New Law Simplifies College Savings For New York Families

ALBANY, N.Y.--(BUSINESS WIRE)--Taking a significant step to simplify college savings for families, New York Governor David A. Paterson recently signed a bill into law that enables relatives, friends, employers, and others to contribute funds to a New York’s 529 College Savings Program account. Before passage of this law, contributions to the Program’s direct and advisor-sold 529 accounts could only be made by the account owner.

Upromise Investments, The Vanguard Group, and Columbia Management Group work with the Office of the Comptroller of the State of New York and the New York State Higher Education Services Corporation to offer the state’s tax-advantaged 529 college savings plans. These three firms acknowledge the significant benefits of this new legislation.

“New York has once again demonstrated its commitment to college savings by opening the door for family and friends to contribute to a 529 college savings plan account,” explained Mark Chapleau, President of Upromise Investments, program manager for both the direct and advisor-sold plans. “This new law will help make college more attainable for families, and it is reflective of New York’s strong commitment to continually enhance and improve the benefit to account owners and their beneficiaries. This is great news for the kids of New York State and their future college plans,” he added.

“Simplicity is the key to a successful savings program, and by streamlining the process, this law better enables families to save more for college and helps them to achieve their higher education goals,” said John Heywood, Principal, Vanguard. Vanguard is the investment manager for New York’s 529 College Savings Program Direct Plan, which has more than $7.1 billion in college savings assets in nearly 500,000 accounts.

Columbia Management is the investment manager of New York’s 529 College Savings Program Advisor Plan, which has approximately $1.2 billion in assets in nearly 100,000 accounts as of May 2008.

“We recognize the challenge families face in building adequate college savings,” said Kevin Wasp, Director of College Savings Plans for Columbia Management. “This important development has the potential to expand the contribution base of New York’s 529 College Savings Program accounts across New York State.”

In the past five years, New York’s 529 College Savings Program reported that more than 20,000 checks totaling more than $57 million were rejected from the direct and advisor-sold accounts because they were submitted by someone other than the account owner. This new law allows the Program to now accept such third-party contributions.

Account owners in both plans who are New York state taxpayers can receive a state tax deduction of up to $5,000 ($10,000 if married, filing jointly) for contributions to an account.(a) Furthermore, investments grow tax-deferred and withdrawals are tax-free when used for qualified educational expenses.(b) The new law will continue to offer the tax deduction only to account owners while accepting donations from third parties. Withdrawals for qualified college expenses remain tax-exempt.

(a) Contributions to a New York’s 529 College Savings Program account in a tax year are deductible from New York state income tax, subject to recapture in certain circumstances – rollovers to another state's 529 plan or non-qualified withdrawals.

(b) Earnings on non-qualified withdrawals are subject to federal income tax and may be subject to a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.

For more information about New York’s 529 College Savings Program Direct Plan, call 1-877-NYSAVES for a Program Brochure and Tuition Savings Agreement. For more information about New York’s 529 College Savings Program Advisor Plan, call 1-800-774-2108 for a Program Brochure and Tuition Savings Agreement. These documents include investment objectives, risks, charges, expenses, and other information. You should read and consider them carefully before investing.

Before you invest, consider whether your or the designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program.

The Comptroller of the State of New York and the New York State Higher Education Services Corporation are the Program Administrators and are responsible for implementing and administering the Direct Plan and the Advisor Plan. Upromise Investments, Inc. and Upromise Investment Advisors, LLC serve as Program Manager and Recordkeeping and Servicing Agent, respectively, and are responsible for day-to-day operations, including effecting transactions. The Vanguard Group serves as the Investment Manager for the Direct Plan. Vanguard Marketing Corporation markets, distributes, and underwrites the Direct Plan.

Upromise Investments, Inc. serves as the Program Manager and has responsibility for certain administrative and recordkeeping services for the Advisor Plan, including assisting Columbia Management Group, LLC (“Columbia Management”) with effecting transactions. These entities are not affiliated with Columbia Management. Columbia Management through its affiliates is investment manager of New York’s 529 College Savings Program Advisor Plan. Columbia Management is the investment management division of Bank of America Corporation. Columbia Management entities furnish investment management services and products for institutional and individual investors. New York’s 529 College Savings Program Advisor Plan and Columbia Funds are marketed and distributed by Columbia Management Distributors, Inc., member of FINRA and SIPC. Columbia Management Distributors, Inc., is part of Columbia Management and an affiliate of Bank of America Corporation.

No guarantee: None of the State of New York, its agencies, the Federal Deposit Insurance Corporation (FDIC), The Vanguard Group, Columbia Management, Upromise Investments, Inc., nor any of their applicable affiliates insures accounts or guarantees the principal deposited therein or any investment returns on any account or investment portfolio.

New York’s 529 College Savings Program currently includes two separate 529 plans. The Direct Plan is sold directly by the Program. You may also participate in the Advisor Plan, which is sold exclusively through financial advisors and has different investment options and higher fees and expenses as well as financial advisor compensation.