Organization

• The PA529 is a low-risk, tax-advantaged plan intended to assist with college savings. The plan is managed by the Guaranteed Savings Plan Fund and is sponsored by the state of Pennsylvania. The funds placed in the program grow free of state and federal taxes, and withdrawals are not taxed if used for approved educational expenses. Virtually any type of professional, career or academic training is recognized as valid for this purpose.
  
  

Contributors and Beneficiaries

• Either the account holder or the designated beneficiary must reside in Pennsylvania at the time the account is established. The account holder may designate anyone as the beneficiary, even himself. This means that grandparents may establish an account expressly for the purpose of a grandchild's education. Also, other people may contribute to the account, once established. So if the parents have established an account, the grandparents may contribute to that account even though it is not in their names. Individual Pennsylvania taxpayers may deduct contributions of up to $13,000 per year per beneficiary from their Pennsylvania state income tax. Couples filing jointly may deduct up to $26,000 per year per beneficiary.
  
  

Guarantee

• The PA529 plan offers the following guarantee: A year's tuition paid into the fund will yield a year's tuition upon withdrawal for payment. The fund is managed to target a growth rate equal to or exceeding that of tuition. If tuition increases at a rate exceeding that of the fund, the fund will still pay as promised. The assumption is that over the long term, the fund's portfolio (a diversified mixture of common stock, bonds and other instruments) will outperform the increase in tuition.
  
  

Alternative Use of Funds

• If a selected beneficiary does not pursue post-secondary education, the money contained in the fund is not forfeited. There is no expiration period for the use of the funds, so they may grow indefinitely if there is a chance of the potential student reconsidering. The beneficiary may also be changed to someone related to the original beneficiary. If these options are not acceptable, the sum may simply be withdrawn, though this may trigger certain penalties or taxation, depending on the type of distribution.