Glossary – Education Planning Products

529 Plan
A state-sponsored, tax-advantaged investment program designed to help finance college education expenses. There are two types of 529 plans: prepaid tuition plans and college savings plans. Tax advantages, investment options, restrictions, and fees can vary a great deal from one plan to another.

529 Prepaid Tuition Plans
529 prepaid tuition plans allow contributors to buy all or part of a public in-state education at present-day prices. The value of the investment may be guaranteed by the state to meet or exceed annual in-state public college tuition inflation. Plan costs can vary, depending on the age of the child.

Account Owner
The individual or entity establishing an Account or any successor to such individual or entity.

Account Application
The account application is completed and submitted with contributions to participate in a plan. It incorporates by reference the plan's Enrollment Handbook. (PDF 525 KB)

Administrative Fee
A charge for expenses incurred in the administration of a 529 college savings plan, which may include services such as record keeping, auditing, and preparing and printing statements and reports. This fee is deducted from your plan assets based on a percentage of your assets in the plan. You can find a description of the fees and expenses charged by a plan in the Enrollment Handbook. (PDF 525 KB)

Annual Rate of Return
The rate of return on your investment, expressed as a percentage of the total amount invested.

Code
The Internal Revenue Code of 1986, as amended.

Contingent Deferred Sales Charge (CDSC)
A common type of deferred sales charge in some 529 college savings plans and mutual funds. The CDSC normally declines each year and is eliminated after a number of years.

Coverdell Education Savings Account (CESA or ESA)
A trust or custodial account in which contributions grow on a tax-deferred basis and withdrawals are tax free if used to pay for a broad range of educational expenses. Unlike 529 plans, ESAs have annual contribution limits and income restrictions.

Custodial Account
An account that is created for the benefit of a minor, with an adult (bank, trust company, or other organization) serving as the custodian in accordance with applicable state law. The adult controls the funds until the child reaches the age prescribed in the UTMA/UGMA statute, at which point the account transfers into the child's name (at the direction of the custodian).

Designated Beneficiary
The individual designated by the Account Owner whose Qualified Higher Education Expenses are expected to be paid from the Account. Anyone can be a designated beneficiary, including the account owner. A designated beneficiary can reside in the United States or abroad. You can open up more than one account for the same beneficiary, but you cannot have more than one beneficiary on the same account.

Eligible Institutions of Higher Education
Accredited post secondary educational institutions offering credit towards a bachelor's degree, an associate's degree, a graduate level or professional degree, or another recognized post-secondary credential which are eligible to participate in certain federal student financial aid programs.

Enrollment Handbook
Similar to a mutual fund's prospectus, a 529 college savings plan's Enrollment Handbook (PDF 525 KB) provides detailed information about the plan, including investment options and fees and expenses.

Enrollment-based Portfolios
A Portfolio in which the assets are invested in a combination of Underlying Investments in accordance with a target asset allocation specified for such Portfolio based on the number of years until the Designated Beneficiary is expected to attend college.

Equity Fund
Mutual funds that invest mainly in stocks. Some equity funds may focus primarily on smaller, mid-sized, or larger corporations, or on specific market sectors. Also known as stock funds.

Fixed Income Funds
Mutual funds that invest in bonds. Some fixed income funds may focus primarily on short-term, intermediate-term and long-term maturities. May also be known as Bond Funds.

Gift Tax
A tax on the right to give away property during ones life.

IRS
The Internal Revenue Service is the nation's tax collection agency and administers the Internal Revenue Code enacted by Congress.

Member of the Family
For purposes of changing the Designated Beneficiary, the definition of a "Member of the Family" of the Designated Beneficiary is:

• a son or daughter, or a descendant of either
• a stepson or stepdaughter
• a brother, sister, stepbrother or stepsister
• the father or mother, or an ancestor of either
• a stepfather or stepmother
• a son or daughter of a brother or sister
• a brother or sister of the father or mother
• a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law
• the spouse of the beneficiary or any of the foregoing individuals
• a first cousin

For purposes of determining who is a "Member of the Family," a legally adopted child of an individual shall be treated as the child of such individual by blood. The terms "brother" and "sister" include half-brothers and half-sisters.

Non-qualified Withdrawals
Withdrawals from a college savings account that are used for non-college related expenses. Non-qualified withdrawals are subject to ordinary federal income tax, any applicable state income tax and an additional 10% federal penalty tax on earnings.

Qualified Higher Education Expenses
Qualified Higher Education expenses include tuition, fees, books, supplies, and equipment required for the enrollment and attendance of a Designated Beneficiary at an eligible institution of Higher Education and, certain room and board expenses. Qualified expenses also include certain additional enrollment and attendant costs for special needs beneficiaries.

