november 1, 2011 texas 2011 raise learning forum taking college savings accounts to scale session:...
TRANSCRIPT
November 1, 2011
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
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What Is a 529 Plan?
What Is a 529 Plan?
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• 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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NationallyEvery 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 accountsSource: 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 creditSource: College Savings Plan Network, collegesavings.org, April 19, 2011.
Use of the Money
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Qualified Higher Education Expenses
What:tuitionfees
certain room and board costsrequired by the class:
•books
•supplies
•equipment
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
See IRS Pub. 970
More on Taxes
Non-qualified withdrawals are allowed but will cause
Federal and state income tax on gains
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10% additional federal penalty tax on gains
Possible recapture of state income tax credit or deduction previously claimed
Not required ifnon-qualified withdrawal is due to the beneficiary’s death, disability, receipt of a scholarship, or U.S. military academy attendance
Account owner Can be an individual, trust, or corporation Is in control of the account
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Who Can Save for Whom?
Beneficiary can be
Child, grandchild, niece/nephew, neighbor, spouse, self
Changed to a member of the current beneficiary’s family
Investment Options
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Investment Options
- Age-Based OptionsAutomatically reallocates the investment to be less
volatile as the beneficiary approaches college age
- Static OptionsFixed 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
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 planso Top ranked by Morningstar Investor Serviceo 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 MediaTip: 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