AFCSP FAQ
What is the Arizona Family
College Savings Program?
It's a tax-advantaged program created by the state of Arizona to encourage families
to save for their children's higher education. The program was established as a
qualified tuition program under Section 529 of the Internal Revenue Code. The Arizona
Commission for Postsecondary Education has contracted with College Savings Bank to
serve as a manager of the program.
What are the income tax
advantages?
Your earnings grow tax free while you control the assets. When the time comes to use
the money for college, earnings distributed to pay qualified higher education expenses
are also 100% tax free.
Arizona residents may deduct from Arizona taxable income the amount of their
contributions up to $750 per year single/$1,500 per year married couples filing
jointly.
Is there a contribution
limit?
Yes. A contribution may not be made if it would cause the sum of all 529 accounts for
the same designated beneficiary to exceed the lesser of the balance limit, currently
set at $340,000, or the cost in current dollars of the qualified higher
education expenses that the account owner reasonably anticipates the designated
beneficiary will incur.
Who can participate?
Any U.S. taxpayer, regardless of income, may establish a tax-favored college savings
account for anyone - including themselves.
Can others contribute to my
child's account?
Yes. A person need not be an account owner to contribute to a child's account.
However, Arizona residents who make deductible contributions must establish their own
accounts (or jointly with spouse).
What is an eligible educational
institution?
It is any institution eligible to participate in a student aid program administered by
the U.S. Department of Education. It includes virtually all accredited, public,
nonprofit and proprietary postsecondary educational institutions. To find out if a
specific institution is eligible, review the 2011/2012 Federal School Code database. If the institution has
been assigned a federal school code by the Department of Education, then it is
considered eligible under Section 529.
Does my child have to attend full
time?
No. Funds can be used to pay for tuition, fees, textbooks, supplies and equipment that
are required for the designated beneficiary to attend an eligible institution. If the
student's enrollment qualifies for at least half-time, room and board expenses are
also eligible up to a specified level.
What happens when my child is
ready to attend college?
The account owner must submit a Distribution Authorization Form.
What if my child receives a
scholarship?
Funds up to the amount of a qualified scholarship can be returned to the account owner
without incurring the 10% federal tax penalty.
What if my child does not
attend college?
The account owner may either close the account or change the beneficiary. If the
account is closed, the funds are subject to a nonqualified distribution penalty in
addition to tax reporting.
What is a nonqualified
distribution?
Nonqualified distributions are withdrawals made for purposes other than for qualified
higher education expenses. Exceptions include withdrawals relating to the death or
permanent disability of the beneficiary.
What if I take a nonqualified
withdrawal?
The account owner may withdraw funds at any time. The account balance with earnings
will be refunded. However, this refund is subject to a federal nonqualified
distribution penalty equal to 10% of earnings. CD early redemption penalties may also
apply.
Can I change the account owner
or beneficiary?
Yes. The account owner and beneficiary may be changed to certain other family members.
There is no fee for the first change of owner or beneficiary. Thereafter, a $50 fee may
be imposed for each change.
Can I also contribute to a
Coverdell Education Savings Account?
If your income qualifies to make a Coverdell ESA contribution you may contribute to
both the AFCSP and a Coverdell ESA for the same beneficiary, in the same year. Amounts
may be withdrawn tax free from an ESA to make contributions to the AFCSP.
What about Hope and Lifetime
Learning Credits?
Participation in the AFCSP does not disqualify you from claiming the Hope and Lifetime
Learning Credits if you so choose.
How does this program affect
financial aid?
Program assets will be considered if the student applies for state or federally
sponsored financial aid or scholarships. If the account is owned by the parent, account
balances are generally included in the asset of the parents rather than the student.
Beginning July 1, 2009, section 529 accounts owned by or for the sole benefit of the
student (such as custodial accounts) also will be treated as assets of the parents for
federal financial aid calculations. (As a result of a peculiarity in the Higher
Education Act of 2005, until July 1, 2009, student owned section 529 accounts (such as
in a custodial account) will not be treated as the student's or parent's assets
for financial aid purposes.) Section 529 account distributions that are not included in
taxable income are not treated as student or parent income for purposes of federal
financial aid calculations. An account owner should check the applicable rules for
financial aid programs and scholarship programs before withdrawing funds to pay
qualified higher education expenses.
Under Arizona law, a student loan program, student grant program, or other financial
assistance program established or administered by the State of Arizona or a financial
assistance program administered by a college or university supported by the State of
Arizona must treat the balance in an account as an asset of the parent of the
designated beneficiary and not as a scholarship or grant or as an asset of the student
for determining a student's or parent's income, assets or financial need. However, this
rule does not apply if it is inconsistent with requirements of federal law or a
specific grant establishing a financial assistance program.
