SMART529 West Virginia
Prepaid Tuition Plan
Annual Report to Account Owners,
Disclosure Statement
and
Participation Agreement
Effective November 14, 2014
Purpose of the Disclosure Statement
This Disclosure Statement provides important information concerning certain material risks associated with investing in the Plan.
However, this Disclosure Statement is not intended to be an exhaustive or definitive description of the features of the Plan or its
implications and risks. Each statement contained in this Disclosure Statement is subject to qualification in its entirety by the
terms and conditions of each document comprising the Account and other documents relating to the Plan, by the descriptions
contained elsewhere in this Disclosure Statement and by other matters beyond the control of the Board.
Capitalized terms not defined in this Disclosure Statement have the meanings as defined in the Participation Agreement and
referenced state and federal statutes, rules and regulations. Headings used in this Disclosure Statement are for convenience only
and are not intended to define, limit, expand, or describe the scope or extent of this Disclosure Statement.
The West Virginia Prepaid Tuition Plan is closed to new enrollment.
PRIVACY AND SECURITY POLICY
OF THE WEST VIRGINIA COLLEGE PREPAID TUITION
AND SAVINGS PROGRAM BOARD OF TRUSTEES
Keeping information about you private and secure is very important to the West Virginia College Prepaid
Tuition and Savings Program Board of Trustees. This Policy is to help you understand the information we
receive and what we do with it.
The West Virginia College Prepaid Tuition and Savings Program Board of Trustees, our staff, our Program
Administrator and our website, www.SMART529.com, offer you access to information about the Program.
You may contact us without providing any information. However, you may request we provide services
that will require we obtain information from you.
Personally Identifying Information is information that allows someone to identify or contact you. The only
Personally Identifying Information we collect is what you choose to provide to us when you contact us inperson, by telephone, by mail or through our website. We hold all Personally Identifying Information in the
strictest of confidence, and will not release, provide, rent, sell or trade Personally Identifying Information to
another person or entity, unless required by law.
As various matters affect this Policy, such as technological advances and changes in the law, we must
reserve the right to alter, amend or modify this Policy at any time and without prior notice. However, we
will always do our very best to protect your Personally Identifying Information in accordance with industry
standards of security and confidentiality. More importantly, we will never attempt to collect personal
information from children.
We value your interest in the West Virginia College Prepaid Tuition and Savings Program and SMART529.
If you have any questions or need additional information, please contact the Board at the West Virginia
State Treasurer's Office, 1900 Kanawha Boulevard, East, Charleston, WV 25305 or at 304.558.5000.
Privacy Policy and Practices of The Hartford Financial Services Group, Inc. and its Affiliates
(herein called “we, our, and us”)
This Privacy Policy applies to our United States Operations
We value your trust. We are committed to the
responsible:
a) management;
b) use; and
c) protection;
of Personal Information.
This notice describes how we collect, disclose, and
protect Personal Information.
We collect Personal Information to:
a) service your Transactions with us; and
b) support our business functions.
We may obtain Personal Information from:
a) You;
b) your Transactions with us; and
c) third parties such as a consumer-reporting agency.
Based on the type of product or service You apply for or
get from us, Personal Information such as:
a) your name;
b) your address;
c) your income;
d) your payment; or
e) your credit history;
may be gathered from sources such as applications,
Transactions, and consumer reports.
To serve You and service our business, we may share
certain Personal Information. We will share Personal
Information, only as allowed by law, with affiliates
such as:
a) our insurance companies;
b) our employee agents;
c) our brokerage firms; and
d) our administrators.
As allowed by law, we may share Personal Financial
Information with our affiliates to:
a) market our products; or
b) market our services;
to You without providing You with an option to prevent
these disclosures.
We may also share Personal Information, only as
allowed by law, with unaffiliated third parties including:
a) independent agents;
b) brokerage firms;
c) insurance companies;
d) administrators; and
e) service providers;
who help us serve You and service our business.
When allowed by law, we may share certain Personal
Financial Information with other unaffiliated third
parties who assist us by performing services or functions
such as:
a) taking surveys;
b) marketing our products or services; or
c) offering financial products or services under a joint
agreement between us and one or more financial
institutions.
We, and third parties we partner with, may track some
of the pages You visit through the use of:
a) cookies;
b) pixel tagging; or
c) other technologies;
and currently do not process or comply with any web
browser's "do not track" signal or other similar
mechanism that indicates a request to disable online
tracking of individual users who visit our websites or
use our services.
We will not sell or share your Personal Financial
Information with anyone for purposes unrelated to our
business functions without offering You the opportunity
to:
a) “opt-out;” or
b) “opt-in;”
as required by law.
We only disclose Personal Health Information with:
a) your proper written authorization; or
b) as otherwise allowed or required by law.
Our employees have access to Personal Information in
the course of doing their jobs, such as:
a) underwriting policies;
b) paying claims;
c) developing new products; or
d) advising customers of our products and services.
We use manual and electronic security procedures to
maintain:
a) the confidentiality; and
b) the integrity of;
Personal Information that we have. We use these
procedures to guard against unauthorized access.
Some techniques we use to protect Personal
Information include:
a) secured files;
b) user authentication;
c) encryption;
d) firewall technology; and
e) the use of detection software.
We are responsible for and must:
a) identify information to be protected;
b) provide an adequate level of protection for that data;
c) grant access to protected data only to those people
who must use it in the performance of their job-related
duties.
Employees who violate our Privacy Policy will be
subject to discipline, which may include ending their
employment with us.
At the start of our business relationship, we will give
You a copy of our current Privacy Policy.
We will also give You a copy of our current Privacy
Policy once a year if You maintain a continuing
business relationship with us.
We will continue to follow our Privacy Policy regarding
Personal Information even when a business
relationship no longer exists between us.
As used in this Privacy Notice:
Application means your request for our product or
service.
Personal Financial Information means financial
information such as:
a) credit history;
b) income;
c) financial benefits; or
d) policy or claim information.
Personal Health Information means health information
such as:
a) your medical records; or
b) information about your illness, disability or injury.
Personal Information means information that identifies
You personally and is not otherwise available to the
public. It includes:
a) Personal Financial Information; and
b) Personal Health Information .
Transaction means your business dealings with us, such
as:
a) your Application;
b) your request for us to pay a claim; and
c) your request for us to take an action on your account.
You means an individual who has given us Personal
Information in conjunction with:
a) asking about;
b) applying for; or
c) obtaining;
a financial product or service from us if the product or
service is used mainly for personal, family, or household
purposes.
