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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 $14,000 in contributions per beneficiary per year ($28,000 if married filing jointly assuming each spouse had income of at least $14,000) 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:
- Must be a Series EE bond issued after 1989 or a Series I bond.
- 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.
- The owner must be 24 years old before the bond's issue date.
- 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.
- If married, you must file a joint tax return.
- You must meet the following income requirements:
- Single making less than $71,100
- Single phases out from $71,100 to $86,100
- Married making less than $106,650
- Married phases out from $106,650 to $136,650
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:
- 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.
- Cash your bonds at any bank or financial institution.
- 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.
How do I access my account to pay for qualified higher education expenses (qualified withdrawal)?
You simply make a request to the PA 529 GSP to have a payment made. Your request can be made through an online process or by mailing or faxing a form. You can direct that a payment be made directly to the school, to yourself, to the student, or even to a third party such as a landlord.
Online qualified withdrawals. Making your request online is the quickest and easiest way to have your payment made. To make an online request, click here. Please note that you will need to attach an electronic copy of the student’s itemized tuition bill to your request. You can make an online request only if no other payment request has been processed for the same semester (either online or by mail/fax). So, for example, if you first make an online or mail/fax request for payment for tuition, fees, and housing and later want to make a request for books, your book payment request would need to be mailed or faxed. Online requests that are in good order will be paid in approximately 5-7 business days.
If your student is attending a Pennsylvania publicly funded school, you should check to see if the Tuition Level at which you have been saving matches the school your student will be attending. If it does not, you should change your Tuition Level. By making sure that your Tuition Level matches the public school being attended, you ensure that you will receive the full benefit of the PA 529 GSP to which you are entitled. If your student is attending a private or out-of-state school, your payment will be made at your current Tuition Level (which you may change at any time). You can change your Tuition Level during the online withdrawal process or beforehand. For information on how to change it beforehand click here.
Paper qualified withdrawals. To make a payment request by mail or fax, you complete and submit a Payment Authorization Form. You may download a Payment Authorization Form and one may be automatically mailed to you each fall and spring semester until your account has a zero balance or may be download from the website. In order to download or be sent a Payment Authorization Form, you must first advise the PA 529 GSP of your intent to use your account and the school your student will be attending. Click here for information on how to obtain, complete, and submit a Payment Authorization Form.
Please note that you will need to attach a paper copy of the student’s itemized tuition bill to your request. Mail/fax requests that are in good order may take up to 14 business days to be processed.
To watch a webinar that explains the withdrawel process in detail, please click here.
For more details about qualified withdrawals. See the relevant parts of the PA 529 GSP Disclosure Statement – particularly Part 1. A, “What schools and what expenses can an Account be used for?”; Part 2. C. 4, “Tuition Inflation Value”; and Part 2.D. 2, “Qualified Withdrawals.”
To watch a webinar that explains how to use your account in more detail, please
click here.
When can I request payment for qualified higher education expenses?
Generally, you can request payment as soon as you receive the itemized tuition bill. However, if your student is attending a private or out-of-state school, there may be a wait for fall semester payments, depending on the Tuition Level at which you are seeking payment. Fall Payment Authorization Forms and online withdrawal requests are not available until the school(s) comprising your Tuition Level have set and certified their tuition rate for the upcoming academic year.Generally, the Private 4-year College Average and the Ivy League Average Tuition Levels are available for payout by July. Payouts for other Tuition Levels might not be available until the end of July. If your bill is due prior to the fall Payment Authorization Form or online withdrawal being available for your Tuition Level, please call customer service at 1-800-440-4000 for additional options.
Can I access my account for purposes other than paying for higher education
(non-qualified withdrawals)?
Yes. You can access the funds in your account at any time for any reason.
A withdrawal used to move your funds to another 529 is called a “Transfer” (if to the PA 529 Investment Plan) or “Rollover” (if to any other 529 plans). A withdrawal for any reason (other than paying for qualified expenses) is called a “Non-qualified Withdrawal.” There are several factors to consider prior to making a Transfer, Rollover, or Non-qualified withdrawal: (1) the growth on contribution used for these types of withdrawal is calculated differently and often is less than growth on contributions used for Qualified Withdrawals; (2) there may be federal and state income tax consequences; and (3) the number of Transfers, Rollover, and Non-qualified Withdrawals that may be taken in a given period of time may be limited. See Part 2.D. of the Disclosure Statement.
You can request most Non-qualified Withdrawals online by logging into your Guaranteed Savings Plan Account and clicking on the “Account Management” link and then “Make a Withdrawal.” Simply follow the withdrawal flow for the appropriate non-qualified withdrawal type.
You may also request a Non-qualified Withdrawal in writing by submitting a signed letter of instruction, and any necessary documentation, to our processing center. You may fax or mail your request to our office.
Please note that Non-qualified withdrawals processed online may take 5-7 business days to complete and withdrawals completed by paper may take 14 business days to complete.
What are the gift, estate, and inheritance benefits of investing in a Pennsylvania 529 GSP account?**
Federal gift tax - You can contribute up to $70,000 in a single year ($140,000 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.
For more information, consult your tax advisor or estate-planning attorney.
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.
Be sure to check with the schools you are considering regarding their criteria for financial aid.
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 a half-time student)
- Required books
- Required supplies
- Required equipment
- Mandatory fees
- Special needs services
Computers are qualified only if the school or major requires students to have their own computers.
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
What happens if my child does not attend college?
You have several options if your child does not attend college. One option is to simply leave the money in the account in case they change their mind down the road. There is no age limit for use of the funds and a 529 account will continue to grow until it is used. Another option is to change the beneficiary on the account to a family member of the previous beneficiary as defined in Part 2.A.3.c of the GSP Disclosure Statement.. Another option is to transfer the funds from the 529 account into the account of another beneficiary who is a family member of the previous beneficiery. For more detailed information about transferring funds, please refer to the question "How do I transfer funds from one 529 account that I own to another?" The final option is to withdraw the funds as a non-qualified withdrawal. Non-qualified withdrawals have certain tax implications and the valuation of the account will vary based on the type of withdrawal that you are requesting. For more information related to non-qualified withdrawals, please see Part 2.D.6 through .9 of the GSP Disclosure Statement..
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 $15. 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:
- Checks and Money Orders
- Electronic Bank Transfer
- Automatic Investment Plan
- Payroll Deduction
- Rollover from another 529 Plan or Coverdell Education Savings Account
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.
What will it cost?
You may open an account with as little as $15 and make minimum subsequent contributions of $15 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.
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, you may wish to look into the Pennsylvania 529 Investment Plan.
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.
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