Frequently Asked Questions

Mutual funds offer you a diversified investment vehicle without requiring a great deal of money. Your investment and those of other investors with similar objectives are pooled to purchase securities.

A professional manager will closely monitor the securities held within a fund portfolio to determine if they're meeting the objective of that fund. Managers will buy and sell securities in an effort to get the best return for investors while maintaining that objective. There's usually a fee charged by fund companies for the manager's services. Those fees are normally a fraction of what it would cost you to make stock or bond purchases independently. See the prospectus for complete information regarding fees.

First, determine your investment goal. Next, establish the amount of risk you're willing to assume to achieve this objective. A registered State Farm Agent can provide you with a risk-tolerance tool to help you in determining your tolerance to risk. From there, identify funds with investment objectives in line with your own and with investment strategies that appear suited to your risk-tolerance level. Your registered State Farm Agent will work with you to determine the funds that fit your risk tolerance, or you can use our Fund Selection Tool.

The number of funds to own is a personal financial decision requiring a careful analysis of your specific needs and long-range investment plans. Your registered State Farm Agent can be a valuable resource in helping you explore this objective.

Yes, there is. While diversification may help, it doesn't assure a profit or protect against loss in a declining market; in addition, over-diversification can water down your investment results. That can hinder your progress toward achieving your goals. As a result, you need to find a balance between returns and risk with a select number of quality funds most appropriate for your personal financial needs. Your registered State Farm Agent can provide important guidance and support in helping you explore this objective.

Complete an application with your registered State Farm® Agent or contact a Mutual Funds representative to request a new account packet. You may also download a new account packet. The minimum initial investment for State Farm Mutual Funds® and The State Farm College Savings Plan is $250, with a $50 minimum for subsequent investments. If you wish to begin an automatic investment plan (AIP), the minimum amount required for both initial and subsequent investments is $50.

During a volatile market period, it’s important to remain focused on your long-term investment goals. There is market risk involved when investing, including possible loss of principal, but by working with your registered State Farm Agent, you can understand the benefits of investing for the long term, the importance of diversifying your portfolio, and the value of making regular investments over a long period of time. Although such an investment program cannot ensure a profit, it can ease the uncertainty created by changes in the markets.

Yes. However, every account opened with State Farm Mutual Funds must have a registered State Farm Agent associated with it. If you open your account without the assistance of a registered State Farm Agent, an Agent in your local area will be assigned to your account.

Yes. An easy way to do this is through an automatic investment plan. And by doing so, you’ll be taking advantage of an investment strategy known as “dollar-cost averaging.”

Investing is not a one-time event. As your needs and goals change over time, you may want to shift assets from one type of fund to another. For example, when you have many years to reach retirement, you may want to invest most of your assets in stock funds because you have time to ride out the market's ups and downs. But when you come within 10 years of retirement, you might want to invest a higher percentage of your assets in bond funds. An annual meeting with your registered State Farm Agent is an excellent opportunity to keep your investments in line with your goals.

With Class A shares, a sales load of up to 5 percent will be added to the initial purchase price. Class B shares are subject to a contingent deferred sales charge, or “back-end load,” that applies when you redeem your shares.

Some investors prefer to pay the sales charge when the initial purchase takes place and then pay lower 12b-1 fees, asset-based sales charges for marketing and distribution costs, over time. Others may purchase Class B shares with higher 12b-1 fees in order to have a higher percentage of their investment go to work on day one. We developed our cost structures with the intention of neutralizing as much as possible the difference in the overall costs between Class A and B shares over time. However, because the sales load applied to Class A shares is reduced based on the amount invested, neutralization may not always occur.

The contingent deferred sales charge will be reduced during the period Class B shares are held. Class B shares held for seven years or longer will not be subject to the contingent deferred sales charge and will convert to Class A shares after eight years. No sales charge is applied when this conversion takes place.

No sales load is applied to reinvested dividends or distributions and Class A shares of the State Farm Money Market Fund are not subject to an up-front load. Exchanges from the State Farm Money Market Fund to any of the other State Farm Mutual Funds will be subject to an up-front load.

Grandfathered shareholders may purchase Legacy Class A and Legacy Class B shares, whereas shareholders who are not grandfathered may purchase Class A or Class B shares.

You are a grandfathered shareholder if you satisfy one or more the following criteria:

• Your account holding Legacy Class A or Legacy Class B shares was established before May 1, 2006.
• Your account holding Legacy Class A or Legacy Class B shares is established after April 30, 2006, as a result of the death or divorce of one or more individual shareholder(s) who had a grandfathered account.
• Your account holding Legacy Class A or Legacy Class B shares is established after April 30, 2006, as a result of a conversion or re-characterization of a grandfathered IRA account.
• You are a trustee that obtained Legacy Class A or Legacy Class B shares from another grandfathered account.

There are no charges for redeeming Class A shares. If you redeem Class B shares, you may be assessed a contingent deferred sales charge based on the length of time you’ve held the shares. Shares held for seven years or longer will not be subject to the contingent deferred sales charge. Any time shares are redeemed, you may be taxed on any realized gains associated with those shares.

Funds that are held in traditional or Roth IRAs may be subject to a 10 percent tax penalty if a withdrawal is made prior to participant reaching age 59 1/2. Traditional IRA withdrawals may be made prior to age 59 1/2 without incurring the 10 percent tax penalty if certain criteria are met. For funds in a Roth IRA, qualified distributions are not subject to the 10 percent tax penalty. There is no 10 percent tax penalty for withdrawals from a Coverdell Education Savings Account if the money is used for qualified education expenses (including grades K-12). In a 529 College Savings Plan, withdrawals must be used for qualified higher education expenses in order for the earnings to be received free of federal income tax. The availability of such tax or other benefits may be conditioned on meeting certain requirements.

