GSP Frequently Asked Questions

What is the Pennsylvania 529 Guaranteed Savings Plan (GSP)?
It is a tax-advantaged and low-risk 529 plan intended to help individuals or families save for college. It is a program sponsored by the Commonwealth of Pennsylvania and administered by the Treasury Department. The GSP guarantees that your account will keep pace with tuition inflation at a Tuition Level you choose.

The basic idea with the GSP is that if you save enough to pay for a semester of college or career school today, you are guaranteed to have enough to pay for a semester of college or career school tomorrow. (Some restrictions apply. See the Program Description for details.)

In order to enroll in the GSP, the Account Owner or Beneficiary must be a resident of Pennsylvania (as well as, U.S. citizen or resident alien).

What are the income tax benefits of investing in a Pennsylvania 529 GSP account?*
Earnings grow federal income tax-free - Earnings grow tax-deferred and are free from federal income tax when used for qualified higher education expenses.

Earnings grow state income tax-free - For Pennsylvania taxpayers, earnings grow tax-deferred and are free from Pennsylvania state income tax when used for qualified higher education expenses.

Pennsylvania state income tax-deductible - Pennsylvania taxpayers can deduct up to $13,000 in contributions per beneficiary per year ($26,000 if married filing jointly assuming each spouse had income of at least $13,000) from their Pennsylvania taxable income for the purposes of determining their state income taxes.

Can I convert my Savings Bonds into tax-free college savings?
In order to roll savings bonds into a 529 plan as a tax-deferred event, for federal tax purposes, the bonds have to meet the following requirements:

1. Must be a Series EE bond issued after 1989 or a Series I bond.
2. The bond must be issued either in your name (as the sole owner) or in the name of both you and your spouse (as co-owners).  If the bond is for a child, the child may not be listed as the owner or co-owner – they can be the beneficiary of the bond.
3. The owner must be 24 years old before the bond's issue date.
4. The bonds must be used for the owner, the spouse of the owner, or a dependent for whom you can claim an income tax exemption on your federal return.  If the grandparent is the owner, they will not qualify unless they can claim the beneficiary.
5. If married, you must file a joint tax return.
6. You must meet the following income requirements:
   - Single making less than $69,950
   - Single phases out from $69,950 to $84,950
   - Married making less than $104,900
   - Married phases out from $104,900 to $134,900

How do I complete the Payment Authorization Form?

1. Review the Amount Available for use - this is the maximum amount that you can use to pay for qualified expenses for the semester listed on the form.  You may have more money in your account that is/was not mature for the semester on the form.  To review the full amount in your account, please log into your account.
2. Review the Qualified Expenses – There are a few examples of qualified and non-qualified expenses as they relate to the federal regulations in regards to 529 plans.  Please only include payment for the qualified expenses.
3. Where do you want your payment to go –
4. If you are requesting reimbursement to the account owner for any expenses, you should include the amount that you want paid to yourself for each of the line items in the PAYMENT TO ACCOUNT OWNER section.  You should also include a daytime phone number for our representatives to call if there are questions related to your inquiry.
5. If you are requesting payment to the school or another third party for any qualified expenses, you should include the portion that you want paid for each of the line items in the OPTIONAL PAYEE sections.  Please note that we often use an address different than what the school provides you for payment to the school.  We have confirmed addresses with the schools that they prefer we make our payments to for quicker processing.
6. Sign the form – Only the Account Owner or an interested party with proper authority (please review the Interested Party section of the PA529.com website for more information) is allowed to sign the withdrawal form.  If the someone other than the account owner or an unauthorized interested party signs the form, we will not be able to process the request
7. Include the proper documentation – All requests, regardless of the type of expenses you are requesting, must include a copy of the itemized tuition bill for the semester you are requesting a withdrawal for.  The itemized tuition bill will include the school’s name, the student’s name, and the total breakdown of charges as charged by the school.  The breakdown would show a line-item description and charge for each of the expenses.  A bill that does not include the breakdown of charges cannot be processed and will delay the total processing time.
8. Allow enough time for processing – Generally speaking, payments are processed within 14 days of receipt.  It may take an additional week (or sometimes more) for the school to receive and process the check from our office.  It is strongly recommended that you fax your request to our office to eliminate the time it takes to mail your request to our office. 

How do I roll a Savings Bond into my PA 529 GSP account as a tax-deferred event?
If they meet all of the requirements above, you must do the following to roll your savings bond into your account:

1. Record the serial number, issue date, face value, and total redemption proceeds (principal and earnings).  You need to use this information for your IRS Form 8818.
2. Cash your bonds at any bank or financial institution.
3. Make the payment to your PA 529 GSP and send it to the Plan with a letter stating it is for a Savings Bond Rollover.  Please include a statement or Form 1099-INT from the bank/institution to show the principal and earnings.

