How to go from here to there.

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1 How to go from here to there. Enrollment Materials

2 $0 $0 Getting an idea of what you ll need. Public Colleges Four-Year (In-state tuition) $73, $123, Private Four-Year Not-For-Profit Colleges $163, $320, This chart indicates actual (2013) and projected (2032) average college costs including four years of tuition, fees, room and board, based on average tuition and fees for 2013 as reported by The College Board. Tuition costs are assumed to increase annually by 2.9% for in-state public schools and 3.8% for private non-profit schools. This is a hypothetical example for illustrative purposes only. *Source: 2013 Trends in College Pricing, Why should you save for college? Paying for a college education can be one of the most pressing financial challenges a family may face. Although it may seem overwhelming, it is not unattainable. It s important to start early, contribute regularly and choose a plan that can help you accomplish your college savings goals. The Kentucky Education Savings Plan Trust (KESPT) can help you get there with its tax advantages, flexible features and low cost. What is the Kentucky Education Savings Plan Trust? The Kentucky Education Savings Plan Trust (KESPT) is Kentucky s official 529 college savings plan. It s designed to help parents, grandparents, relatives and even friends invest in a loved one s college education. With a 529 plan, any earnings in your account are free from federal and Kentucky state income tax when used for qualified higher education expenses. Administered by the Kentucky Higher Education Assistance Authority (KHEAA), KESPT gives you a way to start planning today to prepare for a child s tomorrow. What are the benefits? Affordable: You can open an account with as little as $25 (or $15 by payroll deduction if your employer allows). Anyone can open an account: A parent, grandparent, friend or relative at any income level can open an account for anyone. Control: The account owner designates the beneficiary and controls the account regardless of the age of the beneficiary. Tax advantages: Any earnings in your account are free from federal and Kentucky state income taxes when used for qualified higher education expenses. Choice of schools: Funds may be used at virtually any qualified college, university or trade school in the United States and abroad. It s transferable: If your child or loved one doesn t use all of the money or receives a scholarship, you can change the beneficiary to another eligible member of the family. (See the Disclosure Booklet.) Access to the money: Only the account owner has access to the funds in the account. If used for purposes other than qualified college expenses, taxes and penalties may apply. Low fees: The investment options have low fees and the Guaranteed Option has no annual asset-based fee. No other sales charges, enrollment fees or maintenance fees apply. See the Disclosure Booklet for more information. A range of investment options: There are six different investment options to choose from to best meet your savings objectives. Experienced plan management: TIAA-CREF Tuition Financing, Inc. (TFI) serves as plan manager of the Kentucky Education Savings Plan Trust. TIAA-CREF Tuition Financing Inc. is an affiliate of TIAA-CREF, a financial services organization with over 90 years of investment experience. 2

3 Once you start, it s easy to stay on track. Don t go it alone. You can open an account for as little as $25. Contribute as little or as much as you can, as often as you like, using any of the following flexible methods: Check You, a family member or anyone else can make a contribution to your KESPT account for a minimum of only $25 per investment option. Automatic Contribution Plan (ACP) You can establish convenient monthly, bi-weekly or quarterly contributions to be drawn automatically from your checking or savings account. Payroll Deduction (if your employer allows) If your employer allows payroll deduction, the minimum contribution is only $15 per pay period per investment option. Rollovers You may be able to roll over or transfer funds from another 529 college savings plan or another college savings investment. Consult with your tax advisor on any tax consequences. A child s grandparents or other relatives can be an excellent resource to help you accomplish your college savings goals: Grandparents can open a KESPT account, or contribute to an existing KESPT account, even if they live in a state different than the grandchild. Contributions to a 529 plan may have estate and gift tax benefits. There are no income restrictions or annual contribution limits. There is no annual limit on the amount you may contribute. However, there is an overall maximum account balance limit of $235,000, which applies to all accounts opened for a beneficiary, including the value of any contracts in the Kentucky Affordable Prepaid Tuition Plan (KAPT) for the same beneficiary. Accounts that have reached the maximum account balance limit may continue to accrue earnings. A meaningful contribution is easier than you think. The more you invest and the earlier you start, the more opportunity your money has to grow. Make your gift more meaningful by visiting kysaves.com to download a gift certificate template or to send an e-card. This hypothetical example illustrates the future values of different regular monthly investments for different time periods and assumes an annual investment return of 6% with an initial investment of $5,000 and no withdrawals during the relevant time period. It is presented for illustrative purposes and does not reflect actual performance or predict future results of investing in KESPT. Account values will fluctuate with market conditions and the specific investment options that are selected. 3