This Privacy Policy is being provided on behalf of the following affiliates of The Hartford Financial Services Group, Inc.:
1stAGChoice, Inc.; Access CoverageCorp, Inc.; Access CoverageCorp Technologies, Inc.; American Maturity Life
Insurance Company; Archway 60 R, LLC; Business Management Group, Inc.; Champlain Life Reinsurance Company;
DMS R, LLC; Eloy R, LLC; Ersatz Corporation; First State Insurance Company; Hartford Accident and Indemnity
Company; Hartford Administrative Services Company; Hartford Casualty General Agency, Inc.; Hartford Casualty
Insurance Company; Hartford-Comprehensive Employee Benefit Service Company; Hartford Equity Sales Company,
Inc.; Hartford Fire General Agency, Inc.; Hartford Fire Insurance Company; Hartford Funds Management Company,
LLC; Hartford Funds Management Group, Inc.; Hartford HLS Series Fund II, Inc.; Hartford Insurance Company of
Illinois; Hartford Insurance Company of the Midwest; Hartford Insurance Company of the Southeast; Hartford Integrated
Technologies, Inc.; Hartford International Life Reassurance Corporation; Hartford Funds Distributors, LLC; Hartford
Investment Management Company; Hartford Life and Accident Insurance Company; Hartford Life and Annuity Insurance
Company; Hartford Life Insurance Company; Hartford Life Private Placement, LLC; Hartford Lloyd’s Corporation;
Hartford Lloyd’s Insurance Company; Hartford Mezzanine Investors I, LLC; Hartford Residual Market, L.C.C.; Hartford
Retirement Services, LLC; Hartford Securities Distribution Company, Inc.; Hartford Series Fund, Inc.; Hartford Specialty
Insurance Services of Texas, LLC; Hartford Strategic Investments, LLC; Hartford Underwriters Insurance Company;
Hartford Technology Services Company, L.L.C.; Hartford of Texas General Agency, Inc.; Hartford Underwriters General
Agency, Inc.; HARTRE Company, L.C.C.; HL Investment Advisors, LLC; HLA LLC; Horizon Management Group,
LLC; HRA Brokerage Services, Inc.; Lanidex Class B, LLC; M-CAP Insurance Agency, LLC; New England Insurance
Company; New England Reinsurance Corporation; Nutmeg Insurance Agency, Inc.; Nutmeg Insurance Company; Pacific
Insurance Company, Limited; Planco, LLC: Property and Casualty Insurance Company of Hartford; Revere R, LLC; RVR
R, LLC; Sentinel Insurance Company, Ltd.; Sunstone R, LLC; Symphony R, LLC; The Evergreen Group Incorporated;
The Hartford Alternative Strategies Fund; The Hartford Mutual Funds, Inc.; The Hartford Mutual Funds II, Inc.; Trumbull
Flood Management, L.L.C.; Trumbull Insurance Company; Twin City Fire Insurance Company; White River Life
Reinsurance Company.
HPP Revised January 2014
SMART529 West Virginia Prepaid Tuition Plan
Annual Report to Account Owners,
Disclosure Statement and
Participation Agreement
Effective November 14, 2014
Table of Contents
Annual Report to Account Owners
1
Summary of the Financial Condition of the Trust
1
Escrow Account
1
Disclosure Statement
2
Program Overview
2
Program Administration
2
Opening an Account
4
Qualifying Account Owners
4
Designated Beneficiaries
4
Changing Account Owners
5
Making Contributions
5
Prepaid Tuition Plan Benefits
6
Distributions
7
Tax and Planning Considerations
9
Important Information
11
Participation Agreement
15
SMART529 West Virginia Prepaid Tuition Plan
Annual Report to Account Owners
and Disclosure Statement
Effective November 14, 2014
Annual Report to Account Owners
Summary of the Financial Condition of the Trust
Fiscal Year 2014 saw gains for Prepaid Tuition Trust Fund investments and an increase
in the overall funding status of the Trust Fund. The net return on Trust Fund investments
was 13.7%. As in the past, Trust Fund investments were managed by the West Virginia
Investment Management Board. The annual actuarial valuation of the Trust Fund was
performed by Sherman Actuarial Services, which reported that the funding status rose to
91%, up from 85% the previous year. Looking at it another way, during Fiscal Year 2014
the fund’s projected unfunded liability decreased by $5.7 million.
During the Fiscal Year, the Trust Fund received $0.3 million in contract payments and
disbursed $9.1 million for tuition benefit distributions. Trust Fund assets at June 30,
2014, were $78.4 million. The present value of Trust Fund liabilities on June 30, 2014 –
the amount needed to pay all future tuition benefits and expenses – was calculated at
$86.0 million. The difference between assets and liabilities is the actuarially estimated
deficit of $7.6 million, which makes the Trust Fund 91% funded. Sherman Actuarial
Services estimated that there were adequate resources for tuition benefit payments for the
next eight years. The annual program audit for Fiscal Year 2014 was performed by the
accounting firm Deloitte & Touche LLP, and the program received an unqualified audit
opinion. A copy of the audited financial statements is available on the Program website,
www.SMART529.com.
The Comprehensive Annual Financial Report (“CAFR”) of the West Virginia College
Prepaid Tuition and Savings Program is submitted annually for review by the national
Government Finance Officers Association. The CAFR has consistently received a
Certificate of Achievement for Excellence in Financial Reporting. The Certificate of
Achievement is awarded to recognize government program financial statements that
excel in their clear and fair presentation of financial information.
Escrow Account
In 2003, the West Virginia Legislature established a mechanism to eliminate any
actuarially projected unfunded liability in the Prepaid Tuition Trust Fund over a ten-year
period. The Prepaid Tuition Trust Escrow Account was created "to guarantee payment of
Prepaid Tuition Plan Contracts" (the "Escrow Account"). The Escrow Account will
receive transfers from the Unclaimed Property Trust Fund each year there is an
actuarially determined unfunded liability in the Prepaid Tuition Trust Fund. In 2006, the
1
Legislature increased the maximum allowable annual transfer from $500,000 to $1
million. In the 2009 Legislative Session, the Legislature approved an additional one-time
transfer of $8.0 million from the Unclaimed Property Trust Fund to the Escrow Account
in July 2009.
Beginning with December 2003, there has been a total of $16,254,008 transferred from
the Unclaimed Property Trust Fund to the Prepaid Tuition Escrow Account. The funds
were invested and have a net investment gain of $1,168,024 for the eleven years ended
June 30, 2014, leaving the account with a balance of $117,422,032 at June 30,
2014. These funds, and any earnings on them, will remain invested in the Escrow
Account until such future time as they might be needed to cover any shortfall of funds in
the Prepaid Tuition Trust Fund required to pay tuition benefits.
Disclosure Statement
Program Overview
The SMART529 West Virginia Prepaid Tuition Plan (“Prepaid Tuition Plan”) is a statesponsored qualified tuition program offered by the West Virginia College Prepaid Tuition
and Savings Program Board of Trustees (“Board of Trustees”), which is an entity of the
State of West Virginia. While the West Virginia College Prepaid Tuition and Savings
Program ( “Program”) encompasses multiple components and options, only the Prepaid
Tuition Plan is described in this Disclosure Statement. If there are any discrepancies in
the information presented in this Disclosure Statement and the Participation Agreement,
the terms of the Participation Agreement will control.
Congress created this type of tax-advantaged program in 1996 as part of Section 529 of
the Internal Revenue Code (the “Code”) and such a program sometimes is called a “529
Plan.” The Prepaid Tuition Plan offers the advantages of tax deferred growth and taxfree distributions, provided the amounts distributed are used for the payment of education
expenses expressly defined as Qualified Higher Education Expenses in Section 529 of the
Code (“Qualified Higher Education Expenses”) while attending colleges or other learning
programs that are eligible under Section 529 of the Code (“Eligible Institution”).