What are the gift, estate, and inheritance benefits of investing in a Pennsylvania 529 GSP account?**

Federal gift tax - You can contribute up to $65,000 in a single year ($130,000 for a married couple filing jointly) for each beneficiary without incurring federal gift tax, provided you don't make any other gifts to that beneficiary in that year or in the following four years.

Federal estate tax - If you die with money remaining in your account, it will not be included in your estate for federal estate tax purposes. However, if you choose to take advantage of the federal gift tax averaging option mentioned above and you die within five years of contributing, a prorated portion of the contribution will be subject to estate tax.*

Pennsylvania inheritance tax - Funds in the account are exempt from Pennsylvania inheritance tax. Depending on the relationship between the deceased Account Owner and the heirs, this can be a savings of up to 15% of the entire value of the account.

Will owning a GSP Account affect the beneficiary's eligibility for financial aid?
State financial aid - PA 529 account is not included in determining eligibility for Pennsylvania state financial aid programs. Other 529 plans are. If you or the beneficiary is not a Pennsylvania resident, check with your state to determine its requirements.

Federal financial aid - Your 529 account affects the beneficiary's eligibility for federal financial aid in the following ways:

If the account owner is a custodial parent: Like other parental assets (such as bank savings accounts or mutual funds), only 3% to 6% of money in a 529 account is considered to be available for college expenses.

What are qualified education expenses?
Withdrawals from a GSP account are tax-free when they are used to pay for qualified education expenses. These are defined by the Internal Revenue Code to include the following:

• Tuition
• Room and board (as specified in the college's cost of attendance; must be at least 2 half-time student)
• Required books
• Required supplies
• Required equipment
• Mandatory fees
• Special needs services

What are eligible educational institutions?
Nearly all colleges, universities, community colleges, and law, medical, or business schools qualify. Many career or technical schools and schools abroad are eligible as well. The school must be eligible to participate in the federal financial aid programs. For a list of schools, see https://fafsa.ed.gov/FAFSA/app/schoolSearch?locale=en_EN

Who may open a Pennsylvania 529 GSP account?
Any U.S. citizen or resident alien with a valid Social Security number or taxpayer identification number who is 18 years of age or older with a permanent address that is not a PO Box may open a GSP account. A corporation, non-profit organization or, trust may also open an account. Either the Account Owner or the Beneficiary needs to be a Pennsylvania resident at the time the account is opened.

Who can be a Beneficiary of a Pennsylvania 529 GSP account?
The Beneficiary is the person for whom the Account Owner is saving. Anyone, including the Account Owner, can be a Beneficiary. Only one Beneficiary may be designated per account, but an individual may be the designated Beneficiary of more than one account. Either the Account Owner or the Beneficiary needs to be a Pennsylvania resident at the time the account is opened.

Who may contribute to a Pennsylvania 529 GSP account?
Anyone - parents, grandparents, aunts, uncles - even family friends.

How much can I contribute to the account?
The initial minimum and subsequent investments to your account is $25. By law, the maximum lifetime amount that can be contributed to one Beneficiary from all sources, including accumulated growth, is $368,600. Once your accrued account balance reaches this limit, no additional contributions are allowed. This maximum applies to all 529 Program accounts established for the same Beneficiary, regardless of whether they are owned by different Account Owners.

How do I send in money?
Contributions can be made by:

• Personal check
• Automatic transfer from your bank account
• Payroll deduction (if your employer participates in the GSP)
• Money orders up to $2,000

I've noticed that when I send mail regarding my Pennsylvania 529 GSP account, it goes to Massachusetts, not Pennsylvania. Wouldn't it be more direct to send it in-state?
The Pennsylvania 529 GSP is administered by Upromise Investments, Inc., which is located in Massachusetts. Upromise Investments was chosen as the plan administrator in 2006 after a competitive bidding process. The company has a large processing center and specialized back-office technology to process large quantities of mail and investor requests.

How do I access funds in my account to pay a school?
The program tracks the beneficiary's estimated date of enrollment (based on what is submitted on the enrollment application) and when our records indicate the beneficiary should be ready to attend school for the first time, we will initiate contact via the mail.

The first items you will receive, the Account Attendance and Verification form and Private Out-of-State form, will be sent in the beginning of May. These forms will ask what school the beneficiary is attending and if you plan on using funds for the upcoming semester.

Once you return these forms and if you indicated you want to use credits, we will update your account so that you automatically receive the Payment Authorization form. Payment Authorization forms are sent automatically every Fall and Spring semester until your account has a zero balance. Fall forms are sent after the schools update and certify their tuition for the following year (usually mailed late July) and the Spring forms are sent in November. On the Payment Authorization, you will detail how much (in dollars) you want to use and where you want the money sent. The form is broken down into four sections: 1) Tuition, mandatory fees, and on-campus room and board, 2) books and required supplies, 3) off-campus room and board, and 4) special needs. You will indicate how much, if any, you want to use for each of these items and where you want the money to be sent (you,the school a third party).

