For other versions of this document, see http://wikileaks.org/wiki/CRS-RL31214
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Order Code RL31214

Saving for College Through
Qualified Tuition (Section 529) Programs

Updated March 26, 2008

Linda Levine
Specialist in Labor Economics
Domestic Social Policy Division
Saving for College Through
Qualified Tuition (Section 529) Programs

Summary
Congress has tried to make higher education more affordable by providing
favorable tax treatment to savings accumulated in qualified tuition programs (QTPs),
also called Section 529 programs after their citation in the Internal Revenue Code.
QTPs initially allowed individuals to save for qualified higher education expenses
(QHEEs) on a tax-deferred basis. The Pension Protection Act of 2006 (PPA) made
permanent the temporary enhancements to QTPs contained in the Economic Growth
and Tax Relief Reconciliation Act of 2001. The enhancements include making
qualified withdrawals from QTPs tax-free.

One type of QTP, prepaid tuition plans, enables account owners to make
payments on behalf of student beneficiaries for a specified number of academic
periods/course units at current prices thereby providing a hedge against tuition
inflation. States were the only sponsors of prepaid plans until Congress extended
sponsorship to eligible higher education (private) institutions effective in 2002.

States remain the sole sponsor of the more popular type of Section 529 program,
college savings plans, which account for most of the $105.7 billion in QTP assets as
of December 31, 2006. College savings plans can be used toward a variety of
QHEEs at any eligible institution regardless of which state sponsors the plan or
where the beneficiary attends school. In contrast, if beneficiaries of state-sponsored
prepaid plans attend out-of-state or private schools, the programs typically pay the
same tuition that would have been paid to an eligible in-state public school. Also
unlike prepaid plans, in which the state plan invests the pooled contributions with the
intent of at least matching tuition inflation, college savings account owners can select
from a range of investment portfolios. College savings plans thus offer the chance
of greater returns than prepaid plans, but they also could prove more risky.
Additionally, college savings plans charge fees (e.g., enrollment fees and underlying
mutual fund fees) that lower returns -- more so for accounts opened through
investment advisors (e.g., sales charges). The level of these fees vis-a-vis the tax
savings, the extent and manner of fee disclosure across plans, and the role of federal
regulators in this area was the subject of oversight during the 108th Congress.

(More recently, the 109th Congress included in the PPA enactment of Section
529(f). It charges the Secretary of the Treasury with developing regulations to
prevent abuse of Section 529 and to carry out its purposes in general. The Internal
Revenue Service currently is developing a notice of proposed rule making, which
will include portions of the 1998 proposed regulation and anti-abuse rules.)

Both types of Section 529 programs have several features in common beyond
qualified withdrawals being tax-free. Earnings not applied toward QHEEs (e.g., the
beneficiary forgoes college) generally are taxable and subject to a penalty. The tax
and penalty can be avoided if account owners designate a new beneficiary who is an
eligible relative of the original beneficiary. Account owners, rather than
beneficiaries, maintain control over the funds. Contributions are not deductible on
federal tax returns.
Contents

What Is a Section 529 Program? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Prepaid Tuition Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
State-Sponsored Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Plans of Eligible Institutions of Higher Education . . . . . . . . . . . . . . . . 3
College Savings Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Recent Issues by Type of Section 529 Program . . . . . . . . . . . . . . . . . . . . . . . 5
College Savings Plans: Fees and Disclosure . . . . . . . . . . . . . . . . . . . . . 5
Prepaid Tuition Plans: Closures and Modifications . . . . . . . . . . . . . . . 8

Tax Treatment of QTP Contributions and Earnings . . . . . . . . . . . . . . . . . . . . . . . 9
Qualified Earnings Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
A Penalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Transfer Tax Provisions for Section 529 Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investment Control and the Tax Consequences of Transferring Funds
Between Section 529 Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Changing Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Same-Beneficiary Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Coordination of Contributions with Estate, Gift, and
Generation-Skipping Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 12
IRS Rulemaking: Potential for Abuse of Section 529 Accounts . . . . . . . . 13

Interaction with Other Higher Education Tax Incentives . . . . . . . . . . . . . . . . . . 14

Appendix. State-Sponsored Prepaid Tuition Plans and
College Savings Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

List of Tables
Table A1. Comparison of State-Sponsored Prepaid Tuition Plans . . . . . . . . . . . 15
Table A2. Comparison of State-Sponsored College Savings Plans . . . . . . . . . . 21
Saving for College Through
Qualified Tuition (Section 529) Programs

Since the late 1980s, an oft-voiced concern has been that the nation's
educational and training institutions may not be supplying enough persons with the
heightened skill levels reportedly demanded by businesses. Indeed, the demand for
workers with at least a bachelor's degree has been growing and is projected to
continue growing at a more rapid rate than the demand for individuals with little, if
any, postsecondary education.1

At the same time, the cost of higher education has risen to a greater extent than
average household income over the past two decades.2 The trend has caused concern
among Members of Congress that higher education is becoming less affordable for
middle-income families.

In response to these trends, Congress has added a panoply of tax benefits to
supplement the traditional student financial aid system with the intention of
encouraging human capital development by increasing the affordability of
postsecondary school attendance. Among the tax incentives to promote higher
education is the qualified tuition program (QTP) or Section 529 program, named for
its place in the Internal Revenue Code (IRC). It provides favorable tax treatment to
money accumulated for future payment of qualified higher education expenses.

Although more states sponsored QTPs after the Small Business Job Protection
Act of 1996 (P.L. 104-188) clarified their federal tax status, the amendment of
Section 529 by the Economic Growth and Tax Relief Reconciliation Act of 2001
(EGTRRA, P.L. 107-16) greatly increased the program's attractiveness. Among
other temporary amendments to QTPs, EGTRRA made withdrawals from Section
529 plans to pay qualified higher education expenses tax-free. (Previously, earnings
on contributions to QTPs had been allowed to grow on a tax-deferred basis and their
subsequent withdrawal to pay for qualified expenses had been taxable.) To comply
with the Congressional Budget Act of 1974, however, P.L. 107-16's amendments to
Section 529 and many other provisions in the IRC sunset for tax years beginning after
December 31, 2010.3 Subsequently, the 109th Congress passed the Pension

1
CRS Report RL34224, College Costs and Prices: Issues for Reauthorization of the Higher
Education Act, by Rebecca R. Skinner and Blake Alan Naughton.
2
CRS Report RL32100, College Costs and Prices: Background and Issues for
Reauthorization of the Higher Education Act, by Rebecca R. Skinner.
3
For additional information, see CRS Report RS21870, Education Tax Benefits: Are They
Permanent or Temporary?, by Linda Levine. (Hereafter cited as CRS Report RS21870,
Education Tax Benefits.)
CRS-2

Protection Act of 2006 (PPA, P.L. 109-250); it included provisions that made
permanent EGTRRA's changes to Section 529 plans.

As EGTRRA's modifications to Section 529 plans are now permanent, this
report provides an overview of QTPs that cover its post-P.L. 107-16 provisions. It
also addresses issues of recent concern associated with QTPs. The report discusses
the interaction of Section 529 plans with other tax incentives for postsecondary
education as well. The Appendix Tables A1 and A2 summarize Section 529 prepaid
tuition and college savings plans by state, respectively, as of December 2003.

What Is a Section 529 Program?
States, their agencies, or their instrumentalities can establish and maintain tax-
exempt programs

(1) that permit individuals to purchase tuition credits or certificates for use at
eligible institutions of higher education4 on behalf of a designated beneficiary
which entitles the beneficiary to the waiver or payment of qualified higher
education expenses; or

(2) that permit individuals to contribute to an account for the purpose of paying
a beneficiary's qualified higher education expenses (QHEEs).5

In addition to states, eligible institutions of higher education can now offer the
first type of QTP, commonly called prepaid tuition plans. States remain the sole tax-
exempt sponsors of college savings plans, which is the name commonly applied to
the second type of QTP.

According to Section 529 of the IRC, payments to both types of QTPs must be
in cash (e.g., not in the form of securities). A contributor may establish multiple
accounts for the same beneficiary, and an individual may be a designated beneficiary
of multiple accounts (e.g., an account in a college saving plan sponsored by state A
and another in state B originated by a parent for child X or an account in a prepaid
tuition plan sponsored by state C that is originated by a parent for child Y and an
account in a college savings plan sponsored by state D that is originated by a

4
Eligible institutions of higher education generally are those accredited public and private
non-profit postsecondary schools that offer a bachelor's, associate's, graduate or
professional degree, or another recognized postsecondary credential, as well as certain
proprietary and vocational schools. The institutions also must be eligible to participate in
student aid programs of the U.S. Department of Education.
5
QHEEs are tuition, fees, books, supplies, and equipment required for enrollment or
attendance at an eligible institution as well as room and board for students attending school
at least half-time. Note: P.L. 107-16 further expanded the definition of "qualified
expenses" to cover the cost of special needs services for special needs beneficiaries. The
legislation also raised the potential level of room and board expenses for students who
attend eligible institutions at least half-time, thus enabling QTPs to pay for more of this
qualified expense. Both these expansions are effective in tax year beginning after December
31, 2001.
CRS-3

grandparent of child Y). But states may establish restrictions that are not mandated
either by Section 529 or by the proposed regulations issued in 1998. There generally
are no income caps on contributors, unlike the limits that apply to taxpayers who
want to claim Hope Scholarship and Lifetime Learning tax credits or who want to use
Coverdell Education Savings Accounts. The absence of an income limit on
contributors likely makes Section 529 programs particularly attractive to higher-
income families, who also are likely to make above-average use of the savings plans
because persons with more income have a greater propensity to save.6

Prepaid Tuition Plans
A prepaid tuition plan enables a contributor (e.g., parent, grandparent, and
interested non-relative) to make lump-sum or periodic payments for a specified
number of academic periods or course units at current prices. Prepaid tuition
programs thus provide a hedge against tuition inflation.

