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Glossary


529 Plan
A state-sponsored, tax-advantaged college savings program established under and operated in accordance with IRC §529 designed to help save for Qualified Higher Education Expenses.

Account
A savings trust account established by an Account Owner pursuant to the Savings Trust Agreement for purposes of investing in one or more portfolios. Accounts are part of the Plan and are held in the name of the Plan on behalf of and for the benefit of the Account Owners and the Beneficiaries.

Account Owner
The individual or entity signing the Application and establishing an Account or any successor to such individual or entity. References in this Glossary to “you” or “your” mean the Account Owner in such capacity.

Application
The LoneStar 529 Plan (“Plan”) enrollment form.

Administrative Fees
A charge for expenses incurred in the administration of a 529 college savings plan, which may include services such as recordkeeping, auditing, and preparing and printing statements and reports. This fee is deducted from your holdings based on a percentage of your assets in the plan. You can find a description of the fees and expenses charged by the plan in the Plan Description and Savings Trust Agreement.

Automatic Investment Plan (AIP)
Automatic Investment Plan allows you to contribute a fixed amount of money in regular intervals. Funds are automatically deducted from the Account Owner’s bank account or other financial institution or through payroll deductions.

Annual Rate of Return
The rate of return on your investment, expressed as a percentage of the total amount invested.

Asset Allocation
A strategy for maximizing gains while minimizing risks in your investment portfolio. Asset allocation involves dividing your assets on a percentage basis among different broad categories of investments, including equity, fixed income, and money market.

Beneficiary
The individual identified by the Account Owner whose Qualified Higher Education Expenses are expected to be paid from the Account or, for Accounts owned by a state or local government or qualifying tax-exempt organization (otherwise known as a 501(c)(3) entity) as part of its operation of a scholarship program, the recipient of a scholarship whose Qualified Higher Education Expenses are expected to be paid from the Account. Any individual may be the Beneficiary of an Account, including the Account Owner.

A government entity or 501(c)(3) not-for-profit organization can establish an Account to fund scholarship programs without designating a Beneficiary at the time the Account is established.

Board
The Texas Prepaid Higher Education Tuition Board.

Class A Units
An investor purchasing A shares pays an up-front sales charge plus an on-going distribution/service fee.

Class RIA Units
Class RIA units are available only through qualifying fee-based Registered Investment Advisors (RIAs) or Investment Advisor Representatives (IARs)

Class RIA units do not have an up-front sales charge or an asset-based distribution/service fee. Rather, fees will be assessed separately by the financial advisor.

Code or IRC
The Internal Revenue Code of 1986, as amended.

Coverdell Education Savings Account (Coverdell ESA, Coverdell Account or Education Savings Account)
A trust or custodial account with a Coverdell ESA designation that is created in the United States solely for paying qualified education expenses for designated beneficiaries under the age of 18 or special needs beneficiaries only if the written instrument creating the trust meets certain requirements. See Types of Investments for more details.

Custodial Account
An account that is created for the benefit of a minor, with an adult (agent, bank, trust company, or other organization) serving as the custodian in accordance with applicable state law. The adult controls the funds until the child reaches the age of majority, at which point the account transfers into the child’s name.

Eligible Educational Institution
Accredited post-secondary educational institutions offering credit toward a bachelor’s degree, an associate’s degree, a graduate-level or professional degree, or another recognized post-secondary credential that is eligible to participate in certain federal student financial aid programs. This includes most accredited public, nonprofit and privately owned for profit post-secondary institutions. Certain proprietary institutions, foreign institutions and post‑secondary vocational institutions are also included as are certain specified military academies.

Enrollment Year
The expected college enrollment year of your Beneficiary, typically at age 18.

Equity Fund
Mutual funds that invest mainly in stocks. Some equity funds may focus primarily on smaller, mid-sized, or larger corporations, or on specific market sectors. Also known as stock funds.

Fixed Income Fund
Mutual funds that invest in bonds. Some fixed income funds may focus primarily on short-term, intermediate-term and long-term maturities. May also be known as Bond funds.

Gift Tax
A tax assessed against a person who gives money or assets to another person without receiving fair compensation.

Individual Asset Class Portfolios
The individual asset class portfolios focus on a single type, or class, of investment and allow you to design your own asset allocation.

IRS
The Internal Revenue Service is the nation’s tax collection agency and administers the Internal Revenue Code enacted by Congress.

Maximum Offering Price (MOP)
The purchase price of one unit/share, including any up-front sales charge.

Member of Family
For purposes of changing the Designated Beneficiary, the definition of a “Member of the Family” of the Designated Beneficiary is:

  • a son or daughter, or a descendant of either
  • a stepson or stepdaughter
  • a brother, sister, stepbrother or stepsister
  • the father or mother, or an ancestor of either
  • a stepfather or stepmother
  • a son or daughter of a brother or sister
  • a brother or sister of the father or mother
  • a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law
  • the spouse of the beneficiary or any of the foregoing individuals
  • a first cousin

For purposes of determining who is a “Member of the Family,” a legally adopted child of an individual shall be treated as the child of such individual by blood. The terms “brother” and “sister” include half-brothers and half-sisters.

