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New Tax Law Update – 529 Plans

Now that the new tax reform bill has become law, it is time to dive into the details and learn how these changes will affect our industry – both positively and negatively. In the past few communications we’ve addressed the items that had at one time been on the chopping block (tuition remission/employee educational assistance, tax-exempt bonds, employer provided housing and charitable giving). What we haven’t addressed is a new benefit from the law for independent schools in the area of 529 plans.

529 college savings plans began in the mid-late 90s and immediately gained popularity as a tax-free way to save for higher education expenses. The change in the new tax law has expanded the definition of “qualified expense” for 529 plans to include tuition-based schools.  Independent schools (along with religious or public) that charge tuition will now be considered an eligible expense and families can use up to $10,000 per student per year from their 529 savings. More details are being worked out in the areas of rules, definitions, and when eligibility begins, but this is a helping hand to all our schools.

Our friends at NAIS have recently issued a full legal advisory on this topic. If you are an NAIS member school, you can find that document here (login required).

Since most 529 plans are state sponsored, each state has varying restrictions and regulations so we encourage you to use the resources below to learn more about the specifics to each state plan. There can be secondary benefits to 529 plans in the area of a state income tax deduction, and the benefits continue when you look at it from an estate planning perspective since grandparents and other family members may also contribute to 529 plans.

Helpful resources:

What can schools do now?

  • Prepare for the possibility of a new IRS filing requirement.
  • Learn about your state’s 529 plan documentation requirements.
  • Keep abreast on any state-level advocacy for state law changes pertaining to 529 plans.
  • Think about how to handle financial aid decisions now that 529 savings are eligible funds for tuition expenses.
  • Communicate internally to ensure school personnel are not providing any type of tax advice.
  • Develop a communication plan for families AFTER these steps have been taken.

We’d like to keep this conversation going. Please leave a comment below that can help your colleagues at other schools.

Michelle Shea
Associate Executive Director
MISBO
www.misbo.com

 

From the ED 1.4.18

BEYOND ORDINARY

It is a new year! The turning of the calendar means we get to look back to the previous year and celebrate all that was accomplished and make lists for the new year about all we want to accomplish. At this time of year, Janus, the Roman god with two faces, always comes to mind. One of his faces is looking back and the other is looking forward. He keeps watch over doorways, thresholds, boundary crossings, transitions, beginnings, and endings. While it may be a false etymology to think that January is derived from his name, his image is a convenient icon to mark the passage of the year.

A few weeks ago, I ran across a story about a very old shark that resonated with me and I want to share it with you. This particular shark was said to be slightly over five hundred years old. Of the several articles, one went a little deeper into actual science (because yes, I admit that I succumbed to the “click bait” and read more than one article on the subject). The more fact-entrenched article indicated that in a study of a group of 28 female Greenland sharks, researchers analyzed eye tissue and found an age range of 272 years up to 512 years. More clicked links delved into the science of what it means to analyze eye tissue and the margin of error in calculating age, but you can discover that on your own if you wish. Greenland sharks can grow to 24 feet long and weigh in at over 2,500 pounds. They live in very cold water and are usually at depths of over a mile. These sharks are extremely slow moving and swim at a rate of about a mile per hour with a top speed of less than two miles per hour. It got me thinking about what events throughout history a Methuselah like this would have lived through from the 16th century to now: the Ottoman Empire, Galileo, the age of enlightenment, French and American revolutions, industrialization, lunar landings, Steve Jobs, globalization, the internet, just to name tips of some of the most massive icebergs in our history and society. But, this is the look back and only half of the Janus model. What comes next for a shark like this?

The reality is that while our shark friend might have been alive during momentous occasions in history, she was probably more concerned about her next meal than what the humans were up to. She is an example of something that was built to last and if the measure of sustainability is simple existence, then nature has perfected it for her. But if the measure of sustainability is relevance in the world and making a difference, then I’m not sure how to measure her success. Do you know the Rip Van Winkle story popularized by DesignShare (about a decade ago)?