A tax advisor should be consulted for more in depth information concerning the taxation and tax penalties associated with redeeming mutual fund shares.

You can make annual contributions to a traditional or Roth IRA from January 1 through the tax-filing deadline (excluding extensions) for the contribution year, generally April 15. For example, year 2012 contributions can be made from January 1, 2012 through April 15, 2013.

If you can be disciplined about investing for retirement, you’ll have the opportunity to accumulate money over time and be better prepared for your retirement years. Develop a mindset of paying yourself in addition to paying your bills. By doing so, you should have a steady flow of money going to work for you.

You can change your beneficiary by completing a Designation of Beneficiary Form.

Without a beneficiary, your State Farm® IRA assets will generally pass to your estate upon your death. The assets could then be subject to the potential delays and expenses associated with settling an estate, and the distribution options allowed by federal income tax law may be limited.

Choose your beneficiary carefully. Contact your registered State Farm Agent if you need assistance in selecting a beneficiary or have any questions regarding your investment options.

A transfer is a movement of funds between like-type plans (IRA to IRA, SEP to SEP, Roth to Roth). A rollover is generally a movement of funds from one type of plan (e.g., 401k) to another type of plan (e.g., IRA).

Distribution paperwork is the paperwork of a custodian or plan administrator that must be submitted to initiate a rollover to State Farm. The paperwork may be referred to as a distribution election form, direct rollover form, or distribution authorization form. The paperwork may be part of a termination packet received by a participant who is eligible to receive a distribution from a plan.

Most custodians require the participant to call to request distribution paperwork. Some custodians may process rollover requests through Internet forms or phone calls.

It would be best to send originals to the custodian and a copy to State Farm. If originals are sent to State Farm, we will forward them to the custodian.

Section 529 College Savings Plans are higher education savings plan trusts. 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.

A College Savings Plan is a 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 make a payment to private and out-of-state institutions).

You will need to complete an account application and make an initial contribution to establish 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 for those expenses.

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 nonqualified withdrawal.

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 and any earnings (or less 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.

Contributions will be invested in the selected portfolio(s) and designated allocations that you choose.

The plan consists of nine investment portfolios – four static portfolios and five enrollment-based portfolios. The portfolios each invest all of their assets in underlying OppenheimerFunds®. The Oppenheimer investment portfolios 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.

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 designated beneficiary.

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.

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:

1. 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.
2. The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.

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 the designated beneficiary.

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

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

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.

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.

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 portion of the withdrawal will be included in your ordinary income, but no federal penalty tax will be assessed. The trust will not assess a contingent deferred sales charge if the aid is a scholarship, allowance, or payment described in section 25A(g)(2) of the Internal Revenue 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.

The Coverdell ESA is a trust or custodial account that provides individuals a tax-advantaged method to save up to $2,000 per year for a child’s education – both elementary/secondary education (kindergarten through grade 12) and post-secondary education (college, graduate school, vocational school, etc.) – and may be established for the benefit of any child under age 18.

Contributions to a Coverdell ESA can be made any time after the birth of a child and may continue until the child’s 18th birthday. Contributions will not be accepted after the child reaches his or her 18th birthday, unless the child is a special-needs beneficiary (as defined by Treasury Department regulations).

There is no limit to the number of Coverdell ESAs that can be established designating a particular child as beneficiary; however, the total aggregate contributions to all accounts on behalf of a beneficiary in any year cannot exceed $2,000.

You may contribute up to $2,000 annually to the Coverdell ESA if your modified adjusted gross income is less than $95,000 as a single tax filer (or married filing separate), or $190,000 as a married couple filing jointly in the tax year in which you contribute. The $2,000 maximum contribution limit is gradually reduced if your modified adjusted gross income exceeds these limits.

Anyone (including the child for whose benefit the account is established) may contribute to the Coverdell ESA, as long as his or her income falls within the income guidelines and the total of all contributions for one beneficiary does not exceed the $2,000 limit.

LifePath Funds are target-date portfolios that provide a diversified exposure to stocks, bonds, and/or cash for those investors who have a specific date in mind (in this case, years 2020, 2030, 2040, or 2050) for retirement or another goal. The target date is the approximate date when investors plan to start withdrawing assets. The investment objectives of each fund are adjusted over time to become more conservative as the target date approaches. The principal value of the fund(s) is not guaranteed at any time, including at the target date.

If you follow each LifePath Fund over time, the investment mix changes to reflect the changing risk tolerance for each stage of your life. For example, if a person invests in the LifePath 2040 Fund, with the intent of withdrawing from the account starting in 2040, the Fund will gradually be rebalanced to reflect the asset allocation composition similar to Funds with earlier target dates. In 2040, the final asset allocation composition will be the same as the LifePath Retirement Fund.

State Farm® Investment Management Corp. is the investment advisor to the State Farm LifePath Funds. Each State Farm LifePath Fund invests all of its assets in a separate mutual fund called a LifePath Master Portfolio that has a substantially identical investment objective as the corresponding State Farm LifePath Fund. The LifePath Master Portfolios are managed by a team of investment professionals at BlackRock Fund Advisors. This dedicated team of professionals has the skill, experience, and focus to address the daily investment challenges of managing an investment portfolio.

State Farm VP Management Corp. (SFVPMC) is the distributor of the State Farm LifePath Funds. BlackRock Fund Advisors (BFA) is the investment advisor to the LifePath Master Portfolios. Neither SFIMC or SFVPMC, or their affiliates, are affiliated with BFA or its affiliates.