The term “rollover” refers to the act of moving funds from one 529 plan to another, and there are two different types: direct rollovers and indirect rollovers. Most states treat rollovers differently than regular contributions for tax purposes.

Direct rollovers are those handled by the administrator of the 529 plan. They will be the ones to move the funds from the old account to the new one; all the account owner needs to do is fill out the appropriate form and (depending on the plan) secure a medallion signature guarantee.

Indirect rollovers are those that the account owner handles themselves. To make this change, the owner would need to withdraw the funds from the account and place them into a new 529 plan within 60 days; otherwise, the transaction would be considered a non-qualified distribution and be subject to income tax and a 10% penalty. In addition, the account owner must specify which portion of the funds is contributions and which is earnings, and transferring funds from one plan to another from the same state is typically treated as an investment change, not a rollover.