NAV
A portfolio’s Net Asset Value is equal to its total assets less its total liabilities. For portfolios with multiple classes, Net Asset Values are determined separately for each share class. NAV per share is equal to the portfolio’s share class Net Assets divided by its number of shares outstanding.

Non-qualified Withdrawals
Withdrawals from a college savings account that are not used to pay for Qualified Higher Education Expenses. Non-qualified withdrawals are subject to ordinary federal income tax, any applicable state income tax, and an additional 10% federal tax on earnings.

Plan Description and Savings Trust Agreement
Similar to a mutual fund’s prospectus, a 529 college savings plan’s Plan Description provides detailed information about the plan, including investment options, fees and expenses. The Savings Trust Agreement is the contract between the Account Owner and the Board, which establishes the Account and the obligations of the Board and the Account Owner.

Plan Fees

  • 12b-1 Fees/distribution fee—Named after a Securities and Exchange Commission (SEC) rule, these fees include costs of distributing the fund shares to investors.
  • Estimated Annual Asset-Based Plan Fees—Investment managers for each underlying investment receive compensation for their services directly from the underlying investments in which the Plan portfolios invest.
  • Program Management Fee—This fee is paid to the plan manager for Plan administration and investment-related services.
  • State Administrative Fee—This fee is paid to the Board to administer the Plan.

Qualified Higher Education Expenses
Qualified educational expenses include graduate and undergraduate tuition, fees, certain room and board expenses, textbooks, supplies and equipment required for a student to attend classes at an eligible educational institution, as well as for registered apprenticeship programs, K-12 tuition for private, public or religious schools (up to $10,000 per year per beneficiary), and expenses for special needs services in the case of a special needs beneficiary who incurs such expenses in connection with attendance at an eligible educational institution. A 529 account can also be used to repay student loans for the beneficiary or the beneficiary’s sibling (up to $10,000 lifetime limit per student).

Tax consequences of using 529 plans for elementary or secondary education tuition expenses will vary depending on state law and may include recapture of tax deductions received from the original state as well as penalties. You should consider consulting with a tax or legal advisor to determine any such consequences.

Registered Investment Advisor (“RIA”)
An RIA is an individual or firm that advises clients on their investments and may manage their investment portfolios. RIAs typically earn their income through management fees, which are often calculated as a percentage of a client’s assets under management by the RIA.

Risk-based Portfolios
Risk-based Portfolios feature the flexibility to choose from among several investment options that may align with your tolerance for risk, your time horizon, and other factors.

Rollover
A tax-free reinvestment transfer of funds within 60 days of the distribution from one qualified 529 plan account to another qualified 529 plan account. Funds in a qualified 529 plan account may also be rolled over to a qualified ABLE program account tax free before January 1, 2026, provided certain conditions are met.

Sales Charge (Front-end Load)
The up-front fee charged when you purchase Class A units of a Section 529 portfolio sold through a financial advisor. The fee is deducted from the purchase and reduces the amount available to buy units of the portfolio.

Section 529
Section 529 of the Internal Revenue Code specifies the requirements for qualified tuition programs (529 plans).

Share Class/Unit Class
A 529 college savings plan may offer more than one “class” of shares/units to investors interested in investing through an advisor. Each class represents a similar interest in the plan’s portfolio but has different fees and expenses.

Successor Account Owner
A successor account owner becomes the owner of the account in the event of the death of the Account Owner.

Target Enrollment Year Portfolios
A target enrollment year portfolio is a portfolio that invests based on the year your Beneficiary is expected to begin using the funds for Qualified Higher Education Expenses (i.e., enrollment year). The asset allocation between equities, bonds, and cash automatically adjusts every six months as the enrollment year approaches, providing a smoother risk reduction path for investments along the way.

Tax-Free/Qualified Withdrawals
Any withdrawals from a college savings account that are used to pay for Qualified Higher Education Expenses at Eligible Educational Institutions for the Beneficiary. These withdrawals are tax free and cover expenses such as tuition, room and board, books, supplies and other equipment intended for college use.

Underlying Investment Fund Expenses
Because 529 college savings plan portfolios typically invest in a number of underlying investments, the portfolios bear part of the fees and expenses of these underlying funds. This expense is expressed as a percentage of a portfolio’s assets. These are fees that the Account Owner does not pay directly, but which are taken out of the portfolio’s assets. Underlying Investment Fund Expenses include:

  • Management Fees—These fees include amounts paid to the mutual fund’s investment advisor for managing the underlying investment fund and providing other services, such as shareholder recordkeeping and preparing account owner statements and reports.
  • Other Expenses—These expenses include any other annual fund expenses.

For information on Underlying Investment Fund Expenses for each of the Plan’s portfolios, visit https://www.lonestar529.com/learn/lonestar-529-plan-investments/.




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