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New Mexico’s 529 College Savings Plan
New Mexico’s 529 College Savings Plan
Agenda
• 529 Plan Overview
• Benefits to Employers and Employees
• Investment Options
• Implementation
• Next Steps
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TEP Overview
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The Education Plan (TEP)
• A College Savings Plan sponsored by the state of New Mexico
• 529 is an IRS section code authorizing potential tax-advantaged college savings plans
• Helps families save for future higher education expenses
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Why Does the State of NM Offer a
College Savings Plan?
The underlying interest
of the state is having
more kids going on to
higher education – and
coming out with less
debt.
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NM’s College Saving Plan Today
• NM’s Plan began in the 90’s
• ~130,000 account holders
• >$2B in assets
• More than 50% of account holders are
from other states
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Families with $500 or less in college
savings are 4 times more likely to
attend college, and 2 ½ times more
likely to graduate from college than
those without such savings.
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1-CenterforSocialDevelopment,2013,”Small-DollarChildren’sSavingsAccounts,Income,andCollegeOutcomes”,hFps://csd.wustl.edu/publicaLons/documents/wp13-06.pdf
Who Can Open a TEP Account?
• Parents
• Grandparents
• Aunts/Uncles
• Family Friends
• You (for yourself!)
What If the Beneficiary I’ve
Designated Decides Not to Go To
College?
You can designate a new beneficiary. There
is quite a bit of latitude (according to IRS
definitions) regarding who can be
designated – essentially a relative with one
degree of separation up or down.
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Tax Advantages
• 100% of your contributions each year
are deductible on your NM State
return if you are a NM resident
• Gains each year not taxed on your
Federal return
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Examples of Qualified Expenses
• Tuition
• Room / Board
• Fees
• Books
• Computers/Printers/Internet Connection
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Which Schools
• Nationwide
• At any higher ed institution that qualifies to receive federal financial aid for its students
- Trade Schools
- 2-year colleges
- 4-year colleges
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What Courses of Study
• Associates degree
• Undergraduate degrees
• Masters degrees
• Ph. D.
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NMLoFeryvsTheEducaLonPlanCoveredExpenses NMLo0ery
ScholarshipTheEduca:onPlan
TuiLon(stateschools) √ √TuiLon(schoolsnaLonwide) √Room/board √Books √Supplies √Equipment(ielaptop) √
Do TEP Savings Effect Financial Aid?
Not a big impact
529 accounts opened by parents are
reported on the FAFSA as a parental asset.
Parental assets are assessed at a maximum
rate of 5.64% in determining the students
Expected Family Contribution.
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BENEFITS
Benefits to Employers
• Free to setup
• Easy administration
• Automated file creation & maintenance
• No contribution requirement
• No government reporting
• No fiduciary responsibility
• A tool for recruitment & retention
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Benefits to Employees
• Don’t See It, Don’t Spend It
• Tax Advantages
Contributions each year deductible on
State return for NM residents
Gains each year not taxed on Federal
return.
• Motivate Children
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Investment Options
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Diverse Investment Options
• Age Based:
This is the Set It and Forget It option.
• Custom:
For people with more investing
experience and greater understanding of
financial markets.
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Portfolio Adjustments Over Time
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InvestmentInformaLon
Online Support
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How Much Can I Save?
Small Amounts Add-Up It is important that you start early and continue to contribute. A family making monthly contributions over 15 years can accumulate a college savings fund and reduce the amount borrowed when the child is in college.
$25 $75 $100
Interest
Principal
$ 6,682
$ 26,729
$ 20,047
Assumes monthly contributions and a 5% annual return.
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It is more than just the empty
calories….
$4,783.61 Skip that morning cup a joe just one day per week over 15 years. Buy one fewer latte each week ($4.15) at 5% return and you’ll have $4,783.61 for college.
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IMPLEMENTATION
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What Employers Do
1. Complete Employer Authorization form
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What Employees Do
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1. Open an account online @ TheEducationPlan.com (if no
existing account)
• Ittakesjust15minutes• $25ini1a1oniswaivedifyouoptforpayrolldeduc1on.
What Employees Do (cont’d)
2. Complete Employee Payroll Deduction form
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3.Submitformtoemployer
What Employers Do (cont’d)
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2.SubmitEmployerAuthoriza:onFormtoOFIwithcompiledemployeecontribu:ondata
Implementation Flow Chart Employee
IdenLfiestheywouldliketocontributeviaPayrollDeducLon.IftheyhaveaTEPaccount,theyfilloutEmployeePayrollDeducLonForm.*Ifnot,theygo
onlineandopenanaccount.
EmployeeChecktoseeiftheiremployerwillauthorizepayroll
deducLonstotheir529account.
SendsFormtoOFIOFI
SetsuppayrollallocaLonpercentages
ContactsEmployer
If“yes”,then
Employee
ProvidesEmployeePayrollDeducLonFormtoEmployer
EmployerCompilesandreconcilespayrollinformaLon.
SendsittoOFIviasecureFileDataTransfer(FTP)andsendsmoneyviacheck,wire,orACH.
OFIAutomaLcallypoststo529accountsperallocaLoncreatedinsetupprocess
OFIReconcilesfileandmoney
*IfchangesarebeingmadetoallocaLonsortheaccountbeingcontributedto,OFIwillneedanupdatedEmployeePayrollDeducLonform
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EmployerIdenLfiestheywouldliketoofferPayrollDeducLonsfor
theiremployees.TheyfilloutEmployerPayrollAuthorizaLonFormandsendtoOFI.
Rollout to Employees
• Lunch and Learns
• Internal e-Blast
• Employee Newsletter
• Giveaways
• Kickoff
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On-going Support
Visit TheEducationPlan.com
Call 877.EDPLAN8
Mikaela Roos
Director, TEP Outreach
505.670.4748
Heather Holliday
529 Program Management
303.768.5623
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