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WV Prepaid Tuition Plan
As previously communicated, the Prepaid Tuition Plan is scheduled for termination on June 30, 2022. The West Virginia College Prepaid Tuition and Savings Program Board of Trustees is offering to buy out the remaining units in your Prepaid Tuition Plan account in anticipation of the Prepaid Tuition Plan termination. If part of this program, you should have received a letter in the mail. To review your options again, view letter. On March 8, 2003, the West Virginia Legislature enacted House Bill 2953, which continued the Prepaid Tuition Plan, but closed it to new enrollments. This action did not affect those already enrolled in the Plan.
The WV Prepaid Tuition Plan is scheduled for termination on June 30, 2022.
The West Virginia College Prepaid Tuition and Savings Program Board of Trustees is offering to buy out the remaining units in Prepaid Tuition Plan accounts in anticipation of the Prepaid Tuition Plan termination. The buyout offer will expire automatically on May 31, 2020. See the list of Frequently Asked Questions.
If you choose to accept the buyout, your remaining units will be distributed in one of the following two options:
Option #1: Rollover/Transfer
The rollover value of the remaining units in your Prepaid Tuition Plan account can be distributed as a non-taxable rollover into a SMART529 savings account. Don’t have a SMART529 savings account? You may open a SMART529 savings account now by visiting How to enroll. For new account funding, choose the Rollover/Transfer option. Partial rollovers are not permitted. The buyout value noted above will be transferred to your SMART529 savings account.
The rollover value of remaining units is tax-free and allows you to have all the rights and benefits of owning a SMART529 savings account, including a wide variety of investment options. Additionally, by rolling over to a SMART529 savings account, you as the account owner would be able to change to another eligible beneficiary, subject to program guidelines.
Please note that this option may only be selected if the funds are being rolled over into a SMART529 savings account. A SMART529 savings account number is required to select the Rollover/Transfer option. For more information, please consult your financial planner or www.SMART529.com.
Option #2: Voluntary Cancellation with Distribution to Account Owner
The buyout value of the remaining units in your Prepaid Tuition Plan can be distributed to you, the account owner, as a Voluntary Cancellation distribution. Please note that if the distribution is not used for eligible plan expenses or rolled over into another qualified tuition plan within 60 days, it will be considered a Non-Qualified Distribution. You should consult with a qualified tax advisor and review plan disclosure documents for more information on this option, as this type of distribution generally is considered a taxable event subject to both federal and possibly state income tax, as well as an additional 10% federal tax penalty.
The buyout offer will expire automatically on May 31, 2020
If you choose not to accept either option mentioned above, the units will remain in your Prepaid Tuition Plan account until they expire under normal plan rules or June 30, 2022, whichever comes first.
BUYOUT OFFER QUESTIONS
The West Virginia Prepaid Tuition Plan was closed to new account enrollments in 2002. As we are nearing the program end date, a buyout is being offered to reduce program management and administration fees as the majority of plan accounts have been depleted. The current buyout offer is available from April 1, 2020 through May 31, 2020. There is no guarantee another buyout will be offered.
Keep in mind, the earnings portion of a Non-Qualified Distribution may be subject to federal and possibly state and/or local income tax. The proportion of contributions and earnings for each withdrawal is based on the relative portions of earnings and contributions as of the withdrawal date for the account from which the withdrawal was made.
That amount is taxable to the individual who receives the payment, the account owner if Voluntary Cancellation is selected from the Buyout Offer. The West Virginia state deduction, if originally taken, is subject to recapture for non-qualified distributions. As always, you should consult with a qualified tax advisor for more information. IRS Publication 970 (available at IRS.gov) may have helpful information on 529 qualified tuition programs.
If you do not want to take advantage of the buyout, you DO NOT need to do anything, including the return of your buyout offer form. Your account will close based on the normal expiration policy in effect or upon program closure June 30, 2022, whichever comes first. Upon program closure, accounts will receive a refund for all unused benefits based on the Current Tuition Value in effect at that time.
Yes! You will receive a Form 1099-Q. Each January following a year in which a distribution was made from your Account, we are required to send a Form 1099-Q reporting the earnings portion of any distribution. The Form 1099-Q will be sent to the Account Owner. We also provide the information on the Form 1099-Q to the Internal Revenue Service. The Form 1099-Q recipient is responsible for determining whether the earnings portion of the distribution is taxable, for retaining appropriate documentation to support this determination and for appropriately reporting earnings on the recipient’s income tax forms. Check with your tax advisor regarding any tax reporting required on your tax returns.
A rollover is tax-free and allows you to have all the rights and benefits of owning a 529 account. By rolling your benefits over to a 529 savings account, you will no longer need to use benefits on a semester-by-semester basis and may request withdrawals for any and all qualified higher education expenses (tuition, fees, room, board, books, equipment and supplies). The SMART529 savings plan also offers a wide range of investments options which allows you to decide on how your funds are invested and what your risk tolerance will be. You may only make one rollover for the same beneficiary within a twelve-month period and are allowed two tax-fee transfers between investment options per calendar year.
SMART529 COLLEGE SAVINGS PLAN QUESTIONS
SMART529 is West Virginia’s tax-advantaged education savings plan, where earnings accumulate tax-free and distributions are tax-exempt, as long as they are applied toward eligible education expenses. The program is named for Section 529 of the federal code that governs them. Both the WV Prepaid Tuition Plan and SMART529 education savings plans are Section 529 plans governed by the West Virginia College Prepaid Tuition and Savings Plan Board of Trustees.
SMART529 assets can be used at thousands of eligible education institutions across the United States and some overseas schools. They include colleges, universities, vocational & technical schools, or other post-secondary educational institutions eligible to participate in federal student aid programs administered by the U.S. Department of Education. There is no time limit for use of SMART529 benefits.
Qualified higher education expenses include tuition, fees, the cost of books, supplies and equipment required for enrollment or attendance of a beneficiary at an eligible educational institution as well as certain computers, peripheral equipment and certain software, internet access and related services.
In addition, federal legislation includes expenses for K-12 tuition expenses of $10,000 per year, per child. There is also a student loan provision to include repayment of qualified student loans up to $10,000. See more information at SMART529.com.
Investments in the SMART529 College Savings Plan are not guaranteed or insured by the State of West Virginia, the Board of Trustees or Hartford Funds (program manager) or depository institution. This means that your account may lose value. Plan performance is available at www.SMART529.com.
For more information or question contact:
1-866-574-3542, press prompt 3