State-Sponsored Plans. Eighteen states sponsor the plans. As of December
31, 2006, prepaid tuition plans held about $15.6 billion in contributions and
earnings.7

If the beneficiary of a state-sponsored prepaid tuition contract (e.g., child,
grandchild or someone not related to the contributor) elects to attend an in-state
private college or an out-of-state college, the program typically will pay the student's
chosen institution the tuition it would have paid an in-state public college -- which
may be less than the chosen institution's tuition. The specifics of prepaid tuition
plans vary greatly from one state to another (e.g., as to a residency requirement, age
limitation on beneficiaries, minimum and maximum contributions, refund policies,
and state guarantee of rate of return and principal). Some plans reportedly have
begun to cover room and board as well as tuition and related expenses.8 (See
Appendix, Table A1 for a summary of the specific elements of state-sponsored
prepaid tuition programs, including how the different programs calculate the value
of a contract if a beneficiary attends a private institution or an out-of-state public
institution.)

Plans of Eligible Institutions of Higher Education. Effective for tax
years beginning after December 31, 2001, one or more eligible higher education
institutions -- including private institutions -- may establish and maintain prepaid
tuition programs accorded the same federal tax treatment as state-sponsored prepaid
tuition plans. Some believe the expansion of the plans to include private institutions
might help them recruit students who would otherwise have been deterred from

6
For information on the characteristics of contributors to Section 529 programs, see
Investment Company Institute, Profile of Households Saving for College, fall 2003.
(Hereafter cited as Investment Company Institute, Profile of Households Saving for
College.)
7
Quarterly data on value of assets and number of contracts in each state-sponsored prepaid
tuition program are available at [http://www.collegesavings.org].
8
Anne Tergesen, "Pay Now, Study Later," Business Week, March 11, 2002.
CRS-4

attending due to comparatively high tuition charges. It also has been suggested that
the plans of private institutions might appeal to alumni who could "boast they've not
only enrolled their [offspring] in their alma mater at birth, [but] they've already paid
the tuition."9

In early 2003, the not-for-profit Tuition Plan Consortium received regulatory
approval to sell "tuition certificates" in its Independent 529 Plan. It began accepting
contributions later that year. More than 240 colleges and universities, ranging from
research universities to small liberal arts colleges, have agreed to participate in the
plan. A certificate prepays a share of a beneficiary's tuition, with the value of the
share at a particular institution depending upon its tuition level (e.g., if, in the year
a certificate in the amount of $10,000 would pay for one-half of the annual tuition
and mandatory fees at College X or one-third of the annual tuition and fees at
University Y, then the certificate will be worth that same fraction regardless of a
school's tuition level at the time of enrollment). Beneficiaries do not commit to
attending specific institutions at the time of pre-payment, and they may use the
certificates at any participating school. Each year, participating institutions will set
a discount from its current tuition and fees for purchasers of certificates, with the
plan setting a minimum discount rate. A certificate cannot be used toward tuition
and fees until three years from the date of purchase, and it generally will expire upon
the 30th anniversary of its purchase. Unless at least $500 is contributed by the end of
the first two years after having purchased a certificate, the plan will cancel the
certificate and refund contributions without interest. The value of a certificate,
adjusted for the plan's investment performance plus nominal amount of interest,
cannot be refunded until one year from the date of purchase or upon the death of the
designated beneficiary.10 Unlike either state-sponsored prepaid tuition plans or
college savings plans, account owners of Independent 529 Plan tuition certificates do
not pay administrative fees. They are absorbed by the participating educational
institutions.11

College Savings Plans
State-sponsored college savings plans typically offer several predetermined
investment options from which contributors can select (e.g., a portfolio of equities
and bonds whose percent composition changes automatically as the beneficiary ages,
a portfolio with fixed shares of equities and bonds, or with a guaranteed minimum
rate of return). Unlike prepaid tuition plans, the value of each savings account is
based on the performance of the investment strategy chosen by the account owner.

A number of explanations have been offered for the proliferation and popularity
of this newer type of QTP. It has been suggested that state officials regard college

9
Jeff Wuorio, Prepaying Tuition Offers Peace of Mind at a Price, available at
[http://moneycentral.msn.com/articles/family/college/1462.asp].
10
Description of the Independent 529 Plan submitted to the Securities and Exchange
Commission. Available online at [http://www.sec.gov/divisions/investment/noaction/
tuitionplan020403.htm].
11
See [http://www.Independent529plan.org] for additional information.
CRS-5

savings plans as a way to offer people a benefit with little cost to the state. In
contrast, if a state guarantees its prepaid tuition plan, it assumes the risk that earnings
on the plan's pooled contributions will not match tuition inflation, in which case, the
state must use other resources to satisfy the plan's obligations.12

Another reason put forth, this time from the contributors' perspective, is that the
funds in a college savings plan can be used toward the full range of QHEEs at any
eligible institution, regardless of which state sponsors the plan or where the
contributor resides. In addition, some of the investment options of college savings
plans offer account owners the possibility of greater returns than produced by the
usually conservative investment strategy of prepaid tuition programs. Further,
college savings plans reportedly have increased in popularity as an employee benefit.
Typically, the employer contracts with a mutual fund company and employees'
voluntary contributions are deducted from their paychecks.13 A few credit card
companies also rebate a percentage of purchases made by cardholders. Accumulated
rebates periodically are transferred into particular college savings plans.14

In part for these reasons, all 50 states and the District of Columbia offer college
savings programs. They accounted for more than $90.1 billion (85%) of the $105.7
billion held in 9.3 million QTP accounts as of December 31, 2006.15 (See Appendix,
Table A2 for a summary of college savings plans by state.)

Recent Issues by Type of Section 529 Program
College Savings Plans: Fees and Disclosure. States generally have
turned to financial services companies (e.g., the Vanguard Group, TIAA-CREF, and
Merrill Lynch) to manage their college savings plans. These firms charge account
owners fees that are in addition to those states typically impose (e.g., enrollment fee,
annual account maintenance fee, and administrative fee). The investment company
fees, which reduce returns, generally are calculated as percentages of the assets in the
basket of mutual funds that can comprise one investment option in a college savings
plan.16 (Appendix Table A2 includes estimates of average annual expenses for

12
Andrew P. Roth, "Who Benefits from States' College-Savings Plans?" Chronicle of
Higher Education, January 1, 2001.
13
Lauren Paetsch, "Section 529 College Savings Plans More Attractive Due to 2001 Tax
Law," Employee Benefit Plan Review, February 2002.
14
Brian Hindo, "Shop Your Way to College Savings," Business Week, March 11, 2002; and
Kristin Davis, "College: We Did Your Homework to Find the Best Way to Save for College,
Circa 2004," Kiplinger's Your Money, May 2004. (Hereafter cited as Davis, College: We
Did Your Homework.)
15
Quarterly data on the value of assets and number of accounts in each state-sponsored
college savings plan are available at [http://www.collegesavings.org]. Note: The number
of accounts exceeds the number of beneficiaries because there is no limit to the number of
accounts that can be established on behalf of a beneficiary.
16
Testimony of Daniel McNeela, Senior Analyst, Morningstar, Inc., in Investing for the
Future: 529 State Tuition Savings Plans, Hearing before the Subcommittee on Capital
(continued...)
CRS-6

direct-sold plans.) Reportedly, "expenses are higher in most 529 plans than in
equivalent mutual funds ... [e]ven among plans that aren't sold by brokers (and thus
don't have high upfront loads or annual sales fees)."17

Perhaps in response to the plethora of college savings plans and to the
multiplicity of each plan's investment choices, contributors appear to have increased
their use of commissioned brokers and financial advisors.18 These intermediaries are
the most frequently mentioned source of plan information among persons who have
established college savings accounts.19 Additionally, as shown in Appendix Table
A2, some plans require residents of other states to buy their plans through brokers or
financial advisors. Almost two-thirds of college savings plans were sold by these
intermediaries in 2003, with three-fourths of new accounts coming from this source.20
Individuals who purchase college savings plans through brokers and financial
advisors incur sales charges of up to 5.75% of account assets in addition to the fees
imposed by the state plans and fund companies.21

Congressional Oversight. Some Members of Congress became concerned
about such things as the overall level of fees and the extent to which they offset the
value of the tax benefit, the lack of uniform disclosure across plans that impedes
savers from making informed decisions, and about what group(s) has regulatory
authority. In its March 2004 response to a letter from House Committee on Financial
Services Chairman Oxley, the Securities and Exchange Commission (SEC) explained
that the plans generally are not regulated under federal securities laws because they
are considered instrumentalities of their respective states.22 As a result, those who
enroll in 529 savings plans are not required to be provided the same quality of
information as other mutual fund investors. Similarly, the SEC stated that investors
in the state-sponsored plans do not have to get the same periodic reporting as other
mutual fund investors and that 529 investors encounter difficulty making
comparisons across plans because of the lack of standardized disclosure of fees. The
SEC went on to note, however, that the investment companies state-sponsored plans
hire to manage assets or provide advice as well as the broker-dealers and municipal
securities dealers that sell shares in the plans are governed by applicable federal
securities laws (e.g., anti-fraud provisions) and rules of the Municipal Securities

16
(...continued)
Markets, Insurance, and Government Sponsored Enterprises, House Committee on Financial
Services, 108th Congress, 2nd Sess., Serial No. 108-90 (June 2, 2004). (Hereafter cited as
Morningstar testimony.)
17
Davis, College: We Did Your Homework, p. 72.
18
Lynn O'Shaughnessy, "Avoiding Fee Pitfalls as College Savings Climb," New York
Times, July 13, 2003; and
19
Investment Company Institute, Profile of Households Saving for College.
20
Howard Isenstein, "As College Plans Proliferate, It Pays to Shop Around," New York
Times, June 20, 2004.
21
Morningstar testimony.
22
[http://financialservices.house.gov/media/pdf/3-16-04%20529%20lttr%20part%20two
_001.pdf].
CRS-7

Rulemaking Board (MSRB) and the NASD (formerly known as the National
Association of Securities Dealers).23 Then SEC Chairman Donaldson consequently
created a Task Force on College Savings Plans in March 2004 to examine issues
raised by the structure and sale of college savings plans.

