Assets in the so-called section 529 savings plan have increased from $154,000 in 1996 to more than $1.6 billion this year. The number of accounts in the plan has increased from 157 to nearly 79,000 as of last month. Former state legislator Doug Peterson, R-Riverdale, created the program, and opened an UESP account for his 1-year-old son, Jake, on Friday.
"With the tremendous growth in UESP over the past 10 years, it is apparent that an ever-increasing number of Utahns are seeing the benefits of saving for college," he said in a statement.
Investments in the plan started to spike in 2001, when the plan created an option that invested contributions in Vanguard mutual funds rather than just the state treasurer's investment fund, said Lynne Ward, UESP director.
Under federal law, money invested in section 529 plans such as the UESP is not subject to federal or state income tax if the money is used for qualified higher education expenses, which include tuition, housing, books and even a computer if it's required for a class.
Section 529 plans are part of the Pension Protection Act of 2006, which permanently protects those tax benefits, Ward said.
In addition, Utahns who invest in the UESP can receive a 2006 state tax deduction of up to $1,560 per UESP account. That tax deduction also increases each year with inflation, meaning next year's deduction will be $1,620, Ward said.
On top of state tax deductions, people who establish accounts can gift up to $12,000 annually to account beneficiaries without paying any gift tax, and they can lump five years of gifting together for a total of $60,000, Ward said. That total can be doubled to $120,000 for contributors who file joint tax returns.
"We often get checks for exactly $60,000, and we know it's people who are using the tax advantage, which is great for their children or grandchildren," she said.
About 19 percent of the accounts are held by grandparents, and the funds allow buyers to change beneficiaries to any other family member if the original beneficiary doesn't go to college or no longer needs the funds.
"That means a brother, sister, niece, nephew or cousin can become the beneficiary," Ward said.
Ward has made a conscious outreach effort this fall by putting a brochure explaining the fund in every child's back pack across the state. She said the response has been "great," as she's received interest from cities from throughout the state.
"Every child in the state ought to have the advantage of having a parent or grandparent at least know about the program," Ward said. "Hopefully those children will go to college and become productive citizens."
smcfarland@sltrib.com
Utah Educational Savings Plan
* WHAT IT IS: An investment plan that offers tax advantages to families saving for children's college educations.
* WHAT SAVINGS COVER: Tuition and fees, books, room and board, supplies and computer - if required - at any qualified public or private college, community college or technical school are covered.
* BENEFICIARIES: Children, grandchildren, nieces, nephews, foster children, godchildren, friends or neighbors whether living in Utah or another state.
* WHAT'S AVAILABLE: Investors may choose from nine investment options with varying levels of earnings and risk.
* STATE TAX DEDUCTION PER BENEFICIARY: Tax benefits are $1,560 for single Utah filer or $3,120 for a married couple filing jointly.
* TAX ADVANTAGE: Earnings are tax-free if used for qualified higher-education expenses.
* TAX LIABILITY: There is none if the money is used for college education.
* HOW TO CONTRIBUTE: Participants can contribute a little or a lot, there are no minimum contribution or balance requirements.
* FEES AND CHARGES: They depend on the option selected, ranging from no fees to 0.39 percent of assets. There are no enrollment, transfer, disbursement or other "hidden" fees. An annual $25 maintenance charge is waived for Utah residents.
* INFORMATION: http://www/uesp.org
