|
 VEST Frequently Asked Questions
|
|
|
|
|
On this page you will find our most commonly asked questions about the VEST program.
Please note that these questions relate to the VEST program. If you have questions related to CollegeAmerica, please contact your financial adviser. For questions about CollegeWealth, please contact a participating bank or contact us.
You can use our handy search function to find your question more quickly.
And if you don't see your question listed here, feel free to submit it to us and one of our representatives will get back to you shortly.
As always, we're here to help so don't hesitate to contact us at our toll-free helpline at 1-888-567-0540.
|
|
|
| Q. What is the Virginia Education Savings Trust (VEST)? |
| A. VEST is one of the Section 529 qualified tuition programs offered by the Virginia College Savings Plan (VCSP). VEST offers a tax-advantaged account that lets families save for certain higher education expenses using portfolios of stocks and bonds. Your contributions are invested to help cover future qualified expenses at any eligible educational institution the student decides to attend. |
| Q. Will VEST be offered in the future? |
| A. VEST is open year round, and accounts may be opened at any time. The Board of the VCSP may decide to suspend or delay the acceptance of new accounts at its sole discretion. |
| Q. What other Section 529 college savings options does the Virginia College Savings Plan offer? |
| A. The Virginia College Savings Plan also offers the Virginia Prepaid Education Program (VPEP), which allows families to lock in the cost of tomorrow's college tuition and mandatory fees. VPEP covers future in-state undergraduate tuition and mandatory fees for the normal full-time course load at Virginia public colleges and universities. VPEP benefits may also be applied toward the cost of tuition and fees at Virginia private colleges as well as at most colleges and universities nationwide. CollegeAmerica, the Commonwealth's partnership with the American Funds, is available only through financial advisers. CollegeWealth, the VCSP's newest savings option providing FDIC-insured certificates of deposit and savings accounts, will be available soon at participating banks. CollegeAmerica, VEST, and CollegeWealth have no state residency or age requirements, and, like all Section 529 plans, have no income phaseout restrictions. |
| Q. Am I allowed to have both a VEST account and another 529 account such as a VPEP contract? |
| A. Yes. The same individual or different individuals may have more than one 529 account for the same beneficiary. Complementary college savings options may be beneficial for families seeking a fully diversified college savings portfolio with a guaranteed investment (like VPEP or CollegeWealth) and a market return investment (like VEST or CollegeAmerica). VEST, CollegeAmerica, and CollegeWealth accounts may be rolled over into VPEP contracts during a VPEP enrollment period as long as VPEP eligibility requirements are met. VPEP contracts may be rolled over into VEST, CollegeAmerica, or CollegeWealth accounts at any time. |
| Q. Does VEST have a financial guarantee? |
| A. No. VEST is not backed by the Commonwealth of Virginia and investments are not guaranteed. VEST account owners will be entitled to the current market value of their account. Like any other investment in stocks and bonds, VEST accounts can potentially lose principal due to market losses, and earnings are not guaranteed to cover any particular higher education cost. |
| Q. What expenses can a VEST account be used for? |
| A. VEST account balances may be withdrawn in order to pay for the beneficiary's tuition, all fees, certain room and board costs (for students who are enrolled at least half time), and required books, supplies and equipment, including computers, and special needs services. VEST accounts are not guaranteed by the Commonwealth of Virginia to be sufficient to cover any specific higher education expense, such as tuition. |
| Q. How do I open an account? |
| A. You can open an account in one of two ways. Online application processing is available on this web site. You have the option to use a credit card (MasterCard or VISA) for the application fee. We cannot accept credit card payments for contributions to a VEST account. You can also fill out the VEST application included in the Enrollment Kit and return it along with a non-refundable $25 application fee and your initial investment contribution of at least $25. Contributions to your account may be made by check or automatic deduction from your checking or savings account. Checks should be made payable to VEST. If you choose to make contributions directly from your bank account, please complete the ACH form that will be included in your Welcome Kit. If you sign up for automatic withdrawal from your bank account, you do not need to enclose a check for your initial contribution. |
| Q. Will I receive an official document outlining the terms and conditions of my VEST account? |
| A. The application, Program Description and VEST Account Agreement include the terms and conditions you are agreeing to by opening your VEST account. You will receive a Welcome Kit, which includes a VEST confirmation notice that verifies important account information, such as your portfolio selection. Please read all of the VEST documents carefully and clarify any information you do not understand before opening a VEST account by calling the toll free helpline at 1-888-567-0540. Account owners should retain the Program Description, which includes the Account Agreement, for future use and reference. Current information is always available on the VCSP web site. |
| Q. What fees and expenses will I have to pay? |