On June 2, 2004, the House Committee on Financial Services' Subcommittee
on Capital Markets, Insurance and Government Spending held a hearing on these
matters. The complexity of the college savings plans' fee structure and the lack of
standardized disclosure were frequently raised by those who testified. The Chair of
the College Savings Plan Network (CSPN) testified that the group had begun to
develop voluntary disclosure guidelines in 2003.24 (All states have implemented the
first statement of disclosure principles, which CSPN adopted in December 2004.
CSPN adopted a second statement of disclosure principles in July 2005, and it has
been incorporated in the states' offering materials.)

The Senate Committee on Governmental Affairs' Subcommittee on Financial
Management, the Budget, and International Security held oversight hearings on
college savings on September 30, 2004. NASD Vice Chairman and President of
Regulatory Policy and Oversight Mary Schapiro testified about the application of
advertising rules to the marketing of investments that underlie college savings plans:
broker-dealers have been made to correct sales material they are required to file with
the self-regulatory, private-sector organization. She also addressed the fact that some
states accord preferential tax treatment to residents' contributions to in-state college
savings plans and that an MSRB rule states that broker-dealers must have reason to
believe that the investments they recommend are suitable to the customer. A 2003
NASD investigation of the sales practices of six firms found, however, that most sold
virtually all their 529 plan investments to customers who were not residents of the
state sponsoring the plan.25 Upon expanding the investigation to additional firms in
May 2004 and finding that most 529 plan sales involved the same practice, Schapiro
reported that the NASD issued an Investor Alert. She also noted the availability of

23
The NASD is the major private-sector regulator the U.S. securities industry. The MSRB
is the self-regulatory body that Congress created to develop rules governing broker-dealers
and dealer banks that underwrite, trade, and sell municipal securities (e.g., sell interests in
529 college savings plans). Most of the municipal securities dealers regulated by the MSRB
also are licensed broker-dealers regulated by NASD. NASD enforces the MSRB's rules
pertaining to non-bank broker-dealers.
24
Testimony of Diana Cantor, Executive Director of the Virginia College Savings Plan and
Chair of the College Savings Plan Network, Hearings before the Subcommittee on Capital
Markets and Government Sponsored Enterprises, House Committee on Financial Services,
108th Congress, 2nd Sess., Serial No. 108-90 (June 2, 2004).
25
Testimony of Mary L. Schapiro, NASD, in Section 529 College Savings Plans: High Fees,
Inadequate Disclosure, Disparate State Tax Treatment and Questionable Broker Sales
Practices, Oversight Hearing Before the Subcommittee on Financial Management, the
Budget, and International Security, Senate Committee on Governmental Affairs, 108th
Congress, 2nd Sess., Serial 108-716, September 30, 2004.
CRS-8

information on its website intended to educate both broker-dealers and investors on
college savings plans.26

At the same hearing, testimony was given by the MSRB Senior Associate
General Counsel Ernesto Lanza. He discussed a draft amendment to the MSRB's
advertising rule proposed in June 2004, which went into effect in December 2005,
after the MSRB filed the proposed rule change with the SEC; it is intended to
improve the comparability of performance data across different state-sponsored 529
savings plans, mutual funds, and other types of investments.27 The MSRB and
NASD issued a statement in February 2006 in which they agreed to cooperatively
strive to promote consistency across regulations and interpretations regarding 529
plans. In August 2006, the MSRB's interpretive guidance about customer protection
obligations of brokers, dealers, and municipals securities dealers marketing college
savings plans became effective (e.g., disclosure to clients of tax benefits offered by
their home states' 529 plans).

The SEC similarly has continued to pursue its oversight of states that sponsor
and firms that sell 529 savings plans. In August 2005, for example, the commission
announced settlement of a cease-and-desist proceeding against the Utah Educational
Savings Plan Trust which had made false statements and omissions about errors in
its operation system and accounting practices. The SEC also filed a civil action
against the Trust's former director for violating securities laws. In addition, the
commission released a new Section 529 investor guide that explains the different
plans, their disclosures, tax implications, and expenses.28 In December 2005, the
SEC settled administrative and cease-and-desist proceedings against American
Express Financial Advisors Inc. for its failure to disclose receipt of revenue-sharing
payments that resulted from distribution of certain shares of mutual funds and 529
college savings plans.

Prepaid Tuition Plans: Closures and Modifications. Due to the impact
of the 2001 recession on state government support for higher education and of the
coincident downturn in the stock market on plan performance, many state-sponsored
prepaid plans in 2003 reported

"actuarial deficits" in the millions to tens of millions of dollars, meaning the
plans' assets are currently less than future tuition obligations ... There is a major
difference between having an actuarial deficit and a cash-flow issue, [however]
... New participants will continue to join the program[s], current account holders
will continue adding to their accounts, and program investments will have time
to rebound.29

26
[http://www.nasd.com/index.htm].
27
[http://www.msrb.org/msrb1/].
28
[http://www.sec.gov].
29
Sarah Max, "Are Prepaid Tuition Plans in Trouble?," CNN Money, January 10, 2003.
Available at [http://money.cnn.com/2003/01/07/pf/college/prepaid/index.htm]. See also
Peter Schmidt, "Prepaid-Tuition Plans Feel the Pinch," Chronicle of Higher Education,
September 12, 2003.
CRS-9

In addition, participants in state-sponsored plans that offer a tuition contract for
which they paid in full or for which they agreed to make payments over time are
unlikely to be affected by rising tuition prices.

Nonetheless, a number of states took preemptive measures. For example,
Colorado's prepaid tuition plan was closed to new participants and contributions
were not being accepted from existing participants. Ohio also closed its plan to new
participants. Other states modified their prepaid plans by, for example, greatly
increasing the value of tuition units.30

Tax Treatment of QTP Contributions and Earnings
There is no federal income tax deduction for contributions to QTPs. About 26
states and the District of Columbia allow residents who participate in their own
state's plan to claim a partial or total state income tax deduction on contributions.31

Earnings on contributions to Section 529 plans accumulate tax-deferred until
withdrawn. The deferral confers greater benefits on families with relatively high
incomes because of their higher marginal tax rates. Simulations that compared
potential after-tax accumulations in a college savings plan to those in mutual funds
employing the same asset allocation strategies generally found that the higher a
household's tax bracket, the greater the advantage of saving through a Section 529
plan.32 The study concluded that other factors substantially affect the level of
accumulations as well. These factors are the investment expenses that alternative
savings vehicles charge and the value of a state income tax deduction, if any, on
contributions to a QTP. A subsequent analysis, which took into account reductions
in capital gains and dividend tax rates, generally found that Section 529 plans
remained a superior investment option.33

Qualified Earnings Distributions
Earnings withdrawn from Section 529 plans to pay QHEEs became free from
federal income tax effective in tax years starting after December 31, 2001 for state-
sponsored programs, and starting after December 31, 2003 for programs of private
institutions. The federal tax-exempt status of earnings withdrawals makes Section
529 plans an even more attractive means of saving for higher education expenses:
for example, a student would pay nothing instead of incurring an $18,000 federal tax
bill on $120,000 in earnings from contributions of $80,000 to a QTP made since the

30
Albert B. Crenshaw, "No Quick Fix for Section 529 Plans," Washington Post, June 6,
2004.
31
Davis, College: We Did Your Homework.
32
Jennifer Ma and Douglas Fore, "Saving for College with 529 Plans and Other Options:
An Update," Research Dialogue, Issue no. 70, January 2002.
33
Jennifer Ma, "The Impact of the 2003 Tax Law on College Savings Options," available
at [http://www.tiaa-crefinstitute.org/Publications/pubarts/pa073103.htm].
CRS-10

child was eight years old.34 The tax exemption might especially benefit older
students who have relatively high incomes (e.g., a beneficiary employed full-time,
or with a spouse employed full-time, who is pursuing an advanced degree or who is
taking courses to update the skills used in his/her current occupation or to learn new
skills in order to change occupations).

As shown in the Appendix tables, the majority of states now provide residents
a tax break on qualified earnings distributions from Section 529 plans. The federal
tax exemption likely spurred some of these states to begin to do so. Only a few states
extend the tax exemption on qualified earnings to residents that invest in other states'
QTPs.35

A Penalty
Plans must impose a "more than de minimis penalty" on the earnings portion of
distributions that exceed or are not used for QHEEs (e.g., the beneficiary does not
attend college).36 Effective for tax years beginning after December 31, 2001,
withdrawals of excess earnings continue to be taxable income to the distributee (e.g.,
account owner or beneficiary) and subject to an additional tax of 10%, absent certain
circumstances.37

As clarified by the Job Creation and Worker Assistance Act of 2002 (P.L. 107-
147), the new tax penalty does not apply to earnings distributions that are included
in income but used for QHEEs. For example, a withdrawal is made from a QTP in
the amount of $2,000, which is equal to a student's QHEEs in a given year. Because
a higher education tax credit of $500 is claimed, the coordination rule requires that
the credit amount be subtracted from the QHEE total ($2,000 - $500 = $1,500). As
a consequence, $500 of the QTP withdrawal becomes subject to taxation but not to
the additional 10% tax penalty. (See the section below for more information on the
interaction between Section 529 plans and other higher education tax incentives.)