Is this program guaranteed by
the state?
No. The program is not guaranteed by the State of Arizona.
How does this account affect
estate tax?
For purposes of federal estate tax, the value of an account generally will not be
treated as part of the taxable estate of an account owner who is not a designated
beneficiary.
Must I pay gift tax on the
contribution?
No. Account owners can make annual gifts of up to $13,000 single and $26,000 joint to
a designated beneficiary for all accounts without incurring federal gift tax. For
contribution over the limit, you may treat the money (up $65,000) as having been made
ratably over a five-year period.
Are there alternative
investments available under the program?
Yes, however the CollegeSure CD and InvestorSure CD are only available from College
Savings Bank.
Who may authorize a
distribution?
An Account Owner may seek to withdraw funds at any time. The designated beneficiary of
an account has no authority to withdraw funds from the account unless (a) the
designated beneficiary is also the Account Owner or (b) the account was established
under the Uniform Gifts (or Transfers) to Minors Act and the designated beneficiary is
of the age of majority.
What are qualified higher
education expenses?
Qualified expenses include tuition, fees, books, supplies and equipment that are
required for enrollment or attendance of the designated beneficiary at an eligible
educational institution. If the student's enrollment qualifies as at least half time,
room and board expenses are also qualified expenses up to a specified level.
Can funds be mailed directly to
an Educational Institution?
Many institutions require specific information from the Beneficiary in order to
properly credit the Beneficiary's account. Therefore, we do not mail checks directly to
Educational Institutions.
What is a qualified rollover to
another qualified tuition program?
Federal tax law permits one tax-free rollover in any 12-month period from an account in
one qualified tuition program for a designated beneficiary to an account in another
qualified tuition program for the same designated beneficiary. To initiate a rollover
from your AFCSP Account, please use the forms provided by the receiving institution. CD
redemptions prior to maturity may result in Bank-imposed penalties.
If I do not withdraw the entire
balance of my maturing CDs and / or Accumulator Account, how will the remaining funds
be reinvested?
*See terms and conditions
*All remaining funds will require you to complete and submit an additional Distribution
Authorization Form at least 45 days prior to the date you require the funds.
How will distributions be
reported for tax purposes?
Funds made payable to the account owner will generate a 1099Q in the account owner's
name and social security number. If the distribution is made to the beneficiary or UGMA accounts, a 1099Q will be issued to the
beneficiary.
Will my distribution be subject
to federal income tax?
Distributions used to pay qualified higher education expenses are exempt from federal
income tax, however the portion of your distribution that constitutes earnings will be
included in taxable income if it is not used to pay qualified higher education expenses
or rolled over to another qualified tuition program (i.e. another section 529 program)
in a qualified rollover. Please refer to the Disclosure Statement for more
information.
Will my distribution be subject
to a federal tax penalty?
The earnings portion of your distribution will be subject to a 10% federal penalty if
it is nonqualified. Distributions are nonqualified if they are not:
• used to pay qualified higher education expenses.
• rolled over to another qualified tuition program in a qualified rollover.
• made on account of death or disability of the designated beneficiary.
• made on account of a scholarship received by the designated beneficiary.
* Please read the AFCSP disclosure statement for complete details on nonqualified
distributions.
Where can I find help with this
form?
You can call a college savings advisor any Monday through Friday from 9 a.m. to 6 p.m.
Eastern time at 1-800-888-2723, or e-mail questions to arizona@collegesavings.com.
Additional forms as well as the most recent disclosure statement can be found online at
http:// arizona.collegesavings.com.
Back to top
Products FAQ
The CollegeSure CD
How does the CollegeSure CD work?
The CollegeSure CD is a variable rate certificate of deposit that offers an annual percentage yield tied to college inflation, as measured
by the change in the College Board's Independent College 500® Index (IC 500®). It's backed by the full-faith and
credit of the U.S. Government to at least $250,000 per depositor.
CollegeSure CDs pay interest annually on July 31st each year they remain outstanding. The interest rate is equal to the prior year’s college inflation rate as measured by the College Board’s Independent College 500 index change less an issue margin, and is subject to a maximum interest rate which is equal to the first year’s interest rate plus an interest rate cap. The interest rate on the CollegeSure CD is reset annually on July 31 based on the change in the IC500 index. The issue margin and the interest rate cap are determined on the contribution date.
For more information, view the
CollegeSure CD Terms and Conditions.
Deposits of as little as $250 purchase CollegeSure CDs. Direct deposits of as little
as $25 a month or $25 per pay period will accrue interest in an Accumulator Account.
