From Here to There - Michigan Education Savings Program

From Here
to There
Michigan’s 529 College Savings Plan
You Can Get There.
We Can Help.
Paying for a college education can be one of the most pressing financial challenges a family
may face. Although it may seem overwhelming, it’s not unattainable. It’s important to start
early, contribute regularly and choose a plan that can help you accomplish your college
savings goals. The Michigan Education Savings Program (MESP) can help you get there with
its tax advantages, flexible features and low cost.
Table of Contents
Saving for College.........................................................1
Two easy ways
to enroll:
Contributing to MESP................................................ 2
1Enroll online at
Tax Advantages............................................................ 3
Flexible Features.......................................................... 4
Investment Options.................................................... 5
Your Questions Answered........................................ 8
Summary of Benefits................................................ 10
www.misaves.com.
2Complete and mail the
enclosed paper application.
For assistance, call us toll-free
at 877 861-MESP or visit
www.misaves.com.
Higher Education — A Smart
Investment in Your Child’s Future.
The cost of college.
What is a Section 529 Plan?
A college education is an important ingredient for success.
Recognizing the escalating costs of college and the financial
Research shows that people with college degrees generally
burden placed on families, Congress authorized Qualified
have more job choices and can earn more money than those
Tuition Plans (QTPs), known as Section 529 plans. 529 plans
without degrees. In fact, according to the College Board,
are flexible, tax-advantaged state programs designed to help
“2010 Education Pays” report, the typical bachelor’s degree
families invest for future college costs. When choosing a
recipient can expect to earn about 66% more during a
529 plan, it’s important to consider what additional benefits
40-year working life than the typical high school graduate
your own state’s plan may offer to residents, the investment
earns over the same period. (www.collegeboard.com,
options available, and any costs or fees associated with
“Education Pays,” 2010).
the plan. Michigan offers three 529 plans which include the
For most families, saving enough to pay for college can seem
Michigan Education Savings Program (MESP), the Michigan
overwhelming especially since tuition costs have historically
Education Trust (MET) and the Michigan 529 Advisor
risen faster than the overall rate of inflation. Average national
Plan (MAP).
tuition costs historically have risen over 6% a year and
MESP rated one of the “Top 529 Plans” *
Michigan colleges have increased over 7.2% per year over the
MESP is Michigan’s direct-sold Section 529 college savings
last 22 years. With proper planning, funding a college education,
plan, administered by the Michigan Department of Treasury
like any major financial goal, can be easier to achieve.
and managed by TIAA-CREF Tuition Financing, Inc., a leading
program manager of 529 college savings plans. For over
Projected College Costs
10 years, MESP has been helping families save for college.
Private Four-Year
(Not-for-Profit Colleges)
$500k
low-fees, a choice of Investment Options and state income
tax benefits make MESP one of the most competitive plans
300k
Public Colleges Four-Year
(In-state tuition)
in the nation. We’re not the only ones who think so.
Kiplinger chose MESP as one of the “Top 529 Plans in the
Nation.”* And, Michigan’s 529 plans are the only plans
100k
0
2009
2027
2009
that offer Michigan taxpayers a state income tax deduction
2027
This chart indicates actual (2009) and projected (2027) average
college costs including four years of tuition, fees, and room and board.
Based on average tuition and fees for 2009-2010 as reported by
The College Board® and assumed to increase 6% annually. This is a
hypothetical example for illustrative purposes only. Source: 2009 Trends
in College Pricing, www.collegeboard.com.
on contributions.
* Based on the comparison of Investment Options, fees and expenses, state
tax benefits and other features. Michigan was noted for having a low-risk
option appropriate for conservative investors (June 2010). C48754
How Much Will College Cost?
iphone app
Go to www.misaves.com and click
periodically to meet those costs. It
Download the free
on our College Savings Calculator. The
also estimates the potential tax savings
TIAA-CREF College
calculator projects college costs in your
on your investment. The Planner
Savings Planner
child’s time frame and calculates how
includes a college cost database with
iPhone or Android
much more you need to save
approximately 3,800 colleges.
smart phone app.
www.misaves.com 1
Contributing to MESP
Is Simple And Affordable
Low minimum contributions
No income restrictions
Parents, grandparents, family and friends can start an
There are no income restrictions with MESP. Anyone
account with as little as $25. Additional contributions can
at any income level can start and contribute to an MESP
be made at any time in a variety of flexible ways:
account. With a low minimum contribution of only $25,
Personal Check: Write a personal check and mail it to MESP
it’s easy to start today.
at any time.
