What are 529 college savings plans?
Named for Section 529 of the Internal Revenue Code, these plans help individuals and families save for college in a tax-advantaged way.
What is the Pennsylvania College Savings Program–529 Investment Plan?
It's a tax-advantaged 529 plan intended to help an individual or a family pay the costs of higher education. Although sponsored and administered by the Commonwealth of Pennsylvania, the plan is available to all U.S. citizens and resident aliens, age 18 or older, with a valid Social Security or taxpayer identification number.
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 www.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 relative of the original beneficiary. Another option is to transfer the funds from the 529 account into the account of another, related, beneficiary. 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 refer to your disclosure statement.
Who is Upromise Investments, Inc.?
Upromise Investment Advisers, LLC is the recordkeeper and servicing agent for the Pennsylvania 529 Investment Plan. Upromise® Inc. is a free service that helps you save for college by giving back a percentage of your qualified spending at hundreds of America’s leading companies. This money can be automatically transferred to your Pennsylvania 529 Investment Plan account periodically (subject to a $25 minimum).
Who is Vanguard?
Vanguard is the investment manager for the PA 529 Investment Plan and is one of the world's largest investment management firms. The company is committed to providing a low-cost, wide-ranging choice of investments, including index portfolios, to help PA 529 Investment Plan account owners accumulate the assets they need to send their children to college.
Why should I choose the PA 529 Investment Plan?
Some of the PA 529 Investment Plan's features include:
Low minimum investment of only $25 ($15 if contributing by payroll deduction).
Tax-deferred growth.
Federal and Pennsylvania state income tax-free withdrawals for qualified higher education expenses.*
State income tax deduction for Pennsylvania taxpayers of up to $14,000 in contributions for single filers ($28,000 if married filing jointly, provided that each spouse has taxable income of $14,000) per beneficiary each year.
Gift and estate tax benefits.**
Investor control of assets.
Low costs.
No sales loads or commissions.
Wide range of investment options.
Additional savings opportunities through Upromise Rewards.
Expert investment management by Vanguard.
If you are not a Pennsylvania resident or taxpayer, you should consider your home state's 529 plan first.
Do I have to use my savings at a Pennsylvania college or university?
No. The money in your Investment Plan account may be used at any eligible higher education institution in the United States and abroad that qualifies under federal guidelines. This includes most public and private colleges and universities, graduate and postgraduate schools, community colleges, and certain proprietary and vocational schools.
How do I use my PA 529 IP Account?
To make a qualified or non-qualified withdrawal, you may either make an online withdrawal request here or complete a Withdrawal Request Form, available here.
I've noticed that when I send mail regarding my account, it goes to Massachusetts, not Pennsylvania. Wouldn't it be more direct to send it in-state?
Upromise Investment Advisers, LLC serves as the Pennsylvania 529 Investment Plan’s recordkeeping and servicing agent.
To watch a webinar that explains the withdrawel process in detail, please click here.
Investments
What are my investment choices?
The plan offers the following investment options:
Three age-based options.Investments in age-based portfolios are automatically moved to more conservative investments as the age of the beneficiary increases.
Ten individual portfolios, including a socially responsible portfolio. Choose from a variety of stock, bond, money market, and balanced investment options in which the allocations remain constant within a specified range. Your assets will be invested in the same portfolios until you tell us otherwise.
Are portfolio returns guaranteed?
Your returns are never guaranteed and your account value will fluctuate with market performance. As with any investment in securities, you can lose money by investing in the PA 529 Investment Plan. Keep in mind that the holding period for college investors is short (generally 5 to 20 years), and you should consider investing more conservatively as the time approaches for you to begin making withdrawals. Before you select an investment option, you should carefully consider your investment time horizon and risk tolerance.
When can I change my investment options?
You can change the direction of your future contributions at any time.
If I'm invested in an age-based savings option, do I need to do anything as the beneficiary grows older?
No. Each age-based option's investments will automatically change over time as your beneficiary ages, shifting automatically from more aggressive investments when the beneficiary is younger to more conservative investments as the beneficiary approaches college age.
Can I see a list and description of the portfolios' underlying mutual funds?
Yes. Refer to the Disclosure Statement or go to the Investments section of our Website.
What if I'd like to allocate part of my investment to a portfolio not listed here?
The 13 investment options offered by the PA 529 Investment Plan have been selected specifically for the plan and are the only investment options available.
How is investment performance determined?
The returns displayed on the Website reflect past performance, are net of the management fee, and are not a guarantee of future performance. Keep in mind that you do not actually own shares in the underlying funds. Instead, you own portfolio units of the PA 529 Investment Plan, which means the returns for a particular portfolio may vary from the returns of the underlying funds.
FINANCIAL AID
Will my account affect the beneficiary's eligibility for financial aid?
State financial aid. PA 529 Investment Plan accounts are not included in determining eligibility for Pennsylvania state financial aid programs. If you are not a Pennsylvania resident, check with your state to determine its requirements.
Federal financial aid. Your account may affect the student's eligibility for federal financial aid in the following ways:
If the account owner is a parent: Up to 6 percent of the money in a qualified state tuition plan such as the PA 529 Investment Plan may be considered available for college expenses.
It is strongly recommended that you contact your financial advisor for more detailed information regarding your eligibility for financial aid. Also, check with the schools you are considering regarding their criteria for financial aid.
TAXES
What are the income tax benefits?*
Federal income tax–free. Earnings grow tax-deferred and are free of federal income tax when used for qualified higher education expenses. Qualified withdrawals include tuition, mandatory fees, books, supplies, and equipment required for enrollment or attendance; certain room and board expenses during any academic period the beneficiary is enrolled at least half-time; and certain expenses for a "special-needs" student. (The earnings portion of nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.)
State income tax-free. For Pennsylvania taxpayers, earnings are exempt from Pennsylvania state income tax when used for qualified higher education expenses. If you're not a Pennsylvania taxpayer, consider whether your home state offers a 529 plan that provides its taxpayers with tax benefits not available to you through this plan. Be sure to weigh all the pros and cons of a particular plan before you choose to invest.
State income tax-deductible. Pennsylvania taxpayers can deduct up to $14,000 in contributions for single filers ($28,000 if married filing jointly, provided that each spouse has taxable income of $14,000) per beneficiary each year from their Pennsylvania taxable income for the purposes of determining their state income taxes. Contributions are eligible for the deduction in the year in which they are postmarked or received online.
What are the gift and estate tax benefits?**
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 for the next four years. This gift will be prorated over five years. (In the event that the donor does not survive the five-year period, a prorated amount will revert to the donor's taxable estate.) For more information, consult your tax advisor or estate-planning attorney.
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. For more information, consult your tax advisor or estate-planning attorney.
How do I enroll in the Pennsylvania 529 Investment Plan?
You may enroll online, or call 1-800-440-4000 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 prorated amount will revert to the donor's taxable estate.
The Pennsylvania 529 College Savings Program sponsors two plans-the Guaranteed Savings Plan (GSP) and the Investment Plan (IP). The guarantee of the PA 529 Guaranteed Savings Plan is an obligation of the GSP Fund, not the Commonwealth of Pennsylvania or any state agency. Before investing in either plan, please carefully read that plan’s disclosure to learn more about that plan including investment objectives, risks, fees, and tax implications.