4 College planning resources. Planning for a college education shouldn t be keeping you up at night. We ve put together a collection of college planning resources on the KESPT website to help you rest easier, including guidelines on when to save and how much, how to choose a savings plan that s right for you, plan ratings and information on other programs and services such as applying for financial aid. Visit www. kysaves.com for more information. Tax advantages can help make your money work hard. Any earnings are free from federal and Kentucky state income taxes. Withdrawals from your KESPT account that are used to pay for qualified higher education expenses will be free from federal and Kentucky state income tax. Federal estate and gift tax benefits could help in the future. Contributions to KESPT may reduce the taxable value of your estate. Contributions to KESPT, together with all other gifts from the account owner to the beneficiary, may qualify for the current annual federal gift tax exclusion of $14,000 per contributor ($28,000 for married contributors), per beneficiary. If a contributor s contributions to a KESPT account for a beneficiary in a single year exceed $14,000, the contributor may elect to treat for federal gift tax exclusion up to $70,000 of the contributions, or $140,000 in the case of a consenting married couple or a community property gift, as having been made proportionally over a period of up to five years. Seek the help of a tax advisor regarding federal and gift tax benefits. Paying less taxes could mean more savings. 4

5 A KESPT account is flexible. 529 Plans Use it at a variety of schools. Whether your beneficiary decides to go to a private or public college or university, in state or out of state, trade or graduate school, funds in the account may be used at any eligible higher educational institution in the nation and many abroad. The account can be used for a variety of expenses. Your funds may be applied toward tuition as well as certain room and board expenses, fees and the cost of books, supplies and equipment required for the enrollment or attendance of the beneficiary of your account at an eligible educational institution. Kentucky benefits. Qualify for In-State Tuition Rates The number 529 refers to a federal tax code section that provides federal tax advantages for qualified tuition programs. 401(k) plans are named after a federal tax code section as well. A 401(k) plan helps you save for retirement. A 529 plan helps you save for a college education. If your account beneficiary moves to another state, he or she may still qualify for Kentucky in-state tuition rates. As long as there was a net contribution amount of $2,400 in the account at the end of a continuous 8-year period during which the beneficiary lived in Kentucky, in-state tuition rates would apply (with possible restrictions). See the Disclosure Booklet for additional information. Student Aid Eligibility KESPT accounts are not included when determining Kentucky need-based aid for a beneficiary. Other school or federal financial aid programs may consider KESPT assets in determining financial aid. 5

6 Revisit your investment strategy. When investing future contributions, it s a good idea to revisit your investment strategy periodically. You should re-examine your KESPT account as your goals, time period for college investing and personal financial situation change. You should also re-examine your KESPT account when there are long-term changes in the economy that will affect how you save or invest or when the balance in your account changes significantly (due to varying performance of different options over time). The investment approaches described are not recommendations and do not take into consideration personal goals or preferences. After reviewing the information, the ultimate decision is up to you. Choose from a variety of investment options. Select one or any combination that best meets your savings objectives. Once you invest in a particular investment option, you can transfer the money to another investment option once per calendar year or upon a change of the beneficiary of your account. KESPT offers six investment options to choose from that vary in investment strategy and degree of risk. You can invest new contributions in any one or combination of these six investment options. See the KESPT Program Disclosure Booklet and Participation Agreement for more information on the investment options. Beneficiary s Age % Equities 29.40% Int l Equities 8.00% Real Estate 18.50% Bonds 0.00% Money Market Risk level shifts from Aggressive to Conservative Managed Allocation Option This investment option seeks to match up the investment objective and level of risk to the investment horizon by taking into account the beneficiary s current age and the number of years before the beneficiary turns 18 and is expected to enter college. Beneficiary s Age % Equities 15.60% Int l Equities 4.00% Real Estate 57.00% Bonds 0.00% Money Market Beneficiary s Age % Equities 22.80% Int l Equities 6.00% Real Estate 37.00% Bonds 0.00% Money Market Beneficiary s Age % Equities 12.00% Int l Equities 3.00% Real Estate 67.00% Bonds 0.00% Money Market Beneficiary s Age % Equities 19.20% Int l Equities 5.00% Real Estate 47.00% Bonds 0.00% Money Market Beneficiary s Age % Equities 6.20% Int l Equities 1.50% Real Estate 73.00% Bonds 10.00% Money Market Allocations will vary and may be different at time of investment. Risk Level: Aggressive 6 Active Equity Option This investment option seeks to provide a favorable long-term total return, mainly from capital appreciation, by investing in a combination of actively-managed equity mutual funds % Int l Equities 40.00% 27.60% 27.60% 4.80% Int l Equities Large-Cap Growth Large-Cap Value Small-Cap Equity

