Scholars Choice operational specific FAQs
What is a 529 plan?
A 529 plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996.
Who is Scholars Choice and CollegeInvest?
Scholars Choice Education Savings Plan is a financial-professional sold 529 plan administered by CollegeInvest, a division of the Colorado Department of Higher Education. TIAA-CREF Tuition Financing, Inc. is the plan manager, and Nuveen Securities, LLC is the distributor. Scholars Choice offers a diverse investment menu with investment portfolios that utilize underlying funds from Nuveen, TIAA, and other leading asset managers. Learn more about Scholars Choice.
Why choose a 529 plan to save for education?
- Tax advantaged growth
- Potential for state tax deductions
- Estate planning benefits
- Reduced gift tax
- Tax-free withdrawals
Learn about the top 10 reasons to save with Scholars Choice.
What are the primary benefits of a 529 plan?
- Transfer account balance from one beneficiary to another
- Fund selection, portfolio construction, asset allocation and performance monitoring for the plan
- Broad range of portfolio options
Who can be a beneficiary?
The beneficiary must be a U.S. citizen or resident alien with a valid social security number or other taxpayer ID number. The beneficiary doesn't have to be related to you and doesn't have to live in the same state as you or in the programs sponsor state. As an account owner, you can also name yourself as beneficiary and use the money for your own education.
Who retains control of the money?
The account owner retains control of the account. Unlike certain other types of college savings vehicles, Scholars Choice allows you to maintain ownership and control over your account. Only the account owner may make a withdrawal or complete other transactions, account elections and profile changes.
Who can be an account owner?
One of the many benefits of the Scholars Choice plan is its versatility. Any U.S. citizen or resident (plus residents of Puerto Rico, Guam and the U.S. Virgin Islands) with a valid social security number or tax identification number — can open accounts for the benefit of anyone. You can even open an account for yourself and change the beneficiary at any time to another qualified family member.
How can withdrawals be used?
Qualified withdrawals are intended to pay for qualified higher education expenses at an eligible educational institution that occurred after the account was initially established. Withdrawal requests should be submitted to Scholars Choice no later than December 31 of the calendar year that the expenses were paid/incurred.
Does a 529 plan affect financial aid?
Assets in accounts owned by a dependent student or one of their parents are considered parental assets on the FAFSA. When a school calculates the student's expected family contribution (EFC), a maximum of 5.64% of parental assets are counted. This is quite favorable compared to other student assets, which are counted at 20%. Higher EFC means less financial aid.
Being the account owner or beneficiary of an account may adversely affect the ability to receive financial aid or other benefits under government programs or from a school.
Is financial aid impacted if the 529 plan is held by a grandparent or anyone else?
Due to the FAFSA Simplification Act of 2021, will be in effect in the coming years, assets held in a 529 account owned by a grandparent, other relative or anyone else besides a dependent student or one of their parents will have no effect on the student's FAFSA-eligibility to receive financial aid. Prior to the Act, a student’s FAFSA would report a grandparent’s 529 plan withdrawals as the student’s income on a 2-year look-back basis.
What if the beneficiary does not attend college?
If the beneficiary does not attend college, the account owner can change the beneficiary to another member of the family (see below) or even take the money back.
Please note: Because there is no age or time restriction for Colorado-sponsored 529 Plans, the account owner can leave the money in the account in perpetuity.
- Eligible members of the family of the beneficiary
- Son, daughter, stepchild, foster child, adopted child or a descendant
- Son-in-law, daughter-in-law
- Siblings or step-siblings
- Brother-in-law, sister-in-law
- Father-in-law, mother-in-law
- Father or mother or ancestor or either, stepmother, stepfather
- Aunt, uncle or their spouse
- Niece, nephew or their spouse
- First cousin or their spouse
Can multiple people open separate accounts for the same beneficiary?
Yes. For example, a father, mother, grandparent, and uncle can each open a separate account for the same beneficiary and can also open separate accounts for other beneficiaries. However, all accounts for the benefit of the same beneficiary, in the same state-sponsored plan, are aggregated and cannot exceed the state’s maximum contribution limit. Please refer to the Plan Description for the maximum contribution limit.
