CollegeInvest 529 College Savings Plan Online

CollegeInvest 529 College Savings Plan Online

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Opening a CollegeInvest 529 College Savings Plan account ? Enrollment Kit ? CollegeInvest Direct Portfolio Plan Disclosure Statement ? Direct Portfolio Enrollment Application

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DPTOC 092010

Direct Portfolio

College Savings Plan

COLORADO 529 COLLEGE SAVINGS PROGRAM DIRECT PORTFOLIO ENROLLMENT KIT MARCH 2022

COLLEGEINVEST Trustee and Administrator

ASCENSUS / VANGUARD Managers

Congratulations on taking the first

step to making a college education a reality.

A college education is a gift that lasts a lifetime, and making that education possible is a great goal. But, as college costs continue to rise, most families are finding it more and more challenging to reach that goal. That's why we're here--to help you get there.

As a not-for-profit division of the Colorado Department of Higher Education, CollegeInvest is committed to helping Colorado families take the critical first steps toward gaining an education beyond high school. That's why we're happy to provide you with the enclosed enrollment information about the CollegeInvest Direct Portfolio College Savings PlanSM. Open an account with as little as $25 for a child, grandchild, family member, or even yourself, and save knowing the funds can be used at eligible institutions nationwide. Plus, you benefit from unique tax advantages you can't find with other savings vehicles.

You're on your way to setting your plan into action. Congratulations!

Enrollment Checklist

Before you start the enrollment process, review the following list so you're well prepared and have everything you need to complete the enrollment application.

1. Account Owner

w D etermine the Account Owner, the person who establishes and maintains the account. The Account Owner has overall control of the account.

w Y ou'll need the Account Owner's Full Name, Social Security Number, Date of Birth, Mailing Address, and U.S. Permanent Address handy.

2. Beneficiary

w D etermine the Beneficiary on the account. The Beneficiary is the student who will use the funds for college expenses.

w Y ou'll need the Beneficiary's Full Name, Social Security Number, Date of Birth, and Mailing Address.

3. Successor Account Owner

w D ecide if you want to name a Successor Account Owner. A Successor Account Owner becomes the owner of the account in the event of the Account Owner's death.

w Y ou'll need the Successor Account Owner's Full Name and Date of Birth.

4. Initial Contribution

w If you choose to make your initial contribution electronically or you want to establish a recurring contribution plan, you'll need a:

w Bank account number w Bank routing number

WWW.

CollegeInvest DIRECT PORTFOLIO College Savings Plan

At a Glance

CollegeInvest DIRECT PORTFOLIO College Savings Plan

Colorado State Income Tax Deduction1

Tax-Deferred Growth and Tax-Free Withdrawals2

Nationwide Usage

CollegeInvest offers the only College Savings Plans that provide Colorado residents with an income tax deduction for contributions to an account. Beginning January 1, 2022, the deductions will be limited to $20,000 per taxpayer, per Beneficiary for single filers, or $30,000 per tax filing, per Beneficiary for joint tax return filers. And the plans are open to any Colorado taxpayers, so if friends and family want to contribute to your account, they also receive the state income tax deduction for their contributions.

Funds grow free from federal and state income taxes, and as long as the funds are used for qualified higher education expenses, withdrawals are tax-free as well.3

You can use the funds in your CollegeInvest account at eligible public or private universities, colleges, or trade or vocational schools across the country. 3

Anyone Can Be a Beneficiary Open an account for a child, grandchild, niece, nephew, friend, or even yourself.

You're in Charge Low Initial Contribution

As the account owner, you decide how the funds are invested, and when and how they're used. And if your child decides not to attend college, you can transfer the funds to another qualified family member, even yourself!

You can open a CollegeInvest account with as little as $25 ($15 if contributing by payroll direct deposit), and subsequent contributions can be as little as $15.

Estate and Gift Tax Benefits4

529 plans provide a good way to remove money from your taxable estate, but not from your control. Plus, with the special gift tax provision, you can contribute up to $80,000 ($160,000 for married couples) in one year without incurring gift taxes.