No annual contribution limits
Electronic Funds Transfer: Contribute automatically online
You can contribute any amount each year. However, an
from a checking or savings account by setting up banking
overall maximum account balance limit of $235,000
instructions on your account.
applies to all Michigan 529 plan accounts for a particular
Gifts from Family Members and Friends: Family members
beneficiary which includes contributions made to MET and
and friends can also open an account. If they are Michigan
MAP. Although you can no longer add to the account(s)
taxpayers, they may be eligible for a Michigan income tax
once it has reached the maximum account balance, the
deduction on their contributions too.
account’s earnings can continue to grow.
Automatic Contribution Plan: Set up an automatic
contribution plan to contribute as little as $25 biweekly,
Consistent Investing Gives Your Money Time to Grow
monthly, or quarterly. You can stop, restart or increase
$100k
the automatic contribution at any time.
Payroll Deduction: If your employer allows, you can set up
payroll deduction from your paycheck for a minimum of only
$15 per pay period, per account.
Rollovers: If you currently have another state’s 529 plan or
a Coverdell Education Savings Account, you may roll over
funds from those accounts to MESP tax free. Transfers and
rollovers may be subject to differences in features, costs,
and surrender charges. Indirect transfers may be subject to
taxation and penalties. Please consult your tax advisor about
your particular situation.
2 www.misaves.com
80k
Monthly Contribution
■ $50
■ $100
■ $200
60k
40k
20k
0
6 Years
12 Years
18 Years
Years of Accumulation
This hypothetical example illustrates the future values of different
regular monthly investments for different time periods and assumes
an annual investment return of 6% with an initial investment of $2,500
and no withdrawals during the relevant time period. It is presented for
illustrative purposes and does not reflect actual performance or predict
future results and does not reflect any deduction for expenses or taxes or
the benefits of any state tax deduction that may apply. Account values in
the Investment Options are not guaranteed and will fluctuate based
upon a number of factors, including general market conditions. Note that
systematic investing doesn’t guarantee a profit or protect against loss.
Tax Advantages Can Help Save More
Save on federal and state income taxes
Contributions to an MESP account may reduce the taxable
Contributions made to MESP are contributed after tax
value of your estate. Contributions, together with all other
but any earnings on the account will be tax deferred. If
amounts given by the account owner to the beneficiary, may
the account proceeds are used to pay for qualified higher
qualify for the current annual federal gift tax exclusion of
education expenses, any earnings will be completely
$13,000 per contributor ($26,000 for married contributors),
tax free upon withdrawal of the funds.
per beneficiary.
Potential Michigan income tax deduction
If a contributor’s gifts to an MESP account in a single year
exceed $13,000, then for purposes of the federal gift tax
Michigan taxpayers contributing to an MESP account may
exclusion, the contributor may elect to treat up to $65,000
be eligible for an annual Michigan income tax deduction on
of the contributions ($130,000 for married couples), as
contributions up to $10,000 for married couples filing jointly
having been made proportionally over a period of up to five
or $5,000 for individual filers. Contributions must be made
years. Please consult your tax advisor regarding federal and
by December 31 to be eligible for a Michigan income tax
gift tax benefits.
deduction on the current year’s tax return.
A Michigan taxpayer is permitted a deduction from
Michigan adjusted gross income for a contribution to
an MESP account less any Qualified Withdrawals made
The Benefits of Tax-Free Growth Potential
$80k
$66,676
during the tax year. Amounts transferred from another
60k
529 college savings plan are not eligible for the Michigan
40k
income tax deduction.
20k
Estate planning and gifting
0
Federal estate and gift tax benefits can help parents and
grandparents save on taxes and create a legacy for their
children and grandchildren.
$55,092
529 Account
Taxable Account
This hypothetical example illustrates the growth of an annual
investment of $2,000 made at the beginning of each year for 18 years.