CDs will automatically be purchased each time your Accumulator balance reaches $250.
For each CollegeSure CD purchased you'll receive a confirmation notice. And, each
July 31 you will receive an annual statement detailing account balances, transactions
and earnings that occurred during the year.
Are there any enrollment fees?
No. There are no enrollment fees, management charges or other expenses to erode your
investment.
What interest rate will I earn?
CollegeSure CDs pay interest annually on July 31st each year they remain outstanding. The interest rate is equal to the prior year’s college inflation rate as measured by the College Board’s Independent College 500 index change less an issue margin, and is subject to a maximum interest rate which is equal to the first year’s interest rate plus an interest rate cap. The interest rate on the CollegeSure CD is reset annually on July 31 based on the change in the IC500 index. The issue margin and the interest rate cap are determined on the contribution date.
For the past twenty-five years, the annual college inflation rate has ranged from a
high of 14.35% to a low of 4.15%. For the year ended July 31, 2011, the college
inflation rate was 4.36%.
How is the CollegeSure CD priced?
View the CollegeSure CD Pricing
webpage to see issue margins and interest rate caps, effective March 28, 2011.
Should the CD maturities coincide with anticipated attendance at college or
graduate school?
Yes. Maturities are available from 1 to 22 years. You should time your CDs to mature
the years your child attends college and/or graduate school. In most cases, CDs are
subject to early redemption penalties for withdrawals prior to maturity.
Can others contribute to my child's account?
Yes. A person need not be an account owner to contribute to a child's account.
Must I select a college now?
No. Simply begin making deposits and on each confirmation notice we'll report how
much college you've prepaid. If you'd like to target a specific college, just
call 1-800-888-2723 and we'll help you build a savings plan to meet your funding
goals.
Is my money safe?
Yes. Principal and interest are backed by the full faith and credit of the U.S.
Government to at least $250,000 per depositor.
Can I obtain more than $250,000 of FDIC insurance coverage?
Yes. The basic federal deposit insurance coverage is $250,000 per depositor. However,
the way your accounts are structured can provide maximum insurance protection. In fact,
a family of four can have as much as $3 million in FDIC protection of principal and
accrued interest.
InvestorSure FAQ
How does the InvestorSure CD work?
The InvestorSure CD is a variable rate certificate of deposit indexed to the Standard
& Poor's® 500 Composite Stock Index (S&P 500®) and FDIC-insured to at least $250,000 per depositor.
Unlike many investments, the InvestorSure CD does not risk
principal.
Should the value of the S&P 500 decline over the investment period, you will
receive your full investment back at maturity. Investments held to maturity will also
receive at least 70 percent of the average increase in the S&P 500 based upon specific a
formula. InvestorSure CDs are issued exclusively by College Savings Bank.
While historical rates of return are never a guarantee of future performance - if
the InvestorSure CD was available, the previous 80 maturing CDs (ending May 2008) would
have produced an average annual percentage yield (APY) of at least 5.40%.
For more information, view the
InvestorSure CD Terms and Conditions.
Deposits of as little as $250 purchase an InvestorSure CD. Direct deposits of $25 a month or more or $25 per pay period will
accrue interest in an InvestorSure Accumulator Account. CDs will automatically be
purchased if your Accumulator balance exceeds $250 on a CD issue date. For each
InvestorSure CD purchased you'll receive a confirmation notice. And, each July 31
you will receive an annual statement detailing account balances and transactions that
occurred during the year. Customers will also receive quarterly statements after
October 31, January 31 and April 30.
Are there enrollment fees?
No. There are no enrollment fees, management charges or other expenses to erode your
investment.
What interest rate will I earn?
You'll earn an interest rate tied to the average increase in the S&P 500 and
based on a formula. The chart on the InvestorSure CD product page
illustrates the historical average annual percentage yield for each InvestorSure CD
issued during the time periods noted.
How is the InvestorSure CD priced?
Each InvestorSure CD pays a participation rate that is between 70-100% of the average
increase in the S&P 500 from issue date to maturity and based on a formula. The
exact participation rate of each CD will not be determined until the day the CD is
issued. As an investor, you should assume that the rate is 70% when making your
investment decision.
College Savings Bank uses a complex formula to determine the participation rate and
it requires data only available on the day of issue. While the Bank will always strive
to offer the InvestorSure CD at 100% of the S&P 500, it is not reasonable to assume
this can be done for every issuing of the CD.
What are my choices upon maturity?
