From Union Plus: $500 grant to members who set up college savings accounts!

Union members who set up a new 529 college savings plan or a pre-paid tuition account for children 12 years old or younger can receive a $500 grant from the Union Plus program. The $500 grant is just another example of how union membership pays and it will provide an additional incentive over the already great tax savings that accompany these programs.

There are a few easy-to-meet requirements to be eligible for the $500 grant. You must be a union member, of course. It must be an account begun anytime after July, 2009, and the beneficiary of the account must be 12 years of age or younger. Also, you must build savings of at least $1,000 before qualifying for the grant. Retired union members who meet these conditions are also eligible for the grant.

All 50 states offer College Savings Programs, which are also called 529 plans after the tax code that created them. Most 529 plans work in much the same way, but there are differences from state to state. So, for the purposes of this news article, we will talk about the 529 plan in New York, called the New York College Savings Program.

Here in New York, College Savings Program accounts can be opened with a first deposit of less than $100. The New York College Savings Program offers tax breaks to help families meet the cost of college for their children. But anyone who is interested in building a college savings fund for a child - grandparents, uncles, aunts, friends - can establish a College Savings Program account or 529 plan. and take advantage of the state tax deduction and federal tax deferral of earnings on their contributions. Over a period of time, these tax breaks can add up to substantial amounts of money.

Anyone can open a 529 plan, although contributing to an account under the College Savings Program will be more appealing to individuals who pay New York State taxes. If you are a New York State resident, you can deduct the full amount of your contribution - up to $5,000 per year - from your New York State taxable income. Married individuals can each deduct their contributions up to $5,000 each per year, for a total deduction of $10,000. Accounts can be opened with a regular minimum contribution of $25 through electronic funds transfer from a bank account or payroll deduction by participating employers or with $250 by check.

Students who are the beneficiaries of the accounts do not have to attend colleges or universities in New York State. People who work in New York but live outside the state can still participate in the program. Funds in the account will not be used toward the calculation of New York State college financial aid grants. In other words, a child who is the beneficiary of a College Savings Program can still apply for and receive financial aid from New York State.

You do not have to be wealthy to participate in a New York College Savings Program. You can invest as little as $25 a month. As noted, contributions are deductible for New York State income tax purposes, and none of the investment earnings will be taxed by New York State, as long as the money is used for qualified higher education expenses at any accredited college in the United States. Federal tax on earnings is deferred until the student uses the money for college expenses. When that time comes, the earnings are taxable at the student's - not the contributor's - income tax rate. Provisions are made for contributors who move out of state. They may keep their accounts, they may keep contributing to them, and they may continue to enjoy the federal tax benefits.

Having a College Savings Program account does not mean that you have to itemize deductions when you fill out your state and federal tax return forms. The contributions you make to the accounts become part of an investment program managed by the New York State Comptroller's Office. Quarterly statements are provided that reflect the activity of your account, including its balance. In addition, you will be able to access information about your account through a toll-free automated telephone number.

The New York College Savings Program offers a fine option to those who are looking to save for a child's college education. And yes, there are options available if that child decides not to attend college or does not finish school. The money can be left in the account in case the student later decides to return to college, the account can be transferred into the name of another student or the money can be withdrawn by the contributor. In the event the money is withdrawn by the contributor, it will become subject to New York State income tax and the investment income will be subject to federal income tax and a 10% penalty.

If you would like more information on the program or would like to learn how to open an account, call the program's toll-free hotline at 1-877-NYSAVES (1-877-697-2837) or visit its web site: nysaves.org.

Remember, to qualify for the $500 grant from Union Plus you can choose any state 529 plan. It must be a plan opened by a union member or retiree after July, 2009, and the beneficiary must be 12 years of age or younger at the time the plan is opened. You must have at least $1,000 invested in the 529 plan or Pre-Paid Tuition Account when you apply for the grant. Also, you may combine the totals from multiple 529 plan accounts as long as each plan meets the grant requirements. There is a lifetime limit of one $500 college savings grant per union household.

Applying for the $500 college savings grant from Union Plus is easy. Simply complete the online application form after you open your 529 account. When your account has a balance of at least $1,000, mail a letter or first statement from the plan sponsor showing the date the account was opened and a current statement showing a minimum balance of $1,000 to: College Savings Grants; Union Privilege; 1125 15th St. NW Suite 300; Washington, DC 20005.

You will be notified by mail, and members are asked to allow 4-5 weeks for application processing. You'll find the online application form - and lots of other Union Plus benefits and services - at UnionPlus.org. You'll find it inside the College Planning Center listing, which is under the "Legal and Education" selection on the menu at the top of the cover page.

If you are interested in the $500 college savings grant, you'll find other helpful information at the Union Plus College Planning Center. There is information on college preparation test discounts, scholarships, student discounts, education financing, how to find a college and other valuable topics, all afforded to you through your union membership!