If you’re a typical parent, it’s likely you’ve never heard of the Michigan Education Trust (MET) but it spearheaded the 529 plan movement. Proposed in 1986, this program was intended to “help parents guarantee their children the opportunity of a Michigan college education.” This new fund afforded parents the option to pay a nominal stipulated amount in return for the state agreeing to pay tuition at any Michigan public college.
The plan proved to be largely successful. Within four years over 50,000 Michigan citizens had enrolled in MET. Inspired by this, additional states decided to launch their own version of the program. In 1990 Michigan was able to alleviate even more of the financial burden for those who participated by winning a suit against the IRS to make the program tax-exempt.
This win led to a widespread bipartisan effort to have the tax-exempt status be applied to all college savings plans and qualified state tuition programs. This was achieved in 1996 with the passing of the Small Business Protection Act. Congress added Section 529 to the Internal Revenue Code and thus the 529 Plan was born.