What if the beneficiary gains a scholarship?
If the beneficiary receives a scholarship, money – up to the amount of the scholarship – can be withdrawn without the customary 10% federal penalty. However, ordinary income tax (at the distributee’s tax rate) is applied to the earnings portion of the distribution.
Can I have 529 plans in multiple states?
Yes. 529 plans have no state residency requirements. You can contribute to your in-state plan to capture a state tax deduction (if applicable). You may also hold multiple 529 accounts. For example, open an in-state plan and contribute up to the amount of your home state tax deduction, and then open a Scholars Choice 529 account to invest additional money you would like to contribute toward education savings.
What is the current interest rate being offered by the TIAA-CREF Life Funding Agreement?
Accumulations (including contributions and earnings) under the TIAA-CREF Life Funding Agreement for the Enrollment Year Investment Portfolios and Conservative Allocation Portfolio has an effective annual interest rate of 1.60%, and are guaranteed to earn this rate through June 30, 2023, subject to the claims-paying ability of TIAA-CREF Life Insurance Company.
Scholars Choice operational specific FAQs
What investment options are offered?
Enrollment Year Investment Portfolios — The enrollment year investment portfolios are divided into ten target portfolios that invest in multiple mutual funds, each of which has a different investment strategy. You may invest in the portfolio that corresponds to the beneficiary’s expected year of enrollment, or the one that best meets your varying investment objectives, risk profiles, and investment time horizons.
The further out the enrollment year (for younger designated beneficiaries, for example), the investment will seek a favorable long-term return by investing primarily equities. While equities (i.e., stocks) typically have a higher level of risk, they may also have greater potential for returns than more conservative income-seeking securities (i.e., bonds). As the beneficiary's enrollment year approaches, the portfolio will automatically adjust to become more conservative. By enrollment time, a majority of assets will be in investments designed to be more conservative and lower-risk.
Target Allocation Portfolios — Four Target Allocation Portfolios are designed for investors who want to tailor their strategy based on their personal risk tolerance and goals. The portfolios span a continuum, ranging from lower-risk/lower reward potential — to higher-risk/higher reward potential. Each Target Allocation Portfolio invests in multiple underlying funds, and the Conservative Allocation Portfolio invests in the Funding Agreement. Target Allocation Portfolios do not change with the age of the beneficiary.
Individual Fund Portfolios — If you and your financial professional want to build your own portfolio — or complement another strategy by emphasizing a particular asset class — consider the Individual Fund Portfolios. Each portfolio invests 100% of its assets in a single underlying fund.
What is the initial deposit requirement for Scholars Choice Education Savings Plan?
The initial required minimum contribution is $25. This minimum contribution can be waived if a systematic recurring contribution (automatic funds transfer) is established when the account is opened. Subsequent minimum contribution is also $25.
How to enroll in electronic delivery of Scholars Choice documents?
Account owners may consent to electronic delivery of Quarterly Account Statements, Confirmations, Tax Form 1099-Q, and the Scholars Choice Plan Description depending on the recordkeeping platform your account has been set-up on. Regardless of the account owner’s chosen electronic delivery preference, these documents are viewable within Scholars Choice online account access. To establish electronic delivery, visit scholarschoice529.com and follow instructions to sign into your secure online account. Once signed into your online account, click “View Details” for a beneficiary and select “Profile & Documents,” then “Delivery Preferences” from the left hand navigation.
Where can I obtain 529 specific forms?
529 forms are available on our Forms and Applications webpage at forms.scholars-choice.com.
What tools/calculators are available to help make 529 plan decisions?
The 529 tools listed below are available:
- 529 Savings Calculator
- 529 State Tax & Fee Comparison Calculator
- 529 College Savings Hypothetical Tool
What are the various ways to contribute to a Scholars Choice Education Savings Plan 529 Account?
There are several ways to contribute, as follows:
- Check made payable to Scholars Choice
- Recurring Contribution (Automatic Funds Transfer) from your registered bank account
- Payroll Direct Deposit
- Rollover from another 529 Plan
- Electronic Funds Transfer (EFT)
How can I participate in a crowdfunding/gifting program?
