s Care Obligation

January 2023

In this report, we examine how a broker-dealer and its financial professionals can meet the best interest care obligation under the US Securities and Exchange Commission Regulation Best Interest (Reg. BI) when recommending an education savings plan (529 Plan) to a retail customer, with a particular focus on the relevance of potential state tax benefits to such recommendations.

529 Plans are state-sponsored investment programs that facilitate savings for qualified education expenses, including tuition, fees, room and board, and other education-related expenses. Unlike retirement accounts that penalize withdrawals prior to retirement age, 529 Plan funds are available for withdrawal without penalty as soon as the qualified expense is incurred, making them a potentially attractive way to save for college and other eligible education expenses.