It assumes there are no withdrawals of contributions and earnings. It
also assumes a 30% combined federal, state and local income tax rate
and an annual investment return of 6%. It is presented for illustrative
purposes only to show the effect of compounding and tax deferral and
does not represent the actual performance or predict the future results
of MESP or any Investment Option in the MESP and does not reflect
any reduction for expenses. Nonqualified withdrawals may be subject to
federal and state taxes, and an additional 10% federal tax.
Give a Gift that Can Last a Lifetime
Make your gift more meaningful by
deduction can be a powerful incentive
Why not invite them to open an
downloading and printing a gift
for friends and relatives wondering
account for your child — a gift that
certificate from www.misaves.com.
what to give your children as gifts on
can last a lifetime.
Remember, the Michigan income tax
birthdays and special occasions.
www.misaves.com 3
Mesp Is Flexible to Use
Choice of colleges
Control over the account
Your beneficiary can use the funds in the MESP account at
The account owner controls all withdrawals and makes all
any eligible college, university, or trade school in the nation
investment decisions regarding the account, regardless of
and even some schools abroad, not just Michigan institutions.
the age of the beneficiary.
Use for a variety of qualified expenses
Withdraw funds at any time
Account proceeds can be used for a variety of qualified
When it comes time to use the proceeds for qualified
higher education expenses including tuition, certain
education expenses, you can withdraw funds from your
room and board costs, required supplies and equipment,
account tax free via a paper form or automatically online.
and books.
Receipts are not required by MESP, but it’s important to
Transferable among family members
keep them for your tax records. If the funds are used for any
other purpose besides qualified higher education expenses.
The beneficiary designated on the account can be changed
Nonqualified withdrawals may be subject to federal and
to another eligible family member at any time. The new
state taxes and the additional federal 10% tax.
beneficiary (or beneficiaries) must be a member of the
previous beneficiary’s family as described in the MESP
No age or time restrictions
Disclosure Booklet, to avoid this change being treated as
Account proceeds can be used at any age at any time in the
a nonqualified withdrawal.
future. If your beneficiary is not ready to attend college after
high school, you can use the funds in the future.
4 www.misaves.com
Choice of Low-Fee
Investment Options
Choice of Investment Options
MESP is a low-fee 529 plan
MESP offers experienced professional money management
MESP strives to be one of the lowest-fee Section 529 college
from TIAA-CREF Tuition Financing, Inc. along with a choice
savings plans in the nation. The total annual administrative
of seven Investment Options designed to help meet your
fee, which covers the cost of administration, operations,
family’s college savings goals and risk tolerance. You can
marketing, and investment management, is only 0.35%
invest contributions in one or a combination of these
(less than ½ %) per year. The Principal Plus Interest
Investment Options.
Option is offered without the 0.35% fee.
• Aggressive Age-based Allocation Option
No other fees are associated with the account. That includes
• Moderate Age-based Allocation Option
no additional administration fee or broker commissions.
• Conservative Age-based Allocation Option
A word about risk
Each Investment Option and underlying fund has its own
• 100% Equity Option
risks. For example, there are special risks inherent in
• Balanced Option
international investing, including currency, political, social
• 100% Fixed-Income Option
and economic. Investments in growth stocks may be more
• Principal Plus Interest Option
volatile than other securities. Fixed-Income investing entails
Any time you add new contributions, you can choose a
credit and interest risks.
new option. You can transfer funds from one option to
When interest rates rise, bond prices generally fall, and
another option one time per calendar year or upon the
the underlying fund’s share price can fall. Diversification
change of a beneficiary.
doesn’t guarantee profit or protect against loss. Investment
returns over your investment period could be lower than the
rate of increase in the costs of higher education during that
period. It’s also possible to lose part or all of the value of
your Account.
Trusted Investment Management
TIAA-CREF Tuition Financing, Inc., a leader of
services group of companies and a leading
529 savings plan management, provides
provider of retirement services in the academic,
program management for MESP. TIAA-CREF
research, medical and cultural fields. For more
Tuition Financing, Inc. is an affiliate company of
information, visit tiaa-cref.org.
