A Strategy for Saving
A child's first step is one of the most thrilling moments in a parent's life. It means a lifetime of exploration, discovery, and learning. It also means it's time for you to take the first step – by starting your college savings plan today.
The cost of college. Higher education is getting more expensive, so you need to start saving early. This chart compares the average annual cost of tuition in 2016 with expected costs in 2026 and 2036.
The value of college. Higher education costs a lot – but it pays off. During their working lives, college graduates earn 75 percent more than those without a degree. And college grads are less likely to face unemployment. People with higher education have greater job satisfaction, better health, and are more engaged with their families and communities.
Saving vs. borrowing. Every dollar you save today means less you'll need to borrow later. Even if you only save a little, you can reduce the crushing debt many grads face. A regular program of saving – starting small and starting early – will provide the boost your child will need. By starting today, you can put dreams of college within their reach.
Pick the Plan that Works for You
Saving for college is an important investment that will pay huge dividends throughout your child's life. But first, you need to figure out how. Many financial experts agree that 529 plans are the best option for most families.
The Pennsylvania 529 College Savings Program offers two ways to save:
PA 529 Guaranteed Savings Plan (GSP) – A simple, lower-risk way to help keep pace with rising tuition costs. Save at today's lower GSP credit rates. For example, if you save enough for a semester at one of the state universities today, you'll have enough for a semester at that school in the future – no matter when or how much tuition has gone up in the meantime. The PA GSP offers five average tuition levels to select from, and growth is based on tuition inflation.
PA 529 Investment Plan (IP) – Returns on contributions are based on investment performance of your choice of 15 investment options ranging from aggressive to conservative, including age-based options which automatically progress from more aggressive to more conservative as your child approaches college age.
|How do I start?||Both plans are easy to open with as little as $15. Enroll now.|
|What does it cover?||Both plans can be used for tuition, plus some room and board costs, books and more.|
|Where can I use it?||Both plans work at most post-secondary schools, including colleges, universities, technical and professional schools, both in and out of PA.|
|What happens if the child doesn't attend college?||Both plans allow you to change the beneficiary of the account to certain members of the beneficiary's family. The Plan Disclosures describe other ways to make withdrawals.|
|Can I get my money back?||YES. In the GSP you get back at least what you put in, minus any fees. You also keep the growth on your contributions, if any.
Depending on the reason for withdrawal, growth may be calculated differently. There may be tax consequences if you don’t use the money for educational expenses.
|YES. However, the value of your investment depends on its performance, and could be more or less than you initially invested.
There may be tax consequences if you don't use the money for educational expenses.
|Can I pick my investments?||NO. You pick the type of school or tuition level to save towards. PA Treasury manages the investments of the GSP Fund.||YES. Choose from 15 investments options, all using Vanguard investment vehicles.|
|Will it keep pace with rising tuition costs?||YES. Your savings grow based on tuition inflation, when used for qualified higher education expenses.||MAYBE. Investments can gain or lose, depending on market conditions.|
Direct deposit. To retain the best workers, you need competitive benefits with low costs. At the same time, the rising cost of higher education has your employees scrambling to save – not just for children or grandchildren, but for their own professional growth.
Help your employees save for college! The PA 529 College Savings Program offers payroll direct deposit at no cost. Your employees can deposit as little as $15 every paycheck – a quick and easy way to save for education.
Benefits of direct deposit:
- Improve job satisfaction – employee compensation becomes more than payroll.
- Demonstrate commitment – address employee concerns about their children's future.
- Give a tax break – PA state tax deduction lets employees deduct PA 529 contributions.
No cost to you. PA Treasury administers the plan. We offer online enrollment via our Web site and payroll deduction. We also offer responsive customer support through our knowledgeable customer service representatives. Your employer can contribute via direct deposit, which you're probably using now!
PA College Savings Team. Our program representatives are here to help! We can help you develop a plan to communicate this new voluntary benefit option to your employees, assist your HR and Payroll departments, and answer any questions your employees may have. If now is not the right time for you to offer payroll deduction, we are available to help you provide information on the benefits and best ways to save for college.
Let us do the work:
- Host webinars for employees before, during, or after working hours on the importance of saving for college and the benefits of the PA 529.
- Lead "lunch and learns" for employees on the importance of saving for college and the benefits of the PA 529.
- Staff benefits fairs.
- Provide educational materials for staff and employees, including fact sheets, brochures and posters.
- Offer discounted enrollment for the PA 529 GSP (there is no fee to enroll in the PA 529 IP).
- Special newsletters for HR professionals.
Earn HRCI credits. PA 529 can provide your SHRM chapter, CEBS chapter, or other professional group with a free educational presentation for HR Certification Institute credits:
The HR Office as a Financial Resource: Implementing College Savings as a Voluntary Benefit
This program is pre-approved for 1.25 credits: A 1-hour presentation with a 15-minute Q&A. You'll learn:
- How to add college savings to the benefits package
- How to assess employees' knowledge and perceptions of college savings
- Benefits employees will receive by saving for college with a PA 529 plan
The presentation may be scheduled as an in-person event for your chapter, as an exclusive webinar for your members, or as a breakout session at your conference.