7 Balanced Option 60.00% Equities This investment option seeks to provide favorable returns that reflect the broad investment performance of the financial markets through capital appreciation and investment income by investing in a balanced combination of equity and fixed-income mutual funds. Balanced Fund 32.40% Equities Risk Level: Aggressive Equity Index Option This investment option seeks to provide a favorable long-term total return, mainly from capital appreciation, by investing in equity index mutual funds % 40.00% Risk Level: Moderate 32.40% 21.60% 6.00% 40.00% Risk Level: Moderate Equities Int l Equities Equities Int l Equities Real Estate Bonds Fixed Income Option This investment option seeks to provide preservation of capital along with a moderate rate of return by allocating assets to mutual funds that invest in a diversified mix of fixed-income investments. Professional money management. TIAA-CREF Tuition Financing, Inc. (TFI) provides plan management for KESPT. TFI, a leader in providing management for Section 529 savings plans, manages several other state 529 programs. TIAA-CREF is a national financial services group of companies and the leading provider of retirement services in the academic, research, medical and cultural fields. As of March 31, 2014, TIAA-CREF has $569 billion in combined assets under management. Further information can be found at Risk Level: Conservative Guaranteed Option This investment option seeks to preserve capital and provide a stable return. It may be appropriate for you if you have a short investment horizon and are looking for a conservative investment with a low level of risk. Effective July 1, 2014, accumulations under the Funding Agreement for the Guaranteed Option as of June 30, 2014 as well as any contributions received and earnings on those contributions from July 1, 2014 until further notice, will be credited to the Kentucky Education Savings Plan Trust with an effective annual interest rate of 1.10% and are guaranteed to earn this rate through June 30, 2015, subject to the claims paying ability of TIAA-CREF Life Insurance Company. 7

8 Compare college savings options. Answers to your frequently asked questions. 8 Not sure what type of college savings investment is best for you? If you have questions on the differences of a Coverdell Education Savings Account, UTMA/ UGMA Accounts, 529 Plans or Savings Bonds, our comparison chart on www. kysaves.com can help. Visit for more information. Who can open an account? Any individual with a valid Social Security Number or federal Taxpayer Identification Number who is a U.S. citizen or resident alien can open an account and contribute to KESPT on behalf of any beneficiary. You can even open an account for yourself. Each account may only have one account owner, but you may name a contingent account owner. Who can be the beneficiary of an account? The beneficiary is the student you will be saving for. Only one beneficiary may be listed per account opened, but multiple accounts may be opened by different account owners for the same beneficiary. Any U.S. citizen or resident alien, including the account holder, can be the beneficiary. The beneficiary must have a valid Social Security Number or federal Taxpayer Identification number. Can more than one person contribute to the account? Yes. Anyone can contribute to your account as long as the total contributions do not exceed $235,000 per beneficiary (including all other accounts in KESPT for the same beneficiary, as well as accounts in the Kentucky Affordable Prepaid Tuition Plan (KAPT)). However, the account owner is the only one who has control over the assets and decides when to withdraw the funds in the account. Can I change the beneficiary of my account? Yes, you can change your beneficiary at any time or transfer a portion of your investment to a different beneficiary. The new beneficiary must be an eligible member of the previous beneficiary s family (see the Disclosure Booklet). What if my child decides not to attend college? If the beneficiary of an account does not attend college, the account owner may name another beneficiary for the account. The new beneficiary must be an eligible family member of the previous beneficiary. Otherwise, if the funds are withdrawn for a purpose other than to pay for qualified higher education expenses (except in the event of a beneficiary s death, disability, scholarship or attendance at a military academy) the earnings portion of the withdrawal, if any, may be subject to federal and state income tax as well as a 10% additional federal tax. Please review the KESPT Disclosure Booklet for additional information. What if my child gets a full or partial scholarship? If the beneficiary receives a scholarship that covers the cost of qualified expenses, you can withdraw the funds from your account up to the amount of the scholarship. Withdrawals due to receipt of a scholarship are subject to federal and Kentucky income taxes, but no 10% additional federal tax. Will participation in KESPT affect my beneficiary s eligibility for financial aid? Savings are not included in determining the amount of Kentucky state student aid your beneficiary will receive. However, other federal and institutional aid programs may take amounts in your account into consideration when determining eligibility. Generally a parent s asset is counted at 5.64% of the expected family contribution. You should check with the schools you are considering regarding the effect of your savings on financial aid before opening a KESPT 529 plan account.

