What is a 529 plan?
529 plans were established to help parents and grandparents save money for college that can be used at schools across the country and some institutions abroad. (The name "529" refers to the Internal Revenue Code section that discusses this type of college savings tool.) With the many attractive features and benefits they offer, 529 plans have become one of the most popular ways to save for college.
Can't I just borrow money for college?
Saving even a little can be more cost effective than borrowing. While most families combine some level of saving and borrowing when paying for college, putting aside money early and often is a good way for you to build your savings. Saving and investing even a little each month can be more financially prudent than borrowing money and paying interest on it.
How do I open an Arkansas 529 GIFT Plan account?
You (the account owner) establish an account by completing an enrollment form and by making an investment in an account for the benefit of an individual you choose (the designated beneficiary). You can also enroll online. You may open more than one account; each account must be for the benefit of a different named individual designated beneficiary in order to comply with federal tax law requirements.
Who can open an account?
All U.S. citizens and resident aliens 18 or older with a physical address within the United States or Puerto Rico can open an account for anyone they would like to help save for college. There are no state residency requirements or income limits on participation.
What are the state tax benefits of the Arkansas 529 GIFT Plan?
Arkansas taxpayers can deduct up to $5,000 (up to $10,000 for married couples) of their Arkansas 529 GIFT Plan contributions from their Arkansas adjusted gross income.1 If you are a resident of Arkansas, your earnings are state-tax free if withdrawn to pay for qualified higher education expenses. If you are not a resident of Arkansas, consider whether your state or the designated beneficiary's home state offers a 529 plan that provides state tax or other benefits that are only available for investment in such state's qualified tuition program.
Can I change the designated beneficiary on the account?
Yes. You can change the designated beneficiary to a qualifying Member of the Family of the current designated beneficiary without incurring federal income taxes or penalties.2 Please see the Program Description for more details.
What if the designated beneficiary decides not to go to college?
If the designated beneficiary decides not to go to college, you have three options:
- Stay invested. You can leave the money in the account in case the designated beneficiary decides to attend school later. There is no age limit for using the money.
- Change the designated beneficiary. You can change the designated beneficiary on your account provided that the new designated beneficiary is an eligible Member of the Family2 of the former designated beneficiary.
- Withdraw the money for other uses. The earnings portion of a withdrawal not used for a designated beneficiary's qualified higher education expenses is subject to federal and state income taxes and may be subject to a 10% federal penalty tax. Exceptions to this penalty include a withdrawal made because the designated beneficiary:
- Dies (if paid to a designated beneficiary of the designated beneficiary or the estate of the designated beneficiary).
- Becomes disabled.
- Receives a scholarship, to the extent the withdrawal amount does not exceed the scholarship amount.
- Attends a United States Military Academy, the United States Naval Academy, the United States Air Force Academy, the United States Coast Guard Academy, or the United States Merchant Marine Academy, to the extent that the amount of the withdrawal does not exceed the costs of education attributable to such attendance.
Additionally, any accumulated earnings that are withdrawn from your account must also be reported on the recipient's income tax return for the year in which they are withdrawn. Contact your tax advisor to determine how to report a non-qualified withdrawal.
Can I open an account for more than one designated beneficiary?
Yes. While there can be only one designated beneficiary named for each account, you can open separate accounts for different beneficiaries. Note: The same individual can be the designated beneficiary of multiple accounts. For example, a father, mother, grandparent, and uncle can each open a separate account for the same designated beneficiary and can also open separate accounts for other beneficiaries. The aggregate balance of all accounts for the same designated beneficiary may not exceed the Maximum Contribution Limit, which currently is $366,000.
Can I roll over money from another 529 plan into the Arkansas 529 GIFT Plan?
Yes. You may perform a federal tax-free rollover from another 529 plan into the Arkansas 529 GIFT Plan for the same designated beneficiary once every 12 months. You may also perform a federal tax-free rollover from another 529 plan into the Arkansas 529 GIFT Plan to a qualifying Member of the Family of the current designated beneficiary.2
What expenses are involved in the GIFT Plan?
Total annual asset-based GIFT Plan fees are 0.53% (0.39% for the GIFT Plan Savings Portfolio). For example, if you invest $1,000, the annual fee would be just $5.30 ($3.90 for the GIFT Plan Savings Portfolio). All non-resident accounts are charged an annual account fee of $20, and that fee is waived if the designated beneficiary or account owner is a resident of Arkansas. Please refer to the Program Description (included in the Enrollment Kit) for more information on fees.
How do I enroll in the Upromise rewards service?
You're automatically enrolled in the Upromise rewards service when you sign up for the AR 529 GIFT Plan, so you're all set. If you do not wish to enroll at this time, simply check the decline box when completing the online AR 529 GIFT Plan application.3
Who can be the designated beneficiary of an account?
The person on whose behalf you're opening the account (the designated beneficiary) must be a U.S. citizen or resident alien with a valid Social Security or taxpayer identification number. Each account may have only one designated beneficiary, but you may open as many accounts for as many different beneficiaries as you want. You do not have to be related to the designated beneficiary, and you may choose yourself as the designated beneficiary.
Can I change the designated beneficiary?
You can change the designated beneficiary on your account provided that the new designated beneficiary is an eligible Member of the Family of the former designated beneficiary.2
Why do you need my personal information, including my Social Security number (or taxpayer identification number) and birth date?
The Plan is required by federal law to obtain certain personal information, which will verify your designated beneficiary's identity. If you don't provide the requested information, we will not be able to open the account. If we are unable to verify the designated beneficiary's identity, the Plan reserves the right to close the account or take other steps we deem reasonable. Your designated beneficiary's Social Security number is also required for tax-reporting purposes.
1Contributions to the Plan in a tax year are deductible from Arkansas state income tax, subject to recapture in subsequent years in which a non-qualified withdrawal or a rollover out to another state's 529 plan is made.
2For beneficiary changes to occur without federal or state income taxes, the new beneficiary must be a Member of the Family of the immediately preceding beneficiary. See the Program Description for the definition of Member of the Family.
3Upromise is an optional service offered by Upromise, Inc., is separate from the GIFT College Investing Plan, and is not affiliated with the State of Arkansas. Terms and conditions apply to the Upromise service. Participating companies, contribution levels, and terms and conditions are subject to change at any time without notice. Transfers from Upromise to a GIFT Plan account are subject to a $25 minimum. Upromise and the Upromise logo are registered service marks of Upromise, Inc.