TIAA-CREF. TIAA-CREF is a national financial
www.misaves.com 5
Choose From a Variety of
Investment Options
Age-Based Managed Allocation Options
Investing in the Age-based Options (Conservative, Moderate,
and Aggressive) follows the method of using the number of
years an investor has for saving to determine the appropriate
investment allocation. Although there is no guarantee that the
investment objectives will be met, this option offers the
opportunity to invest aggressively when the beneficiary is
young, and over time, more conservatively,
Ages 0–3
thus creating a balanced approach. Aged-based Investment
Options combine equity, real estate, fixed-income, and money
market mutual funds offered by the TIAA-CREF Funds –
Institutional Class. Younger beneficiaries will have a higher
exposure to equities and real estate investments which will
decrease significantly as they approach college age, as the
following charts illustrate:
Ages 8–11
Ages 18+
conservative
Conservative
Moderate
moderate
Aggressive
AGGRESSIVE
Equities
Real Estate
Bonds
Inflation-Linked Bonds
Allocations for all investments are as of October 2010. Allocations are reviewed and adjusted periodically.
6 www.misaves.com
Money Market
Balanced Option
100% Fixed-Income Option
Equities
36.0%
International
Equities
18.0
Real Estate
Bonds
Bond Index
75.0%
Inflation-Linked 25.0
Bonds
6.0
40.0
Risk level — Moderate
Risk level — Conservative
The Balanced Option seeks to provide a favorable long-term
total return by investing in a balanced mix of equity and
fixed-income mutual funds. Because of the high exposure
to domestic and foreign equities, and the corresponding
degree of risk, this option may be appropriate for you if you
can tolerate a degree of volatility in exchange for potentially
higher returns over time.
The 100% Fixed-Income Option seeks to provide preservation
of capital along with a moderate rate of return through a
diversified mix of fixed-income investments. This Option
may be appropriate for you if you have a medium to short
investment time horizon and can tolerate a moderate level
of risk.
Principal Plus Interest Option
100% Equity Option
International
Equity
Mid-Cap Equity
Small-Cap Equity
S&P 500 Index
30.0%
8.4
5.6
56.0
Risk level — Aggressive
The 100% Equity Option seeks to provide a favorable longterm total return, mainly from capital appreciation, by
investing in equity mutual funds. Because of the high
exposure to domestic and foreign equities, and the
corresponding high degree of risk, this Option may be
appropriate for you if you already have substantial college
savings from less volatile investments (e.g., fixed-income
investments) or you have a long time until college and can
tolerate a higher level of risk.
The Principal Plus Interest Option provides the stability many
people may want for at least a portion of their college savings
funds. It provides an investment option to investors who can
tolerate little risk, including those who have tradition­ally
saved using fixed-income vehicles and are willing to accept
returns that may be lower than those offered in the other
Invest­ment Options.
Effective October 1, 2010, accumulations (including
contributions and earnings) under the Funding Agreement
for the Principal Plus Interest Option as of September 30,
2010 will be credited to MESP with an effective annual
interest rate of 2.50%, and are guaranteed to earn this rate
through September 30, 2011, subject to the claims-paying
ability of TIAA-CREF Life Insurance Company.
www.misaves.com 7
Your Questions Answered
What is the difference among the Michigan
Education Savings Program (MESP),
the Michigan Education Trust (MET) and
the Michigan 529 Advisor Plan (MAP)?
Who can be an account beneficiary?
• MET is a prepaid Section 529 plan that locks in the
same beneficiary. The beneficiary must have a valid Social
current costs of tuition and mandatory fees at Michigan
public institutions.
• MESP and the MAP are Section 529 college savings
plans which can be used at virtually any qualified higher
education institution in the nation for tuition, certain
room and board expenses, fees, mandatory equipment
and books. MESP is a direct-sold program, managed by
TIAA-CREF Tuition Financing, Inc. and offers seven
low-fee investment options.
• MAP is offered by Allianz Global Investor Distributors
The beneficiary is the student for whom you are saving.
Only one beneficiary may be listed per account, but multiple
accounts may be opened by different account owners for the
Security Number.
Can more than one person contribute
to the account?
Yes. Anyone, including family members and friends, can
contribute to your account as long as the total contributions
do not exceed $235,000 per beneficiary, including all
contributions made to a MET account and MAP.
How can I set up payroll deduction for
my account?
and managed by TIAA-CREF Tuition Financing, Inc. MAP
If your employer allows payroll deduction (direct deposit)
offers different Investment Options than MESP. MAP is
from your account, you can set up contributions from your
sold only by advisors and higher fees apply.
paycheck for a minimum of $15 per pay period, per account.