Qualified Withdrawals
A withdrawal from an Account that is used to pay the Qualified Higher Education Expenses of the Designated Beneficiary. These withdrawals are tax free and cover expenses such as tuition, room and board (if the student is enrolled on at least a 1/2-time basis), books, supplies and other equipment.

Rollover
A tax-free reinvestment from one qualified plan to another within a specific time frame. The time frame to complete a rollover is 60 days.

Sales Charge (Front-end Load)
The fee charged when you purchase shares in a 529 Plan.

Section 529
Section 529 of the Internal Revenue Code specifies the requirements for qualified tuition programs (529 plans).

Share Class/Unit Class
A single 529 college savings plan or mutual fund may offer more than one "class" of shares/units to investors interested in investing through an Advisor. Each class represents a similar interest in the plan's or fund's portfolio, but has different fees and expenses.

Static Portfolios
A Portfolio in which the assets are invested in a combination of Underlying Investments in accordance with a target asset allocation specified for such Portfolio, in which the Portfolio’s investment remains the same and does not change based on the age of the Designated Beneficiary.  Static Portfolios feature the flexibility to choose from among several investment options that may align with your tolerance for risk, your time horizon and other factors.

Successor Account Owner
The person designated by the Account Owner to assume ownership of the Account in the event of the Account Owner’s death or legal incapacity while there is still money in the Account.

Tax Deductible
An expense or other item that can be deducted from annually reported income to reduce the amount of taxable income.

Tax-Deferred
Income which is not currently taxable but will be taxed in the future; e.g., when the income is distributed from the account.

UGMA /UTMA
The Uniform Gifts to Minors Act or Uniform Transfers to Minors Act. At the direction of the custodian, control over money in an UGMA/UTMA account automatically is transferred to the beneficiary when he or she reaches the age specified in the state’s UGMA\UTMA statute.

Underlying Investment Expenses
Because 529 college savings plan portfolios typically invest in a number of investments, the portfolios bear part of the fees and expenses of those securities. This expense is expressed as a percentage of the plan's assets. These fees are not directly paid, but are reflected within the portfolios daily unit value calculation. Underlying investment expenses include:

1. Management Fees-These fees include amounts paid to the fund's investment advisor for managing the portfolio and providing other services, such as shareholder record keeping and preparing account owner statements and reports
2. 12b-1 Fees-Named after a Securities and Exchange Commission (SEC) rule, these fees include costs of distributing the fund shares to investors
   • Other Expenses-These expenses include any other annual fund expenses

It is important to note that there is market risk involved when investing in mutual funds, including possible loss of principal.

The State Farm College Savings Plan is available by registered representatives of State Farm VP Management Corp., One State Farm Plaza, Bloomington, IL 61710, 1-800-447-4930. Please read carefully the Enrollment Handbook and Participation Agreement and consider the investment objectives, risks, fees and expenses and other information associated with The State Farm College Savings Plan before investing or sending money. State and local tax laws vary. If you or the designated beneficiary are not Nebraska residents, you should consider before investing whether you or the designated beneficiary's home state offers any state tax or other benefits to its residents for investing in the plan offered by the state.

The State Farm College Savings Plan (the plan) is sponsored by the State of Nebraska and administered by the Nebraska State Treasurer. The plan is established in cooperation with State Farm VP Management Corp. ("State Farm"), the State of Nebraska, and OFI Private Investments Inc. (OFIPI), a subsidiary of OppenheimerFunds Inc, pursuant to which State Farm offers classes of shares in a series of accounts within the Nebraska Educational Savings Plan Trust (the "Trust" and plan issuer) that are distributed by OppenheimerFunds Distributor, Inc. (OFDI and together with OFIPI, “Oppenheimer”).The Trust offers other accounts that are not affiliated with the plan.

The Nebraska State Treasurer serves as trustee of the plan; OFIPI serves as the investment manager, with the oversight of the Nebraska Investment Council; and servicing agent: OFDI serves as the distributor: Union Bank & Trust (“Union Bank”) serves as the program manager.

The State Farm College Savings Plan is not insured or guaranteed by State Farm, Oppenheimer,  Union Bank and Trust Company, the Trust, the State of Nebraska, the Nebraska State Treasurer, the Nebraska Investment Council, any of their respective affiliates, directors, officers or agents, or any other entity.

State Farm VP Management Corp Risk/Important Disclosures. State Farm Mutual Funds Prospectus. The State Farm College Savings Plan Enrollment Handbook (PDF 525 KB) .

AP2009/10/3400