Generally, the Prepaid Tuition Plan was designed to help West Virginia families save for
the tuition and fees portion of higher education expenses. While it may be used at any
Eligible Institution in the United States and certain educational institutions outside the
United States, the Plan Benefit value is based on the expected average cost of Tuition and
Mandatory Fees at West Virginia public colleges and universities.
Program Administration
The West Virginia Legislature enacted the West Virginia College Prepaid Tuition and
Savings Program Act on April 12, 2001, as the successor to the West Virginia Tuition
Trust Act. The Program is administered by the West Virginia State Treasurer (the
“Treasurer”) on behalf of the Program’s Board of Trustees. The Board of Trustees
2
consists of nine voting members, namely, the Secretary of Education and the Arts, the
Treasurer, two representatives of the Higher Education Policy Commission, and five
members appointed by the Governor of West Virginia. The Treasurer is the chairman and
presiding officer of the Board of Trustees. You may write to the Board of Trustees at:
Board of Trustees of the West Virginia College Prepaid Tuition and Savings Program, c/o
West Virginia State Treasurer’s Office, 1900 Kanawha Blvd. East, Charleston, WV
25305-0860.
The Board of Trustees has established a prepaid tuition plan, through its associated West
Virginia Prepaid Tuition Trust Fund (“Trust Fund”). Money you invest in the West
Virginia Prepaid Tuition Plan will be deposited in the Trust Fund. Each year, the Board
of Trustees has the Trust Fund evaluated by an independent actuary. The Board of
Trustees or its designee prepares an annual financial statement for the Program, including
the Trust Fund, and has it audited by an accounting firm. Annually, a report summarizing
the financial condition of the Trust Fund is provided to all current Account Owners.
Through a competitive bidding process, the Board of Trustees selected Hartford Life
Insurance Company (“Hartford Life”), located at 200 Hopmeadow Street, Simsbury, CT
06089, to perform many aspects of administering the Program (the “Program Manager”).
The Hartford, Hartford Life’s parent company, has provided insurance and other financial
management services for its clients since 1810.
The Program Manager maintains the SMART529 Service Center. You may contact them
by writing to the SMART529 Service Center at PO Box 44070, Jacksonville FL 322314070, calling toll-free 1-866-574-3542 or visiting the Program web site
www.SMART529.com.
Hartford Life will provide the services described in this Disclosure Statement according
to the terms and conditions of an agreement between Hartford Life and the Board of
Trustees executed in February of 2002 (the “Hartford Management Agreement”). The
Hartford Management Agreement expires in June of 2017. The Board of Trustees and
Hartford Life may from time to time agree to extend the term of the Hartford
Management Agreement, and each have the right to terminate the Hartford Management
Agreement prior to its expiration date under certain circumstances. If the Hartford
Management Agreement were terminated, the Board of Trustees could continue to
provide the SMART529 West Virginia Prepaid Tuition Plan on its own or through other
third party administrators. Termination of the Hartford Management Agreement would
not terminate the operation of the Program or the West Virginia Prepaid Tuition Plan.
Other college savings plans offered under the Program are not described in this
Disclosure Statement, including some savings plans that are available exclusively
through investment professional who receive a commission for selling the plans. If you
are interested in learning about these other plans, call the SMART529 Service Center at
1-866-574-3542 or visit www.SMART529.com.
3
Opening an Account
The Prepaid Tuition Plan is currently closed to new enrollment.
Qualifying Account Owners
An Account Owner must be a citizen or resident of the United States and must have a
Social Security Number. State and local governments, government agencies and not-forprofit organizations may also become Account Owners to help fund scholarship
programs. Businesses may also be Account Owners. For the purposes of this Disclosure
Statement, “You” means the person who is the Account Owner. As an Account Owner,
You can make contributions, name the Designated Beneficiary, authorize and take
Distributions or rollover the present value of the Prepaid Tuition Plan Benefits in your
Account to another 529 Plan.
Designating Beneficiaries
As Account Owner, You name the individual, called the “Designated Beneficiary,” on
whose behalf the payments from the Account will be made. Prior to January 15, 2015,
you may change the Designated Beneficiary. To change the Designated Beneficiary
without having to pay federal income taxes or federal income tax penalties, You must
name a family member of the current Designated Beneficiary as the new Designated
Beneficiary, as limited by the Participation Agreement prior to January 15, 2015. In
relation to the current Designated Beneficiary, the following family members are
considered “Eligible Family Members” and can be named as a replacement beneficiary
until January 15, 2015:
·
·
·
·
·
·
·
·
·
·
son, daughter, or descendant of either;
stepson or stepdaughter;
brother, sister, stepbrother or stepsister;
stepfather or stepmother;
father, mother or ancestor of either;
son or daughter of a brother or sister;
brother or sister of father or mother;
son-in-law, daughter-in-law, father-in-law, mother-in-law, sister-in-law or
brother-in-law;
spouse, or spouse of any family member listed above; or
first cousin.
Please call 1-866-574-3542 for more information about the preceding paragraph prior to
January 15, 2015.
Effective January 15, 2015, You are not permitted to change the person identified as the
Designated Beneficiary on your Account. If the individual named the Designated
Beneficiary is unable to use any amount of the benefits in the Account, You may seek a
4
non-qualified withdrawal or rollover Distribution of the Account benefits as explained
below.
Changing Account Owners
The Account Owner can be changed if the current Account Owner requests transfer on a
Transfer of Account Owner Form, or becomes disabled, divorces or dies. If there is a
Successor Owner designated in writing, then the Successor Owner becomes the Account
Owner. If the Account Owner becomes disabled and has not named a Successor Owner,
ownership of the Account will be changed upon receipt of proper authorization
acceptable to the Board of Trustees. If a Successor Owner has not been named by the
Account Owner and the change is due to divorce, the Account Owner will be changed
based on the instructions contained in the final divorce decree. If a Successor Owner has
not been named by the Account Owner and the Account Owner dies, ownership of the
Account will be changed when we receive a certified copy of the death certificate and
authorization acceptable to the Board of Trustees. The Designated Beneficiary may be
named the Account Owner unless he or she is a minor, in which case a qualified adult
must be named.
Please contact the SMART529 Service Center for any instructions or forms needed to
change the Designated Beneficiary, or Account Owner, or to name or change a Successor
Owner.
Making Contributions
You contribute to your Account on a preset payment schedule as selected by the Account
Owner upon enrolling in the Plan, by a lump sum payment or by monthly installments.
The maximum contribution amount for an Account under the Prepaid Tuition Plan is the
sum necessary to purchase 10 semester Units, which is the equivalent of five, twosemester academic years at a West Virginia public university or college. No more than 10
Units may be purchased on behalf of any Designated Beneficiary, regardless of the
number of Accounts for which a person is named the Designated Beneficiary.
SMART529 does not track Designated Beneficiary account balances on 529 plan
accounts other than those within the SMART529 Program.
Contributions will be credited to your Account when the documentation received from
You is complete and in good order. Federal income tax laws require that a limit be placed
on the total amount that can be in this Account along with any other 529 Plan that may be
established for the same Designated Beneficiary. Currently, the limit for the SMART529
Program is $265,620.
You can make contributions to your Account using any of the following methods:
·
Check – Investments equal to the amount specified in your Enrollment
Confirmation may be made by check, made payable to SMART529– Prepaid
Tuition.