Rip wakes up in the 21st century and he marvels at what he sees. “Men and women dash about talking to small metal devices pinned to their ears . . . older folk defy death and disability with metronomes in their chests and with hips made of metal and plastic . . . airports, hospitals, shopping malls – every place Rip goes just baffles him.” You can predict where he goes next: into a school. There, he recognizes the place immediately and exclaims, “This is a school. We used to have these back in 1907 only the blackboards are now white.” Funny. Although I bet Rip didn’t go into many independent schools like yours where things do look quite a bit different. Learning and laughing still take place and the relationships throughout your community are as strong as ever. But, there are new tools in use and these tools have liberated us from being the sage on the stage and helped us hone our skills in pedagogy and in focusing on the needs of the unique learner.

The transition from the first to the second semester breathes new life into students, faculty, staff, and your community and allows a new start midway through the year. Sometimes it is important to imagine what we want the future to look like and sometimes it is important to plan for how we will make that future happen. We have our own new things cooking at MISBO: a calendar filled with relevant webinars and On the Road meetings; two summer workshops: one for the business office team to work together more effectively and help others in the school work better with you, and a second on profound changes in hiring practices and philosophies in independent schools; a fall conference dedicated to moving from questions to solutions which will be keynoted by one of the big thinkers in independent education today, Ian Symmonds. We will be at NBOA in Nashville in March and hope to see you there, especially at the MISBO reception jointly hosted with our friends from other associations around the country. Also on the horizon for MISBO is a new look and feel to our website that will allow you to get to the answers you need more quickly, revised list-servs that will allow you to connect with others and rely on the shared wisdom of a community deeply dedicated to lending a helping hand, and a renewed emphasis on your ownership of the purchasing consortium.

2018 is going to be great and who knows, maybe we will find a way to teach an old shark new tricks.

What I am (still) reading now: We Were Eight Years in Power, by Ta-Nehisi Coates. An important collection of essays on race in the U.S.

From the ED 12.7.17

BEYOND ORDINARY

Leaders are readers and in our field that means staying as informed as possible on the trends in various segments of education, demographic trends, market movement, and examples of innovation from other industries. We struggle to balance our commitment to the ideals of those that came before us with the pressures of today’s fast moving changes that disrupt the way we do things. I ran across this particular statement on a listserv recently from an organizational theory and governance master whose books I have been reading for some time now:

Entrepreneurial thinking is employed by every exceptional [leader] we know. But, it is driven by value to [students and families]; not just financial return. On the for profit Boards on which I serve, we see the company’s job as finding a hole customers want filled and to be the place to fill it for a cost less than the price they are willing to pay. On the nonprofit Boards on which I serve, we see our job as finding a hole our members or mission need filled and making sure it gets filled the best way possible. A subtle but significant commentary on culture. Form follows function and function follows purpose. (Glenn Tecker, November 2017)

With the holidays nearly upon us, I am sure that in your school the anticipation of the break is becoming more real and palpable every day. Students (and maybe some faculty and staff members, too) are squirming more than usual as we head into the last few weeks of projects and tests and holiday performances. Staff members are moving at lightning speed, engaged in a myriad of different activities. There are multiple events and parties, each with unique setup and catering needs. The tax year needs to be closed out with the requisite filings and wage forms issued. There are final board meetings filled with budget and enrollment planning.

Very soon, this whirlwind we are all experiencing will be replaced with another, more personal one. Visions of sugar plums will dance in our heads as we move at lightning speed to prepare our homes for the arrival of family members, friends, and neighbors. Some of us will stay home (and rest!) and others will travel short distances or long, celebrating traditions that were passed down to us that we in turn get to pass to the next generation. We will take comfort in these traditions and in the rituals of the season.

When we hit January and the second semester, we will have the chance to take up the conversations about change and the elements that are causing it and MISBO will help you take up the mantle to lead your community to the solutions that matter. In fact, next month I’ll share more information about our amazing calendar of 2018 events. In the meantime, save those dates and take some downtime to recharge – 2018 is going to be great!

What I am reading now: We Were Eight Years in Power, by Ta-Nehisi Coates. Probably not the best holiday reading, but an important collection that you should get around to.

