Transcript No Slide Title

Texas 2011
RAISE Learning
Forum
Taking College Savings
Accounts to Scale
SESSION:
State Platforms for College Savings Accounts
Lynne Ward, Executive Director, Utah Educational Savings Plan
November 1, 2011
What Is a
529 Plan?
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What Is a 529 Plan?
• Authorized by Congress in 1996 and codified in
Section 529 of the Internal Revenue Code of 1986.
• A tax-advantaged program to save for higher
education expenses.
• Two Types:
- Prepaid
- Savings
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Nationally
Every state and the District of Columbia has at least one
529 plan (Wyoming residents are referred to the Colorado plan)
As of June 30, 2011:
 $170 billion in total investments
 10 million accounts
Prepaids
 $18 million
 1.2 million accounts
Savings
 $151.5 billion
 8.8 million accounts
Source: College Savings Plan Network
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Tax Benefits
 Earnings exempt from
federal income tax if used
for qualified higher
education expenses
 Special estate planning
provisions
 State tax benefits
35 states (including the
District of Columbia) offer a
state tax deduction or credit
Source: College Savings Plan Network, collegesavings.org, April 19, 2011.
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Use of the Money
Qualified Higher Education Expenses
What:
 tuition
 fees
 certain room and board
costs
 required by the class:
• books
• supplies
• equipment
See IRS Pub. 970
Where:
 any higher education
institution that accepts
federal financial aid
programs for students
(see fafsa.ed.gov)
• technical school
• college
• graduate school
 anywhere in the United
States or abroad
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More on Taxes
Non-qualified withdrawals are allowed but
will cause
 Federal and state income tax on gains
 10% additional federal
penalty tax on gains
 Possible recapture of
state income tax credit
or deduction
previously claimed
Not required if
non-qualified
withdrawal is due to
the beneficiary’s
death, disability,
receipt of a
scholarship, or U.S.
military academy
attendance
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Who Can Save for Whom?
Account owner
 Can be an individual, trust, or corporation
 Is in control of the account
Beneficiary can be
 Child, grandchild,
niece/nephew, neighbor,
spouse, self
 Changed to a member of the
current beneficiary’s family
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Investment Options
Investment Options
- Age-Based Options
Automatically reallocates the investment to be less
volatile as the beneficiary approaches college age
- Static Options
Fixed allocation
Underlying Investments
- Mutual funds
- Banks
- State Treasurers investment pools
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Fees
Fees range from 0% to 2.05% annually plus
annual maintenance fees
In other words:
$0 to $50.50 annually on a $1,000 investment
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About
the
Utah
Educational
Savings Plan
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UESP at a Glance
 $4 Billion
 186,000 Accounts
 Direct-Sold
 Managed by Utah State Board of Regents
 Nationally ranked as one of the top 529 plans
o Top ranked by Morningstar Investor Service
o Number one by Allan Roth, CBS MoneyWatch
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UESP – Top Ranking Reasons
 Strong investments with good returns
 Sound investment options
 Innovation – First of a kind customizable
age-based option
 Low fees
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UESP Outreach
 National Rankings
 Outreach Efforts
- Partnerships with:
•
•
•
•
United Way of Salt Lake – BELIEVE! And Utah Saves Campaigns
Utah K-12 brochures
Private Business – Reading incentive program in schools
Bank – Bookmark contest
Tip: Use 529 account as prize
• TV commercials and advertisements
Tip: Make part of overall campaign, be mindful of advertising rules
• Presentations – business, professional groups, community groups
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UESP Outreach, cont.
 State income tax check-off for refund to UESP
account(s)
 Low-Income Matching Program
 Match up to $400/yr per child
 Family income less than 200% of poverty
Tip: start with a pilot
 Olene S. Walker Transition to Adult Living Scholarship
 Former foster children
Tip: Start small
 Social Media
Tip: Tread carefully
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Resources
 College Savings Plan Network (CSPN)
collegesavings.org
 Savingforcollege.com
 Center for Social Development,
Washington University in St. Louis
csd.wustl.edu
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