Effective after December 31, 2002, the 10% tax penalty also no longer applies
to withdrawals made when a beneficiary attends the U.S. Military Academy, the U.S.
Naval Academy, the U.S. Air Force Academy, the U.S. Coast Guard Academy, or the
U.S. Merchant Marine Academy. The amount of the withdrawals must be less than

34
Joseph F. Hurley, "Planning Strategies Under the Education Provisions of the New Tax
Act," Journal of Financial Planning, September 2001.
35
Carol Marie Cropper and Anne Tergesen, "College Savings Plans Come of Age," Business
Week, March 12, 2001.
36
Plans still may collect for themselves the penalty that prior federal law required.
However, some observers have commented that the modest revenue the penalties have
afforded states is outweighed by their administrative burden. In addition, the practice would
create a competitive disadvantage unless all states continued it.
37
The conditions under which an account owner is not subject to a penalty on a refund of
excess earnings are the beneficiary's death or disability, or the beneficiary's receipt of a
scholarship, veterans educational assistance allowance or other nontaxable payment for
educational purposes (excluding a gift or inheritance).
CRS-11

the costs of advanced education in order to avoid the penalty. This amendment is a
part of the Military Family Tax Relief Act of 2003 (P.L. 108-121).

Transfer Tax Provisions for Section 529 Plans
Investment Control and the Tax Consequences
of Transferring Funds Between Section 529 Plans
Neither account owners nor beneficiaries are allowed to direct the investment
of contributions to, or associated earnings from, a Section 529 plan. According to
the proposed regulations published on August 24, 1998, in the Federal Register (63
F.R. 45019), contributors are permitted -- at the time they establish an account --
to choose a prepaid tuition plan, a college savings program, or both; if they select the
a college savings program, they then can choose among its investment options.

The statutory restriction on investment control had been considered a major
drawback of QTPs, but it was significantly loosened. On September 7, 2001
(Bulletin Notice 2001-55), the Internal Revenue Service (IRS) issued a special rule
that permits contributors to Section 529's college savings programs to move balances
once per calendar year from one investment strategy to another within the state's
offerings without incurring taxes and without changing beneficiaries. Account
owners also can, on a tax-free basis, move balances among a state's investment
offerings if they change beneficiaries.

Changing Beneficiaries. Section 529 of the Code allows QTP distributions
to occur without tax consequences if the funds are transferred to the account of a new
beneficiary who is a family member of the old beneficiary. In order to receive this
tax treatment, the new beneficiary must be one of the following family members: (1)
the spouse of the designated beneficiary; (2) a son or daughter, or their descendants;
(3) stepchildren; (4) a brother, sister, stepbrother, or stepsister; (5) a father or mother,
or their ancestors; (6) a stepfather or stepmother; (7) a niece or nephew; (8) an aunt
or uncle; (9) a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-
law, or sister-in-law; (10) the spouse of an individual referenced in (2)-(9); or (11)
any first cousin of the designated beneficiary.

First cousins are covered by the definition in tax years starting after December
31, 2001. The expansion to first cousins makes QTPs "more attractive to
grandparents [who] can transfer an account between cousins [that is, between their
grandchildren, and thereby avoid paying federal income tax and a penalty on non-
qualified distributions] if, say, the original beneficiary decides not to go to college."38

38
Stephanie AuWerter, "The 529 Basics," SmartMoney.com, June 8, 2001. Available at
[http://www.smartmoney.com/consumer/index.cfm?Story=200106083].
CRS-12

Same-Beneficiary Rollovers. Tax-free transfers from one QTP to another
for the same beneficiary can occur once in any 12-month period.39 The same-
beneficiary rollover permits contributors to make tax-free transfers between a prepaid
tuition plan and a college savings plan offered by the same state, and between a state
and a private prepaid tuition plan.

Perhaps more importantly according to some observers, the amendment to
Section 529 made permanent by the PPA provides an account owner with the
opportunity for greater control over the investment of his/her funds without changing
beneficiaries. An account owner could, for example, make a same-beneficiary
rollover into the program of another state with an investment strategy the contributor
prefers to those offered by the original state's program.40

Coordination of Contributions with Estate, Gift,
and Generation-Skipping Transfer Taxes
Contributors to Section 529 plans, rather than beneficiaries, maintain control
over the accounts. In other words, contributors can change the beneficiary or have
the plan balance refunded to them. This feature has been touted as a significant
advantage of saving for college through a QTP as opposed to a custodial account
opened under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers
for Minors Act (UTMA) or through a Coverdell Education Savings Account. These
savings vehicles ultimately are owned by the child. The child also can use them for
whatever purpose they chose upon gaining control of the funds.41

Nonetheless, the Taxpayer Relief Act of 1997 (TRA, P.L. 105-34) declared that
payments to Section 529 plans made after August 1997 are completed gifts of present
interest from the contributor to the beneficiary. As a result, an individual can
contribute up to $12,000 in tax year 2007 as a tax-free gift per QTP beneficiary.
(This amount of a tax-free gift is subject to indexation.)

A special gifting provision for contributions to Section 529 plans could make
them of interest to individuals with substantial resources and to families with
children who will be attending college in the not-too-distant future. A QTP
contributor may make an excludable gift of up to $60,000 in 2007, for example, by

39
This is a per-beneficiary limit rather than a per-account limit. If more than one account
of a beneficiary is rolled over in a 12-month period, it would represent a nonqualified
distribution that is subject to taxation. Susan T. Brat, "Planning for College Using Section
529 Savings Accounts," The Practical Tax Lawyer, winter 2002.
40
Kristin Davis, "Miracle Grow," Kiplinger's Personal Finance, September 2001, and
[http://www.savingforcollege.com].
41
About 32 states allow parents to fund QTPs with money from custodial accounts.
"Custodial" 529 plans retain some features of the original accounts (e.g., savings still belong
to the child). There also could be tax consequences to funding QTPs in this manner due to
the requirement that QTPs accept only cash contributions (i.e., the sale of investments in
custodial accounts could produce capital gains that would be subject to taxation). Penelope
Wang, "Education: Yes, There's Still College," Money, December 2001; and Anne
Tergesen, "What About Those Custodial Accounts?" Business Week, March 11, 2002.
CRS-13

treating the payment as if it were made over five years. Thus, each grandparent could
contribute $60,000 (for a total of $120,000) to each grandchild's QTP in tax year
2007, which potentially would allow more earnings to accumulate than if each had
contributed $12,000 annually for five years. In this instance, assuming the tax-free
gift annual limit remained at $12,000 over the period, the two grandparents could not
make another excludable gift to those account beneficiaries until 2012.

By making QTP contributions completed gifts, the TRA also generally removed
the value of the payments from the contributor's taxable estate. An exception occurs,
however, if a contributor who selected the five-year advance exclusion option dies
within the period.

IRS Rulemaking: Potential for Abuse
of Section 529 Accounts
At the same time that the PPA permanently extended the EGTRRA amendments
to Section 529, the 2006 act added Section 529(f). It provides that the Secretary of
the Treasury shall prescribe regulations to prevent abuse of 529 accounts. The Joint
Committee on Taxation (JCT) gave two examples of abuse in its technical
explanation of the bill (JCX-38-06). Abuse might arise because account owners can
change beneficiaries without inducing transfer tax payments. For example, a
taxpayer establishes several accounts for different beneficiaries and contributes to
each using the five-year rule, discussed above, with the ultimate purpose of changing
the beneficiaries to one individual and distributing to that beneficiary the combined
account balance without further transfer tax consequences. The JCT also noted that
abuse might arise because a taxpayer endeavors to use a QTP like a retirement
account, but Section 529 does not have the same requirements and restrictions as
retirement accounts.

The IRS, on March 3, 2008, published in Internal Revenue Bulletin 2008-9 an
advance notice of rule making requesting that comments be submitted by March 18.
The notice of proposed rule making (NPRM) is expected to include "a general anti-
abuse rule that will apply when section 529 accounts are established or used for
purposes of avoiding or evading transfer tax." The NPRM also "will include rules
relating to the tax treatment of contributions to and participants in QTPs, including
rules addressing the inconsistency between section 529 and the generally applicable
income and transfer tax provisions of the Code." In addition, the NPRM will contain
rules about the function and operation of the programs, drawing in part on regulations
proposed in 1998, Notice 2001-55 concerning the statutory restriction against
investment direction, Notice 2001-81 concerning recordkeeping, reporting and other
requirements, and instructions related to Form 1099-Q (Payments From Qualified
Education Programs (Under Section 529 and 530)).
CRS-14

Interaction with Other
Higher Education Tax Incentives
Contributions can be made to a QTP and a Coverdell Education Savings
Account in the same year for the same beneficiary.42 Before January 1, 2002,
however, same-year contributions to a QTP and Coverdell account on behalf of the
same beneficiary were considered an excess payment to the latter, and therefore,
subject to income tax and a penalty.43

The Hope Scholarship and Lifetime Learning credits can be claimed for tuition
and fees in the same year that tax-free distributions are made from a Section 529 plan
or a Coverdell account, provided that the distributions are not used toward the same
expenses for which the credits are claimed.44 If distributions are taken from a Section
529 plan and a Coverdell account on behalf of the same student, EGTRRA further
requires that QHEEs remaining after reduction for the education tax credits must be
allocated between the two savings vehicles.

