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FAQs: Account maintenance

Contributions
Rollovers and transfers
Withdrawals

Contributions 

Who can contribute to an account?

Anyone can contribute, not just the account owner (participant). Nonaccount owners can make a contribution with a check payable to College Savings Iowa and provide it to the account owner. The account owner can use the Additional Purchase Form to submit it. Note that only the participant is eligible for the Iowa state income tax deduction on contributions made to the participant's account.

How much can I invest?
You can invest until the combined balances of all accounts held in a 529 plan sponsored by the state of Iowa for a beneficiary reach $320,000. Earnings (but not contributions) may cause the total account value to exceed this amount. The maximum, which is adjusted periodically, may or may not cover all of your beneficiary's qualified higher-education expenses.

How can I contribute to my account?
  • By electronic bank transfer (EBT) (one-time contributions in varying amounts from your checking or savings account).
  • By automatic investment plan (AIP) (scheduled contributions in set amounts from your checking or savings account).
  • By payroll deduction (participating employers only).
  • By check (made payable to College Savings Iowa).
  • By rollover from another 529 plan.
  • By liquidating and reinvesting assets from an education savings account or a Series EE or Series I U.S. savings bond.
  • By liquidating and reinvesting assets from an Uniform Gifts/Transfers to Minors (UGMA/UTMA) account.

We won't accept contributions made in cash, money order, credit card, third-party check greater than $10,000, foreign check not in U.S. dollars, check dated past 180 days, postdated check, traveler's check, bank courtesy check, or credit card check. We also won't accept noncash assets, such as mutual fund shares (including Vanguard® fund shares) or other securities.

If I choose to mail a check, when will my contribution be invested in the plan?
Generally, your contribution will be processed on the same day it's received, if the check is in good order and it's received before 4 p.m., Eastern time, on a business day that the New York Stock Exchange is open. All checks should be made payable to College Savings Iowa.

If I make a one-time contribution via EBT, when will my contribution be invested?
If you request an EBT by 10 p.m., Eastern time, you'll receive a trade date of the next business day. Your purchase will be made at that day's closing price for units of the applicable portfolio. Your bank account will be debited on the business day following the trade date.

If you request an EBT after 10 p.m., Eastern time, you'll receive a trade date of the second business day after your request date. Your bank account will be debited on the business day following the trade date (i.e., the third business day after your request date).

If I set up an AIP, when will my contributions be invested?
Your bank account will be debited on the day you designate, provided that day is a regular business day. If the day falls on a weekend or a holiday, the AIP debit will occur the next business day. Your College Savings Iowa account will be credited on the business day preceding the day the bank debit occurs. The first debit of an AIP must be at least three days from the date we receive your request. Quarterly AIP investments will be made every three months on the date you indicate, not on a calendar quarterly basis. If you don't indicate a date for your AIP investments, they will be made on the 20th of the month.

If I want to establish AIP or EBT on my 529 account, do I need a special bank account?
You must have a personal checking or savings account held with a U.S. financial institution that is a member of the Automated Clearing House (ACH) network. You can't use a passbook savings account for an AIP or EBT. Generally, money market accounts aren't eligible.

Can I invest by AIP or EBT from a mutual fund?
No. Most mutual fund companies, including Vanguard, aren't members of the ACH network.

Can I contribute to more than one 529 plan?

There's no limit to the number of accounts a participant or beneficiary may have. In fact, participants and beneficiaries may have multiple accounts in multiple states.

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Rollovers and transfers 

Can I move money from an UGMA/UTMA account to this 529 plan?
You may use money from an UGMA/UTMA account to open a College Savings Iowa account. However, keep in mind that you may incur capital gains taxes from the sale of the assets currently held in the UGMA/UTMA account.

Because money gifted to a child in an UGMA/UTMA account is irrevocable, the 529 should be opened as a separate UGMA/UTMA 529 account. Note that the UGMA/UTMA rules of the state in which the original account was established will continue to apply and that you can't change the beneficiary on an UGMA/UTMA 529 account. If you want to contribute non-UGMA/UTMA money, you should consider opening a separate 529 account for the same child. Any money that you contribute to the UGMA/UTMA 529 account will be considered owned by the child. The Program won't be liable for any consequences related to an UGMA/UTMA custodian's improper use, transfer, or characterization of custodial funds.