You must return these forms with a copy of the itemized tuition bill from the school. It takes about 14 days to process a payment, so please allow adequate time if you are requesting payment to the school.

What will it cost?
You may open an account with as little as $25 and make minimum subsequent contributions of $25 whenever you want. Make saving even easier by setting up automatic payroll deduction or deductions from your bank account.

The GSP has low fees. A one-time enrollment fee of $50 is charged. But a discount to just $25 is available with the coupon enclosed with the Enrollment Guide or by enrolling online. Additional discounts may be available through your employer or your child's school. And, the enrollment fee is waived if an account is opened within six months of a child's birth or adoption. Additionally, there is an account maintenance fee, which varies based on the value of your account if used for qualified higher education expenses. For more information, please contact our customer service department at 1-800-440-4000.

What is the Account Maintenance Fee?
The account maintenance fee is a fee charged to GSP accounts to help cover the costs of administering the Plan. The legislation creating the GSP designed it to be self-sustaining, which means that tax revenues are not provided to cover the operational expenses of the Plan. Instead, the Plan must generate enough revenues to meet both its expenses and its obligations to pay requested college payments and other withdrawals. The account maintenance fee is a primary source of revenues to offset expenses and an important factor in maintaining the financial soundness of the GSP.

Costs of administering the Plan include such expenses as investment management costs, processing functions (e.g., opening and closing accounts, processing contributions and withdrawals, sending transaction confirmation and quarterly statements), operating the GSP call center, and staffing costs.

How much is the Account Maintenance Fee?
Like the fees associated with most other types of investments, the GSP account maintenance fee is based on the value of your account – your assets. The current fee is 0.49% annually of the value of your account if used for qualified expenses, which is lower than the fees associated with most other Section 529 plans.

The fee is automatically deducted from your account at the end of each calendar quarter. On that date, one fourth of 0.49% (0.1225%) of the value of your account if used for qualified expenses is deducted and a corresponding number of GSP Credits is subtracted. For example, if the value of an account saving at the State System of Higher Education Tuition Level if used for qualified expenses were $25,000 on the last day of the quarter, the fee would be $30.63 ($25,000 x 0.001225 = $30.63) and 0.132 GSP Credits would be deducted.

The dollar amount deducted and the corresponding number of GSP Credits subtracted from your account are shown on your quarterly statement under the entry “Account Maintenance Fee.” To keep the deduction of the fee from affecting your account value and the number of GSP Credits in your account, simply make a contribution in the same amount as the fee deducted ($30.63, in the above example). Doing so will restore your account to its status before the fee was taken.

The Account Maintenance Fee will also be taken on any withdrawals made during a quarter and will be prorated for the number of days in the quarter that the assets being withdrawn were in your account. If assets would remain in your account after the withdrawal, the full amount requested will be paid and the fee will be taken from the remaining account value and GSP Credits.

Example: You took a $3,000 withdrawal on December 1, 2009, and your account value, as listed above, is $25,000 at the State System of Higher Education Tuition Level. The amount of the fee deducted at the time of the withdrawal would be $2.48 [($3,000x.001225)x(62/92)] = $2.48. December 1, 2009, was the 62nd day in the quarter. There are 92 days in the fourth quarter. The withdrawn amount would be the full $3,000 and the fee ($2.48) would be taken from the remaining balance.

If the withdrawal would deplete your account, the amount requested will be reduced by the amount of the fee.

Example: You took the full $25,000 withdrawal on December 1, 2009, and you were saving at the State System of Higher Education Level. The amount of the fee deducted from your total payment would be $20.64 [($25,000x.001225)x(62/92)] = $20.64. Your total payment would be $24,979.36.

The fee taken in any in-quarter withdrawals will be shown on your end-of-quarter statement.

Treasury’s goal is to keep the fee as low as possible. To that end, the amount of the fee will be rexamined periodically and account owners will be notified of any changes.

What if I am not a Pennsylvania resident?
In order to establish a Pennsylvania 529 GSP account, either the Account Owner or the Beneficiary must be a Pennsylvania resident. If you are not a Pennsylvania resident, look into whether your state offers its own 529 plan. If so, consider whether the benefits it offers to residents outweigh benefits offered by the Pennsylvania 529 GSP.

How do I enroll in the Pennsylvania 529 Guaranteed Savings Plan (GSP)?
You may enroll online , or call 800-440-4000 to request an enrollment kit.

* The availability of tax or other benefits may be contingent on meeting other requirements. A withdrawal or a portion of a withdrawal not used to pay for qualified expenses may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes.

** In the event the donor does not survive the five-year period, a pro-rated amount will revert to the donor's taxable estate.