EGTRRA also initiated an above-the-line income tax deduction for tuition and
fees, effective in tax years starting after December 31, 2001 and ending before
January 1, 2006. (The deduction was last extended until January 1, 2008.)45 It can
be taken for qualified expenses paid with the contributions portion of withdrawals
from a Section 529 program.

42
Same-year contributions to a QTP and a Coverdell account for the same beneficiary could
have gift-tax consequences if the payment to the two savings vehicles exceeds the annual
limit on gifts in one year or five times the annual limit the five-year option for QTPs is
utilized.
43
For information on Coverdell Education Savings Accounts see CRS Report RL32155,
Tax-Favored Higher Education Savings Benefits and Their Relationship to Traditional
Federal Student Aid, by Linda Levine and Charmaine Mercer.
44
For information on the credits see CRS Report RL31129, Higher Education Tax Credits
and Deduction: An Overview of the Benefits and Their Relationship to Traditional Student
Aid, by Linda Levine and Charmaine Mercer.
45
For legislative activity on the deduction, see CRS Report RS21870, Education Tax
Benefits, by Linda Levine.
CRS-15

Appendix. State-Sponsored Prepaid Tuition Plans and College Savings Plans
Table A1. Comparison of State-Sponsored Prepaid Tuition Plans
(as of November 24, 2003)

Date of How Is Contract
Operation Age Value Determined
and Restriction If Used for Private
State and Enrollment on What Is Covered in or Out-of-State
Program Name Period Beneficiary the Contract? Public Institutions? Refund Policy Comments

Alabama (Prepaid 1990 (Sept.) 9th grade or four years of Average of four-year Contract payments $100 to enroll, benefits must be used
Affordable younger undergraduate tuition in-state public tuition refundable plus up within 10 years after the projected
College Tuition) and fees at state public and fees to 5% interest college entrance date, no residency
institutions requirement
Alaska (Advance 1991 None Credits can be used on Full value of the Full value of the Plan purchasers get full value of the
College Tuition (anytime) tuition, fees, books, account account is earnings, benefits must be used within
Payment supplies, equipment, refundable 15 years of the projected college
Program) room and board entrance date, no residency
requirement, guaranteed by the state
Colorado 1997 not not available not available not available Program not accepting contributions or
(Colorado Prepaid available new enrollments as of Aug. 1, 2002
Tuition Fund)

Florida (Florida 1987 (Nov.- Under 21 Up to four years of Average in-state Only contributions $50 to enroll, benefits must be used
Prepaid College Jan.) and less undergraduate tuition public tuition and refunded, $50 fee within 10 years of the projected college
Program) than 12th and fees at state public fees for contracts less entrance date, guaranteed by the state
grade or private higher than two years
institutions, plus
optional plans that
cover other local fees
and dormitory
CRS-16

Illinois (College 1998 (Nov.- None Up to nine semesters of Average Contributions + 2% $85 to enroll, three-year waiting period,
Illinois!) Mar.) tuition and fees at state mean-weighted interest refundable benefits need to be used within 10 years
(Newborns, public higher in-state less $100 fee (no of projected college entrance date
Nov.-Aug.) institutions public tuition and interest if contract
fees is less than three
years old)
Kentucky 2001 Not Not available Not available Not available Program temporarily closed, new
(Affordable available enrollments suspended until June 30,
Prepaid Tuition 2004 at the earliest
Plan)
Maryland April 1998 9th grade or Up to five years of Weighted average $75 cancellation $75 to enroll, up to $2,500 of
(Maryland (Nov.-Mar.) younger tuition and fees at state in-state public tuition fee. Refund is contributions per taxpayer per year state
Prepaid College (Newborns public institutions and fees equal to 1) tax deductible, benefits must be used
Trust) anytime) contributions and within 10 years of projected high
90% of school graduation
earnings/losses
after three years; 2)
contributions and
50% of
earnings/losses if
cancelled within
three years
CRS-17

Massachusetts (U. 1995 (May- 10th grade or Certificates worth up to Principal + annual Certificates only Not a qualified 529 plan, but earnings
Plan) June) younger four years of tuition compound interest redeemable upon are exempt from state tax, no
and fees at the highest equal to consumer maturity (between enrollment fee, no residency
cost institution among price index 5 and 16 years). requirement, certificates must be
81 participating However, redeemed within six years of maturity,
institutions certificates may be guaranteed by the state
sold anytime.
Michigan 1988 (Dec.- 8th grade or Up to four years of Weighted average of $100 cancellation $60 enrollment fee, $25 to $85
(Michigan April) younger for tuition and fees at state in-state public tuition fee. Only students application fee based on contact
Education Trust) full benefit public institutions and fees who are 18 or have postmark date, contributions state tax
contract, a high school deductible if postmarked by Dec. 31 of
10th grade diploma may tax year, benefits must be used within
or younger terminate nine years of projected college entrance
for limited contracts.
benefit Depending on the
contract reason for
cancellation,
refund value can be
1) the lowest; 2)
the average; or 3)
the weighted
average of in-state
public tuition
CRS-18

Mississippi 1997 18 years or Up to five years of Weighted average Contributions and $60 to enroll, contributions state tax
(Prepaid (Sept.-Nov.) younger undergraduate tuition in-state tuition and 90% of interest deductible, benefits must be used
Affordable (Newborns and fees at state public fees earnings refunded, within 10 years of projected enrollment
College Tuition) anytime) institutions cancellation fee is date, guaranteed by the state
the lesser of $25 or
50% of
contributions

New Mexico (The 2000 (Sept.- Contract Up to five years of The lesser of (1) the Contributions No enrollment fee. All contributions
Education Plan of Dec.) must be tuition and fees at state average in-state refunded, plus a deductible from state income tax, for
New Mexico) (Newborns purchased at public institutions undergraduate tuition reasonable rate of non-qualified withdrawals earnings
anytime) least five and fees for the return (if account subject to 20% penalty, benefits must
years before contract type, or (2) has been open for be used within 10 years of projected
projected contributions plus a at least five years) college entrance date
enrollment reasonable rate of
return
Nevada (Prepaid 1998 Under 18 Up to four years of Weighted average Contributions and $100 to enroll, benefits must be used
College Tuition (Oct.-Nov.) and below tuition at state tuition and fees at 90% of interest within 10 years of projected college
Plan Trust Fund) (Newborns 9th grade institutions in-state public earnings refunded, entrance date or the age of 30, account
anytime) institutions up to $100 owner must be a state resident or
cancellation fee alumnus of state college
Ohio (Ohio 1989 Not Not available Not available Not available Program permanently closed
Prepaid Tuition (Anytime) available
Program)
CRS-19

Pennsylvania 1993 None Tuition credits for the Full value of the Only contributions $50 to enroll, $25 annual maintenance
(Tuition Account (Anytime) chosen type of contract refunded within 12 fee, one-year waiting period, must be
Program) institutions months. After, the used within 10 years of projected
refund is the lesser college entrance date
of the market or
full value of the
contract, but no
less than
contributions.
South Carolina 1998 (Oct.- 10th grade or Up to four years of The lesser of the $100 cancellation $75 to enroll, benefits must be used
(SC Tuition Jan.) younger tuition and fees at state value of the contract fee. Contributions before age 30, contributions state tax
Prepayment (Newborns public institutions or the actual tuition and 80% of deductible
Program) anytime) cost (plus $30 fee if earnings refunded
school is out-of- for contracts of
state) more than one
year.
Tennessee 1997 None Units can be purchased Weighted average Contributions + Up to $42 to enroll, two-year waiting
(Tennessee BEST (Anytime) with each worth 1% of in-state tuition and 50% earnings period
Tuition Plan) weighted average fees refunded minus
tuition and fees at state $25 fee, no refund
public institutions before beneficiary
is college age
Texas (Texas 1996 (Oct.- Not Not available Not available Not available Program closed to new enrollment,
Guaranteed May) available existing plan contracts remain backed
Tuition Plan) by the state
CRS-20

Virginia (Prepaid 1996 (Any 9th grade or Up to five years of Contributions and Within three years, $85 to enroll, up to $2,000 per year
Education time) younger tuition at state public actual earnings up to only contributions state tax deductible, must be used
Program) institutions the highest (average) refunded, less $100 within 10 years after high school,
in-state public tuition penalty. After that, guaranteed by the state
and fees for in-state refund includes
private and contributions plus a
out-of-state reasonable rate of
institutions return
Washington 1998 (Sept.- None Up to five years of Full value of the $10 penalty, refund $50 to enroll, two-year waiting period,
(Guaranteed Mar.) tuition units at the contract can be requested must be used within 10 years of
Education Univ. of Washington after two years of projected enrollment date or the first
Tuition) and Washington State contract being in use of the units whichever is later,
effect, refund guaranteed by the state
amount either the
current value or the
weighted average
tuition, subject to
administrative fees
West Virginia 1998 Not Not available Not available Not available Program closed as of Dec. 31, 2002
(WV Prepaid available
College Plan)

Source: Reprinted from [http://www.tiaa-crefinstitute.org/Data/statistics/pdfs/jma_prepaid.pdf], which relied on information contained in [http://www.collegesavings.org] and
[http://www.savingforcollege.com] as well as in various states' websites.