| A. You will be charged a one-time $25 application fee to open an account. In addition, investment management fees and program operating fees will be deducted from your VEST account on a pro-rata basis according to the fund balance in each account and the portfolio selected. VEST may also charge other administrative fees (such as fees for returned checks), which are all listed on page 23 of the Program Description. The Board may change or waive administrative fees in its sole discretion and upon consideration of individual written requests in cases of hardship. |
| Q. Is there an individual account set up for my money? |
| A. Yes. VEST is a tax-advantaged individual savings account intended specifically for the payment of qualified higher education expenses for the designated beneficiary. VEST maintains separate accounting records for each account owner and beneficiary for the purpose of calculating refunds, tax reporting, and making distributions. Account owners will receive monthly statements for all accounts with activity during the preceding month, including contributions and distributions. All accounts will receive quarterly statements. Account owners may also access their information online with a user identification number and PIN that will be provided in the Welcome Kit. |
| Q. Are other individuals allowed to make contributions to my account? |
| A. Yes. Anyone can make a contribution to your account. However, all contributions to an account are deemed to come from the account owner for all state tax reporting and other administrative purposes. Non-account owners have not established a customer relationship with VEST and lose control over funds contributed to another person's account. |
| Q. If someone else makes a contribution to my account, is that person eligible for the Virginia state tax deduction and other state tax benefits? |
| A. No. Only the account owner is eligible to take a Virginia state tax deduction for any contributions made to a VEST account, regardless of who made the contribution. Non-account owners who choose to make a contribution to someone else's account are not eligible to deduct that contribution from their Virginia taxable income. |
| Q. What happens to my account if I die? |
| A. All VEST account owners must designate an individual or entity that would take over ownership of the account in the event of the account owner's death. Individuals designated must be at least 18 years old at the time of designation. Account owners may change this designation at any time by submitting a written request. Custodial accounts under Uniform Gifts to Minors/Uniform Transfers to Minors statutes should have the beneficiary's estate designated as the survivor. Accounts owned by trusts, corporations or other entities do not need a survivorship designation, but should provide a successor trustee or other contact. If an account does not have a valid survivorship designation at the time of the account owner's death, the VCSP reserves the right to designate the current beneficiary of the account as the new owner. If the current beneficiary is under the age of 21, the VCSP may designate the deceased account owner's executor or administrator, if any, as the custodian under the appropriate Uniform Gifts to Minors/Uniform Transfers to Minors statute for the current beneficiary until the current beneficiary reaches the age of 21. If no executor or administrator was named or appointed, the VCSP, in its sole discretion, may designate a parent or other close relative of the current beneficiary as the custodian. |
| Q. Does a VEST account guarantee the student admission to a college or university or in-state tuition rates? |
A. No. Students must be accepted by the college or university they wish to attend. VEST accounts are not considered as part of the admissions process. Ownership of a VEST account is not a factor in the determination by a particular state institution as to whether a student is eligible for in-state tuition rates. VEST will not release the names of students who are beneficiaries of VEST accounts to higher education institutions without the permission of the account owner.
|
| Q. If I have financial problems, will my creditors be able to attach or garnish my VEST account? |
| A. This will depend on the specific situation, but under Virginia law, VEST accounts are protected from creditors of either the account owner or the beneficiary, and this protection generally may be preserved by a debtor in a bankruptcy case. Additional protection of these assets is available under federal bankruptcy law, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Federal bankruptcy law, as amended by BAPCPA provisions effective as of October 17, 2005, protects contributions made at least two years before a bankruptcy filing to a VEST account for the children or grandchildren of the account owner or other individual contributing to a VEST account. Federal bankruptcy law also offers limited protection for contributions made at least one year before a bankruptcy filing to a VEST account for the children or grandchildren of the account owner or other individual contributing to a VEST account. |
| Q. Can I open a VEST account to use as a scholarship? |
| A. Yes. You may open a VEST account to use as a scholarship, but the beneficiary must be designated at the time the account is opened and the account balance may only be transferred to a member of the beneficiary's family. Alternatively, you may wish to consider a tax-deductible contribution to the VCSP. The VCSP would use your donation to open an account, which would be owned by the agency, track the scholarship award for you and the beneficiary can be designated at a later date from a broad group of candidates. Please call our toll-free number, 1-888-567-0540, for information on opening a scholarship account. |
