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Uncertain about what some terms mean? Although Virginia529 strives to explain 529 plans in a straightforward manner, some legal language, investment terms and acronyms still show up. So, if you find yourself scratching your head, here’s a glossary for the unfamiliar terms you may encounter.

An IRS form an individual receives if withdrawals were made from a 529 or Coverdell Education Savings Account (ESA) during the previous tax year. The form is used by the individual to fill out both federal and state tax returns.

A tax–advantaged higher-education savings program designed to help families meet the ever–rising cost of higher education through planning and saving in a variety of investment options and programs.

The owner of an account who controls the account assets and distributions; typically, the parent or grandparent, but it doesn’t need to be a family relation. The account owner generally may also be a U.S. trust, corporation, partnership, nonprofit organization, custodian, guardian or other legal entity.

An individual who is authorized to access information on an account, such as an account statement, but does not have any control or authority to act on the account. In many situations, spouses and/or financial advisors may be named as an authorized individual.

The average cost of tuition at Virginia’s 15 public colleges and universities, weighted by enrollment. Virginia529 uses this weighted average tuition to help calculate the cost of an individual Tuition Track Portfolio Unit.

The person named by the account owner in the account application. This is the future student who will use the funds.

A trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the designated student on the account. It may be used to save for K-12 and higher education expenses and limits contributions to $2,000 per year per child. Household income limitations may apply.

A  trusted adult (individual, corporation, organization or other legal entity) who holds and safeguards an individual’s account assets for them.

The person named by the account owner to assume account ownership in the event of the account owner’s death.

An additional amount charged on top of a college or university’s base tuition to support additional services and programming for students in a particular major, class program or other course of study.

Contributions to a Virginia529 account from a net paycheck, using an employer’s process for establishing direct deposits. Contributions are made every pay period.

Any college, university, vocational or technical school deemed eligible to participate in federal student aid programs. This includes thousands of schools in the U.S. and some abroad.Use the Federal School Code Search on the FAFSA web site to view a complete list of eligible colleges, universities, and vocational schools.

July 1st of the student’s projected high school graduation year. Contributions to certain portfolios are no longer accepted once the expected usage date is met. The expected usage date also marks the beginning of an account’s time limit. Funds must be used within 10 years of the expected usage date for the Tuition Track Portfolio and Prepaid529 accounts, and within 30 years of the account opening for all other Invest529 portfolios.

A measure of how much of a portfolio’s assets are used for administrative and other operating expenses.

 A “member of the family” of a student is a person related to that student as follows: (a) a son or daughter, or a descendant of either; (b) a stepson or stepdaughter; (c) a brother, sister, stepbrother or stepsister; (d) the father or mother, or an ancestor of either; (e) a stepfather or stepmother; (f) a son or daughter of a brother or sister; (g) a brother or sister of the father or mother; (h) a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law; (i) the spouse of the beneficiary or of any of the other foregoing individuals; or (j) a first cousin of the beneficiary. For this purpose, a child includes a legally adopted child, and a brother or sister includes a half-brother or half-sister.

Charges to your account. There are two types of fees that account owners may incur on their account — asset-based, which are related to your portfolio investments; and service, which covers operational costs including processing a form or other account requests. Related: Invest529 Fees and Expenses

A savings program available directly from Virginia529 with a number of investment portfolios, including age-based evolving, non-evolving and an FDIC-insured portfolio to which account owners can decide how much and how often to contribute.

A change to all or part of an account owner's Virginia529 account holdings to another investment option within Virginia529 is an investment option change. IRC Section 529 permits an investment option change twice per calendar year by an account owner for all Virginia529 accounts held for a specific student. Also known as an Investment Direction Change.

The market value of a portfolio’s total assets, minus liabilities, divided by the number of outstanding units. Also commonly referred to as Unit Price.

A program established and maintained by a state, Eligible Education Institution or agency under which a person may make contributions to an account to meet the qualified higher education expenses of the designated student on the account. Virginia529 sponsors two programs: Invest529 and CollegeAmerica.

A tax-free reinvestment of funds.

  • From one Qualified Tuition Program to another: Once funds are distributed there is a 60-day time frame in which funds must be deposited into the new Qualified Tuition Program. IRS regulations allow only one Rollover for the same Student during a rolling 12-month period. NOTE: Requests to move funds among Invest529 or CollegeAmerica are considered Investment Direction Changes, not Rollovers.
  • From a 529 plan to a Roth IRA: Certain unused funds in a 529 account can be moved to a Roth IRA for the
    benefit of the student listed on the account, as long as the account has been opened for at least 15 years
    and meets additional specific rules. A rollover to a Roth IRA is not counted towards the 12-month rollover
    limit for 529 accounts.

Student housing accompanied by a meal plan. Room and board costs can include both on-campus and off-campus housing. 

A tax-free movement of funds between Virginia529 accounts where the Account Owner/Beneficiary (student) combination is different on the receiving account.

For purposes of Prepaid529 only, Virginia529 defines tuition as the undergraduate in-state semester or term charges for tuition and mandatory fees required and imposed as a condition of enrollment of all students by a two-year or four-year Virginia public school. Please see the Prepaid Program Description and Master Agreement for a complete definition.

Uniform Gift to Minors Act. Laws adopted by most states allow an adult to contribute to a custodial account in a minor’s name without having to establish a trust or name a legal guardian. Thus, minors can have securities bought and money invested in their names, but the custodian is responsible for managing the funds in the account. Once the minor reaches the age of majority, he/she has access to the account and can take control of the funds. The assets are the legal property of the minor, and the custodian has a duty to manage the account for the benefit of the student. All withdrawals from the account are taxed at the minor’s rate. Putting money into a UGMA account can negatively impact the chances for financial aid since financial aid officers may weigh children’s assets more heavily than parents’ assets.

An individual contribution amount that represents 1/100th of Average Tuition at Virginia public colleges and universities. Savers in the Tuition Track Portfolio will receive one year of the current Average Tuition for every 100 units previously purchased, regardless of how much tuition rates have grown. Related: About the Tuition Track Portfolio

Uniform Transfers to Minors Act. Law that extends the Uniform Gift to Minors Act’s definition of a gift to include real estate, fine art, patents and royalties. An UTMA account allows the custodian to manage the minor’s account until they reach 18 or 21 years old, depending on the state in which the account was established.

An independent agency of the Commonwealth of Virginia, with a mission to provide superior, affordable, innovative, tax-advantaged higher-education savings options to help families and others achieve their academic goals.

Taking money out of a 529 account.

A qualified distribution is a withdrawal of funds for 1) the properly documented qualified higher education expenses of the designated student or 2) a qualified rollover to another Qualified Tuition Plan (529 Plan).

A non-qualified distribution is a withdrawal made for any reason other than the two described above. Withdrawals that are non-qualified distributions will be subject to federal income tax on the earnings and Virginia state income tax on the earnings for Virginia taxpayers, as well as a federal penalty of 10 percent of the earnings, reported on the taxpayer’s federal tax return. Virginia taxpayers will need to recapture any deductions they have previously taken on the amount of the withdrawal if it is a non-qualified distribution.

This glossary is for illustrative purposes and is not a full list of terms related to 529 account usage. For the legal definition of these terms, and/or to see other rules related to 529 plans, review the applicable program descriptions.