Ugift® - once Scholars Choice online account access has been established, you may participate in the free crowdfunding/gifting service that invites their family and friends to celebrate important milestones with gift contributions to their Scholars Choice 529 account. You will get one simple code (per 529 account) to share with everyone you would like to invite to contribute. This code never expires, and gift givers can easily manage multiple gift contributions. Gifting requests can also be posted on social media. To learn more, log into your secure Scholars Choice online account at scholarschoice529.com and click on Ugift®.
What types of fees and expenses are involved with investing in the Scholars Choice Education Savings Plan?
Fee and expense information can be found in the Scholars Choice Education Savings Plan Description, found here.
Why is the Scholars Choice Education Savings Plan Description important?
The Plan Description provides an overview of the key features, and detailed information about the Scholars Choice Education Savings Plan. Before investing, you should read it carefully to make an informed investment choice.
How are refunds of tuition and other qualified expenses handled?
If the beneficiary of your Scholars Choice Education Savings Plan account has received a refund from an educational institution for tuition, room & board, or any other qualified expense, that money can be reinvested into your Scholars Choice Education Savings Plan account, without tax or penalty on the earnings, as long as they do so within 60 days of the date of the refund.
Additionally, that recontribution would be treated as a NAV purchase. From a principal and earnings standpoint, the entire amount of the recontribution would be treated as new money (i.e., goes back into the account all as principal).
You, along with your financial professional, can use the Scholars Choice “Additional Contribution Form” to recontribute tuition reimbursement checks. Fillable forms can be downloaded from our Forms and Applications webpage at forms.scholars-choice.com. (Important note to financial professionals with omnibus selling institutions that hold the Scholars Choice Education Savings Plan in Street Name: Contact your back office for instructions specific to your firm.)
What is First Step by CollegeInvest?
First Step by CollegeInvest is a program that gives every child born or adopted in the State of Colorado a $100 contribution to their Scholars Choice Education Savings Plan 529 account. The Colorado Legislature passed this law in May 2019 and the program runs for 20 years. The program is administered by CollegeInvest.
Who is eligible for First Step by CollegeInvest?
The one-time contribution is available for all children born or adopted in the State of Colorado which began on January 1, 2020. Children and their parent or guardian must be U.S citizens or resident aliens who have been assigned a social security number or federal tax identification number. The parent or legal guardian must be the account owner of a Scholars Choice Education Savings Plan account with the eligible child listed as the beneficiary and apply before the child’s fifth birthday.
How can Colorado Residents apply for First Step by CollegeInvest?
As a Colorado resident, you can apply online at collegeinvest.org/first-step. Once approved, you will receive a welcome email and the contribution will be deposited into the child’s account within 30 days. You will also need to provide your child’s official birth certificate or adoption documents, issued by the State of Colorado, and your Scholars Choice Education Savings Plan 529 account number.
Will there be any tax implications on contributions for First Step by CollegeInvest?
According to CollegeInvest, the contributions are treated as a scholarship; therefore, the recipients don’t pay taxes on it.
What are the tax benefits to Colorado residents?
Colorado is the home state of the Scholars Choice Education Savings Plan.
Colorado state taxpayers are eligible for a Colorado income tax deduction for contributions to a Colorado 529 plan. On or after January 1, 2022, the Colorado income tax deduction will be limited to $20,000 per taxpayer per beneficiary for single filers, or $30,000 per tax filing, per beneficiary for joint filers. You should consult a tax advisor regarding the application of these deduction limits to your particular circumstances.
Do I receive tax benefits if I purchase the Scholars Choice Plan and live in another state?
Depending on your state of residence, you may be able to deduct your contributions. Please refer to Understanding State Tax Deductions for more information.
Is there a penalty for a non-qualified withdrawal?
The earnings portion of non-qualified withdrawals is subject to federal and state taxes, at the beneficiary’s tax rate if applicable, plus an additional 10% federal tax. The withdrawal can only be made payable to the account owner or the beneficiary.