529 Basic Information

• 529 Basic Information
• 529 Contributions
• 529 Withdrawals
• Financial Aid

Q: What is a 529 plan?
A: 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.

Q: What's the difference between a 529 savings plan and 529 prepaid plan?
A: According to the Investment Company Institute (ICI), a 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 a payment to private and out-of-state institutions).

Q: How does The State Farm ® College Savings Plan sponsored by the State of Nebraska work?
A: The first step toward enhancing your savings for college and other post high school 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. It is important to note that there is market risk involved when investing in mutual funds, including possible loss of principal.

Q: What happens to an account if the beneficiary dies, becomes disabled, or does not attend college?
A: If the beneficiary of an account dies or becomes disabled, you will 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 that 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.

Please refer to the Enrollment Handbook (PDF 260 KB) for more information on The State Farm College Savings Plan.

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"), Invesco Aim Distributors, Inc. and the State of Nebraska, 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 managed and distributed by Invesco Aim Capital Management, Inc. ("Invesco AIM") and its affiliates. The Trust offers other accounts that are not affiliated with the plan. State Farm does not provide investment management services for the plan and the accounts in the plan are not insured or guaranteed by State Farm, Invesco Aim, 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.

Invesco AimSM is a service mark of Invesco Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the investment advisors for the products and services represented by Invesco Aim; they each provide investment advisory services to individual and institutional clients and do not sell securities. Invesco Aim Distributors, Inc. is the distributor for the retail mutual funds, exchange-traded funds and U.S. institutional money market funds represented by Invesco Aim. All entities are indirect, wholly owned subsidiaries of Invesco Ltd.

Sate Farm and Invesco Aim are not affiliates. Invesco Aim Distributors Inc. is the distributor of the plan.

The information presented in this document does not constitute tax advice. State and local tax laws vary. Additionally, your home state may only offer favorable tax treatment for investing in a plan that your state offers. Please consult your tax advisor for specific information about your tax situation, including any state tax consequences of an investment.

State Farm VP Management Corp Risk/Important Disclosures. State Farm Mutual Funds Prospectus. The State Farm College Savings Plan Enrollment Handbook (PDF 260 KB) .

AP2008/04/0409