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What is a "529?"

In 1996, Congress created Section 529 of the Internal Revenue Code — as a complement to prepaid tuition plans established by many states — to help investors save for college.

Like prepaid tuition plans, 529 savings plan earnings grow tax-deferred, as long as the money is kept in your account. And, now withdrawals — used for qualified higher education expenses — are free from federal income tax.

Qualified expenses include tuition and fees, room and board, books and other supplies. State taxes may apply to the earnings portion of any withdrawal for residents of states other than South Dakota. Speak to your tax or financial advisor.

But unlike prepaid tuition plans, there are no residency requirements. 529 savings plan monies can be used to pay for higher education costs at any accredited college, university or technical school in any state.

Compare 529 Plans to Other College Savings Strategies

CollegeAccess 529 Custodial Accounts (UGMA, UTMA) Coverdell Savings Plans Pre-Paid Tuition Plan
Control of Account Account owner retains control Child takes control of account after reaching "age of majority" (18 in SD) Account owner retains control Account owner retains control
Taxation of Earnings Free from Federal and State taxes (in most states) May be subject to annual taxes Free from Federal and State taxes (in most states) Free from Federal and State taxes (in most states)
Usage Guidelines Any accredited college, university or technical school in any state None Must use for qualified education expenses before child turns 30 Must use for pre-determined school
Income Limit None None Single filers: $95,000-110,000; joint: $190,000-220,000 None
Residency Requirements None None None Generally must be a resident of the same state as school
Maximum Balance Limit $350,000 max balance per beneficiary None Annual contribution limit: $2,000 per child N/A
Change of Beneficiary Allowed Yes, to any family member at any time1 None Yes N/A
Financial Aid Implications Treated as account owner's assets2 Treated as child's assets (35% expected to be contributed) Treated as child's assets (35% expected to be contributed) Dollar-for-dollar reduction of financial aid

Click here to see Frequently Asked Questions about 529 plans.

 

1. Gift taxes may apply. Speak to your tax advisor.

2. Certain restrictions apply. See the current Plan Disclosure Statement for details.

NOTICE: CollegeAccess 529 Plan accounts are not insured by any state, and neither the principal deposited nor any investment return is guaranteed by any state. Furthermore, the accounts are not insured, nor the principal or any investment return guaranteed, by the federal government or any federal agency.

Before investing, investors should consider whether their state of residency — or their intended Designated Beneficiary's state of residency — offers any benefit, such as a state tax deduction, or any other benefits that are only available for investments in that state's 529 savings program.

Please read the current CollegeAccess 529 Plan Disclosure Statement, before investing.

CollegeAccess 529 Plan is a Section 529 college savings plan sponsored by the State of South Dakota, and managed and distributed by Allianz Global Investors Distributors LLC,
1345 Avenue of the Americas, New York, NY 10105-4800, 1-866-529-7462.

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