5
·
Automatic Investment Program – You may make payments to your Account
through automatic investments from your savings or checking account. These
automatic investments will be confirmed on your Account’s quarterly statement.
Contributions must equal the amount specified in your Enrollment Confirmation.
You should allow up to 45 days for the first automatic contribution to occur. If
You would like to start automatic investing, please call us at 1-866-574-3542 for
the appropriate forms or visit our website, www.SMART529.com.
Prepaid Tuition Plan Benefits
The Prepaid Tuition Plan Benefit value is not limited for use at West Virginia public
colleges and universities, and may be used at any Eligible Institution under Section 529
in the United States and certain educational institutions outside the United States.
Generally, this is any college, university, vocational school, or other postsecondary
educational institution eligible to participate in a student aid program administered by the
Department of Education. It includes virtually all accredited public, nonprofit, and
proprietary (privately owned profit-making) postsecondary institutions in the United
States.
Benefits are available for Distribution beginning the fall semester of the academic year in
which the Designated Beneficiary would normally be expected to begin college based on
the beneficiary’s age or grade information submitted on the Application. Prepaid Tuition
Plan Benefits are available for the number of paid-up semester Units in the Account.
Prepaid Tuition Plan Units mature for use two per academic year, on a semester-bysemester basis, on a schedule further defined by Board of Trustees policy. The Account
Owner retains control over the Distribution of available Benefits. Distributions of Plan
Benefits may be made payable to the Eligible Institution, the Account Owner or the
Designated Beneficiary, as directed by the Account Owner. The Board of Trustees
maintains Distribution procedures, which may change from time to time in the sole
discretion of the Board of Trustees, that define the process that must be followed in order
to access Plan Benefits. Current Distribution procedures and the current Benefit value
schedule are available from the Program Manager or the Program web site at
www.SMART529.com.
The Benefit value varies depending on where the Designated Beneficiary enrolls. Benefit
value for a Beneficiary enrolled at a West Virginia Public Eligible Institution is equal to
the Tuition and Mandatory Fees amount approved by the Board of Trustees for that
institution. As solely determined by the Board of Trustees, the value of a Prepaid Tuition
Plan Benefit Unit is based on the actual cost of eligible Tuition and Mandatory Fees for
attending a West Virginia public college or university as a full-time, in-state
undergraduate student. The Board of Trustees determines which charges and fees are
mandatory and in what amounts they are eligible for Prepaid Tuition Plan coverage at
each West Virginia public college or university. The actual tuition and fee amounts
charged to a Beneficiary by a West Virginia public college or university may be greater
than the Plan Benefit value at that institution.
6
The Board of Trustees also sets the Current Tuition Value that is based on the expected
average cost of tuition and mandatory fees for attending a West Virginia public college or
university as a full-time, in-state undergraduate student. The Maximum Plan Benefit
value for a Beneficiary enrolled at an Eligible Institution other than a West Virginia
Public Eligible Institution is equal to the Current Tuition Value.
Exhaustion/Expiration of Prepaid Tuition Plan Benefits. Prepaid Tuition Plan
Benefits under the Account will be considered exhausted at such time as all Prepaid
Tuition Plan Benefits purchased under the Account for the Designated Beneficiary are
paid. Effective January 1, 2015, Prepaid Tuition Plan Benefits expire three years after
the Designated Beneficiary’s Projected Enrollment Year plus the number of years (or
partial years) that would be required to utilize any unused Prepaid Tuition Plan Benefit
Units purchased in the Account for the Designated Beneficiary (“Expiration Policy”).
For example, the Prepaid Tuition Benefits on an Account with 4 Units (each Unit is a
semester, for a total of 2 years) and a Designated Beneficiary who will graduate from
high school in 2015 (so that the Projected Enrollment Year is 2015) will expire at the end
of the calendar year in 2020 (2015 plus 3 years plus 2 years). Once the Prepaid Tuition
Plan Benefits expire, the Current Tuition Value of the unused Prepaid Tuition Plan
Benefits shall be paid to the Account Owner. Payment of the Current Tuition Value of
the unused Prepaid Tuition Plan Benefits to the Account Owner may have tax
consequences. The Account Owner should consult with a qualified tax advisor about
this. If the Account Owner cannot be located the amount to be paid shall be presumed
abandoned and reported and remitted as unclaimed property in accordance with W.Va.
Code §36-8-1 et seq., and the Account Owner and Designated Beneficiary shall cease to
have any interest in the Trust Fund, any Prepaid Tuition Plan Benefits, and any Account
or other Payments.
However, if you take a Qualified Distribution in an Account prior to July 30, 2015, the
above Expiration Policy will not apply. Instead, the remainder of your Prepaid Tuition
Plan Benefits will expire ten (10) years after the Designated Beneficiary’s Projected
Enrollment Year, regardless of whether the Prepaid Tuition Plan Benefits have been
exhausted.
Distributions
The availability and amounts of Distributions are limited by the Participation Agreement.
It is the responsibility of the individual receiving the Distribution to properly characterize
the Distribution for any required tax reporting. The Plan does not provide tax advice or
tax planning assistance.
In order to take a Distribution, the Account Owner must complete and sign a Prepaid
Tuition Plan Distribution Request Form. As a 529 Plan, there are three types of
Distributions that can be made from the Prepaid Tuition Plan: qualified distributions,
non-qualified distributions, and rollover distributions.
7
Qualified Distributions – This type of Distribution is used to pay for the Designated
Beneficiary’s Qualified Higher Education Expenses while enrolled in an Eligible
Institution. It is the responsibility of the Account Owner and/or the Designated
Beneficiary to determine whether an institution is an Eligible Institution. Qualified
Higher Education Expenses include:
·
·
·
Tuition, fees, books, supplies and equipment required for enrollment or
attendance of a Designated Beneficiary at an Eligible Institution.
Room and board expenses if the Designated Beneficiary is enrolled as at least a
half time student, as determined by the Eligible Institution (subject to certain
limitations).
Expenses for special needs services that are incurred in connection with the
enrollment or attendance of a Designated Beneficiary at an Eligible Institution.
Non-Qualified Distribution – A Non-Qualified Distribution is any distribution that is
not a Qualified Distribution or a Rollover Distribution (defined below). You may request
a Non-Qualified Distribution at any time. However, the earnings portion of a NonQualified Distribution will be subject to income tax, potentially including a 10%
additional tax (“Additional Tax”). The earnings portion of a Non-Qualified Distribution
is taxable to the individual who receives the payment, either the Account Owner or the
Designated Beneficiary. For tax reporting purposes, if the payment is made directly to an
Eligible Institution, it will be deemed to have been made to the Designated Beneficiary.
A fee may be assessed for any Distribution that depletes the Account prior to the
expected Distribution schedule based on the projected college enrollment year of the
Designated Beneficiary listed on the Enrollment Confirmation.