Q. May I send in my power of attorney?
|
| A. Yes. Account owners are encouraged to send in power of attorney documents designating another individual to act for them in the event of their absence or disability. All powers of attorney must be submitted to the VCSP for approval prior to having the attorney-in-fact sign any documents related to the VCSP account(s). |
|
|
|
|
| Q. Who manages the money I invest? |
| A. VEST is administered by the eight-member VCSP Board and its Executive Director. Portfolio investments include stocks, fixed income securities, real estate investment trust and inflation-protected securities funds, and money market instruments professionally managed by a team of investment firms and mutual funds representing all asset strategy sectors. These firms and mutual funds were selected through competitive global searches conducted with the assistance of the Board's investment consulting firm. All of the external investment managers and their strategies are described in the Program Description. |
| Q. What are my investment choices? |
| A. VEST has created an investment program through its own group of portfolios that invest in a selected group of mutual funds and individually managed accounts. Please refer to the Investment Options section of the Program Description for a complete description of all the VEST portfolios. The long-term asset strategy of the evolving portfolios is based on the beneficiary's current age. Account owners may, however, choose to invest in an age-based portfolio other than the one that corresponds to the beneficiary's age. The asset allocations of the age-based portfolios (except for the Piedmont portfolio) shift every three years toward that of the Piedmont portfolio (100% stable value), which is designed to help reduce the risk of principal loss. Please refer to the age-based portfolios evolution timeline on page 7 for the specific evolution dates of the age-based portfolios. Participants may also choose among non-evolving portfolios where the target asset allocation remains fixed. You may open additional VEST accounts for the same beneficiary in a different portfolio. Unless you open a second account, any additional contributions you make for that beneficiary will be invested in the portfolio you originally selected. Account owners may change investment options once every calendar year, or whenever the beneficiary is changed. If an account owner has more than one account for the same beneficiary and wishes to change the investment option for more than one account, the investment option changes must be made at the same time for all accounts. VEST accounts involve investment risk, including the possible loss of principal. |
| Q. Am I allowed to change investment options after my VEST account is opened? |
| A. Yes. According to Internal Revenue Service guidance, you may change your VEST investment options once per calendar year. After an initial change, you must wait until the next calendar year to change your portfolio selection again. In addition, you may change the investment option for a VEST account in the event of a change of beneficiary. You may not choose the underlying mutual fund or securities in which a VEST portfolio invests, but you may change your portfolio. A change in investment direction includes moving from one VEST portfolio to another, and transferring money among VEST, CollegeAmerica, and CollegeWealth. Investment option changes will be processed according to the settlement and cutoff dates described under the definition of Pending Settlement Period in the Glossary of Terms in the Program Description. |
| Q. How soon will my money be invested? |
| A. Funds are settled with the investment managers weekly. Funds in good order received in time to allow for deposit on Fridays or the last business day of the week will generally be invested the following Wednesday, or the next business day in the event of a holiday or if the VCSP is closed. This means that depending on when your contributions are received, there may be a lag of up to two weeks before your funds are invested in the portfolio you selected. In addition, settlement of any contributions or distributions that are not in good standing may be delayed until any outstanding issues are resolved. The interest earned on the funds during the pending settlement period is used to defray program costs. The pending settlement period also applies to distributions from VEST accounts. Please see the definition of Pending Settlement Period in the Glossary of Terms in the Program Description for more specific information. |
| Q. Will the investment managers ever change? |
| A. The Board may change the underlying investment managers and mutual funds that make up the VEST portfolios from time to time as it deems necessary or prudent. Participants will be provided with information on any manager changes via our web site and through other notices. Changes to new investment options will require the account owner to use the once-per-calendar year investment change option. |
| Q. Are there investment management fees for VEST accounts? |
| A. Yes. Investment management fees and VEST operating expenses will be paid on a pro-rata basis based on the assets in each account and will vary for each VEST portfolio. The annual asset-based fee for the most aggressive age-based portfolio (the Alleghany) is 0.56% of the average daily net assets. This means that an account with $100 invested in the Alleghany portfolio will not have more than $0.56 paid per year from this account for fees and expenses. The fees for the other age-based portfolios range from 0.40% to 0.56% annually. Fees for the non-evolving portfolios range from 0.33% to 0.56%. There is a $25 fee for each VEST application but there are no sales charges or other annual maintenance fees. See the Fees and Expenses section in the Program Description for the specific expenses of each VEST portfolio and other administrative fees that might apply to specific transactions. |
