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

2 What Is a 529 Plan?

3 Authorized by Congress in 1996 and codified in Section 529 of the Internal Revenue Code of 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.

Use of the Money 6 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

More on Taxes Non-qualified withdrawals are allowed but will cause  Federal and state income tax on gains 7  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

Account owner  Can be an individual, trust, or corporation  Is in control of the account 8 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 9 - 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 Aboutthe 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 plans o Top ranked by Morningstar Investor Service o Number one by Allan Roth, CBS MoneyWatch 12

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

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