1 Contributions to the plan(s) are deductible from Colorado state income tax in the tax year of the contribution, up to your Colorado taxable income for that year. May be subject to recapture in certain circumstances such as rollovers to another state's plan or nonqualified withdrawals.

2 The earnings portion of a nonqualified withdrawal is subject to federal income taxes and any applicable state income tax, as well as an additional 10% federal penalty tax. The availability of tax or other benefits may be contingent on meeting other requirements.

3 The Tax Cuts and Jobs Act of 2017 expanded the qualified use of 529 savings accounts by allowing withdrawals for K?12 tuition expenses. Section 529 of the federal tax code sets the general rules of qualified tuition programs, which authorizes each state to administer its own program and determine its unique state tax treatment and other policies. In Colorado, the intent of the state's 529 college savings plan, CollegeInvest, is to encourage savings for higher education. Colorado tax law remains unchanged and CollegeInvest 529 plans can only be used for qualified higher education expenses. Any other use, including K?12 tuition expenses, are considered nonqualified withdrawals and subject to penalties. In 2019 the SECURE Act expanded the types of eligible expenses. Beginning January 1, 2019, assets in a 529 plan used for certain apprenticeship programs and qualified loan repayments will have the same federal tax benefit as qualified higher education expenses. However, the treatment of these expenses for Colorado state income tax purposes is currently being evaluated by the State. State law determines whether earnings on withdrawals taken for payment of these expenses are taxable and/or subject to recapture by the State. We encourage you to consult a qualified tax advisor about your personal situation. See the Plan Disclosure Statement, Participation Agreement, and Privacy Policy for additional details on the qualifications and limitations on use of distributions for apprenticeship programs and qualified loan repayments.

4 For tax year 2022, contributions between $16,000 and $80,000 made in one year can be prorated over a five-year period without incurring gift taxes or reducing your unified estate and gift tax credit. If the account owner dies before the end of the five-year period, a prorated portion of the contribution will be included in his or her taxable estate. If you contribute less than the $80,000 maximum, additional contributions can be made without incurring gift taxes, up to a prorated level of $16,000 per year. Gift taxation may result if a contribution exceeds the available annual gift tax exclusion amount remaining for a given student in the year of contribution.

The CollegeInvest

$60,000

CollegeInvest Direct Portfolio College Savings Plan Account

$56,857

Account Balance

Advantage

$45,000

$47,254

As the only tax-deductible college savings plan for Colorado

$30,000

residents, CollegeInvest helps you take your college savings dollars further. Here's an example of the tax advantages that

$15,000

Taxable Account

a CollegeInvest 529 account can offer.

$0 2 4 6 8 10 12 14 16 18 Years

Source: CollegeInvest. Results are based on a $1,000 lump-sum initial investment with subsequent $150 monthly ($1,800 annual) contributions, growing at a hypothetical 5% compounded annual rate of return. The taxable account results assume an annual federal tax rate of 28% and the earnings are taxed annually. The CollegeInvest Direct Portfolio College Savings Plan Account example assumes an exemption of 28% federal tax on the earnings and a voluntary reinvestment of the Colorado state amount of 4.63% of contributions on an annual basis. In Year 1, $46.30 is added to the value of the account based on the tax-deductible initial contribution of $1,000 plus $83.34, representing the amount added to the value of the account based on the tax-deductible annual contributions of $1,800. After Year 1, only $83.34 is added back to the account, representing the tax-deduction amount on the year's contributions. These savings represent additional investable dollars compared to the taxable account example. All results assume no withdrawals are made and do not reflect any taxes or penalties that may be due upon distribution. These hypothetical illustrations do not represent any particular investments and the assumed return rate is not guaranteed. Your investment will vary and may perform better or worse than these examples, which are for illustrative purposes only. Please consult a certified tax advisor for full understanding on how state tax deductions may affect your personal tax situation.

800.448.2424

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