How to Open a 529 Plan in Virginia

A 529 plan is a tax-advantaged investment account designed to help families save for a wide range of education expenses. These plans allow money to grow without federal tax, and withdrawals are also free from federal income tax when used for qualified education costs. Such expenses can include tuition, fees, books, and supplies for college, graduate school, or apprenticeship programs. They can also cover up to $10,000 annually for K-12 tuition and a lifetime limit of $10,000 for student loan repayment. Named after Section 529 of the Internal Revenue Code, these plans fund future educational pursuits.

Understanding Virginia’s 529 Plan Options

Virginia offers two primary 529 savings plans to assist residents in saving for education: Invest529 and CollegeAmerica. The Invest529 plan is a direct-sold option, meaning individuals can enroll and manage their accounts directly online. This plan provides a variety of investment portfolios, including age-based portfolios that automatically adjust risk as the beneficiary approaches enrollment, target risk portfolios, and index portfolios. Its minimum initial contribution can be as low as $10 or $25, making it accessible for many savers.

The CollegeAmerica plan, in contrast, is an advisor-sold option that utilizes American Funds portfolios. This plan requires engagement with a financial advisor, who can provide guidance on investment selections and overall college savings strategies. While it offers a broader range of investment portfolios, participants incur additional sales charges for this advised approach.

Virginia previously offered a Prepaid529 program, which closed to new enrollments in April 2019. Existing contracts remain valid. Within the Invest529 plan, Virginia residents also have access to the Tuition Track Portfolio, a principal-protected option designed to align with average tuition growth. This unique portfolio functions as a “pre-pay” program, allowing individuals to purchase “units” that track tuition costs rather than buying semesters directly.

An account owner, who must be at least 18 years old and a U.S. citizen or legal resident, controls the contributions, investment choices, and can change the beneficiary as needed. The designated beneficiary, who can be anyone including the account owner, must be a U.S. citizen or legal resident with a Social Security Number or Taxpayer Identification Number. Beneficiaries can be changed to another qualified family member without incurring tax consequences. The Internal Revenue Service defines a wide range of qualified family members, including spouses, children, siblings, parents, in-laws, aunts, uncles, nieces, nephews, and first cousins. Contributions to a Virginia 529 plan offer a state income tax deduction for Virginia taxpayers, allowing them to deduct up to $4,000 per account per year, with any excess contributions carried forward for future deductions.

For account owners aged 70 or older, the entire contribution amount is deductible in the year it is made. Virginia’s plans permit total contributions up to $550,000 per beneficiary across all accounts.

Information and Documents Required for Application

Before beginning the application process for a Virginia 529 plan, prospective account owners should gather several pieces of information and documents. For the account owner, essential details include their full legal name, current address, date of birth, and either a Social Security Number (SSN) or Taxpayer Identification Number (TIN). Providing contact information such as a phone number and email address is also necessary for communication and account management.

Specific information is required for the designated beneficiary of the 529 plan. This includes their full legal name, address, date of birth, and their Social Security Number or Taxpayer Identification Number.

Account owners will need their bank account number and routing number to set up initial contributions and any recurring automatic debits. The Invest529 plan allows for initial contributions as low as $10 or $25.

Some applications may also request information for a designated survivor, which includes their address, Social Security Number, and phone number. This provision allows for a smooth transition of account ownership in unforeseen circumstances. Applying online for the Invest529 plan generally does not incur an application fee, whereas submitting a paper application might involve a processing fee, typically around $50.

Completing and Submitting Your 529 Plan Application

The primary and most efficient method for applying is through the Virginia529 website, Invest529.com, which offers an online application portal. The online application process usually starts with creating an online user profile.

After establishing a profile, users will select the option to open a “New Invest529 Account.” This section prompts for the previously gathered details concerning the account owner, the designated beneficiary, and any other authorized individuals, such as a designated survivor.

Virginia529 offers various portfolios, including age-based, index, and the Tuition Track Portfolio. Account owners will then input their initial contribution amount and can set up recurring contributions directly from their bank account using the banking details prepared earlier.

Before final submission, the application provides an opportunity to review all entered information for accuracy. It is important to carefully read the account agreement, which outlines the terms and conditions of the plan. Upon successful submission, a confirmation will typically be provided, and the initial funding will be processed according to the chosen investment strategy.

Paper applications can also be downloaded from the Virginia529 website, completed manually, and mailed in with the initial contribution. This method may involve a processing fee.