| Q. Why should I consider opening a VEST account instead of choosing some other savings vehicle? |
| A. The Virginia and federal tax advantages and the potential for higher after-tax return from the federal tax-free growth and distributions afforded VEST should be taken into account when comparing VEST to other college savings vehicles. Families may initially choose from among different age-based investment portfolios and non-evolving portfolios to find the investment mix that's right for their individual situation and the ages of their children. You should take into account the Virginia and federal tax advantages and VEST's tax-free growth and distributions for qualified expenses when comparing VEST to other college savings options. Because of VEST's tax-advantaged status, however, funds invested are required to be used for qualified higher education expenses. While VEST accounts can be cancelled at any time, there is a federal penalty tax equal to 10% of earnings if the cancellation is for any reason other than a qualified rollover or the beneficiary's death, disability or receipt of a scholarship. In addition, any amounts previously deducted from the account owner's Virginia taxable income must be recaptured unless the account is cancelled due to a beneficiary's death, disability, receipt of a scholarship, or a qualified rollover to the Virginia Prepaid Education Program. |
| Q. Am I required to choose the age-based portfolio that corresponds to the beneficiary's current age? |
| A. No. Although VEST's age-based portfolios have been designed based on the age of the beneficiary and the expected time horizon until funds will be needed, you are not required to select the VEST portfolio that corresponds to the beneficiary's age. |
|
|
|
|
| Q. What is the federal income tax treatment of a VEST account? |
| A. Any earnings on VEST accounts grow tax free at the federal level, which means that the account owner does not have to pay federal tax on any earnings each year. For qualified distributions, any increase in the value of the VEST account (the earnings) is also tax free. Non-qualified distributions, other than those in the event of the Beneficiary's death, disability or receipt of a scholarship, are subject to a federal penalty tax of 10% of the earnings. All non-qualified distributions, including those made on account of the Beneficiary's death, disability and receipt of a scholarship, are subject to federal income tax on the earnings portion of the distribution. Federal tax law also provides for favorable estate and gift tax treatment of qualified tuition programs like VEST. See the Virginia and Federal Tax Considerations section of the Program Description for more detailed information about the taxation of VEST accounts. Please contact your tax adviser concerning the effect of a VEST account on your individual tax situation. The VCSP cannot provide financial, tax or legal advice. |
| Q. Will I have to pay federal gift tax? |
| A. Contributions to a section 529 account must be counted toward your $12,000 annual federal gift tax exclusion. This means that a contribution to any one beneficiary's 529 account in a single tax year that is greater than $12,000 ($24,000 for married couples) could have federal gift tax consequences. You must also take into account additional gifts, if any, you make to the same individual during the same year. You may also make an election to take advantage of a five-year averaging provision available for section 529 contributions. Please see the Virginia and Federal Tax Considerations section of the Program Description for more detailed information on the federal gift and estate tax provisions, and be sure to consult the Internal Revenue Service or your tax adviser for information on how to document any elections that you make. Usually, these elections require you to file an IRS Form 709. |
| Q. What are VEST's Virginia state tax advantages? |
| A. All VEST account owners who have Virginia taxable income and file Virginia income tax returns can deduct from their taxable income up to $2,000 per year per account or the amount contributed during the year, whichever is less, with unlimited carry forward until all contributions to the account have been deducted. Only the account owner is allowed to deduct contributions to his or her account. If the funds are not used for qualified higher education expenses, or if the account is rolled over to another state's Section 529 plan, the account owner must add the deducted amount back to his or her Virginia income for state income tax purposes unless the refund is due to the beneficiary's death, disability or receipt of a scholarship. The $2,000 annual cap does not apply to VEST account owners who are age 70 or above. They may deduct the entire amount contributed to a VEST account at one time or in any future tax years. There is also a Virginia state income tax exemption for earnings and interest from a VEST account if a refund is made because of the beneficiary's death, disability or receipt of a scholarship. The earnings portion of these refunds is taxed at the federal level, although there is no penalty assessed. The Virginia state tax advantages are only available for investments in Virginia's Section 529 qualified tuition programs (VPEP, VEST, CollegeAmerica, and CollegeWealth). If you are a resident of a state other than Virginia, please consult a tax adviser to determine your state's tax treatment of a Virginia 529 account. |
| Q. May I redeem my series EE or I U.S. Savings Bonds to contribute to a VEST account without losing any tax advantages for which I may currently qualify? |