All three of Michigan 529 plans (MET, MESP and MAP)
You must set up an MESP account first and obtain an
offer Michigan taxpayers a state income tax deduction on
account number for each beneficiary for whom you want to
contributions. Total contributions for all three plans must
contribute via payroll deduction. Once you have an account
not exceed $235,000 per beneficiary.
number, fill out a payroll deduction form and return one
Who can open an account?
copy to MESP and another copy to your Human Resources/
Benefits department. You can stop, start or change the
Any U.S. citizen or resident alien with a valid Social Security
contribution at any time, and it’s portable to any new
Number or federal Taxpayer Identification Number and a
employer that offers payroll deduction for MESP.
U.S. mailing address can open an account on behalf of a
beneficiary. Each account has one account owner and one
listed beneficiary. A contingent account owner can be set up
on the account in the event of the original account owner’s
death. The account owner can be changed at any time.
8 www.misaves.com
Can I change the account beneficiary?
What if my child gets a full or partial scholarship?
Yes, you can change the beneficiary at any time or transfer
If the beneficiary receives a scholarship that covers the cost
a portion of your investment to a different beneficiary. The
of qualified expenses, you can withdraw funds from your
new beneficiary must be an eligible family member of the
account up to the amount of the scholarship. The earnings
previous beneficiary’s family. See the Disclosure Booklet for
portion of a withdrawal due to receiving a scholarship are
more details.
subject to federal and state income taxes, but not the
If I move out of Michigan, can I still contribute
to MESP?
additional 10% federal excise tax.
You do not have to be a Michigan resident to use MESP.
Will participation in MESP affect my
beneficiary’s eligibility for financial aid?
Only Michigan taxpayers qualify for a Michigan income tax
Generally, a parent’s assets are counted at 5.64% of the
deduction on MESP contributions, but earnings can still
expected family contribution when determining federal
grow tax free regardless of where you reside.
financial aid. Check with the college or institution your
What if my child decides not to attend college?
You have a variety of choices:
beneficiary may attend to learn about any financial
aid requirements.
the account owner may name another eligible family
Can I roll over funds from another 529 college
savings plan?
member as the account beneficiary.
You may transfer funds from another 529 college savings
• If the beneficiary of an account does not attend college,
• There is no time or age restriction for using the account, so
you might want to hold onto the account in the event your
current beneficiary changes her/his mind in the future.
• You can withdraw funds from the account at any time
for any purpose, but if the account proceeds are not
used for qualified educational expenses the withdrawal
amount will be taxable and will incur an additional 10%
federal excise tax. Indirect withdrawals may be subject to
federal and state taxes and the additional federal 10% tax.
plan to an account with MESP without triggering federal or
state income tax if: it’s for the same beneficiary, and the
transfer takes place within 12 months. Transfers and
rollovers may be subject to differences in features, costs,
and surrender charges. Indirect transfers may be subject to
taxation and penalties. Please consult your tax advisor about
your particular situation.
Can I transfer or roll over assets from another
college savings investment?
You can roll over funds from a Coverdell Education Savings
Do I have to use my account at
Michigan institutions?
account tax free. Transfers from custodial accounts (UGMA or
No, you can use your account at any qualified institution in
the nation and many abroad. Visit the U.S. Department of
Education website, www.ed.gov, to learn if an institution
is qualified.
UTMA) are taxable. The college savings investment from
which you are transferring may be subject to different features,
costs and surrender charges. Consult your tax advisor before
rolling over to another 529 college savings plan.
Kiplinger Rating
MESP Goes Green!
Once you are an MESP account owner,
MESP offers
Kiplinger chose the Michigan
you can sign for our convenient
• e-Delivery of quarterly statements
Education Savings Program as one of
e-Delivery services and help the
• Online Withdrawals
the “Top 529 Plans in the Nation”*
environment too.
• Access to your account online 24/7
C48754
Visit www.misaves.com to sign up.
www.misaves.com 9
Summary of MESP Benefits
Affordable to start and contribute: You can open an account
Transferable: If your student decides not to attend college or
with a minimum contribution of only $25 or $15 via payroll
uses a scholarship, you can change the beneficiary to
deduction. Family members and friends can also contribute
another eligible member of the family.
to your account or open a new account on behalf of
Access to the money: Only the account owner has access to
your beneficiary.
the funds in the account. You can use the money at any time
Anyone can open an account: A parent, grandparent, friend
for any purpose other than qualified college expenses, but
or relative at any income level can open or contribute to an
taxes and penalties may apply.
account for a beneficiary.