A Non-Qualified Distribution is not subject to the Additional Tax (although the earnings
portion will be subject to federal and any applicable state income tax) if it is (1) paid to a
beneficiary of, or the estate of, the Designated Beneficiary on or after the Designated
Beneficiary’s death or attributable to the permanent disability of the Designated
Beneficiary; (2) made on account of receipt by the Designated Beneficiary of a
scholarship award or veterans’ or other nontaxable educational assistance (other than
gifts or inheritances), but only to the extent of such scholarship or assistance; or (3) made
on account of the Designated Beneficiary’s attendance at a military academy, but only to
the extent of the costs of education attributable to such attendance.
For West Virginia Personal Income Tax purposes, if You have previously deducted
amounts you contributed to the Plan, you must recapture the contribution portion of
any Non-Qualified Distribution by adding it to income on your West Virginia Personal
Income Tax return in the year of the Distribution.
You should consult a qualified tax advisor to ensure that these Distributions are correctly
characterized on your income tax returns.
8
Rollover Distributions – You may also take a tax-free Distribution from your Account
by rolling the Distribution from your Account to another 529 Plan. Generally, the
following conditions must be met:
·
You keep the same Designated Beneficiary or name an Eligible Family Member
of the Designated Beneficiary as the new Designated Beneficiary on the receiving
Account; and
·
You make only one rollover for the same Designated Beneficiary within a twelve
month period.
A fee may be deducted from your Account in the event You rollover your West Virginia
Prepaid Tuition Plan Account into another 529 Plan. Please contact us for additional
information about rolling a Prepaid Tuition Plan Account over to another qualified tuition
program.
Tax and Planning Considerations
We have tried to summarize some of the potential tax benefits, penalties and financial
planning opportunities offered through SMART529. However, You should consult a
qualified tax advisor in your state for more information. The tax information in this
Disclosure Statement is based on the information available at the time it was prepared.
Federal Income Tax Treatment – The earnings in your Account will grow on a taxdeferred basis until withdrawn. Qualified Distributions are not subject to federal income
tax. (Non-Qualified Distributions are subject to federal income tax, potentially including
the Additional Tax.)
West Virginia State Tax Treatment – The earnings in your Account will grow on a taxdeferred basis until withdrawn, and Qualified Distributions are not subject to the West
Virginia Personal Income Tax. You may take a deduction equal to the amount of your
total contributions to the Account made in a tax year from your federal adjusted gross
income for West Virginia Personal Income Tax purposes. You are allowed the deduction
for contributions You make for each Designated Beneficiary. To take a deduction, your
contribution must be postmarked by December 31 of the year for which the deduction is
taken. You may also elect to carry forward the deduction over a period not to exceed five
tax years, beginning in the tax year in which the contribution was made. If you are not a
West Virginia resident, be sure to check your local and state tax laws to determine any
liability for Prepaid Tuition Plan Distributions. The West Virginia state deduction is
subject to recapture for Non-Qualified Distributions. The contribution portion of a NonQualified Distribution must be added to income on your West Virginia personal income
tax return in the year of the Distribution to the extent you have previously deducted
contributions for West Virginia income tax purposes. The earnings portion of a NonQualified Distribution is also subject to West Virginia income tax.
9
Federal Gift Tax — Contributions to an Account are treated as completed gifts of a
present interest for federal gift tax purposes and, therefore, are potentially subject to
federal gift tax. Generally, contributions during a taxable year will not be subject to
federal gift tax if the contributions, together with any other gifts made to the Designated
Beneficiary in that year, do not exceed the annual exclusion of $14,000 ($28,000 for
married contributors electing to split gifts). This annual exclusion amount is indexed for
inflation in $1,000 increments and may therefore increase in future years. In addition,
You may not have to pay federal gift tax on your contributions of up to $70,000 for each
Designated Beneficiary ($140,000 for married contributors electing to split gifts) in a
single year. To qualify for this special tax treatment, You must file a gift tax return and
elect to treat the gift as if it were made in equal payments over five years. No gift tax will
be owed as long as the allocated amount in a year, when combined with other gifts made
to the Designated Beneficiary in that year do not exceed $14,000 ($28,000 for married
contributors electing to gift split). In addition, to the extent not previously used, each
contributor has a $5,000,000 lifetime exemption that will be applied to gifts in excess of
the annual exclusion amounts referred to above. This lifetime exemption is adjusted for
inflation and is currently $5,340,000 for each contributor. Married contributors may elect
to split gifts and apply their combined exemption of $10,680,000 to gifts by either of
them. Accordingly, while federal gift tax returns are required for gifts in excess of the
annual exclusion amount referred to above (including gifts that the contributor elects to
treat as having been made ratably over a five-year period), no federal gift tax will be due
until the lifetime exemption has been used. Contributions to an Account that are
considered completed gifts by You generally will not be included in your gross estate for
federal estate tax purposes; however, if You elect to treat the gift as having been made
over a five-year period and You die during the five-year period, the remaining portion of
the gift would need to be included in your estate. As discussed above, if You give more
than $14,000 to a Designated Beneficiary in any single year, You will need to file IRS
Form 709. Consult a qualified tax advisor or see IRS Form 709 for more information and
to learn if the dollar amounts provided above have been updated.
Your Contributions to the Account are Removed From Your Taxable Estate — You
maintain control of the Account, including how the money is used and who will be the
Designated Beneficiary. If a third party is the Designated Beneficiary, the value of the
Account will not be included in the donor’s estate for estate tax purposes. As discussed
above, the only exception occurs if You are spreading a gift over five years for gift tax
purposes. If You die within that five-year period, the gifts properly allocable to the period
before your death are not included in your estate. Gifts allocable to periods after your
death are included in your estate. Contributions in an Account at the death of a
Designated Beneficiary will be included in the Designated Beneficiary’s gross estate for
federal estate tax purposes to the extent such amount are distributed to a beneficiary of, or
the estate of, the Designated Beneficiary. Each taxpayer has an estate tax exemption of
$5,000,000 reduced by lifetime taxable gifts. This estate tax exemption is adjusted for
inflation and is currently $5,340,000 for each contributor.
IRS Form 709 — This form is used to report gifts to another party or to pay the tax for
generation-skipping transactions. If your annual gift to a Designated Beneficiary is more
10
than the annual exclusion of $14,000 for any reason, You will need to complete Form
709. You also will need to complete the form if You elect to treat a gift of up to $70,000
($140,000 for married contributors electing to gift split) as being made equally over a
five-year period. In order for federal gift and generation-skipping taxes not to apply to a
change in beneficiaries or a rollover to the account of a new Designated Beneficiary, the
new Designated Beneficiary must be an Eligible Family Member of the current
Designated Beneficiary and be of the same (or higher) generation as the current
Designated Beneficiary. You should consult a tax advisor to determine if You need to file
this form.
IRS Form 1099-Q — This form reflects the earnings portion of Distributions taken from
the Account. Each January following a year in which a Distribution was made from your
Account, we will send a Form 1099-Q reporting the earnings portion of any Distribution
to the Designated Beneficiary if the Distribution was made to the Designated Beneficiary
or to an eligible institution for the benefit of the Designated Beneficiary. Otherwise, the
Account Owner will receive the Form 1099-Q. We also provide the information on Form
1099-Q to the Internal Revenue Service. The Form 1099-Q recipient is responsible for
determining whether the earnings portion of the Distribution is taxable, for retaining
appropriate documentation to support this determination and for appropriately reporting
earnings on the recipient’s income tax forms. Check with your tax advisor regarding any
tax reporting required on your tax returns.
