FAQ


Select a topic to access questions and answers:


How Do I
General
Beneficiary Questions
Tax Benefit Questions
Contributions and Withdrawals
Investment Options
Rollover and Transfer Questions




HOW DO I [back to top]


Open an Account?
You can open an account in one of three ways:

Enroll Online.
Download and mail in an enrollment application.
Order an enrollment kit.


Contribute to My Account?
You can make a contribution any time online at My Accounts or by using the Account Maintenance Form. Funds can automatically be transferred from your bank account on a regular basis using our Automatic Investment Plan (AIP).


Withdraw Money from My Account?
You can request a withdrawal online at My Accounts or you can complete a Distribution Request Form. Payments can be made directly to the educational institution, account owner or beneficiary. For details, please check The Plan Description and Participation Agreement.


Make Changes to My Account?
In My Accounts you can:


  • Change Your Investment Options
  • Change Successor Account Owner
  • Establish, Change or Delete your Automatic Investment Plan (AIP)
  • Change Your Elected Investment Allocation
  • Change Address or Phone Numbers
  • Sign Up for eDelivery
  • Add or Change Bank Account Information
  • Purchase, Redeem, or Exchange
  • Alternatively, you can use the Account Maintenance Form to update your account



GENERAL [back to top]


What is a 529 plan?
A 529 plan is a tax advantaged plan that is used specifically to save for college expenses.


Can anyone open a The Education Plan® account? What about grandparents?
Yes, any U.S. citizen or resident alien with a valid Social Security number can open a 529 savings plan account, regardless of income level or state of residence.


What is the difference between an "account owner" and a "beneficiary"?
An account owner is the person who opens and controls the 529 account. The beneficiary is the person whose education expenses will be paid from the account. An account owner sets up the account on behalf of a beneficiary. An account owner can also be the beneficiary of a 529 plan account.


What if I don't live in New Mexico?
As long as you reside in the United States of America, you can participate and receive benefits (other than New Mexico state tax benefits) from The Education Plan.

Some states offer favorable tax treatment to their residents only if they invest in the state's own plan. Non-residents should consider whether their state offers its residents a 529 plan with alternative tax advantages and should consult with their tax advisor about any state or local taxes.


Does the money have to be used at a college in New Mexico?
No, the money can be used at any accredited public or private post-secondary institution in the United States and abroad. This includes most two-year and four-year colleges and universities, vocational and technical schools, graduate schools, professional, medical and law schools.


Does my home state offer a similar 529 program?
Many states offer similar college savings programs. You should compare the benefits carefully before choosing a plan. Keep in mind that many plans offer additional state tax or other benefits only to residents of the state offering the plan.


Can I invest in more than one state's 529 college savings plan?
Yes, it is possible to have multiple 529 plan accounts in different states.


Will a 529 plan affect my child's ability to qualify for financial aid?
Since assets in 529 plans are treated as assets of the account owner when determining eligibility for financial aid, the impact on a child's ability to get aid is lower than if the assets were the name of the child. However, certain exceptions apply.


How do I know which schools are eligible to use funds from a 529 plan?
Most schools assigned a federal school code by the Department of Education are eligible. We suggest you perform a Federal School Code search and confirm with the school.


What are 529 plan "qualified higher education expenses"?
Qualified higher education expenses include tuition, required fees, books, supplies, computers and necessary software and equipment required for attendance. Room and board expenses are also eligible when certain eligibility requirements are met. Also, the expenses that are necessary for attendance for a special-needs student are eligible.


Can the money be used at a foreign college?
You can use a 529 plan account to pay for qualified educational expenses at some foreign colleges. To find out which schools, do a Federal School Code search.


What if I die while money is still in the account?
As an account owner you can name a "successor," a person that will take over the management of the account if the owner dies. However, if the account owner dies without naming a successor, the account will typically be transferred to the account owner's estate. Keep in mind the transfer of ownership after death varies from state to state.


How does The Education Plan® differ from a Coverdell Education Savings Account?
Coverdell Education Savings Accounts offer similar tax advantages but contributions are limited and may not be sufficient to adequately fund a college education. In addition, Coverdell accounts restrict who can contribute based on income levels.




BENEFICIARY QUESTIONS [back to top]


Who can be a beneficiary of a The Education Plan® account?
Any U.S. citizen or resident alien with a valid Social Security number. For instance, you can set up an account for your child, grandchild, spouse or someone who is not related to you. If you are planning to attend college or graduate school, you can open an account for yourself.


Can a beneficiary have more than one account?
Yes, there can be more than one 529 account for a beneficiary. For example, you can have an account set up for your child, a grandparent can open a different account for the same child, and other family members and friends can also open an account on behalf of your child.


How many beneficiaries can I have on an account?
You can only have one beneficiary on a 529 account. However, a beneficiary can have multiple accounts.


Can I change the beneficiary on my The Education Plan® account?
Yes, you can typically change the designated beneficiary to another eligible family member without tax consequences. If the new beneficiary is not a member of the family of the old beneficiary, the change is treated as a nonqualified distribution to the account owner and may trigger a taxable event.