Range of Investment Options: There are seven different
Control of the account: The account owner designates the
Investment Options to choose from to best meet your
beneficiary and controls the funds in the account regardless
savings objectives and risk tolerance.
of the beneficiary’s age.
Low-Fees: The total annual asset-based fee is only 0.35%
Tax free earnings: Any earnings are free from federal and
(less than ½ %). There is no annual asset-based fee for the
Michigan income taxes when used for qualified higher
Principal Plus Interest Option. There are no additional
education expenses.
broker commissions or annual administrative fees.
State income tax deduction: Michigan taxpayers may
Professional management: TIAA-CREF Tuition Financing,
be eligible for a Michigan income tax deduction on
Inc. has served as MESP Program Manager since the launch
Program contributions.
of MESP in November 2000. TIAA-CREF Tuition Financing,
Choice of schools: Funds may be used at virtually any
Inc. is a leader in 529 plan management and is an affiliate
qualified college, university or career school in the nation and
of TIAA-CREF, a financial services organization with more
some abroad. MESP is not limited to Michigan institutions.
than 90 years of investment experience.
How to learn more
MESP offers a variety of online
Webinar: Sign up for a live online
Webcast: Take five minutes to listen
presentations to learn more about
webinar. You can participate in an
to our MESP Webcast which is a
the plan and spread the word
online presentation from work or home
recorded video on the advantages
to your friends and families.
and interact with a live presenter. Visit
and benefits of MESP.
the MESP website for dates and times.
Visit www.misaves.com to learn more.
10 www.misaves.com
Open an Account Today
With each day that passes, the time until your child goes
Two easy ways to enroll
to college shortens. When your child reaches kindergarten,
Remember to read the MESP Disclosure Book and
he or she is one-third of the way to college! So don’t delay.
Participation Agreement before opening an account.
A few minutes of your time today could mean a lifetime of
benefits for your child’s tomorrow.
Don’t forget, family members can contribute to your account
too. Encourage family members and friends to contribute to
your existing account or open an account. It’s a gift that can
ONLINE
1 Visit www.misaves.com.
2 Click Open an Account and enter the information.
3Contribute online via electronic banking, or mail a
personal check.
last a lifetime.
4 An account will automatically be established.
5 Print copies for your records.
MAIL
1Complete the application in the back of this
enrollment book.
2Mail the application and a check to the address
on the form.
3 Keep copies for your records.
4A confirmation will be sent to the address of record
once the account is opened.
MESP Tools and Resources
Great tools and resources to help
you stay on track with your college
savings goals.
1
2
Online Access to your account 24/7.
iPhone application to calculate
your college savings goals.
3
E-newsletters to learn more
about community events and
pertinent news.
www.misaves.com 11
We’re Here to Help
Contact us by 877 861-MESP or visit
www.misaves.com to learn more.
12 www.misaves.com
877 861-MESP
www.misaves.com
* Based on the comparison of Investment Options, fees and expenses, state tax benefits and other features. Michigan was
noted for having a low-risk option appropriate for conservative investors (June 2010).
Consider the investment objectives, risks, charges and expenses before investing in the Michigan Education Savings Program
(MESP). Please visit www.misaves.com for a Disclosure Booklet containing this and other information. Read it carefully.
Account value in the investment options is not guaranteed and will fluctuate based on a number of factors, including general
market conditions.
Before investing in a 529 plan, you should consider whether the state where you or your designated beneficiary reside or have
taxable income has a 529 plan that offers favorable state income tax or other benefits that are available only if you invest in that
state’s 529 plan.
The tax information contained herein is not intended to be used, and cannot be used, by any taxpayer for the purpose of
avoiding tax penalties. It was written to support the promotion of the Michigan Education Savings Program. Taxpayers should
seek advice based on their own particular circumstances from an independent tax advisor.
Nonqualified withdrawals may be subject to federal and state taxes and the additional federal 10% tax.
TIAA-CREF Tuition Financing, Inc., Program Manager.
877 861-MESP
www.misaves.com
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