State Farm® College Savings Plan – 529

• Eligibility Requirements

  The plan is open to any individual (including a custodian under a State’s Uniform Gifts or Transfers to Minors Act) who has a valid Social Security number.

  There are no state residency requirements or income restrictions.

• Contribution Limits

  You may make additional contributions at any time, provided that:

  • The total amount of all contributions to all accounts maintained within the Nebraska Educational Savings Plan Trust for the same beneficiary may not exceed $360,000.
  • No additional contributions may be made for the benefit of a particular beneficiary when the fair market value of all accounts maintained within the Nebraska Educational Savings Plan Trust for that beneficiary plus any current contribution exceed $360,000.

  Individual contributions of up to $65,000 ($130,000 for married couples) per beneficiary are allowed in a single year with no federal gift tax.

• Federal Income Tax Benefits

  • Your contributions to the plan are generally removed from your federal taxable estate, reducing its taxable value.
  • You may make contributions of up to $65,000 per beneficiary in a single year without triggering a federal gift tax. Married couples may contribute $130,000 per beneficiary in a single year.
  • You make after-tax contributions to the account, but you don’t pay taxes as the account grows. And as long as withdrawals are used to pay for qualified higher education expenses such as tuition, books, supplies, fees, and certain room and board, your investment earnings are received free of federal income tax.

  The availability of such tax or other benefits may depend on meeting certain requirements. Pursuant to the Economic Growth and Tax Relief Reconciliation Act of 2001, earnings must be used to pay for qualified higher education expenses to be federally tax free. The earnings portion of a non-qualified withdrawal will be subject to ordinary income tax at the recipient's marginal rate and subject to a 10 percent penalty.

• Qualified Withdrawals

  Shares in your account may be redeemed to pay the beneficiary’s tuition and fees and the cost of books, supplies, and equipment required for enrollment or attendance at an institution of higher education. Subject to certain limits, room and board expenses of a student enrolled on at least a half-time basis may also be paid.

529 FAQ’s

• What is a 529 plan?

  Section 529 College Savings Plans are higher education savings plan trusts established under Section 529(b) of the Internal Revenue Code as “qualified tuition programs.” Through these plans, individuals may make investments for the purpose of accumulating savings for qualifying higher education costs of beneficiaries. The plans include interests in pooled investment funds under trusts established by states or local governmental entities, as well as higher education savings plan trusts established by states.

• What’s the difference between a 529 college savings plan and 529 prepaid plan?

  According to the Investment Company Institute (ICI), a 529 college savings plan is an investment program that allows participants to invest in a special account designated for qualified higher education expenses. In general, college savings plans offer a rate of return that depends on the performance of the plan’s investments. As such, the value of a college savings plan account may increase or decrease over time.

  With a prepaid tuition plan, parents, grandparents, and others essentially “lock in” today’s tuition rates, and the program will pay out future college tuition at any of the state’s eligible colleges or universities (or will make a payment to private and out-of-state institutions).

• How does The State Farm College Savings Plan sponsored by the state of Nebraska work?

  The first step toward enhancing your savings for college and higher education begins when you complete an account application and make an initial contribution establishing an account for a named beneficiary. Contributions to your account will be invested in shares of the portfolio or portfolios you choose after deducting any sales charges that may be applicable. When your beneficiary incurs higher education costs, shares may be redeemed from your account to pay the higher education costs for the beneficiary.

• What happens to an account if the beneficiary dies, becomes disabled, or does not attend college?

  If the beneficiary of an account dies or becomes disabled, you’ll be entitled to receive the balance in your account. Investment earnings will be taxed at your ordinary income rate, but no federal penalty tax will be assessed, and the trust will not assess a contingent deferred sales charge. You may also transfer the balance tax free to an account for another beneficiary who is a qualified member of the family.

  If your beneficiary elects not to pursue post-secondary education, you may either transfer the account balance to an account for another beneficiary who is a qualified member of the family or withdraw the principal and investment earnings in a non-qualified withdrawal.

• What happens to contributions over the maximum limit?

  The servicing agent will not knowingly accept contributions in excess of the applicable limit. If, however, it’s determined that contributions are made in excess of the applicable limit, the excess plus any earnings (or minus any loss) attributable to such excess will be promptly refunded and will be treated as a non-qualified withdrawal that may be subject to a 10 percent federal penalty tax, but no contingent deferred sales charge will be assessed by the servicing agent.

• How are my plan contributions invested?

  Contributions will be invested in the selected portfolio(s) with designated allocations that you choose. Under federal tax law, once a portfolio selection has been made, an account owner may only change how previous contributions (and any earnings thereon) have been allocated among the available portfolio options for all accounts for the same designated beneficiary once per calendar year or upon a change of the designated beneficiary.

  The plan consists of nine investment portfolios – four Static Portfolios and five Enrollment-Based Portfolios. The static portfolios and the enrollment-based portfolios each invest all of their assets in underlying OppenheimerFunds. The Oppenheimer investment portfolios are each a “fund of funds” that invest their assets in other underlying mutual funds managed by OFI Private Investments Inc. (OFIPI), a subsidiary of OppenheimerFunds, Inc. Each portfolio seeks to meet its investment objective by building a portfolio of investments that meet a target investment allocation between equity and fixed-income investments. Each portfolio’s performance depends on the investment performance of the underlying funds in which it invests. Therefore, the risks of investing in the portfolios are the same as the risks associated with an investment in the underlying investments.

