Saving for College

The Utah Educational Savings Plan

The Utah Educational Savings Plan ("UESP") is a qualified tuition plan, created pursuant to Section 529 of the Internal Revenue Code of 1986, as amended. The UESP is the official 529 plan of the State of Utah and is designed to encourage adults to save for the qualified higher education expenses of their loved ones. As a 529 plan, UESP provides account owners with valuable federal tax benefits, and it also offers Utah state tax benefits to account owners who are Utah taxpayers.¹

The appealing flexibility of UESP is that any adult US citizen or resident alien can open an account without regard to age or income, and any US citizen or resident alien can use the funds for qualified expenses at any eligible educational institution here in the US or abroad. There are no minimum initial or on-going contribution requirements, and aggregate contributions of $315,000 can be made for any one beneficiary. Furthermore, an account owner can choose from a wide spectrum of investment options with varying degrees of risk and return potential, in order to best prepare for the high cost of a college education.

In short, UESP offers compelling federal and state tax benefits together with flexible program features to make saving for college easy and attractive. Some of the key benefits:

• Earnings accrue tax-free while moneys are in the account, and earnings are free from federal and state income taxes when disbursements are used for qualified higher education expenses at eligible educational institutions.²
• Account owners who are Utah taxpayers may deduct up to $1,510 ($3,020 for joint filers) in contributions per beneficiary in 2005.
• Low annual administrative fees range from 0.275% to 0.414%, plus up to $25 for annual maintenance
  • Fees include Vanguard expenses (0.025% to 0.164%), ) and 0.25% for UESP
  • Annual maintenance fees are waived for Utah account owners
  • No fees at all for the money market investment option (Option 1)
• Account owners can choose how the moneys are invested.
  • UESP offers nine investment options, which are invested in varying mixtures of stocks, bonds, and money market funds.
  • The investment options reflect the UESP's investment in mutual funds managed by the Vanguard Group and the Public Treasurer's Investment Fund.
• Account owners control how and when the moneys are disbursed.
  • Qualified higher education expenses include tuition and fees, required books, supplies and equipment, and with certain limits, room and board, at eligible educational institutions generally including 2-year, 4-year, public, private colleges and universities in the US and abroad
  • Account owners can change the beneficiary to a member of the beneficiary's family without adverse tax consequences
  • If circumstances change, account owners can withdraw funds with earnings subject to federal and state income taxes and a 10% federal tax penalty
  • Although the earnings are taxable, the 10% federal tax penalties does not apply if the beneficiary dies, is disabled, wins a scholarship or attends a military academy

For detailed information on all aspects of UESP, you must read the 2005 Program Description. To open an account, you must submit an Account Agreement to UESP. See Enroll Now on the UESP website. Investors who are not Utah taxpayers should determine whether the state in which they reside or pay taxes offers a 529 plan and if so, whether that plan offers state tax or other benefits not available through UESP. Neither the State of Utah, UESP, the FDIC nor any governmental entity guarantees a return on your investment or the principal you invest. You could lose the money you invest in UESP.

 ¹  Investors who are not Utah taxpayers should determine whether the state in which they reside or pay taxes offers a 529 plan with tax or other benefits not available through an investment in the UESP.

 ²  The federal tax provision regarding tax exemption will sunset on December 31, 2010 unless extended or made permanent by Congress. If the provision sunsets or is not extended, then the earnings on qualified disbursements will be taxed at the beneficiary's applicable income tax rate.