| A. Yes. Federal law allows the redemption of Series EE and I U.S. Savings Bonds issued after December 31, 1989, in order to contribute to a qualified tuition program like VEST. Please contact your tax adviser or the Internal Revenue Service to determine how the redemption of these bonds will affect you. Additional information on the redemption of these bonds is available on the U.S. Department of the Treasury's web site at www.TreasuryDirect.gov. |
|
|
|
|
| Q. What are VEST's eligibility requirements? |
| A. Anyone can open a VEST account—there are no age, state residency or income restrictions, although the beneficiary must have been born at the time the account is opened. The account owner can even open an account for his or her own educational expenses. A trust, corporation, partnership or other entity can also open a VEST account. The account owner does not have to be related to the beneficiary. Account owners and beneficiaries must be U.S. citizens or legal residents. |
| Q. May I use an existing Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account to contribute to a VEST account? |
| A. Depending on the specific state legislation, you may be able to open a VEST account with cash proceeds from the sale of assets held in a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) custodial account. These types of accounts, however, involve additional restrictions that do not apply to noncustodial VEST accounts, such as the inability to transfer the account to another beneficiary. If you are using existing UGMA or UTMA funds to establish a VEST account, you must indicate that the account is custodial by checking the appropriate box on your VEST Account application. The VCSP is not responsible for any consequences related to the custodian's improper use, transfer or characterization of custodial funds. The custodian is responsible for transferring the custodial account to the beneficiary at the appropriate time. Please contact a legal or tax professional to determine how to transfer an existing UGMA or UTMA account, and what the implications of such a transfer may be for your specific situation. |
| Q. As a court-appointed legal guardian, may I open a VEST account? |
| A. As long as a VEST account is permissible under the legal guardianship provisions, you may open a VEST account in your capacity as guardian. Please check the other box on the VEST application and fill in the appropriate information provided by the court order. |
| Q. May two people jointly open an account? |
| A. No. Only one person can be the owner of the account. If a trust or other entity requires two or more signatures for the disbursement of funds, VEST may not be an appropriate investment as we cannot accomodate more than one primary individual who is responsible for the account. Although anyone may make contributions to an account, only the owner of record may take the Virginia tax deduction or make decisions related to the account (such as rollover, transfer and cancellation). Unless the account owner makes a written request either on the application or at a later date to allow another individual to receive account information, only the owner of record may receive information about the account unless required by a court order or other legal process. Anyone may contribute to a VEST account at any time as long as the account number is included with the payment. |
| Q. Can I transfer ownership of the account? |
| A. Yes. Ownership of the account can be transferred by changing the account owner. Written authorization is required from the current account owner. To request an Account Owner Change Form, please call our toll free number, 1-888-567-0540, or download the form from our web site. There may be tax consequences related to the transfer of a VEST account, so please contact a tax professional to determine the effect of an account transfer on your individual situation. |
| Q. How will VEST affect a student's eligibility for financial aid? |
A. Any investment or savings may affect financial aid eligibility. A VEST account will be treated like any other non-retirement investment or savings the account owner may have. VEST accounts should be reported on the Free Application for Federal Student Aid (FAFSA) if the account is owned by the beneficiary's parent whose assets are reported on the FAFSA. Approximately 5.6% of the account's value will be included in the calculation of federal financial aid eligibility. You can access your account online to determine the current value to report on the FAFSA. If the VEST account is owned by a dependent student (custodial accounts under Uniform Transfers to Minors or Uniform Gifts to Minors statutes, for example) its value is not counted toward federal financial aid eligibility, and should not be reported on the FAFSA. If the VEST account is owned by someone whose assets are not reported on the FAFSA, its value is also not included in this calculation and should not be reported on the FAFSA. The receipt of account distributions should not affect the beneficiary's receipt of merit-based financial aid (academic or most athletic scholarships, for example). VEST benefits do not affect a student's eligibility for a Virginia Tuition Assistance Grant for Virginia residents who attend an eligible, independent, nonprofit institution of higher education in Virginia. If a student receives a full or partial athletic scholarship that is governed by NCAA or ACC regulations, a payment from VEST may affect that scholarship. Because the largest part of most financial aid packages is student loans, families who plan ahead by saving can significantly reduce future debt. The best resource for more detailed information is the financial aid office of your local community college or university.