• How do the static portfolios work?

  The underlying investments in which each of the four static portfolios invests remains the same and doesn’t change based on the age of the designated beneficiary. This helps provide control over how your savings are invested by allowing you to choose the portfolio(s) that work best for you. Should your needs or goals change, you are responsible for selecting a new portfolio (transfers are allowed once per calendar year).

• How do the enrollment-based portfolios work?

  The enrollment-based portfolios are a series of five investment portfolios that are designed to fit particular investment time horizons. Your contributions are invested in the underlying investments based on the anticipated time to college enrollment of the designated beneficiary. The portfolios automatically adjust over time and will typically be invested more heavily in equity investments when the designated beneficiary is younger and more heavily in fixed-income and money market investments as the designated beneficiary nears enrollment in college.

  If you invest in the enrollment-based portfolios, OppenheimerFunds will reallocate your investments as the designated beneficiary nears enrollment. In this case, you will be asked to provide (on the enrollment application) your designated beneficiary’s estimated year of enrollment in college. OppenheimerFunds will make the determination as to whether your investments are scheduled to move to the next portfolio on an annual basis. Thus, if you open an account in 2009 and indicate on your enrollment application that your designated beneficiary is expected to begin enrollment in 2014, OppenheimerFunds will reallocate your investments on a schedule that will have you invested in the College Now Portfolio before September 1, 2014. If you elect to invest in the enrollment-based portfolios for a designated beneficiary who is under age 18, and you don’t provide an estimated time to enrollment, your initial investment will be made based on the assumption that enrollment will begin in the year in which the designated beneficiary turns 18 years of age.

• What types of costs may be paid with withdrawn funds?

  Withdrawals from an account may be used to pay higher education costs for a designated beneficiary. These include tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible institution of higher education. They also include the reasonable costs of room and board for a designated beneficiary who is at least a half-time student. The cost of room and board qualifies only to the extent that it is not more than the greater of the following two amounts:

  • The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.
  • The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.

  You will need to contact the eligible educational institution for qualified room and board costs. Institutions of higher education generally include accredited, post-secondary educational institutions offering credit toward a bachelor’s degree, an associate’s degree, a graduate-level or professional degree, or another recognized post-secondary credential, including certain post-secondary vocational institutions. The institution must be eligible to participate in U.S. Department of Education student aid programs.

• How do I make qualified withdrawals?

  You may request a qualified withdrawal at any time and elect any of the following distribution options:

  • The distribution may be deposited directly to your bank account.
  • The distribution may be made in the form of a check payable to:
    • The account owner,
    • The designated beneficiary, or
    • An eligible Institution of higher education for the benefit of (FBO) the designated beneficiary.

  To request a qualified withdrawal from your account, the account owner must complete and submit a Withdrawal Request Form to his or her State Farm registered representative or to OppenheimerFunds at P.O. Box 173865, Denver, CO 80217-3865. A withdrawal can also be requested by calling The State Farm College Savings Plan at 1-800-321-7520.

• When must withdrawals begin?

  There is no set date or age by which you must begin making withdrawals from your account.

• May I make withdrawals for other purposes?

  Yes, but any such withdrawal will be a non-qualified withdrawal unless it is:

  • A withdrawal by reason of the death (if paid to the designated beneficiary’s estate) or disability (within the meaning of Section 72(m)(7) of the Code) of the designated beneficiary of the account;
  • A withdrawal by reason of the designated beneficiary’s receipt of a qualified scholarship (to the extent of the scholarship amount);
  • A qualified rollover distribution.

  The earnings portion of a non-qualified withdrawal is treated as income to the distributee and is subject to federal and applicable state income tax as well as an additional 10 percent federal tax on earnings. In addition, any applicable contingent deferred sales charges will be assessed by the servicing agent.

• How will investments in the plan affect my beneficiary’s chances of receiving financial aid?

  The eligibility of the beneficiary for financial aid may depend upon the circumstances of the beneficiary’s family at the time the beneficiary enrolls in an institution of higher education, as well as on the policies of the governmental agencies, school, or private organizations to which the beneficiary and/or the beneficiary’s family applies for financial assistance. These policies vary at different institutions and can change over time. Therefore, no person or entity can say with certainty how the federal or state aid programs, or the school to which the beneficiary applies, will treat your account. However, financial aid programs administered by agencies of the state of Nebraska won’t take your account balance into consideration, except as may be otherwise provided by federal law.

• How do scholarships and other financial aid affect my account?

  If the beneficiary of your account receives a scholarship or other financial aid, the beneficiary may no longer require all of the funds in the account. In that case, IRS Publication 970 indicates that you may withdraw funds from your account up to the amount of such scholarship or other financial aid. The earnings portions of the withdrawal will be included in your ordinary income, but no federal penalty tax will be assessed, and the trust will not assess a contingent deferred sales charge if the scholarship or aid is a scholarship, allowance, or payment described in section 25A(g)(2) of the Code.

  You may also transfer the amount withdrawn in a qualified rollover distribution, in which case no amount of the withdrawal will be included in your income.