From the ED 11.2.17

BEYOND ORDINARY

From the did-you-know files: There are approximately 7,400 languages spoken on the planet. Of these, 900 languages are spoken by fewer than 100,000 individuals. Nearly half of all humans speak a language from the Indo-European family as their native language – this family includes Spanish, English, German, French, Hindustani/Hindi-Urdu, Portuguese, Russian, Punjabi, Latin (my favorite – I am a former Latin teacher), etc. This remarkable linguistic and cultural diversity will not exist in the future. Most predict that about 90% of languages will be extinct, meaning there are no native speakers, within the next century.

We can catch the barest glimpse of this within our own experiences. For example, national news and the internet have brought flat accents and regularized speech patterns, vocabulary, and semantics to a wider audience. This is usually called “General American” or the “newscaster accent” and is similar to the phenomenon of the British Received Pronunciation. I like to call it the Tom Brokaw effect – Brokaw, Walter Cronkite, and Johnny Carson are usually credited with broadening the appeal of this dialect. In this age of the internet of things where we are more connected to each other than ever before, we are simultaneously leveling many playing fields by providing access to a wider world (a good thing), while also enlarging the playing fields of the dominant groups (maybe not a good thing?). Is there a slippery slope that should concern us?

When working with trustees, senior leaders, or presenting workshops, I like to do an activity where participants list the top five things they think their school is really good at and the top five things they think the school really struggles to be good at. As they are debriefing and sharing with each other, numerous similarities emerge, one of which is the drive to balance tradition with innovation. Put this another way and it is the need to find the fulcrum between the advancing tide of change, some of it radical and some of it progressive, and the sense that the past holds keys to the future.

Every school has its own language, its own lexicon that drives the way we talk to each other on campus. I think we would all agree that the language we use in schools has new additions to it. We now talk about maker space, design thinking, collaborative learning, mastery, the sharing economy, micro schools. We use the language of futurists and innovators and look for the changes that will lead us forward. We have some language that all schools in the throes of educational change share and other language that is unique to our campus that remains regardless of external influences. At the end of the day, we all use language, but it does not always make us understand each other. While most of the current linguistic diversity will not exist in the future, and perhaps some of the current pedagogical diversity will not exist in the future either, we will continue to have to work harder to understand and celebrate the differences we can see and those we can’t see in all individuals. Our own slippery slope is about the migration of our mission and being wise enough to understand the language we use might be allowed to change, but what makes us truly unique is foundational to who we are.

As for what language will win out in the future, here is a brief review from the Washington Post of some of the different ways to approach that question. And although Latin probably won’t make a comeback as the last native Latin speakers probably died about thirteen centuries ago, I could make a case that those speaking French, Spanish, Italian, etc. are really speaking Latin with a strange accent.

What I am reading now: Born Digital: How Children Grow Up in a Digital Age, by John Palfrey and Urs Gasser. As the back jacket says, “… for parents, teachers, and the myriad of confused adults who want to understand the digital present and shape the digital future.”

Lessons from School Leaders – an IDEO reflection

In my past life as a teacher, I spent countless hours finding the right balance between correcting students and letting students correct themselves. Little did I know that in my current career manifestation at IDEO, I would be searching for that balance once again.

IDEO is best known for using design to tackle big, meaty complex challenges, from designing a new school system for Peru’s middle class to creating a digital platform to scale coaching for first generation college students.

For our collaboration with MISBO, it was a little bit different. The challenge was big and meaty – reimagining business models for independent schools – but instead of coming up with innovative solutions for independent schools, we designed a 3-month learning experience to empower a cohort of leaders from 12 schools around the world to lead the charge themselves.

In this case, our job was to be teachers and facilitators of design thinking. Our primary goal was to help the cohort develop design and innovation muscles from within the context of their day-to-day to show that change is possible and that you can fight fires and start fires at the same time.

“How do we stay relevant if we don’t do this?” – Carrollwood Day School

“It’s hard for the leaders of today to be the leaders of tomorrow.” – Jackson Academy

The thing about being an expert in a sector like education is that it comes with deep and intimate knowledge of all of the reasons why a new idea will never work. For the cohort of schools, those constraints included demanding boards and demanding parents, rising tuition and rising competition, rapidly evolving technology and rapidly evolving student needs. Luckily, as the saying goes, creativity loves constraints.

As a process for problem solving, design thinking helps reframe constraints as human-centered needs and opportunities, for example, moving from “parents are demanding” to “how might we channel the energy of parents to build community?” Without ignoring the realities of the given context, design thinking allows for moments of divergent and convergent thinking, providing space to dream, and separate space to make decisions.

