The CollegeSure CD

The InvestorSure CD

The Montana Family Education Savings Program

The Arizona Family College Savings Program

 

 

The CollegeSure CD

How does the CollegeSure CD work?
The CollegeSure CD is a certificate of deposit indexed to college costs and guaranteed to meet future tuition, fees, room and board. It's backed by the full-faith and credit of the U.S. Government to at least $250,000 per depositor. FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor through December 31, 2013.

Each year it pays an annual percentage yield tied to college inflation, as measured by the change in the College Board's Independent College 500 (IC500) Index. It allows you to prepay college costs today at a fraction of tomorrow's prices. And, the CD provides a 2% floor rate for added protection.

Deposits of as little as $250 purchase CollegeSure CDs. Direct deposits of as little as $100 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?
You'll earn an interest rate tied to the year-to-year increase in college costs. The interest rate adjusts each July 31. The annual percentage yield (APY) over the term of each CollegeSure CD is not less than the college inflation rate less a 3.00% margin. For the past twenty-five years, the annual college inflation rate has ranged from a high of 14.35% to a low of 4.24%. For the year ended July 31, 2008, the college inflation rate was 5.49%.

How is the CollegeSure CD priced?
The purchase price exceeds the value of the IC 500 at the deposit date. For example, if today's cost for 10% of one year of private college is $3,720, you would deposit $5,736 to guarantee 10% of the future cost of private college as measured by the IC 500. CollegeSure CD deposits, however, begin as low as $250.00.

Should the CD maturities coincide with anticipated attendance at college or graduate school?
Yes. Maturities are available from 3 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. FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor through December 31, 2013.

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 Index and FDIC insured to at least $250,000 per depositor. FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor through December 31, 2013. 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 85 percent of the average increase in the S&P 500 based on 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%.

Deposits of as little as $1,000 purchase InvestorSure CDs while mail in deposits of as little as $500, direct deposits of $250 a month or more or $100 per pay period will accrue interest in an InvestorSure Accumulator Account. CDs will automatically be purchased if your Accumulator balance exceeds $1,000 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&P500 and based on a formula*. The chart on the InvestorSure 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 85-100% of the average increase in the S&P500 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 85% 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&P500, it is not reasonable to assume this can be done for every issuing of the CD.

What are my choices upon maturity?
The Bank will provide written notification to investors at least 60 days before the Maturity Date. The Account Owner must provide the Bank written instructions at least 30 days prior to the Maturity Date if it desires the proceeds upon Maturity to be invested other than in accordance with the default actions described below. If the Bank does not receive such instructions, the Bank will take one of the following Default Actions:

• If the beneficiary’s date of entry into college is five years or more after the Maturity Date, the Bank will transfer the matured funds to a new InvestorSure CD issued under the then current terms and conditions for issuing InvestorSure CDs (if the Bank is continuing to issue InvestorSure CDs under the Program);
• If the beneficiary’s date of entry into college is more than one year and less than five years after the Maturity Date and the Bank is still offering the CollegeSure CD under the Program, the Bank will transfer the matured funds to a CollegeSure CD with a maturity date of July 31 preceding the expected year of matriculation under the then current terms and conditions applicable to CollegeSure CDs; and
• If the beneficiary’s date of entry into college is one year or less after the Maturity Date (or neither of the two preceding options applies), the Bank will hold the matured funds in an InvestorSure Accumulator Account until the funds are required for qualified higher education expenses at an eligible educational institution, or until the Account Owner is permitted to and does provide other permitted investment instructions.

At Maturity, the matured funds will be applied using one of the Default Actions, unless the account owner chooses one of the following pursuant to written instructions:

• Transfer the matured funds to a CollegeSure CD (if the Bank is continuing to offer CollegeSureCDs under the Program)
• Re-invest the matured funds in another InvestorSure CD under the then current terms and conditions (if the Bank is continuing to offer InvestorSure CDs under the Program);
• Roll over the matured funds to another 529 plan investment;
• Hold the matured funds in the InvestorSure Accumulator Account; or
• Withdraw the funds.

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. FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor through December 31, 2013.

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 800-888-2723 or visit our product page.

 

 

MFESP FAQ

What is the Montana Family Education Savings Program?
It's a tax-advantaged program created by the state of Montana 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 Board of Regents (BOR) has contracted with College Savings Bank to serve as 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.

Montana residents may deduct from Montana taxable income the amount of their contributions up to $3,000 per year single/$6,000 per year married couples filing jointly. Upon withdrawal from accounts opened at least three years, deductions are not subject to recapture if the money is used to pay qualified higher education expenses.

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 $335,000 (as of 8/1/08), 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, Montana 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 2007/2008 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 make 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. Montana residents who deducted contributions from their taxable income may be subject to tax recapture.

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 MFESP 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 MFESP.

What about Hope and Lifetime Learning Credits?
Participation in the MFESP 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 Montana law, a student loan program, student grant program, or other financial assistance program established or administered by the State of Montana or a financial assistance program administered by a college or university supported by the State of Montana 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 Montana.

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. For more information call 800-888-2723 or visit our product page.

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.

What is an eligible educational institution?
Any college, university, vocational school or postsecondary 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 (privately-owned profit making) postsecondary institutions. If you’d like to find out if a specific institution is eligible, please go to http://montana.collegesavings.com/ faq.html and click on the 2008/2009 Federal School Code database link under “What is an eligible educational institution?”.

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 MFESP 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. For 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 MFESP disclosure statement for complete details on nonqualified distributions.

Is my distribution subject to MT tax recapture?
Montana residents that claimed a Montana income tax deduction based on contributions to the program will be subject to a Montana recapture tax on nonqualified withdrawals. Withdrawals made within three years of opening the account, as well as rollovers to other qualified tuition programs are also considered nonqualified for state tax purposes.

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 montana@collegesavings.com. Additional forms as well as the most recent disclosure statement can be found online at http:// montana.collegesavings.com.

 

 

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 $335,000 (as of 10/1/08), 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 2007/2008 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 is 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.

What is an eligible educational institution?
Any college, university, vocational school or postsecondary 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 (privately-owned profit making) postsecondary institutions. If you’d like to find out if a specific institution is eligible, please go to http://arizona.collegesavings.com/ faq.html and click on the 2008/2009 Federal School Code database link under “What is an eligible educational institution?”.

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. For 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.

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