Can I move money from an education savings account or a qualified U.S. savings bond?
Yes. You can contribute to College Savings Iowa with proceeds from the sale of assets held in an education savings account (formerly known as an Education IRA) or the redemption of a qualified U.S. savings bond. You will need to provide the following documentation:

  • Education savings account: An account statement or other documentation issued by the financial institution that acted as custodian of the account showing the total amount contributed to such account and the earnings in the account.
  • U.S. savings bond: An account statement, or Form 1099-INT, or other documentation issued by the financial institution that redeemed the bond showing the interest from the redemption of the bond.

Until we receive this documentation, the entire amount of your contribution will be treated as earnings. This treatment will result in adverse tax consequences if any portion of the account is subsequently taken as a nonqualified withdrawal.

Can I move money from another 529 plan to this 529 plan?
Yes. You may perform a tax-free rollover of a 529 account for the same beneficiary once every 12 months. You may move money by direct rollover (money is transferred directly from your current 529 plan custodian to College Savings Iowa) or by indirect rollover (you request a check for the amount from the current 529 plan custodian and reinvest it in College Savings Iowa within 60 days). Check with your current custodian to verify they will accept our request for a rollover and to determine if any penalties will apply to the transaction.

When you request a direct rollover, using either the Participant Agreement (for new accounts) or the Incoming Rollover Form (for existing accounts), you must provide us with a statement of the basis and earnings amounts in the 529 account at the time of the distribution.

Why must I include a breakdown of principal and earnings when I move money from another plan?
If you don't provide us with a breakdown of the principal and earnings, federal regulations require that your rollover or transfer be treated as 100% earnings, and you may have to pay taxes on the full amount at the time of any nonqualified withdrawal. For direct rollovers, the originating plan is required to provide College Savings Iowa with the breakdown generally within 30 days of the withdrawal. For additional information, refer to the Program Description.

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Withdrawals 

How can I use the money in my account?
Your account can be used for any purpose. However, to qualify for federally tax-free withdrawals on earnings, the money must be used for qualified higher-education expenses of the beneficiary at an eligible educational institution.* These include tuition, mandatory fees, books, supplies, and equipment required for enrollment or attendance; room and board during any academic period the beneficiary is enrolled at least half-time; and certain expenses for a "special needs" student.

* The earnings portion of nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.

What are qualified higher-education expenses?
These expenses include tuition, mandatory fees, books, required supplies, and equipment required for enrollment or attendance; room and board during any academic period the beneficiary is enrolled at least half-time; and certain expenses for a "special needs" student. Refer to IRS Publication 970 for more detailed information on eligible expenses at www.irs.gov/publications/p970/index.html.

How do I know which educational institutions are eligible?
If a school has been assigned a federal school code by the Department of Education, then it's an eligible institution under Section 529. You can access the federal school and campus code link under the Resources tab on the Links page.

What if I don't use the money in my account for a qualified higher-education expense?
The earnings portion of a distribution not used for a beneficiary's qualified education expenses is subject to federal and state income taxes and a 10% federal penalty tax. Exceptions to this penalty include a withdrawal made because the beneficiary:

  • Has died or become disabled.
  • Received a scholarship, to the extent the withdrawal amount doesn't exceed the scholarship amount.
  • Has enrolled in the United States Military Academy, the United States Naval Academy, the United States Air Force Academy, the United States Coast Guard Academy, or the United States Merchant Marine Academy, to the extent that the amount of the withdrawal doesn't exceed the costs of advanced education attributable to such attendance.

Any accumulated earnings that are withdrawn from your account must be included on the income tax return of the recipient for the tax year in which they are distributed. Contact your tax advisor about how to report a nonqualified withdrawal.

For Iowa taxpayers, any previous deductions must be added back to Iowa taxable income in the year of the distribution.

Is paying off a student loan a qualified higher-education expense?
No. Repayment of student loans isn't considered a qualified higher-education expense. Qualified expenses only include tuition, mandatory fees, books, supplies, and equipment required for enrollment or attendance; room and board during any academic period the beneficiary is enrolled at least half-time; and certain expenses for a "special needs" student.

What if the beneficiary decides not to go to college?
If the beneficiary decides not to go to an eligible educational institution, you have three options:

  • Stay invested. You can leave the money in the account in case the beneficiary decides to attend school later. There's no age limit for using the money.
  • Change the beneficiary. You can change the beneficiary on your account at any time, provided that the substitute beneficiary is an eligible family member of the original beneficiary. For a complete list of eligible family members, refer to the Program Description.
  • Withdraw the money for other uses. A 10% federal penalty tax on the earnings will apply if you withdraw money from an account for any reason other than to pay for qualified higher-education expenses. Exceptions to this penalty include a withdrawal made because the beneficiary:

    • Has died or become disabled.
    • Received a scholarship, to the extent the withdrawal amount doesn't exceed the scholarship amount.
    • Has enrolled in the United States Military Academy, the United States Naval Academy, the United States Air Force Academy, the United States Coast Guard Academy, or the United States Merchant Marine Academy, to the extent that the amount of the withdrawal doesn't exceed the costs of advanced education attributable to such attendance.