Note: Between Jan. 1, 2002 and Dec. 31, 2010, earnings in Section 529 prepaid tuition plans are exempt from federal income tax when used for QHEEs. Unless noted, earnings are exempt
from state income tax as well and state residency is required from Section 529 prepaid tuition plans. "Waiting period" is defined as the amount of time an account needs to be open before
qualified withdrawals can be made without penalty.
CRS-21

Table A2. Comparison of State-Sponsored College Savings Plans
(as of December 10, 2003)

Current
Lifetime Estimated Average
First Date Account Annual Expenses
Name of the of Investment Options Balance and Other Fees for State Tax
State Program Operation for Direct-Sold Plansa Limit Direct-sold Plansb Advantages Commentsc

Alabama The Higher 2002 Option 1 (enrollment-based): $269,000 $25 annual fee + None $25 annual fee
Education three enrollment-based portfolios between 0.90% and reduced to $10 for
529 Fund that shift away from equities and 1.24% underlying state residents and
towards bonds and cash over time. fund fee waived for accounts
Option 2 (static portfolios): with a balance of at
100% equities; 100% bonds, or least $25,000. Non-
50% cash + 50% bonds. Option 3 residents must open
(individual fund portfolios): eight an account through an
individual fund portfolios advisor
Alaska University 1991 Option 1 (enrollment-based): $250,000 0.33% for Option 3. State has no $30 annual fee waived
of Alaska multiple enrollment-based For other options, $30 income tax for accounts with
College portfolios that shift away from annual fee + 0.30% investment in Option
Savings Plan equities and towards bonds and program fee + 3, automatic
cash over time. Option 2 (static between 0.52% and payments, or a
portfolios): 100% equities; 100% 0.84% underlying combined balance of
fixed-income; and 60% equities + fund fee at least $25,000 for
40% bonds, or 100% bond and the same beneficiary
money market. Option 3
(advanced college tuition
portfolio): prepaid plan for
University of Alaska
CRS-22

Arizona Arizona 1999 Option 1: CollegeSure CDs with $187,000 No fee for Option 1. Earnings state $10 to enroll for each
Family at least 2% return and FDIC For mutual funds, income tax mutual fund.
College insured up to $100,000. Option 2: between 0.49% and exempt Maturity for
Savings Investors choose from 10 mutual 2.1% underlying fund CollegeSure CDs
Program funds including all-equity, all-bond, fee ranges from 1 to 25
all-money-market, and balanced years. CDs must be
funds withdrawn within 30
years
Arkansas GIFT 1999 Option 1 (age-based): 90% $245,000 $25 annual fee + Earnings state $25 annual fee waived
College equities for youngest, 10% equities 0.60% management income tax for state residents and
Investing for 19 and older. Option 2 (static fee + between 0.70% exempt accounts with a
Plan portfolios): growth, growth and and 1.38% underlying balance of at least
income, balanced, and fixed- fund fee $25,000. Non-
income portfolios with 100%, 75%, residents must open
50%, and 0% in equities, an account through an
respectively advisor
California Golden State 1999 Option 1 (age-based): 80% $267,580 No fee for Option 5. Earnings state An additional state
Scholar- equities for youngest, 20% equities For other options, income tax tax of 2.5% will be
Share for 17 and older. Option 2 0.80% exempt imposed on earning of
Trust (aggressive age-based): 100% non-qualified
equities for youngest, 30% equities withdrawals. This
for 19 and older. Option 3: 100% additional tax applies
equities. Option 4: 100% Social to state residents
Choice equities. Option 5: regardless which
guaranteed with at least 3% return state's 529 plan the
withdrawals are from
CRS-23

Colorado Scholars 1999 Option 1 (age-based): 80% $235,000 $30 annual fee + All $30 annual fee waived
Choice equities for youngest, 10% equities between 0.99% and contributions for state residents
for 19 and older. Option 2 1.09% state tax
(years-to-enrollment-based): deductible.
60% equities if more than 10 years Earnings state
from enrollment, 10% equities if income tax
less than one year from enrollment. exempt
Option 3 (balanced): 50%
equities + 50% bonds. Option 4:
100% equities. Option 5: 100%
fixed income. Option 6: 80%
equities + 20% fixed income.
Option 7: 80% fixed income +
20% equities
Connecticut Connecticut 1997 Option 1 (aged-based): 80% $235,000 No fee for Option 3. Earnings state
Higher equities for youngest, 20% equities For other options, income tax
Education for 17 and older. Option 2 (high 0.79% exempt
Trust equity): 80% equities + 20%
bonds. Option 3 (principal plus
interest): guaranteed with at least
3% return

Delaware Delaware 1998 Option 1 (age-based): 88% $250,000 $30 annual fee + Earnings state $30 annual fee waived
College equities for youngest, 20% equities 1.04% income tax for accounts with
Investment for those already in college. exempt automatic payments
Plan Option 2: 100% equities. Option or a balance of at least
3: 70% equities + 30% bonds. $25,000
Option 4: 45% bonds + 55%
money market
CRS-24

District of DC College 2002 Option 1 (age-based): 85% $260,000 $30 annual fee + Up to $3,000 $30 annual fee
Columbia Savings Plan equities for youngest, 13% equities 0.15% management per taxpayer reduced to $15 for
for 17 and older. Option 2: fee + between 0.35% per year residents. $25
Investors choose from six mutual and 1.70% underlying District tax enrollment fee for
funds including all equity, all bond, fund fee (no deductible non-residents
and balanced funds. Option 3 underlying fund fee (with carry-
(stability of principal): for Option 3) forward up to
guaranteed with at least 3% return 5 subsequent
years).
Earnings
District tax
exempt
Florida Florida 2002 Option 1 (age-based): portfolios $283,000 0.75% State has no $50 application fee
College that shift away from equities and income tax (reduced to $30 for
Investment towards fixed income and cash over current Florida
Plan time. Option 2: 100% equities. prepaid plan
Option 3: 100% fixed income. participants)
Option 4: 100% money market.
Option 5: 50% equities + 50%
fixed income
CRS-25

Georgia Georgia 2002 Option 1 (age-based): 80% $235,000 No fee for Option 5. Up to $2,000 State tax deductions
Higher equities for youngest, 15% equities For other options, per beneficiary phase out between
Education for 17 and older. Option 2 0.85% per year state $100,000 and
Savings Plan (aggressive age-based): 100% tax deductible. $105,000 for joint tax
equities for youngest, 15% equities Earnings state filers ($50,000 and
for 23 and older. Option 3: 100% tax exempt, if $55,000 for single tax
equities. Option 4 (balanced): account has filers). For non-
50% equities + 50% bonds. been open for qualified withdrawals,
Option 5 (guaranteed): more than a contributions for
guaranteed with at least 3% return year which previous state
tax deductions were
taken will be subject
to state income tax
Hawaii Tuition- 2002 Option 1 (age-based): 85% $297,000 No fee for Option 3. Earnings state $25 annual fee waived
EDGE equities for youngest, 10% equities For other options, $25 tax exempt for residents or
for 18 and older. Option 2 + 0.95% accounts with balance
(static): aggressive, balanced, and of at least $10,000.
conservative portfolios with 80%, Non-residents must
60%, and 40% in equities, open an account
respectively. Option 3 (savings through an advisor
account option): FDIC insured
savings account
CRS-26

Idaho Idaho 2001 Option 1 (age-based): 75% $235,000 No fee for Option 3. Up to $4,000 The entire amount of
College equities for youngest, 10% equities For other options, per taxpayer a non-qualified
Savings Plan for 17 and older. Option 2: 100% 0.70% per year state withdrawal, including
equities. Option 3: guaranteed tax deductible. both the earnings
with at least 3% return Earnings state portion and the
tax exempt principal portion, will
be included in the
owner's taxable
income for state tax
purposes
Illinoisd Bright Start 2000 Option 1 (age-based): 90% $235,000 0.99% All
College equities for youngest, 10% equities contributions
Savings Plan for 18 and older. Option 2 (age- state tax
based with bank deposits): similar deductible.
to Option 1, with bank deposits. Earnings
Option 3: 100% bonds. Option 4: exempt from
100% equities. Option 5: 50% state tax
bonds + 50% bank deposits.
Option 6: principal protection
income portfolio
CRS-27

Indiana College- 1997 Option 1 (age-based): 90% $236,750 $30 annual fee + Earnings state $30 annual fee
Choice 529 equities for youngest, 100% money administrative fees + income tax reduced to $10 for
Plan market for 20 and older. Option 2 between 0.35% and exempt residents, reduced to
(static portfolios): four portfolios 1.49% underlying $25 for accounts
with 100% equities, two with 100% fund fees converted from
bonds, one with 100% money former program, and
market, one with 90% equities, one waived for accounts
with 70% equities, one with 50% with automatic
equities, and one with 30% payments or $25,000
equities. Option 3 (individual balance. $10 annual
fund portfolios): 8 individual fund state authority fee for
portfolios non-residents. Very
complicated fee
structures

Iowa College 1998 Option 1(age-based): multiple $239,000 0.65% Up to $2,230 Beneficiary must be
Savings portfolios available that shift away per taxpayer under 18 when
Iowa from equities and towards fixed per year state account opened.
income and cash over time. tax deductible. Account balance must
Option 2 (statistic portfolios): 8 Earnings state be paid out within 30
portfolios including 100%, 80%, tax exempt days after a
60%, 40%, 20% equities; 100% beneficiary turns 30
bonds; 100% money market; and
80% bonds + 20% money market,
respectively
CRS-28

Kansas Learning 2000 Option 1 (age-based): three age- $235,000 $27 annual fee + Up to $2,000 12-month waiting
Quest based investment tracks 0.39% management per taxpayer period.e $27 annual
Education (aggressive, moderate, and fee + between 0.47% per beneficiary waived for residents
Savings conservative) available. Option 2 and 0.94% underlying per year state and for accounts with
Program (two static portfolios): 100% fund fee tax deductible. a balance of at least
equities or 100% money market Earnings state $25,000
tax exempt