Student financial aid – Student financial aid may be available even if You are invested
in the West Virginia Prepaid Tuition Plan. The State of West Virginia excludes the value
of your Prepaid Tuition Plan Account from determination of the Designated
Beneficiary’s qualification for state-funded student financial aid. For federal student aid,
the U.S. Department of Education (USDOE), Office of Postsecondary Education issues
guidance about financial aid and how it may be affected by investments in Section 529
prepaid tuition programs. In most cases, if the Account Owner is the parent of the
Designated Beneficiary, the West Virginia Prepaid Tuition Plan Account will be
considered an asset of the parent when computing the Designated Beneficiary’s financial
aid needs. If the Account Owner is the Designated Beneficiary, the West Virginia Prepaid
Tuition Plan Account is considered an asset of the Designated Beneficiary. For more
information, You should consult with the USDOE Office of Postsecondary Education or
the financial aid office of a college, university, trade school or adult vocational program.
Student financial aid programs and qualifications have changed since their inception and
are likely to change again in future years. These changes may or may not be
advantageous to participants in the Prepaid Tuition Plan.
Important Information
Changes may occur to the Prepaid Tuition Plan
Change of Prepaid Tuition Plan Investment Guidelines – The Board of Trustees
maintains investment policies and guidelines that direct and limit the investment structure
11
utilized for the West Virginia Prepaid Tuition Trust Fund. The Board of Trustees may
change these investment policies, guidelines and investment managers from time to time.
Change of Program Manager ─ The Management Agreement between Hartford Life
and the Board of Trustees has a ten-year term. The Hartford Management Agreement
may be continued for additional terms after that term expires. Under certain conditions,
either Hartford Life or the Board of Trustees may terminate the agreement prior to its
expiration date.
If Hartford Life ceases to be the Program Manager, the Board of Trustees may hire a
different program manager or, during any period that the Board of Trustees is unable to
hire a program manager or decides not to do so, the Board of Trustees may manage the
Prepaid Tuition Plan itself.
Changes to the Prepaid Tuition Plan Account and Benefits – The Board of Trustees
may change the terms and conditions of the Prepaid Tuition Plan without the consent of
the Account Owners or Designated Beneficiaries. These changes, if implemented, may
impose additional requirements on the Account Owner, limit the flexibility of the Prepaid
Tuition Plan, change the Benefit definition or otherwise change the terms and conditions
that the Account Owner considers important. In the event the Prepaid Tuition Plan fails to
qualify, or loses its qualification, as a “qualified tuition program,” the income tax
consequences or gift tax consequences of an investment may be substantially less
favorable than those described in this Disclosure Statement.
Changes to Federal or State Laws –Changes to federal or state laws could occur in the
future that could have a significant impact on the Prepaid Tuition Plan and your Account,
or result in termination of the Prepaid Tuition Plan.
Limit of Obligations
The obligations of the Trust Fund under the Accounts are limited obligations payable
only from moneys contributed to the Fund, such as Payments received from Account
Owners and earnings from investment performance and moneys deposited in the Escrow
Account. The Accounts create an obligation of the Trust Fund to pay the Plan Benefits
over a specified number of years. The Trust Fund’s obligations to Account Owners,
Beneficiaries or others are not obligations of the State of West Virginia. Further, the
Accounts neither contain nor obligate any general revenue funds of the State.
Summary of Certain Risk Factors
A number of risks are associated with the Plan that may affect the Trust Fund in meeting
its anticipated Prepaid Tuition Plan Benefit obligations, including, but not necessarily
limited to, the following risks:
Actuarial Risks – The Board of Trustees pools and invests moneys received from the
sale of Prepaid Tuition Plan Units and seeks to earn rates of return on such investments
that meet or exceed its anticipated earnings rates. The Board of Trustees has engaged an
actuarial consultant to project the ability of the Trust Fund to meet its obligations and to
12
assist the Board of Trustees in establishing the pricing of Prepaid Tuition Plan Benefits
each year. Various actuarial assumptions are employed to evaluate the assets and
liabilities of the Trust Fund, such areas as the inflation rate affecting Tuition and
Mandatory Fees, the enrollment mix of Beneficiaries among the various Plan options, the
rate of Account cancellations, the timing of Payments, and the investment return achieved
by the Trust Fund. The actuarial analysis is highly sensitive to changes in one or more of
these assumptions. Because actuarial determinations necessarily involve predictions
regarding future events, no assurance can be given that such assumptions will prove to be
accurate or that the Trust Fund will be able to satisfy its future obligations. In the event
that one or more of the underlying assumptions proves to be inaccurate, such as failing to
meet its projected rate of earnings, the Trust Fund may be unable to perform its
obligations under the Participation Agreement.
Investment Risk – Investments are required to be made with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person would use in the
conduct of an enterprise of like character and with like aims. The Board of Trustees has
engaged the investment consultant, Summit Strategies, Inc., to develop and maintain an
appropriate investment policy. Assets of the Trust Fund are invested with the West
Virginia Investment Management Board. No representation is made or guarantee given
that investment returns will be sufficient to fulfill the obligations of the Trust Fund. In
addition, the Accounts are not bank deposits or savings accounts, and are not insured by
the Federal Depository Insurance Corporation (FDIC) or any other entity.
Lack of Account Transferability – No known market exists for resale of Accounts.
Although limited opportunities for account rollovers may arise, no representation is made
or assurance given that an Account Owner will be able to transfer his or her Account.
No Assurance of Admission to Eligible Institutions – Participation in the SMART529
West Virginia Prepaid Tuition Plan in no way constitutes a promise, commitment, or
guarantee by the Board of Trustees, the State Treasurer, or the State of West Virginia,
Hartford Life or any of their employees or consultants that a Designated Beneficiary: (a)
will be admitted to an Eligible Institution; (b) will be admitted to a particular Eligible
Institution; (c) will be allowed to continue to attend an Eligible Institution after having
been admitted; (d) will be graduated from an Eligible Institution; or (e) if admitted to an
Eligible Institution, will meet the Institution’s residency requirements for in-state Tuition
and Mandatory Fees.
Limited Substitution of Beneficiaries – Effective January 15, 2015, You will no longer
be able to change the Designated Beneficiary. Prior to January 15, 2015, the Account
Owner may be eligible to substitute another Designated Beneficiary according to the
Participation Agreement. However, substitution of a Designated Beneficiary whose
Projected Enrollment Year is later than that of the current Designated Beneficiary will
not result in any refund of payments or earnings realized by the Trust Fund in respect of
such payments. In the instance of a substitution of a Designated Beneficiary with a
Projected Enrollment Year that is earlier than that of the current Designated Beneficiary,
the Account Owner may be required to pay an Actuarial Assessment as a condition of the
substitution.
13
Modifications or Clarification of Account Rules – The Board of Trustees may modify,
amend, alter and change existing Account agreements and rules at any time, which may
be adverse to the Account Owner or Designated Beneficiary. The terms of new
agreements and rules may differ materially from existing agreements and rules. Notice
will be provided to any affected Account Owner of modifications, amendments,
alterations or changes to the Participation Agreement.