CSB will provide written notification at
least 60 days before the Maturity Date. Thereafter, you must
provide written instructions at least 30 days prior to the Maturity
Date if you would like the proceeds upon maturity of
the InvestorSure CD to be invested other than in accordance
with the Default Actions described in this document. If you
provide us with instructions in good order, funds will be
disbursed from your Account no later than the first Business
Day following the Maturity Date.
If CSB does not receive instructions at maturity, we will take
one of the following default actions:
- If the Beneficiary will be 17 years of age or younger by
December 31 of the year in which the CD matures, the
Bank will transfer the matured funds to a 1-year Fixed
Rate CD under the then current terms and conditions
for issuing Fixed Rate CDs;
- If the Beneficiary will be 18 years of age or older by
December 31 of the year in which the CD matures,
the Bank will hold the matured funds in a Savings
Account until you provide distribution or other
investment instructions.
Alternatively, you may choose one of the following
alternative options at maturity:
- Transfer the matured funds to a CollegeSure CD;
- Transfer the matured funds to a 1- or 3-year
Fixed Rate CD;
- Reinvest the matured funds in another InvestorSure CD
under the then current terms and conditions;
- Rollover the matured funds to another qualified program;
- Hold the matured funds in a Savings Account; or
- Take a Qualified or Non-Qualified Distribution
of the funds.
Please note that any actions other than taking a Qualified or
Non-Qualified Distribution or a default action stated above,
could be considered your once per calendar year investment
exchange as per 529 plan rules.
Is my money safe?
Yes. Principal is backed by the full faith and credit of the U.S. Government to at
least $250,000 per depositor.
Can I obtain more than $250,000 of FDIC insurance coverage?
Yes. The basic federal deposit insurance coverage is $250,000 per depositor. However,
the way your accounts are structured can provide maximum insurance protection. In fact,
a family of four can have as much as $3 million in FDIC protection of principal and
accrued interest.
Are there alternative investments available under the
program?
Yes. For more information call 1-800-888-2723 or visit our product page.
Fixed Rate CDs
How do Fixed Rate CDs work?
Fixed Rate CDs earn a fixed rate for the entire term of
the CD (1- and 3-years), determined at the time the CD is
opened. The rate will appear on your deposit confirmation
along with the annual percentage yield (APY).
The minimum initial contribution is $250. Subsequent contributions are also $250. Additional contributions may not be made to existing CDs but may be made into an existing Account to purchase new CDs offered by College Savings Bank.
If you do not intend to contribute $250 at one time, you may contribute $25 per month through direct deposits from your bank or brokerage account, or $25 per pay period using payroll deduction. Direct deposit contributions or payroll deductions are held in an Accumulator Account until the balance of your Account reaches $250. Once the funds reach the $250 level, they are used to purchase a Fixed Rate CD.
Are there any enrollment fees?
No. There are no enrollment fees, management charges or other expenses to erode your
investment.
What interest rate will I earn?
The APY is published
online at www.collegesavings.com. Account Owners will
receive the published interest rate on the Contribution Date,
except for online deposits where the Account Owner will
receive the APY applicable at the time of the day when the
online application and funding are complete. If you prefer to
mail in a check to fund the CD, the Account will be opened
at the applicable interest rate for the term selected on the
Contribution Date.
Contributions are credited to your
Account as follows:
- Contributions by check received before 2:00 p.m. Eastern
time are credited on the same Business Day. Contributions
by check received after 2:00 p.m. Eastern time are credited
the next Business Day.
- Contributions by E-Check and credit card are credited on
the next Business Day.
- Contributions by ACH or wire transfer are credited on the
Business Day the Bank receives the funds.
Accrual, Crediting and Compounding. Interest begins
to accrue on the Contribution Date, and is computed based
on the daily balance of the contribution and the actual
number of days elapsed divided by 365. Interest is compounded
and credited to your Account annually. Interest accrued on
your Account will not be paid until maturity of the CD.
No interest will be earned after maturity unless the CD is
renewed for another term.
Can others contribute to my child’s account?
Yes. A person need not be an account owner to contribute to a child’s account.
Must I select a college now?
No. Simply begin making deposits and on each confirmation notice we’ll report how
much in college expenses you’ve saved. If you’d like to target a specific college, just
call 1-800-888-2723 and we’ll help you build a savings plan to meet your funding
goals.
Is my money safe?
Yes. Principal and interest are backed by the full faith and credit of the U.S.
Government to at least $250,000 per depositor.
Can I obtain more than $250,000 of FDIC insurance coverage?
Yes. The basic federal deposit insurance coverage is $250,000 per depositor. However,
the way your accounts are structured can provide maximum insurance protection. In fact,
a family of four can have as much as $3 million in FDIC protection of principal and
accrued interest.
Back to top