|
Q. May I transfer funds from a Coverdell Education Savings Account, Series EE or I Bonds, or another qualified tuition program?
|
| A. Yes. VEST will accept transfers from a Coverdell Education Savings Account, Series EE or I Bonds, or another qualified tuition program. If you are funding your VEST account with funds from these sources, you must provide the breakdown of the amount you contributed and the amount of interest earnings. For transfers from a Coverdell Education Savings Account, please provide an account statement issued by the financial institution that acted as trustee or custodian showing contributions and earnings (or losses) in the account. For redemptions of qualified Series EE or I U.S. Savings Bonds, please provide either a statement, a Form 1099-INT issued by the financial institution that redeemed the bonds, or an IRS Form 8815, showing interest from the redemption of the bonds. Please ensure that you redeem the bonds in the same calendar year that you fund your VEST account. If you have additional questions about the redemption of U.S. Savings Bonds, please contact the Bureau of Public Debt at www.TreasuryDirect.gov, or the Internal Revenue Service at 1-800-829-1040. For rollovers from another Section 529 program, the program manager must provide a statement showing contributions and earnings (or losses). |
|
|
|
|
| Q. Can my VEST account have any effect on other aid or benefit programs? |
| A. Yes. A VEST account may be considered an asset of the account owner or beneficiary and therefore may affect qualification for need-based federal or state benefit programs, such as Medicaid. You may wish to contact the federal or state agency that administers a particular benefit program to determine how your VEST account will be treated. |
| Q. What are qualified higher education expenses? |
A. Qualified higher education expenses include tuition, all mandatory fees, room and board costs, textbooks, supplies and computers required for attendance or enrollment, and special needs services. Room and board costs may only be paid with VEST distributions if the student is enrolled on at least a half-time basis in a degree, certificate, or other program that leads to a recognized educational credential. The allowable amount of room and board expenses for students living on campus is the actual amount invoiced by the school. Federal law limits the amount of room and board costs if the student lives off campus. For students who live off campus or at home, the allowable amount for room and board expenses is the applicable room and board amount for that period used by the school in determining its cost of attendance for federal financial aid purposes. Cost of attendance figures are available from individual schools.
|
| Q. If a student decides to attend a Virginia private college or university or an out-of-state school, can VEST account distributions be used? |
A. Yes. VEST account distributions can be used at any eligible educational institution, which includes any accredited college or university in the country that is eligible to participate in U.S. Department of Education student financial aid programs. VEST distributions may also be applied at schools abroad under certain circumstances as well as at certain accredited private career schools. Account owners and beneficiaries may determine the eligibility of a specific higher educational institution by contacting the school directly or by visiting the web site for the U.S. Department of Education at www.fafsa.ed.gov and clicking on "Find my school codes."
|
| Q. May a student use VEST account benefits for graduate school? |
| A. Yes. VEST benefits may be used at accredited graduate schools that are eligible to participate in U.S. Department of Education student financial aid programs. |
| Q. If my child attends a professional career school or computer institute, can I still use my VEST account? |
| A. Yes. VEST benefits may also be applied at accredited for-profit vocational and technical schools and colleges that are eligible to participate in U.S. Department of Education student financial aid programs. |
| Q. When can I begin receiving distributions from my account? |
| A. There may be a lag time of several weeks after you open your account before funds will be available for distribution. Remember that the pending settlement period, defined in the Program Description, prevents immediate withdrawals. Once your account has been established, funds will be settled weekly. |
| Q. How will VEST pay benefits? |
| A. Prior to your estimated usage date, VEST will send out a Benefits Guide to the account owner with instructions for using benefits. Upon receipt of a signed Distribution Request Form, VEST will arrange for account distributions according to the account owner's instructions. |
| Q. How long does a student have to use the benefits? |
| A. A beneficiary who has not yet graduated from high school at the time the account is opened has at least ten years after the projected high school graduation date to use VEST account benefits. VEST beneficiaries who have already graduated from high school have at least ten years from the date the account is opened to use their benefits. In addition, any years served as an active duty member of any branch of the United States Armed Services are added to the ten-year limit. Extensions of the ten-year limit may be requested. Funds remaining at the end of the ten-year period may be transferred to a member of the beneficiary's family, as defined in the Program Description, or distributed to the account owner. If, after the ten-year period specified above, an account has a remaining balance, no extension has been requested and the VCSP cannot locate the account owner, the beneficiary, or any designee of survivorship rights, the VCSP shall report the unclaimed amounts to the State Treasurer as unclaimed property pursuant to Section 55-210.12 of the Code of Virginia (1950). |
|
|
|
|
| Q. How can I make contributions to VEST? |
A. You can contribute to your VEST account in any of the following ways:
Check or money order at any time.