Perhaps most importantly in this case, design thinking brings a bias to action and a practice around experimentation, creating proof points that help move things forward without burning the whole house down.

“We’ve spent a lot of time trying to define ‘the problem’ rather than thinking about solutions.” – Bancroft School

“I’m tired of talking about it, I want to find some solutions.” – Indian Creek School

Teaching these mindsets and methods required us to create space for school leaders to be active learners. That meant that we, as teachers, had to let go of a certain amount of control to allow for a truly student-led learning experience. Rather than running experiments we had designed, we had each school design and run their own experiments, with the IDEO team serving as guides. Our goal was not to design groundbreaking solutions ourselves, but rather to empower the schools to design their own.

Members of the cohort brought a range of experience with design thinking, from those who run their own state of the art design thinking programs, to pragmatic skeptics, to bright-eyed beginners. Like teaching a mixed-level class, we designed a series of workshops and activities to challenge those on the more experienced end and scaffold those who were still learning.

Learning a new skill sometimes means not getting quite as far as fast, which can feel frustrating for teacher and students alike, but after hearing the school leaders share their own journeys, I realized what a focus on building capacity does do. Building capacity and creative confidence creates disproportionate impact by equipping leaders and influencers across a given sector with rare time and space to exercise their design muscles, moving the entire sector forward, and ultimately farther, from within.

“When we model innovation and change as a school, the students learn from it.”  – Cary Academy

“It’s not convenient, it’s aspirational.” – Nueva School

In true teacher fashion, I learned many lessons from my students:

  • I learned that moments of struggle help to internalize methods and mindsets like “Learn from Failure” and “Be Optimistic.”
  • I learned that when your goal is to teach someone to fish, sometimes it’s enough to be in the boat with them.
  • I learned that design requires rigorous and structured learning experiences just as much as any other subject or field of expertise.
  • I learned that being a teacher and facilitator of experiential learning is hard, but boy, is it worth it.

A few last words of advice:

  • To those teaching design thinking, find moments to relinquish control and model the comfort with ambiguity that is key to the process.
  • To those learning design thinking, perfect is the enemy of good. And when in doubt, test it out.

Always learning,

Becky Lee
IDEO
San Francisco

From the ED 10.5.17

BEYOND ORDINARY

Automation is not new. MIT professor and labor economist David Autor points out that there is a long history of technology replacing human labor – and markets adjust. Beasts of burden replaced much of lifting and carrying; the tractor replaced the horse and plow; electricity, internal combustion engines, and telecommunications replaced numerous systems that were previously manual. He notes that at the turn of the last century, 40% of employment was in farming and now there is less than 2% – and we have more food than ever before. Mechanical horsepower replaced having a strong back. What is interesting about his research is when he turns his attention to labor areas that require workers that are more skilled and demonstrates that automation and productivity does not always replace human labor but can augment human labor.

I heard Dr. Autor interviewed in a podcast originally aired in January, 2015 in which he draws attention to the complexities of machines: “[T]he interactions by which technological changes lead to changes in employment are really rich and complex . . . and it’s not simply a matter of a machine does the job, therefore the worker doesn’t do the job, therefore there are fewer workers needed.”

While market sectors can become so productive that they need fewer workers, such as agriculture, in other sectors, productivity has risen and the labor market has as well. In sectors in which we get better, prices go down but the demand grows, creating more employment opportunities. This is great news and great research, but here is the part of the interview that made my heart skip a beat – see if it does for you as well:

“One example would be medicine. Seventy-five years ago, most of what doctors could do was harm you. Now they have lots of ways to do good; they’re much more productive in terms of improving your health. That’s also true, apparently, with lawyers or with people in marketing or even in education – well, maybe there hasn’t been that much productivity growth in education. I should watch myself there.”

I had to rewind and listen to that part several times. Once the initial shock wore off, I could see his point and concede that he is probably right about the lack of productivity in education. We perpetuate some of our practices and market a low teacher-student ratio (which requires more labor), remarkable facilities (largest budget line after personnel) and a greater diversity of curricular and co-curricular opportunities (double whammy: more labor and more resources). Does education defy advances in productivity? Maybe. But, more likely there are two key factors at play.