9 How do I take distributions to pay for college? When you want to withdraw money from your account, log into your account at kysaves.com to send a withdrawal directly to a school or download and complete a Withdrawal Request Form and send it to the Plan. This form can be used for withdrawals for qualified higher education expenses of your beneficiary, nonqualified withdrawals, or withdrawals due to death, disability or scholarship. Note: Non-qualified withdrawals are subject to income taxes and the additional 10% federal tax. Keep your receipts or other documentation. It is your responsibility under federal tax law to substantiate the tax treatment of contributions to, withdrawals from, and other transactions involving your account. If I move out of Kentucky, what will happen to my account? If you move to another state, you can still keep your money invested in your KESPT account. You can also continue contributing money to your account. Before investing in a 529 plan, you should consider whether the state you or your designated beneficiary reside in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state s 529 plan. period, a net minimum amount of $2,400 is contributed to the Account while the beneficiary is a Kentucky resident.) You will need to submit evidence that your beneficiary was living in Kentucky for eight continuous years. For information on how to submit evidence of residence, including a list of documentation that will be accepted, contact KHEAA directly at (502) See the Disclosure Booklet for additional information. Can I roll over funds from another 529 plan into KESPT? You are permitted to transfer funds from another 529 college savings plan to an account in KESPT for the same beneficiary once within a 12-month period without incurring federal or state income tax. The 529 college savings plan from which you are transferring funds may be subject to differences in features, costs and surrender charges. You should consult with your tax advisor or the other 529 college savings plan provider prior to the request of a rollover. Can I transfer assets in a Coverdell Education Savings Account to KESPT? Yes, but you should discuss this with your financial advisor to determine if there are any tax or other consequences. The Kentucky Higher Education Assistance Authority The Kentucky Higher Education Assistance Authority (KHEAA) is a state agency and instrumentality of the Commonwealth of Kentucky established in 1966 to improve a student s access to financial aid. Find all the information you need to plan and prepare for a college education. How can I receive in-state tuition rates after I move out of state? If a beneficiary who is covered under a vested participation agreement moves to another state, he or she can still qualify for Kentucky in-state tuition rates at certain eligible educational institutions in Kentucky. (A participation agreement becomes vested when, at the end of an eight year continuous Can assets from an UGMA/UTMA account be transferred to KESPT? Yes, though transferring UGMA/UTMA assets into a 529 plan account may result in a tax liability. You should discuss this with your financial advisor. 9

10 How to open an account. 2 Simple Ways to Get Started It s important to read the KESPT Disclosure Booklet and Participation Agreement prior to opening an account. 1. Visit 2. Click Open An Account 3. Complete the online application Or you can enroll by mail. 1. Fill out and sign the enclosed application. Please fill out one application per new account. Additional forms can be printed online or by request. This includes the KESPT Disclosure Booklet and Participation Agreement enclosed in this enrollment kit. 2. Decide how to make your contributions. You can contribute by check, electronic funds transfer, rollover from another qualified tuition program or payroll deduction. You may also sign up for the automatic contribution plan. 3. Mail your completed and signed application in the postage-paid envelope provided. Once we receive your information, we ll promptly open your account and send you a welcome kit. Questions? Call toll-free

11 You can get there. We can help. Start today with the Kentucky Education Savings Plan Trust. Everything you need to enroll is contained in this package or enroll online at. For help, please call us at

12 Consider the investment objectives, risks, charges and expenses before investing in KESPT. Please visit for a Plan Disclosure Booklet containing this and other information. Read it carefully. Investments in the Plan are neither insured nor guaranteed and there is the risk of investment loss. Before investing in a 529 plan, you should consider whether the state you or your designated beneficiary reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state s 529 plan. The tax information contained herein is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding tax penalties. Taxpayers should seek tax advice from an independent tax advisor based on their own particular circumstances. Non-qualified withdrawals may be subject to federal and state taxes and the additional federal 10% tax. The Commonwealth of Kentucky, its agencies, TIAA-CREF Tuition Financing, Inc., Teachers Insurance and Annuity Association of America and its affiliates do not insure any Account or guarantee its principal or investment return except for TIAA-CREF Life Insurance Company s guarantee to the KESPT under the Funding Agreement for the Guaranteed Option. KESPT is administered by the Commonwealth of Kentucky. TIAA-CREF Tuition Financing, Inc. is the Plan Manager A /14 C51464 KY1107.XXB