State OKs Web tool for college accounts
Posted on Thursday, May 8, 2008
Arkansas has joined two other states in offering an online tool so parents can solicit gifts for their children’s 529 college-savings plans.
The state treasurer’s office rolled out “Ugift” last week, officials announced Wednesday.
“The most simplistic way to think of it is like an ‘E-vite, ’” said Liz Robinson, marketing vice president for Upromise Investments Inc., speaking by phone from Newton, Mass.
Parents, grandparents or other owners of a child’s account can e-mail invitations before birthdays and other occasions suggesting that the recipient consider a donation to the child’s 529 plan instead of a traditional gift.
The plans, subject to the Internal Revenue Service code’s Section 529, encourage families to save for college expenses and can offer tax advantages such as credits or exemptions.
Upromise is program manager for Arkansas’ 529 plan. With 18 plans in 10 states, it contends it is the largest administrator of such plans.
Arkansas has had its Greater Investment for Tomorrow College Investing Plan for years.
Dale Ellis, spokesman for the Arkansas Department of Higher Education, said the plan has some similarities with Roth IRAs and 401 (k ) plans. When money is drawn out for qualified higher education expenses — such as tuition, books or room and board — the withdrawals are not taxed and cause no penalties, he said.
Arkansas’ plan offers a tax exemption.
An Arkansas resident who opens an account for a child can deduct what is deposited into the plan up to $ 5, 000 a year, or up to $ 10, 000 annually for a couple, Ellis and Upromise officials said, adding that is generous compared with most states.
“Now by the same token, you’re perfectly able to go with another states’ plan, but you wouldn’t get the Arkansas deduction,” Ellis said.
Each of the state-sponsored plans offers different investment options, fees, plan rules and tax advantages.
Pennsylvania is one state that offers tax parity, meaning that if a person there invested in another state’s plan, the person would get a Pennsylvania state tax benefit, Robinson said.
Vanguard Group Inc. is investment manager for GIFT.
Upromise started the Ugift tool in November 2007 in Nevada, which administers two 529 plans. It later put one in use in Idaho, which has one plan. It started Arkansas’ Ugift on April 28.
To date, the e-gift tool has generated more than $ 450, 000 in gifts, Upromise’s Dave Ponder said.
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