Kentucky Education 1990 Option 1 (age-based): 80% $235,000 No fee for Option 3. Earnings state A 1% Kentucky
Savings Plan equities for youngest, 15% equities For other options, tax exempt penalty applies to
Trust for 17 and older. Option 2: 100% 0.80% non-qualified
equities. Option 3: guaranteed withdrawals
with at least 3% return
Louisiana Louisiana 1997 State treasurer's office invests $197,600 None Up to $2,400 Residency required.
START mostly in fixed income securities per beneficiary 12-month waiting
per year state period.e Up to 14%
tax deductible matching grant
with carry- available for accounts
forward. with at least $100
Earnings state contributions during
tax exempt the year
CRS-29

Mainef NextGen 1999 Option 1 (age-based): 90% $250,000 $50 annual fee + Earnings state $50 annual fee
College equities for youngest, 10% equities 0.55% management tax exempt reduced to $25 for
Investing for 20 and older. Option 2: 100% fee + between 0.77% payroll deposits and
Plan equities. Option 3: 75% equities and 1.12% underlying waived for residents,
+ 25% fixed income. Option 4: fund fee accounts with annual
100% fixed income contributions of at
least $2,500, or a
balance of at least
$20,000. Up to $200
initial matching grant
and up to $100 annual
matching grant
available for families
whose adjusted gross
income is less than
$50,000
Maryland Maryland 2001 Option 1 (age-based): multiple $250,000 $30 annual fee + Up to $2,500 $90 to enroll (may be
College age-based portfolios available that 0.38% management per account reduced under certain
Investment shift away from equities and fee + between 0.35% per year state conditions). $30
Plan towards fixed income and cash over and 0.96% underlying tax deductible annual fee waived for
time. Option 2: 100% equities. fund fee (with carry- accounts with
Option 3: 100% bonds. Option 4: forward up to automatic
60% equities + 40% bonds 10 succeeding contributions or a
years). balance of at least
Earnings state $25,000
tax exempt
CRS-30

Massachusetts U. Fund 1999 Option 1 (age-based): 86% $250,000 $30 annual fee + Earnings state $30 annual fee waived
equities for youngest, 20% equities 1.03% tax exempt for accounts with
for those already in college. automatic
Option 2: 100% equities. Option contributions or a
3: 70% equities + 30% bonds. balance of at least
Option 4: 45% bonds + 55% $25,000
money market
Michigan Michigan 2000 Option 1 (age-based): 72% $235,000 No fee for Option 3. Up to $5,000 One-third matching
Education equities for youngest, 13-15% For other options, per taxpayer grant (up to $200)
Savings equities for 17 and older. Option 0.65% per year state available for new
Program 2: 100% equities. Option 3: tax deductible. accounts with a state
guaranteed with at least 3% return Earnings state resident beneficiary
tax exempt who is 6 or younger,
and whose family
income is less than
$80,000
CRS-31

Minnesota Minnesota 2001 Option 1 (age-based): 72% $235,000 No fee for Option 3. Earnings state For accounts with at
College equities for youngest, 13-15% For other options, tax exempt least $200
Savings Plan equities for 17 and older. Option 0.65% contributions made
2: 100% equities. Option 3: during the year, 15%
guaranteed with at least 3% return state matching grant
is available for state
residents with family
income less than
$50,000 (5%
matching rate for
family income
between $50,000 and
$80,000). Annual
maximum grant is
$300 per beneficiary
Mississippid Mississippi 2001 Option 1 (age-based): 72% $235,000 No fee for Option 3. Up to $10,000
Affordable equities for youngest, 18% equities For other options, per taxpayer
College for 17 and older. Option 2: 100% 0.60% management per year state
Savings equities. Option 3: guaranteed fee + between 0- 16% tax
with at least 3% return and 0-23% underlying deductible.
fund fee Earnings state
tax exempt

Missouri MO$T 1999 Option 1 (age-based): 72% $235,000 No fee for Option 3. Up to $8,000
(Missouri equities for youngest, 13-15% For other options, per taxpayer
Saving for equities for 17 and older. Option 0.65% per year state
Tuition 2: 100% equities. Option 3: tax deductible.
Program) guaranteed with at least 3% return Earnings state
tax exempt
CRS-32

Montana Montana 1998 Option 1: CollegeSure CDs issued $262,000 No fee for Option 1. Up to $3,000 State tax deductions
Family by College Savings Banks with at For Option 2, $25 per taxpayer will be recaptured at
Education least 2% return (maturity of CDs annual fee (waived per year state the highest state
Savings needs to coincide with the expected for accounts with tax deductible. income tax rate if
Program years of college attendance), FDIC automatic payments Earnings withdrawals are not
insured up to $100,000 per account. or a balance of at least exempt from used for higher
Option 2: investors choose from $25,000) + underlying state tax education or if
15 individual mutual funds and 5 fund fees withdrawals are made
static portfolios within three years of
account opening
Nebraska Nebraska 2001 Option 1 (age-based): multiple $250,000 $20 annual fee + Up to $1,000
College age-based portfolios that shift away 0.60% management per year state
Savings Plan from equities and toward fixed fee + up to 1.17% tax deductible
income and cash over time. underlying fund fee ($500 if
Option 2: six target portfolios married filing
with 100%, 80%, 60%, 40%, 20%, separately).
and 0% equities, respectively. Earnings state
Option 3: 22 individual fund tax exempt
portfolios
CRS-33

Nevada The Strong 2001 Option 1 (age-based): three age- $250,000 $10 annual fee + State has no $10 to enroll
529 Plan based portfolios that shift away 1.25% (0.85% for income tax
from equities and towards fixed Option 6)
income and cash over time.
Option 2 (aggressive): 90%
equities. Option 3 (moderate):
65% equities. Option 4
(balanced): 50% equities. Option
5 (conservative): 30% equities.
Option 6 (all bond): 100% bonds
New Hampshire Unique 1998 Option 1 (age-based): 86% $250,000 $30 annual fee + State has no $30 annual fee waived
College equities for youngest, 20% equities 1.04% income tax. for accounts with
Investing for those already in college. Earnings automatic
Plan Option 2: 100% equities. Option exempt from contributions or a
3: 70% equities + 30% bonds. state interest balance of at least
Option 4: 45% bonds + 55% and dividends $25,000
money market tax
New Jersey New 1998 Option 1 (age-based): 100% $305,000 0.40% management Earnings Residency required.
Jersey's equities for the youngest, 0% fee + between 0.45% exempt from Between $500 and
Better equities for 21 and older. Option and 1.17% underlying state tax $1,500 scholarship for
Educational 2: three 100% equity portfolios. fund fee college in NJ
Savings Option 3: 50% equities. Option available for accounts
Trust 4: 80% fixed income + 20% cash. that have been open
Option 5: 100% fixed income for more than four
years and with at least
$1,200 contributions
CRS-34

New Mexico The 2000 Option 1 (age-based): 85% $294,000 $30 annual fee + All one-year waiting
Education equities for youngest, 20% equities 0.30% management contributions period.e $30 annual
Plan's for 19 and older. Option 2: 100% fee + between 0.53% state tax fee waived for
College equities. Option 3: 100% bonds. and 1.22% underlying deductible. residents, accounts
Savings Option 4: 100% money market. fund fee Earnings with automatic
Program Option 5: five other static exempt from contributions or a
portfolios with 85%, 70%, 55%, state tax balance of at least
40%, and 20% in equities, $10,000
respectively

New York New York's 1998 Option 1 (age-based): 65% $235,500 0.55% to 0.60% all- Up to $5,000 three-year waiting
College equities for youngest, 100% income inclusive management per taxpayer period.e Starting
Savings for 19 and older. Option 2 fee, decreasing as per year state 2003, rollovers from
Program (aggressive age-based): 100% program assets tax deductible. NY's 529 plan to
equities for youngest, 35% equities increase Earnings another state's plan
for 16-18, 100% income for 19 and exempt from will be considered
older. Option 3 (conservative): state tax non-qualified
50% equities for youngest, 100% withdrawals for NY
money market for 19 or older. income tax, meaning
Option 4: 12 static portfolios, 8 of the earnings and the
which invest in a single mutual contributions for
fund, and 4 of which invest in a which previous state
blend of funds tax deductions were
taken will be subject
to state income tax
CRS-35

North Carolinad North 1998 Option 1 (age-based): portfolios $276,046 $25 annual fee + Earnings state $25 waived for
Carolina's that shift away from equities and 0.25% management income tax accounts with
National towards fixed income and cash over fee (0.10% for Option exempt automatic
College time. Option 2: 100% equities. 1) + between 0.05% contributions or a
Savings Option 3 (balanced): 40% and 1.28% underlying balance of more than
Program equities + 60% fixed income. fund fee $1,000. Option 5
Option 4 (income fund): 100% requires a lump-sum
fixed income. Option 5 (protected minimum
stock fund): guaranteed with a 3% contribution of $1,000
return per year or 70% of the gain for a five-year period.
in the S&P 500 Price Index over Non-residents must
five years, whichever is greater. open an account
Option 6: any of the 22 portfolios through an advisor
used in the age-based option
North Dakota College 2001 Option 1 (age-based): multiple $269,000 $30 annual fee + Earnings state $30 annual fee and
SAVE age-based portfolios that shift away 0.50% management income tax 0.50% management
from equities and towards fixed fee + between 0.68% exempt fee waived for state
income and cash over time. and 1.22% underlying residents
Option 2 (static portfolios): two fund fee
aggressive growth portfolios with
90% equities and two balanced
portfolios with 50% equities and
50% bonds
CRS-36