No pledging of interest as a security – You cannot borrow money from the Account and
the Account cannot be used as collateral for a loan. No interest in an Account or any
portion thereof may be pledged as security for a loan.
No investment direction – An Account Owner or Designated Beneficiary may not
directly or indirectly direct the investment of their payments or of any earnings thereon.
Securities Considerations
The Plan has not been registered with the United States Securities and Exchange
Commission or with any state securities commission. The Board of Trustees believes
that: (a) the Accounts may be offered under the Plan without meeting the requirements of
the Securities Act of 1933 or the qualification provisions of the Trust Indenture Act of
1939, as amended; (b) any Board of Trustees member, officer or employee of the Board
of Trustees or State Treasurer’s Office who engages in the offer or sale of the Accounts
in the course of his or her official duties as a Board of Trustees member, officer or
employee thereof will not be deemed to be a “broker” (including a “municipal securities
broker”) as defined in the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), solely by reason of such activity; and (c) the Board of Trustees and the State
Treasurer’s Office will not be deemed to be a “dealer” (including a “municipal securities
dealer”) as defined in the Exchange Act, solely by reason of offering, selling and issuing
the Accounts.
14
Participation Agreement
SMART529 West Virginia Prepaid Tuition Plan
Effective November14, 2014
Section 1. Introduction
This Participation Agreement (“Participation Agreement” or “Agreement”), as may be
amended from time to time, describes the basic terms and conditions of the West Virginia
SMART529 Prepaid Tuition Plan (the “Prepaid Tuition Plan”). The Prepaid Tuition Plan
is the prepaid tuition program authorized by the State of West Virginia under the West
Virginia College Prepaid Tuition and Savings Program Act, West Virginia Code §18-301 et seq., and any related regulations (the “Act”). The provisions of West Virginia Code
§18-30-1 et seq., and related policies, procedural or legislative rules of the Board of
Trustees of the West Virginia College Prepaid Tuition and Savings Program (“Board”),
and the provisions of the United States Code, Title 26, Section 529 and the regulations
thereunder, as may be amended from time to time (“Section 529”), shall apply to the
Account and are hereby incorporated by reference into this Participation Agreement.
The Prepaid Tuition Plan supersedes the previous West Virginia Prepaid College Plan,
and all prior West Virginia Prepaid College Plan accounts as well as Prepaid Tuition Plan
accounts, are now governed by this Agreement.
The Board has contracted with a Program Manager to administer the Prepaid Tuition Plan
on its behalf. The Program Manager serves under the direction of the Board of Trustees
of the West Virginia College Prepaid Tuition and Savings Program and its Prepaid
Tuition Trust Fund (the “Trust Fund”). The current Program Manager is Hartford Life
Insurance Company.
The person signing the Application to open an account in the Prepaid Tuition Plan
(“You” or “Account Owner”) agrees to be subject to the terms and conditions of the
Participation Agreement as may be amended from time to time. Once the Application for
the Prepaid Tuition Plan was submitted to and accepted by the Program, You were issued
a confirmation of enrollment in the Prepaid Tuition Plan (“Enrollment Confirmation”).
The Application, the current Participation Agreement, and the Enrollment Confirmation
constitute your account in the Prepaid Tuition Plan (“Account”). Additional documents
relating to your Account, issued or received by the Board pursuant to the various terms
and conditions described in this Participation Agreement, may be incorporated into and
made part of the terms of your Account.
Section 2. Definitions
In addition to definitions provided in the West Virginia Code, the United States Code,
and the rules and regulations thereto, the following definitions apply to the Accounts:
“Account Owner” means the individual at least 18 years of age, a corporation or other
entity obligated to make payments in accordance with the Enrollment Confirmation.
15
Only the Account Owner may execute changes, conversions, transfers, Distributions, and
refund requests for the Account. Any requests to change the Account Owner must be
signed by both the current Account Owner and the new Account Owner. In the event an
employer opens an Account on behalf of a Designated Beneficiary selected by an
employee, that employee is considered to be the Account Owner.
“Actuarial Assessment” means either an amount which accrues on any payment that is
not received by the scheduled due date listed on the Enrollment Confirmation, or an
amount that may be charged when the Account Owner makes a change to the Account
such as changing the Designated Beneficiary. Actuarial Assessments are charged to
ensure the actuarial soundness of the Trust Fund. Actuarial Assessments may be
deducted from your Prepaid Tuition Plan Benefits.
“Administrative Fees” means amounts assessed to an Account by the Board to cover or
defray the costs of operation. They may be charged at the Trust Fund level and
apportioned to each Account and may be charged directly to an individual Account, as
determined by the Board. Outstanding Administrative Fees may be deducted from
Prepaid Tuition Plan Benefits. Certain Administrative Fees may not be refunded.
“Application” means the Prepaid Tuition Plan Application form or a duplicate of the
form completed and signed by the Account Owner that opens an Account in the Prepaid
Tuition Plan.
“Cancellation Fee” means the Administrative Fee that may be assessed when an
Account Owner totally depletes an Account earlier than the normal schedule that would
be expected from the Projected Enrollment Year on the Enrollment Confirmation, or
when a rollover Distribution is requested to be made to another state's Section 529 plan.
“Current Tuition Value” (“CTV”) means an amount determined by the Board that is
based on the average in-state Tuition and Mandatory Fees, weighted by enrollment, for
one semester’s attendance as a full-time undergraduate student at West Virginia Public
Eligible Institutions, but excluding from the calculation all West Virginia Public
Postsecondary Institutions under the purview of the West Virginia Council for
Community and Technical Education. The CTV is the basis for determination of the
value of the Prepaid Tuition Plan Benefit for Beneficiaries enrolled at higher education
institutions other than West Virginia Public Eligible Institutions.
“Designated Beneficiary” means the person designated by the Account Owner at the
time the Account is established to receive Distributions from an Account.
“Distribution” means a withdrawal from your account, whether paid to You, to the
Designated Beneficiary or to an Eligible Institution.
“Eligible Institution” means any eligible educational institution as defined in Section
529.
16
“Eligible Family Member” means, prior to January 15, 2015, in relation to the original
Designated Beneficiary, a:
a.
son, daughter, or descendant of either;
b.
stepson or stepdaughter;
c.
brother, sister, stepbrother or stepsister;
d.
stepfather or stepmother;
e.
father, mother or ancestor of either;
f.
son or daughter of a brother or sister;
g.
brother or sister of father or mother;
h.
son-in-law, daughter-in-law, father-in-law, mother-in-law, sister-in-law or
brother-in-law;
i.
spouse or spouse of any family member listed above; or
j.
first cousin.
“Enrollment Confirmation” means the document that describes the required amount,
frequency, duration, and due date of Account payments, based on information provided
by the Account Owner on the Application. The Enrollment Confirmation confirms the
Projected Enrollment Year, amount of Prepaid Tuition Plan Benefits and any other
options selected by the Account Owner. The Enrollment Confirmation includes Plan
documents formerly issued as the “Participation and Payment Schedule.”
“Full Time” means registered for 12 or more semester hours at any one West Virginia
Public Eligible Institution.
“Maximum Plan Benefit” means the total Prepaid Tuition Plan Benefits payable under
the Program, not to exceed ten (10) semester Units of Prepaid Tuition Plan Benefits, or
its equivalent on a quarter basis or other academic system, for a Designated Beneficiary
and for which all Payments have been made.