If my child is in high school is it too late to open an account?
No, you can open a 529 college savings account if your child is in high school since there are generally no restrictions on the age of the beneficiary.


What if my beneficiary receives a scholarship?
There are different ways to handle your 529 college savings account if your beneficiary receives a scholarship. If your beneficiary receives a partial scholarship, the funds in your 529 college savings account can be used to pay for all or part of the remaining college costs, depending on the size of the balance. Or, the amount equal to that of the partial scholarship can be "refunded" or withdrawn from the account on an annual basis. If the beneficiary receives a full scholarship, you can change the beneficiary to another child or withdraw funds from the account. If you withdraw an amount less than or equal to the value of the scholarship from your account(s), the earnings on the amount you withdraw are subject to income taxes at the ordinary federal income tax rates, but you will not be subject to the additional 10% penalty.


What if my beneficiary does not go to college?
As the account owner, you always have control of your withdrawals. If the beneficiary chooses not to attend college, you have three options:


  • Keep the funds in the account. Since there are no age restrictions on the investments, they will be available in future years if the beneficiary changes his or her mind about school.
  • Change the beneficiary. You can change your beneficiary at any time, provided that your new beneficiary is a qualified family member. You should consult your tax advisor to determine whether this may create a taxable gift.
  • Make a nonqualified withdrawal. Earnings will be subject to federal income taxes and any applicable state income tax including recapture, as well as an additional 10% federal tax.

What if the beneficiary becomes disabled or dies?
If the beneficiary becomes disabled or dies, the money may be refunded to the account owner. Earnings are taxed as ordinary income but the 10% penalty would not apply or you can change the beneficiary to another eligible beneficiary.




TAX BENEFIT QUESTIONS [back to top]


What are the tax benefits of the The Education Plan® Plan?
Tax benefits of 529 plans include tax-free growth of earnings in a plan and federal tax-free withdrawals as long as funds are used for qualified higher education expenses.


Are plan contributions tax deductible?
Yes, your plan contributions are fully deductible from your New Mexico state taxable income for each beneficiary. Contributions include the principal and earnings portion of amounts rolled over to a New Mexico approved Section 529 college savings plan account from a non-New Mexico approved Section 529 plan. However, the total deduction cannot exceed the cost of attendance at the applicable eligible higher education institutions as determined by the Board. State tax deductions are subject to recapture in certain instances; check with your tax professional and see The Plan Description and Participation Agreement for more details.


Can I claim a federal income tax deduction based on my contributions to my The Education Plan® account?
No, contributions to your The Education Plan® account are generally not eligible for federal income tax deduction.


Are withdrawals from a The Education Plan® account exempt from federal income tax?
Yes, as long as the funds are used for qualified higher education expenses.




CONTRIBUTIONS AND WITHDRAWALS [back to top]


Who can contribute to a The Education Plan® account?
Anyone can contribute to The Education Plan® account as long as the account hasn't reached its maximum contribution limit.


What is the minimum initial investment? What's the maximum?
The minimum initial contribution required to open an account is $25 and may be allocated among as many portfolios as the account owner desires (minimum $25 per portfolio). The minimum initial contribution amount of $25 is waived if the account Owner agrees to enter into an Automatic Investment Plan (AIP) or payroll deduction. The maximum aggregate account balance per Designated Beneficiary is $500,000 and, once such maximum is reached, no further Contributions for the benefit of the same Designated Beneficiary will be allowed, although the Account balance may continue to increase due to appreciation of its holdings.


What if I need to make a withdrawal for non-higher education purposes?
You can take money from your account at any time. However, if the money is not used to pay for qualified higher education expenses, earnings will be subject to ordinary federal income tax and any applicable state income tax including recapture, as well as an additional 10% federal tax. There may be exceptions, please see The Plan Description and Participation Agreement for additional details, or discuss with your tax advisor.




INVESTMENT OPTIONS [back to top]


How do I monitor The Education Plan® investment performance?
You may view recent Total Returns, Average Annual Total Returns or Prices.


What if I want to change my investment option?
Should your goals or needs change, you have the flexibility to rebalance your existing investment options to different portfolios available within the program. Under federal law you are able to exchange assets in each beneficiary's 529 account twice during the calendar year, or whenever you name a new beneficiary. See The Plan Description and Participation Agreement for details.




ROLLOVER AND TRANSFER QUESTIONS [back to top]


Can I open an account in The Education Plan® with money from my children's (UGMA/UTMA) account?
Yes, you can transfer the funds from an UGMA/UTMA account into a 529 plan. The assets must be first converted to cash which may be taxable, and then invested into the 529 plan account. Also, certain restrictions apply to custodial UGMA/UTMA 529 plan accounts. Please see The Plan Description and Participation Agreement for more details. You should consult with a financial or tax advisor before moving the funds.


Can I roll over money from one 529 plan to another 529 plan?
Yes, you can roll over from one plan to another once per rolling twelve months. This will not incur taxes and penalties if the funds from the first account are deposited into the new account within 60 days from the distribution from the first account.


Can I transfer my child's existing Coverdell account into The Education Plan®?
Yes, you can transfer funds from a Coverdell account into The Education Plan®.



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