  1. We have a paying customer (parent) who is not also the consumer of the product (student), leading to what we might euphemistically call a discrepancy in demand.
  2. We have not recognized (or created) the innovation that will transform and be scaled up.

The first point could resolve with either time or training. On the second point, one of the issues with any advancement is the law of diffusion of innovation, which Simon Sinek talks about in his TED Talk and in his books:

“The first 2.5% of our population are our innovators. The next 13.5% of our population are our early adopters. The next 34% are your early majority, your late majority and your laggards. The only reason these people buy touch-tone phones is because you can’t buy rotary phones anymore. We all sit at various places at various times on this scale, but what the law of diffusion of innovation tells us is that if you want mass-market success or mass-market acceptance of an idea, you cannot have it until you achieve this tipping point between 15 and 18 percent market penetration, and then the system tips.”

It is entirely possible that the innovation education needs to increase productivity (and hopefully a greater demand for labor) already exists. The lingering question is – what is it? And can we do it at my school? As of the publication date of this piece, we are at the 2017 MISBO Fall Conference having these types of conversations and stretching our imaginations into new possibilities. I doubt there is any one magic thing that will lead to the types of innovations we have been talking about for the past several years, but I do believe that we will diverge and converge and use other elements of design thinking to help kick start us into the future. David Autor uses the phrase “cognitive flexibility” to describe the key skill that labor markets will always need. It is the ability to adapt and face a volatile, uncertain, complex, and ambiguous world. We can continue to get better at teaching this and, as he says, cognitive flexibility beats heavy lifting for a living.

Think Before You Click

One of the most insidious threats to any industry today comes in the form of a cyberattack. You have heard the stories, seen the news, and may have even experienced some version on your campus. This is a growing concern for independent schools, due to the open and collaborative nature of our communities and the people who work there.

An attack can range from a simple student hack to a much more sophisticated attempt to penetrate your network. While all forms of cyberattacks can affect your classroom, campus, and business operations, a significant breach can have a long-lasting effect on your institution’s image.

What makes an independent school vulnerable and what can you do to protect yourself? The helpful, caring, and trusting individuals found on your campus provide the perfect opportunity for a hacker to enter your network. Do you regularly conduct phishing tests for students, faculty, and staff? The Lovett School began performing this exercise and found that a majority (almost 80%) of their faculty initially “took the bait.” Woodward Academy conducted a similar email campaign and those that clicked were taken to an educational video; a soft lesson but still extremely effective. Both schools dramatically increased awareness among students, faculty, and staff, and reduced the number of potential risks.

Sophisticated hackers may also take readily available information from your website (new employee, school trips, etc.) to conduct another type of attack; one that asks you to share information with a “known” coworker. This occurs when you receive an email that appears to come from an email address you recognize and contains a request that might be legitimate. At The Pine School in Hobe Sound, Florida, a request to transfer funds to cover a professional development event was sent to the business office, presumably from the new Head of School. Fortunately that request was immediately recognized as out of the ordinary, and an attempt to verify the request by other means proved it to be false.

How do you help your staff recognize these types of emails? Lee Conner, Assistant VP for Technology and Transportation at Woodward Academy, recommends you look for the obvious clues first. Hover over the link – what does it show? Check the grammar – a poorly written email often indicates a false request. To whom was the request sent? Are there several names, odd names, or are they listed alphabetically on the recipient list? These too are indicators of a phishing email. Finally, if there is an immediate call to action, be especially cautious. Perpetrators often use a sense of urgency to move you past your initial suspicions.

As independent schools we also need to be conscious of the people with whom we work, and what they are doing to protect our information. What security measures do your vendors regularly employ? Do they conduct an annual analysis of cyber risk? What questions are you asking before doing business with a vendor? These questions and more are being considered in the work being done by many IT professionals and the associations to which they belong in an effort to compile safety measures all schools, regardless of size, can embrace. MISBO will continue to research these issues and produce helpful suggestions and tools that can be shared.

If you are from a MISBO member school, click the link below to learn from one school’s personal account of living through a cyberattack by visiting our webinar archives.

Surviving and Preventing a Ransomware Attack

Dianne Sagaas
Director, Education
MISBO