Payroll deduction, if your employer offers this option.
Automatic deduction from your checking or savings account.
Please refer to the ACH (automatic withdrawal) form that will be included in your Welcome Kit for further instructions. This form is also available on our web site, www.Virginia529.com. |
| Q. How do I find out whether payroll deduction is available where I work? |
A. You will need to ask your employer if payroll deduction for VEST is available where you work. Currently, many federal and state agencies offer payroll deduction. Some private employers are also participating. If your employer is not participating, have your payroll office call VEST for more information.
|
|
|
|
|
| Q. What if the student decides not to go to college? |
A. VEST offers a number of options:
VEST account benefits may be rolled over to a member of the family of the beneficiary. Please see the Glossary of Terms in the Program Description for the definition of Member of the Family. Generally, this includes the beneficiary's immediate family and first cousins.
Alternatively, you may want to maintain your VEST account because a student has at least ten years after the projected high school graduation date (or, for adults, ten years after the account is opened), plus an extension, if requested, to use the account benefits.
Another option is to cancel all or a portion of the account. You can do this at any time, even after the student has enrolled in college. |
| Q. What happens if I cancel a VEST account? |
A. An account owner may cancel a VEST account at any time for any reason and receive a refund of the current account balance. If the account is cancelled for a reason other than a qualified rollover, federal income tax will be due on the earnings portion of the refund. Non-qualified distributions will also be subject to a federal penalty tax of 10% of the earnings, reported on the taxpayer's federal tax return. The 10% federal penalty tax will not apply to non-qualified distributions resulting from the beneficiary's death, disability or receipt of a scholarship. In addition, any amount of the refund that was deducted from the account owner's Virginia taxable income in prior years must be added back to the account owner's Virginia taxable income in the year the refund is received (unless the refund is due to the beneficiary's death, disability or receipt of a scholarship).
Death or Disability: If the beneficiary dies or becomes disabled (see the definition of Disabled in the Glossary of Terms in the Program Description), the account owner will be entitled to cancel the account and receive a lump-sum refund of the current account balance, which will be treated as a non-qualified distribution. The earnings portion of the distribution will be taxed as ordinary income at the federal level but will be exempt from Virginia income tax. The earnings portion of the distribution will not be subject to the 10% federal penalty tax otherwise applicable to non-qualified distributions. As an alternative, the account owner can change the beneficiary of the account to a member of the family of the current beneficiary and avoid paying any tax.
Scholarship: If the beneficiary receives a scholarship, the account owner may request a refund of the current account balance, up to the amount of the scholarship. The earnings portion of the refund will be taxed as ordinary income at the federal level but will be exempt from Virginia income tax. The earnings portion of the distribution will not be subject to the 10% federal penalty tax otherwise applicable to non-qualified distributions As an alternative, the account owner can change the beneficiary of the account to a member of the family of the current beneficiary and avoid paying any tax.
Rollovers to another Section 529 qualified tuition program: If VEST transfers the current account balance directly to another qualified tuition program, the earnings portion of the transfer will not be included in the account owner's federal income tax and will not be subject to the 10% federal penalty tax. However, the account owner will be required to recapture (in one year) any amount of deductions taken on prior years' Virginia tax returns, unless the rollover is to a Virginia Prepaid Education Program account. You are allowed one rollover every 12 months without changing the beneficiary to a member of the beneficiary's family.
|
|
|
|
|
|
 |
|
|
| In cases where distributions are payable to a beneficiary or a higher education institution, the Virginia College Savings Plan will mail an IRS Form 1099-Q in late January directly to the student. For all other distributions, an IRS Form 1099-Q will be sent to the account owner in late January |
|
|
|
|
|
|
 |
 See all Good to Know tips |
|
|
 |
|
 |
|
|
|