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529 Plan
A state-sponsored, tax-advantaged investment program designed to help finance education expenses. There are two types of 529 plans: prepaid tuition plans and college savings plans. Tax advantages, investment options, restrictions and fees can vary a great deal from one plan to another.

529 Prepaid Tuition Plans
Also known as Prepaid Education Arrangements (PEAs), 529 prepaid tuition plans allow families to buy all or part of a public in-state education at present-day prices. The value of the investment is guaranteed by the state to meet or exceed annual in-state public college tuition inflation. Plan costs can vary, depending on how close the student is to college.

Account Owner
The individual or entity establishing an Account or any successor to such individual or entity. References in this document to “you” mean you in your capacity as the Account Owner.

Account Application
The account application is completed and submitted with payment to participate in a plan. It incorporates by reference the plan’s Plan Description and Savings Trust Agreement.

Administrative Fee
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 a plan in the Plan Description and Savings Trust Agreement.

Age-based Portfolios
Age-based Portfolios aim to make investment decisions easier by placing you in a portfolio based on the beneficiary’s age. Portfolios for younger children will invest more heavily in equities, while older children’s portfolios will tend to include more fixed income and money market investments.

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 your checking or savings account.

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.

The individual designated by the Account Owner to use the savings for college expenses. Anyone can be a beneficiary, including the account owner. A beneficiary can reside in the United States or abroad. You can open up more than one account for the same beneficiary, but you cannot have more than one beneficiary on the same account.

The Internal Revenue Code of 1986, as amended.

Contingent Deferred Sales Charge (CDSC)
A common type of deferred sales charge in some 529 college savings plans and mutual funds. The CDSC normally declines each year and is eliminated after a number of years.

Coverdell Education Savings Account (CESA or ESA)
A trust or custodial account in which contributions grow on a tax-deferred basis and withdrawals are tax free if used to pay for a broad range of educational expenses, including private high school tuition. Unlike 529 plans, ESAs have annual contribution limits and income restrictions.

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 Institutions of Higher Education
Accredited post-secondary educational institutions offering credit towards 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.

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 Funds
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.

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

Member of the 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.

Mutual Funds
Types of investments that raise money from shareholders to invest in a group of assets such as equities, fixed income and money market funds. Mutual funds may often have a minimum investment amount and a series of fees associated with them.

Nonqualified Withdrawals
Withdrawals from a college savings account that are used for non-college-related expenses. Nonqualified 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 and Savings Trust Agreement provides detailed information about the plan, including investment options and fees and expenses.


Qualified Higher Education Expenses
Qualified higher education expenses include tuition; fees; the cost of books, supplies and equipment required for the enrollment and attendance at an eligible educational institution; and, certain room and board expenses. Qualified expenses also include certain additional enrollment and attendant costs for special needs beneficiaries.

Qualified Withdrawals
Any withdrawals from a college savings account that are used at eligible schools 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.

A tax-free reinvestment from one qualified plan to another within a specific time frame. The time frame to complete a rollover usually is 60 days.

Sales Charge (Front-end Load)
The fee charged when you purchase shares in an Advisor-sold 529 Plan.

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

Share Class/Unit Class
A single 529 college savings plan or mutual fund 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 or fund’s portfolio, but has different fees and expenses.

Static Portfolios
Static 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.

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

Tax Deductible
An expense that can be deducted from annually reported income to reduce the amount of tax payments to the government.

Taxes that can be paid at a future date, typically when shares of certain investments are sold. Tax-deferred mutual funds can increase interest payments because more money is compounded in the fund.

The Uniform Gifts to Minors Act or Uniform Transfers to Minors Act. Control over money in a UGMA/UTMA account automatically is transferred to the beneficiary when he or she reaches 18, or the age of majority.

Underlying Investment 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 securities. This expense is expressed as a percentage of your Plan’s assets. These are fees you do not directly pay, but which are reflected within the portfolio’s daily unit value calculation. Underlying investment expenses include:

  • Management Fees—These fees include amounts paid to the fund’s investment advisor for managing the portfolio and providing other services, such as shareholder recordkeeping and preparing account owner statements and reports
  • 12b-1 Fees—Named after a Securities and Exchange Commission (SEC) rule, these fees include costs of distributing the fund shares to investors
  • Other Expenses—These expenses include any other annual fund expenses

U.S. Series EE and I Savings Bonds
Backed by the full faith and credit of the United States government, U.S. Government savings bonds offer a tax-advantaged way to save for college. The interest from these bonds is usually exempt from state and local taxes and is tax free if used for a beneficiary.

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