INVESTMENT PLAN - PA529

INVESTMENT PLAN

ENROLLMENT GUIDE

WELCOME FROM THE TREASURER

I'm pleased to share information on the Pennsylvania 529 Investment Plan (IP) administered by the Pennsylvania Treasury Department.

Congratulations on taking the first step toward saving for future education costs! Student debt is a serious problem, and one of the best options to help reduce borrowing is to take advantage of the PA 529 IP.

At Treasury, we want to make it as easy as possible for you to start saving now. This enrollment guide explains some of the key benefits of the PA 529 IP, which offers investment options that range from conservative to aggressive.

Tens of thousands of Pennsylvania families just like yours have used the PA 529 IP to reach their savings goals. In fact, since its inception, more than $2.2 billion has been paid from the PA 529 IP to cover qualified higher education expenses. It's a flexible, tax-advantaged way to help you save for the cost of higher education. And it's one of only two programs in the entire nation to earn a Gold Rating from Morningstar in 2023!

Should you have any questions as you review the information contained within this enrollment guide, please visit our website, , email PA529@, or call our customer service center at 800-440-4000. We want to help you start saving today!

Sincerely,

Stacy Garrity Pennsylvania Treasurer

TABLE OF CONTENTS

PA 529 ? The Smart, Tax-Advantaged Way to Save for Education 1 Generous Tax Breaks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Easy to Set Up, Contribute To, and Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 MorningstarTM rating and Ugift? contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Better State Financial Aid Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Get Your Money Back at Any Time, for Any Reason 4 Make Saving Automatic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Choose an Investment Option That's Right for You 6 Build Your Own Education Savings Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 - 8 Earn Additional Savings for Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Earn College Tuition Discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

PA 529 ? THE SMART, TAX-ADVANTAGED WAY TO SAVE FOR EDUCATION

You have choices in ways to save for education. Many financial experts agree that a 529 plan is the best option for most families.

HIGHER EDUCATION IS WELL WORTH THE COST

A 529 savings plan is a tax-advantaged way to help families like yours save for future education expenses. The name "529" comes from the section of the Internal Revenue Code that specifies the plans' federal tax advantages.

The PA 529 Investment Plan (IP) is a mutual fund-based investment product. You can select from more than a dozen individual options, from conservative to moderate to aggressive, and even a socially responsible portfolio.

You can also select a target enrollment date portfolio which gradually rebalances over time as your child nears his or her projected enrollment date.

The Vanguard Group - one of the nation's leading investment companies - serves as investment manager for the PA 529 IP.

Higher education is expensive ? but it pays off over your child's lifetime. How much? College graduates earn about $2.1 million over their working lives, while those without a degree earn $1.2 million.

College grads are less likely to face unemployment. In general, people with a higher education have greater job satisfaction, better health, and are more engaged with their families and communities.

The PA 529 Investment Plan (IP) received its first ever Morningstar Gold Rating in 2023, standing out as one of the best plans rated by the financial services company.

Anyone age 18 or older can open a PA 529 IP account. There's no minimum to enroll, so you can contribute as little or as much as you'd like up to $511,758 per beneficiary, and make contributions whenever you want.

Education is getting more expensive, so you need to start saving early. The chart below compares the average annual tuition cost for several types of colleges and universities against what they are expected to cost in 10 and 20 years.

You can use your PA 529 IP account to pay for qualified higher educational expenses, including tuition, fees, books, certain room and board expenses, equipment and computers, at most colleges and universities, and many technical and career schools nationwide.

You may also use a PA 529 IP account to pay qualified education loans, certain expenses for certified and registered apprenticeship programs, and qualified K-12 tuition expenses up to $10,000 per year, per student at public, private, or religious schools.

CURRENT AND PROJECTED ANNUAL COLLEGE TUITION COSTS

$180,000 $160,000

$173,598.71

IVY LEAGUE COLLEGES

$140,000 $120,000 $100,000

$104,069.97

$111,199.15

PRIVATE FOUR-YEAR COLLEGES

PA STATE-RELATED UNIVERSITIES

$80,000 $60,000 $40,000 $20,000

$0

$62,388.48

$39,963.12

$18,649.92

$7,716.00

$4,512.60

2023-24

$66,662.32

$28,962.76 $11,149.96

$6,679.75

2033-34

$44,978.27

$16,112.18 $9,887.66

2043-44

PA STATE SYSTEM OF HIGHER EDUCATION

PA COMMUNITY COLLEGES

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The chart assumes average annual tuition inflation rates: Community Colleges, 4.50%; State System of Higher Education, 4.25%; State-Related Universities Average, 6.00%;

Private Four-Year Colleges, 5.25%; and Ivy League Colleges, 5.25%. Although these projections are based on historical and projected rates of tuition inflation at each type of

institution, there can be no assurance that they will accurately reflect future increases. Projected tuition rates do not represent actual tuition costs at a specific school.

GENEROUS TAX BREAKS

Thanks to an array of Pennsylvania and federal tax provisions, you can enjoy the following benefits when you save through a PA 529 IP account.

STATE TAX DEDUCTION

Pennsylvania taxpayers can deduct contributions to the PA 529 IP from their Pennsylvania taxable income up to $18,000 per beneficiary, per year. For married couples, contributions up to $36,000 per beneficiary, per year, are deductible, provided each spouse has taxable income of at least $18,000.

TAX-DEFERRED GROWTH

Earnings are not subject to yearly taxation for either federal or Pennsylvania income taxes while they remain in the account.

TAX-FREE WITHDRAWALS

When used for qualified expenses, the growth in your account is not subject to federal or Pennsylvania income taxes.1

GIVE A GIFT BUT RETAIN CONTROL

Section 529 plans also provide unique control over your assets. Contributions are considered completed gifts and are removed from the assets of the contributor and/or the account owner for federal estate tax purposes. However,

unlike other completed gifts, while alive, the account owner retains control and can take the contributions back at any time for any reason. This can provide estate planning benefits.

GIFT TAX EXCLUSION

Contributions are included in the annual $18,000 exclusion from federal gift taxes for gifts made to any one person. But, unique to 529 plans, a contributor can give up to five times that amount ($90,000 for individuals or $180,000 for married couples) in one year and treat that contribution as if it were made over five years for gift tax purposes. So, large contributions to the PA 529 IP can be made without impacting gift taxes.2

STATE INHERITANCE TAX EXEMPTION

Unique to Pennsylvania 529 accounts, depending on the relationship between the deceased account owner and the heirs, this can be a savings of up to 15% of the entire value of the account. Out-of-state 529 plans do not offer this benefit.

TAX FREE VS. TAXED GROWTH

Save more than $14,000!

PA 529 IP ACCOUNT TAXABLE ACCOUNT

$60,000 $50,000

$55,192

$40,000

$40,972

$30,000

$20,000

$10,000

0

(years) 2

4

6

8

10

12

14

16

18

Hypothetical example. Assumes initial contribution of $3,000, and subsequent monthly contributions of $100 into both types of accounts earning 7.5% return (net of expenses) over a period of 18 years for taxpayers in a 30% tax bracket (combined federal, state, and local) and no withdrawals during the period.

Questions?

Call 800-440-4000 or visit

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