- Learn how we can help you offer the benefit of college savings to your employees.
- Learn about PA 529 at Work or about offering PA 529 as a voluntary workplace benefit.
- Call 1-800-440-4000 or e-mail us.
A 529 college savings plan isn't only for parents! Family members – including grandparents, aunts, and uncles – can open a PA 529 account to help fund a child's future higher education AND enjoy generous tax benefits.
You can make a dream come true. A student with a dedicated college savings account is seven times more likely to attend college than someone without such an account. Create a lasting legacy!
Retain control. Assets in your PA 529 account are excluded from your federal taxable estate, but you maintain complete control over them. If an unforeseen need arises, you can access your account – at any time, for any reason (taxes and penalties may apply). The beneficiary never gains ownership – at any age. Custodial accounts and trusts don't have this flexibility.
Control also means that you can change the beneficiary; the only restriction is that the new beneficiary must be a "family member" of the old beneficiary (as defined by the IRS; see the appropriate disclosure statement for more information). You may voluntarily give up control by transferring ownership of the account to any other person.
Accelerated gifting*. A special federal gift tax exclusion allows you to contribute a large sum in a single year. The IRS code allows for a five-year acceleration of the annual federal gift tax exclusion. This means that you can contribute up to $70,000 per taxpayer ($140,000 for married couples) per beneficiary in one year without incurring federal gift tax consequences. To take advantage of this opportunity, you simply elect to prorate a contribution of more than $14,000 evenly over five years on IRS Form 709. Of course, you can contribute any amount at any time, up to the maximum allowable account value subject to normal federal gift tax rules.
Enjoy tax advantages**
- The entire value of your account is exempt from Pennsylvania inheritance tax. Depending on your heirs, that could be a savings of up to 15 percent.
- Contributions of up to $14,000 per beneficiary per taxpayer are deductible from your Pennsylvania taxable income. For married couples filing jointly, $28,000 per beneficiary may be deducted if each spouse has taxable income of at least the amount deducted. There is no limit on the number of accounts to which you can contribute.
- Earnings on your contributions are federal and state income tax free. You pay no state or federal income tax while the contributions in your account are growing. And, when used for qualified higher education expenses, you pay no federal or state income tax even when you make a withdrawal.
- You can take advantage of these great federal and state tax benefits no matter your income.
High account maximum. You can build a college savings account of up to $511,758 for each of your beneficiaries. That's enough to cover the current cost for undergraduate and some, if not all, graduate schools at some of the nation's most expensive schools. So you can feel confident about fully funding college for those you care about!
*In the event the donor does not survive the five-year period, a pro-rated amount will revert to the donor's taxable estate.
**The availability of tax or other benefits may be contingent on meeting other requirements. Only the earnings portion of a withdrawal not used to pay for qualified expenses may be subject to federal income tax and a 10% federal penalty tax; the entire amount of the withdrawal may be subject to state and local income taxes.
Help address one of your client's top financial concerns – how to pay for college. Learn about the benefits of the PA 529 College Savings Program.
When reviewing your client's current savings strategies, think about these unique benefits with the Pennsylvania 529 College Savings Program. Only PA 529 accounts are:
- Protected in state court proceedings from creditors
- Not subject to Pennsylvania inheritance tax
- Not counted against your clients for state financial aid purposes (savings in out-of-state 529 plans will be counted)
- Eligible to earn free tuition discounts through the SAGE Scholars Tuition Rewards program
Financial data is available in the PA 529 College Savings Program Annual Report (web version). See current investment performance for the PA 529 Investment Plan.
Earn CFP (Continuing Education Credits). Financial professionals holding a Certified Financial Planners designation may register for a webinar to earn 1 hour of pre-approved continuing education credit. You can also earn credits by scheduling a face-to-face presentation for your firm, local professional chapter or at a professional conference.
An Advisor's Guide to the PA 529 College Savings Program will cover topics such as:
- The benefits and basics of the PA 529 College Savings Program
- The difference between the PA 529 GSP and PA 529 IP
- Additional support offerings for financial professionals
Information on how to register for a FREE continuing education program is available at www.cfp.net, or by calling the PA 529 at 717-772-5000.
529 QuickView access. PA 529 QuickView is a data-delivery website that gives you immediate online access to your clients' PA 529 IP accounts. No more sorting through stacks of paper, fumbling through files or waiting for the latest account information to be mailed.
PA 529 QuickView is easy to use and password-protected, so only authorized personnel have access to your clients' information. Learn more about PA 529 QuickView.
Additional resources. Let the PA 529 do the work. Communicating with your clients about college savings should be part of a comprehensive financial relationship, and the PA 529 team is a valuable resource. Whether it is supplying your office with program material or conducting an exclusive presentation, we're here to help.
Working with a PA 529 program representative provides financial professionals with direct access to program information, and gives your clients FREE online enrollment in the PA 529 GSP. To learn more, email us at advisors@PA529.com.
Additional services include:
- FREE online enrollment promo code for the PA 529 GSP (clients save $50)
- PA 529 College Savings Program marketing material
- Access to free online webinars
- Scheduling in-person meetings and presentations
- Recent editions of The PA 529 Advisor newsletter
Contact the PA 529 College Savings Program team today!