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November 1, 2011

Texas 2011 RAISE Learning Forum. November 1, 2011. Taking College Savings Accounts to Scale. SESSION: State Platforms for College Savings Accounts Lynne Ward, Executive Director, Utah Educational Savings Plan. What Is a 529 Plan?. What Is a 529 Plan?.

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November 1, 2011

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  1. Texas 2011 RAISE Learning Forum November 1, 2011 Taking College Savings Accounts to Scale SESSION: State Platforms for College Savings Accounts Lynne Ward, Executive Director, Utah Educational Savings Plan

  2. What Is a 529 Plan?

  3. 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

  4. 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

  5. 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.

  6. Use of the Money Qualified Higher Education Expenses • What: • tuition • fees • certain room and board costs • required 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

  7. More on Taxes • Non-qualified withdrawals are allowed but will cause • Federal and state income tax on gains Not required ifnon-qualified withdrawal is due to the beneficiary’s death, disability, receipt of a scholarship, or U.S. military academy attendance • 10% additional federal penalty tax on gains • Possible recapture of state income tax credit or deduction previously claimed

  8. 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

  9. 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

  10. 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

  11. About the Utah Educational Savings Plan

  12. 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 • Top ranked by Morningstar Investor Service • Number one by Allan Roth, CBS MoneyWatch

  13. UESP – Top Ranking Reasons • Strong investments with good returns • Sound investment options • Innovation – First of a kind customizable age-based option • Low fees

  14. 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

  15. 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

  16. 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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