Ohio College 1989 Option 1 (age-based): 85% $245,000 No fee for Option 6. Up to $2,000 Residency required
Advantage equities for youngest, 15% equities For others, 0.55% to per tax return for Option 6. Other
Savings Plan for 21 and older. Option 2 1.34% per year state options are available
(balanced): 60% equities + 30% tax deductible, to non-residents
bonds + 10% cash. Option 3 with unlimited through an advisor.
(growth): 85% equities + 15% carry-forward Beneficiary must be
bonds. Option 4 (aggressive in future years. 18 or older when
growth): 100% equities. Option Earnings state prepaid tuition units
5: 13 single-fund portfolios. tax exempt are redeemed
Option 6: Guaranteed Savings
Fund that is essentially a prepaid
plan
Oklahoma Oklahoma 2000 Option 1 (age-based): 72% $235,000 No fee for Option 3. Up to $2,500
College equities for youngest, 18% equities For other options, per account
Savings Plan for 17 and older. Option 2: 100% 0.55% management state tax
equities. Option 3: guaranteed fee + between 0.11% deductible.
with at least 3% return and 0.13% underlying Earnings state
fund fee tax exempt
Oregon Oregon 2001 Option 1 (age-based): 90% $250,000 $30 annual fee + Up to $2,000 $30 annual fee waived
College equities when 10 years or more 1.25% (0.975% for per year state for state residents,
Savings Plan away from college, 10% equities the 100%-equity tax deductible accounts with
when in college. Option 2 (static): portfolio) ($1,000 if automatic payments,
six portfolios with 100%, 90%, married filing or a balance of at least
60%, 50%, 30% and 10% in separately). $25,000
equities, respectively Earnings state
tax exempt
CRS-37

Pennsylvaniad TAP 529 2002 Option 1 (age-based): 85% $290,000 $25 annual fee + Earnings state $25 annual fee waived
Investment equities for youngest, 10% equities 0.35% management tax exempt for accounts with
Plan for 19 and older. Option 2 (age- fee + between 0.45% automatic
based): 100% equities for and 1.69% underlying contributions or a
youngest, 10% equities for 19 and fund fee balance of at least
older. Option 3 (risk-based): five $20,000. Non-
static portfolios with 100%, 80%, residents must open
60%, 40%, 0% in equities, an account through an
respectively. Option 4 (socially advisor
responsible): one bond portfolio
and one equity portfolio
Rhode Island College- 1998 Option 1 (age-based): 100% $301,550 $25 annual fee + Up to $500 per $25 annual fee waived
Bound Fund equities for youngest, 25% equities between 0.70% and taxpayer per for state residents,
for 19 and older. Option 2 1.67% underlying year state tax accounts with
(age-based): similar to Option 1, fund fee deductible automatic
with more equities. Option 3: with carry- contributions or a
100% equities (invested in forward to balance of at least
aggressive funds). Option 4: future years. $25,000. Non-
100% equities (invested in growth Earnings state residents must open
funds). Option 5: 60% equities + tax exempt an account through an
40% fixed income. Option 6: advisor
100% fixed income. Option 7: 9
single-fund portfolios
CRS-38

South Carolina Future 2002 Option 1 (age-based): 100% $265,000 $25 annual fee + All $25 annual fee waived
Scholar 529 equities for youngest, 15% equities 0.20% management contributions for state residents and
College for 18 and older. Option 2: six fee + between 0.20% state tax employees. Non-
Savings Plan portfolios with different equity and 1.23% underlying deductible. residents must open
exposures. Option 3: three single- fund fee Earnings state an account through an
fund portfolios tax exempt advisor
South Dakota College 2002 Option 1 (age-based): 85% $305,000 0.65% for Option 1, State has no Non-residents must
Access 529 equities for youngest, 5% equities 0.53% for Option 2 income tax open an account
for 18 and older. Option 2 (real through an advisor
return plus portfolio): 100%
fixed-income
Tennesseef Tennessee 2000 Option 1 (age-based): 75% $235,000 0.95% State has no
BEST equities for youngest, 10% equities income tax.
Investment for 17 and older. Option 2: 100% Earnings
Savings equities exempt from
Program state interest
and dividends
tax
CRS-39

Texas Tomorrow's 2002 Option 1 (age or enrollment- $257,460 $30 annual fee + State has no $30 annual fee waives
College based): 90% equities for youngest, 1.0% for the age- income tax for state residents and
Investment 15% equities for 15 and older. For based and blended accounts with
Plan adult beneficiaries, 90% equities portfolios, 0.45% for automatic
for 15 or more years away from the stable value and contributions or a
enrolling in college, 15% equities if single fund portfolios balance of at least
within two years of enrolling. $25,000. Non-
Option 2: 60% equities + 40% residents must open
fixed income. Option 3: 100% an account through an
equities. Option 4: single-fund advisor
options that offer 13 portfolios
focusing on a single investment
strategy or asset class
Utah Utah 1997 Option 1: 100% State Treasurer's $280,000 No fee for Option 1. Up to $1,435 Only contributions
Educational Investment Fund, which invests in For other options, up per beneficiary (up to the current
Savings Plan money market securities. Option to $25 annual fee + per taxpayer balance) are refunded
Trust 2: 100% index equities. Option 3: 0.25% management per year state if account is
100% bonds. Option 4: 100% fee if balance is tax deductible cancelled within two
diversified equities. Option 5-9 greater than $5,000 (account must years of opening.
(age-based): multiple age-based (0.75% otherwise) + be opened Benefit payout must
portfolios available that shift away between 0.0275% and before the begin before the
from equities and towards fixed 0.65% underlying beneficiary beneficiary turns 27,
income and cash over time fund fee turns 19 for or 10 years after
this benefit) opening the account,
Earnings state whichever is later
tax exempt.
CRS-40

Vermont Vermont 1999 Option 1 (age-based): 80% $240,100 No fee for Contributions Tax credit will be
Higher equities for youngest, 15% equities Option 3. 0.80% for made after recaptured for non-
Education for 17 and older. Option 2: 100% others. 2003 are qualified withdrawals
Savings Plan equities. Option 3 (interest eligible for a
income option): 100% fixed- tax credit that
income securities is 5% of
contributions
of up to
$2,000 per
beneficiary.
Earnings state
tax exempt
Virginia Virginia 1999 Option 1 (age-based portfolios): $250,000 Between 0.85% and Up to $2,000 $85 to enroll.
Education multiple age-based portfolios 1.0% per account Benefits must be paid
Savings available that shift away from per year state out within 10 years
Trust equities and towards fixed income tax deductible after the
and cash over time. Option 2: with unlimited projected high school
80% equities + 20% fixed income. carry-forward graduation date (or,
Option 3: 60% equities + 40% in future years. for adults, 10 years
fixed income. Option 4: 20% Unlimited after the account is
equities + 80% fixed income. state tax opened)
Option 5: 100% money market deduction for
owners 70 and
older.
Earnings state
tax exempt
CRS-41

West Virginia Smart 529 2002 Option 1 (age-based): 100% $265,620 $25 annual fee + All $25 annual fee waived
Plan equities for youngest, 20% equities 1.16% contributions for state residents and
for 19 and older. Option 2: 100% state tax accounts with
equities. Option 3: 80% equities deductible. automatic
+ 20% bonds. Option 4: 60% Earnings state contributions or a
equities + 30% bonds + 10% stable tax exempt balance of at least
value portfolio. Option 5 (stable $25,000. Non-
value portfolio): aims to preserve residents must open
principal and interest income an account through an
advisor
Wisconsin EDVEST 1997 Option 1 (age-based): 90% $246,000 $10 annual fee + Up to $3,000 $10 enrollment fee
Wisconsin equities for youngest, 100% bonds 1.15% asset-based fee per beneficiary per portfolio (waived
College for those who are less than two (0.90% for Option 7) per year state for accounts opened
Savings years away from college. Option 2: tax deductible. through an employed-
Program 100% index equities. Option 3: Earnings state sponsor plan). $10
90% equities + 10% bonds. tax exempt annual fee waived for
Option 4: 70% equities + 30% accounts with
bonds. Option 5: 50% equities + automatic
50% bonds. Option 6: 100% contributions or with
bonds. Option 7 (stable value a balance of at least
portfolio): primarily invested in $25,000
government bonds
CRS-42

Wyoming Wyoming 2000 Option 1 (age-based): 90% $245,000 $25 annual fee + State has no $25 annual fee waived
College equities for youngest, 10% equities 0.95% management income tax for state residents or
Achieve- for 22 and older. Option 2: 100% fee + between 0.85% accounts with a
ment Plan equities. Option 3: 75% equities and 1.45% underlying balance of at least
+ 25% fixed income. Option 4: fund fee $25,000
50% equities + 50% fixed income.
Option 5: 100% fixed income

Source: Reprinted from [http://www.tiaa-crefinstitute.org/Data/statistics/pdfs/jma_savingsplans.pdf], which relied on information contained in [http://www.collegesavings.org] and
[http://www.savingforcollege.com] as well as in various states' websites.

a. The investment options listed in this table refer to those available to accounts opened directly through the program. More options may be available for accounts opened through an advisor
or broker.
b. Estimated expense charges apply to accounts opened directly through the program. Additional and/or higher fees may apply to accounts opened through brokers.
c. The earnings of non-qualified withdrawals are subject to income tax at the distributee's rate in addition to a 10% federal penalty tax.
d. Earnings on qualified withdrawals are subject to state tax if withdrawals are from an out-of-state plan.
e. "Waiting period" is defined as the amount of time an account needs to be open before qualified withdrawals can be made without penalty.
f. Earnings on qualified withdrawals are subject to state interest and dividend tax if withdrawals are from an out-of-state plan.

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For other versions of this document, see http://wikileaks.org/wiki/CRS-RL31214