(Helena, MT – January 2013) – A new tax-advantaged option is available to Montana residents saving for college with the introduction of the Montana Family Education Savings Program (MFESP) Honors Savings Account (Honors). Honors was created to provide an additional 529 college savings plan to meet consumer demand for a safe investment option in light of recent market volatility.
Honors Savings is available through the MFESP Bank Plan and offers an annual percentage yield (APY)** that is currently nine times the national average rate for a savings account***. Principal in the flexible and liquid Honors account is insured by the FDIC. Interest grows tax-free, and qualified withdrawals are also tax-free. Montana residents may also receive a $3,000 ($6,000 if married, filing jointly) deduction to state taxable income based up on contributions to Honors. There are no annual fees or early withdrawal penalties, but may be subject to Montana state recapture tax provisions****.
Funds in an Honors account can be used at nearly any U.S.-accredited public or private, two-year or four-year college or technical school in the U.S. or abroad. Residents may open an Honors account for the child, grandchild, friend or relative or even open one for their own education.
In addition to the Honors account, the MFESP Bank Plan features FDIC-insured certificates of deposit (CD) savings options including the CollegeSure®
The MFESP also offers the MFESP Investment Plan featuring five investment options in two categories, which invest in mutual funds from The Vanguard Group, Inc., a global investment management company.
To find out more or to enroll, go to http://collegesavings.com/
*The Federal Deposit Insurance Corporation (FDIC) generally insures, with respect to each FDIC-insured institution, deposit accounts that are held in the same right and capacity up to the maximum amount set by federal law, currently $250,000. An account owner’s interest in the insurable balance of a College Savings Bank CD account is insured by the FDIC on a pass-through basis, together with any other deposit accounts the account owner holds at College Savings Bank, up to the maximum amount.
**APY is accurate as of January 10, 2013. Rates are determined by College Savings Bank and can change daily.
**National average savings account rate based upon data published by the FDIC. National rates are calculated based on a simple average of rates paid (uses annual percentage yield) by all insured depository institutions and branches for which data are available. Data used to calculate the national rates are gathered by RateWatch. Savings and interest checking account rates are based on $2,500 product tier. The deposit rates of credit unions are not included in the calculation.
****State tax recapture provisions: The principal portion of rollovers, qualified withdrawals within three years of establishing the account, and nonqualified withdrawals form this plan are subject to Montana tax at the highest Montana marginal rate to the extent of prior Montana tax deductions, but only after removal of non-deducted contributions
Before investing in any 529 plan, you should consider the benefits of your home state’s 529 plan. It may provide taxpayers with state tax and other benefits that are only available through your home state. You should also consult your financial, tax, or other advisor to learn how state-based benefits (or limitations)