Any accumulated earnings that are withdrawn from your account must also be reported on the recipient's income tax return for the year in which they're distributed. Contact your tax advisor to determine how to report a nonqualified distribution.

For Iowa taxpayers, any previous deductions must be added back to Iowa taxable income in the year of the distribution.

What tax forms will I receive?
A Form 1099-Q will be generated by the program in January of the calendar year following a year in which there was a withdrawal from the account. The recipient of the Form 1099-Q will be either the account owner or the beneficiary, depending upon who received the proceeds of the withdrawal. Withdrawals sent to the account owner will be reported under the account owner's Social Security number. Withdrawals sent to the beneficiary or to an educational institution will be reported under the beneficiary's Social Security number per IRS guidelines.

What if I move to another state?
You can maintain your account and continue to make contributions no matter where you live in the United States. However, if you're an Iowa resident and move out of state, you'll no longer be eligible to deduct your contributions for Iowa state income tax purposes.

How do I make withdrawals from the plan?
Withdrawals can be made online, over the phone (888-672-9116), or by downloading the Withdrawal Request Form under Forms, completing it, and mailing it in. For more information, go to the Plan details tab and look for the Withdrawals link on the left-hand navigation bar.

How long does the withdrawal process take?
For withdrawals done online, or by phone, if your request is submitted on a New York Stock Exchange business day prior to 4 p.m., Eastern time, your withdrawal will be processed with that day's trade date. Withdrawals requested after the 4 p.m. cutoff time will receive the next business day's trade date. Proceeds can be sent by check or, if you already have banking instructions established on your account by electronic bank transfer to your bank account (for security purposes this must be established 15 days prior to your withdrawal request). Proceeds by check will generally be mailed to the recipient within three business days. For withdrawals done by submitting a Withdrawal request form, if your form is received in good order on a business day prior to 4 p.m., Eastern time, it will receive that day's trade date, and a check will generally be mailed to the appropriate recipient within three business days. Allow ten business days for the check to be received. Allow extra time if the proceeds are being sent directly to the educational institution, as crediting the money to the student's school account may be delayed in periods of heavy volume.

How soon can I begin making withdrawals after depositing?
You can withdraw money at any time, but if the withdrawal includes uncleared assets your withdrawal proceeds will be held until the recent contribution has been collected. Contributions by check, automatic investment plan, or electronic bank transfer will not be available for withdrawal for seven business days.

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As of December 2, 2013, Upromise Investments, Inc. and Upromise Investment Advisors, LLC are no longer affiliated with Upromise, Inc., SLM Corporation, or its affiliates.

Investment returns are not guaranteed, and you could lose money by investing in the College Savings Iowa 529 Plan.

For more information about the College Savings Iowa 529 Plan, obtain a Program Description online or request one by calling 888-672-9116. Investment objectives, risks, charges, expenses, and other important information are included in the Program Description; read and consider it carefully before investing. Vanguard Marketing Corporation, Distributor.

If you are not an Iowa taxpayer, consider before investing whether your or the designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program.

College Savings Iowa is an Iowa trust sponsored by the Iowa State Treasurer's Office. The Treasurer of the State of Iowa sponsors and is responsible for overseeing the administration of the College Savings Iowa 529 Plan. The Vanguard Group, Inc., serves as Investment Manager and Vanguard Marketing Corporation, an affiliate of The Vanguard Group, Inc., assists the Treasurer with marketing and distributing the Plan. Upromise Investment Advisors, LLC, provides records administration services. The Plan's portfolios, although they invest in Vanguard mutual funds, are not mutual funds.

The Upromise service is an optional service offered by Upromise, Inc., and is separate from College Savings Iowa. Terms and conditions apply to the Upromise service. Participating companies, contribution levels, and terms and conditions are subject to change at any time without notice. Go to www.upromise.com to learn more.

College Savings Iowa and the College Savings Iowa logo are trademarks of the State of Iowa. The Upromise Investments logo is a registered service mark of Upromise Investments, Inc. Ugift and Upromise are registered service marks of Upromise, Inc. Vanguard and the ship logo are trademarks of The Vanguard Group, Inc.

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