“Maximum Program Amount” means the total amount in a Prepaid Tuition Plan
Account and any amounts in a SMART529 Savings Option Account established for the
same Designated Beneficiary. Currently, the limit is $265,620.
“Non-Sufficient Funds Fee” means an Administrative Fee assessed for any items
returned by financial institutions for non-sufficient funds.
“Payment(s)” means the amount(s) required to be paid to the Trust Fund and credited to
the Account in accordance with the payment schedule listed on the Enrollment
Confirmation. Payments may not exceed the Maximum Program Amount.
“Prepaid Tuition Plan Benefit” means the value of the Distributions eligible to be paid
on behalf of the Designated Beneficiary, as described in Section 4 of this Participation
Agreement.
“Projected Enrollment Year” (“PEY”) means the academic school year immediately
following the Designated Beneficiary’s projected high school graduation date and is the
17
earliest date for utilization of Prepaid Tuition Plan Benefits. The PEY is a factor used to
determine the price of prepaid tuition Units and the value of Prepaid Tuition Plan
Benefits. The Projected Enrollment Year is calculated by the Program based on
information provided by the Account Owner in the Application and is provided to the
Account Owner on the Enrollment Confirmation.
“Program” means the West Virginia College Prepaid Tuition and Savings Program
operated by the Board of Trustees of the West Virginia College Prepaid Tuition and
Savings Program in accordance with the provisions of West Virginia Code §18-30-1 et
seq. The Program includes the Prepaid Tuition Plan.
“Program Manager” means Hartford Life Insurance Company. The Board has
contracted with Hartford Life Insurance Company to provide a variety of administrative,
investment and marketing services for the Program, including the Prepaid Tuition Plan.
“Resident” means a person who is a resident of the State of West Virginia at the time an
Application is submitted. The Designated Beneficiary, the Account Owner, or a parent of
the Designated Beneficiary must be a Resident. A person will be considered a Resident of
West Virginia for purposes of the Prepaid Tuition Plan if upon Application he or she
meets one of the following requirements: he or she has a West Virginia mailing address
and resides at least part of the year in the state; he or she is a West Virginia resident on
active duty in the United States Armed Forces; he or she has West Virginia income and is
required to file a West Virginia Personal Income Tax return; he or she owns real property
in West Virginia; he or she has a primary place of employment located in West Virginia;
or he or she attends school as a full-time student in West Virginia. The Board may
require proof of residency.
“Successor Owner” means the individual, at least 18 years of age, corporation or other
entity authorized to become the Account Owner and assume the responsibilities and
duties of the Account Owner as described in Sections 5.4 and 8.2.
“Tuition and Mandatory Fees” means those base amounts approved by the Board as
required to be paid as a condition of enrollment for all in-state, undergraduate students
attending the West Virginia Public Eligible Institution in which the Designated
Beneficiary wishes to enroll; however, the term “Tuition and Mandatory Fees” does not
include course-specific or program-specific fees, or charges for books, supplies,
equipment, room, board, and certain other non-academic charges or fees, even if the West
Virginia Public Eligible Institution to be attended by the Designated Beneficiary requires
all students to pay such charges.
“Unit” means the base measurement amount for which Prepaid Tuition Plan Benefits are
priced and offered by the Board. A Unit is one semester of Prepaid Tuition Plan
Benefits.
“West Virginia Public Eligible Institution” means a post-secondary college or
university owned and operated by the State of West Virginia and as further defined
18
annually by the Board.
Section 3. Payments
3.1 General. Payments are due in the amounts and on the dates specified in your
Enrollment Confirmation. All Payments due under your Account must be made by
automatic or other withdrawal from your bank account, personal check, cashier’s check,
authorized payroll deduction plan, or other certified funds approved in advance. Noncash contributions cannot be accepted.
3.2 Account Owner’s Responsibilities. You are responsible for making all Payments on
time. You are responsible for verifying all information contained in your Enrollment
Confirmation. You are responsible for submitting updates to the Program for changes in
personal information, such as addresses, originally submitted on the Application.
3.3 Returned Items and Late Payments. A Non-Sufficient Funds Fee may be assessed
for all Payments returned for non-sufficient funds. The Board reserves the right to
authorize the Program Manager to collect any check returned for “Non- Sufficient Funds”
or “Uncollected Funds” electronically or in any other lawful manner. An Actuarial
Assessment may apply to any Payment that is not received by the due date listed on the
Enrollment Confirmation.
3.4 Delinquent Accounts. Failure to pay any outstanding Payment by its due date will
result in the Account being considered delinquent and an Actuarial Assessment will
accrue from the date of delinquency. Failure to pay all outstanding Payments, Actuarial
Assessments, or Administrative Fees within ninety (90) days of the due date will result in
a Delinquency Conversion. A Delinquency Conversion will result in the Account being
closed to any subsequent Payments and a reduction in the amount of Prepaid Tuition Plan
Benefits under the Account for the Designated Beneficiary.
3.5 Changes in Payment Method. A request for a change in Payment method, for
example from check to automatic withdrawal, may be made at any time. The request
must be submitted to and approved by the Program Manager before any change in
Payment method will be processed.
Section 4. Prepaid Tuition Plan Benefits
4.1 General. Prepaid Tuition Plan Benefits are available on paid-in-full Accounts
beginning in the fall semester Projected Enrollment Year, unless otherwise provided by
the Board. Prepaid Tuition Plan Benefits available in an Account are expressed in onesemester Units. Benefits mature for use two Units per academic year. Each Unit is valued
at the amount of Tuition and Mandatory Fees approved by the Board for enrollment at the
West Virginia Public Eligible Institution in which the Designated Beneficiary is enrolled
or at the Current Tuition Value for Beneficiaries enrolled at other higher education
institutions. The Prepaid Tuition Plan Benefit value may vary based on the Eligible
Institution selected by the Designated Beneficiary. The maximum Prepaid Tuition
Benefits a Designated Beneficiary may receive are the number of semester Units
19
specified in his or her current Enrollment Confirmation and for which Payment has been
made. The Prepaid Tuition Plan Benefits may not be advanced from the expected use
schedule, unless otherwise expressly allowed in this Participation Agreement. While an
individual may be the Designated Beneficiary of multiple Accounts, the Designated
Beneficiary may not receive more than the Maximum Plan Benefit under the Prepaid
Tuition Plan, nor exceed the Maximum Program Amount.
4.2 Receiving Benefits. The Board will maintain Distribution procedures, which may
change from time to time, and which must be followed in order to access the Prepaid
Tuition Plan Benefits. Information on the Distribution procedure will be sent to the
Account Owner at the maturity of the Account. The current Distribution procedures and
Distribution request forms are available from the Program Manager. At the direction of
the Account Owner, Distributions may be made payable to the Account Owner, the
Designated Beneficiary or an Eligible Institution. Once issued, a Distribution may not be
reversed unless the Distribution was made in error.
4.3 Scholarships. If a Beneficiary is awarded a scholarship to a West Virginia Public
Eligible Institution and attends that Eligible Institution, the Prepaid Tuition Plan Benefit
paid will be the Tuition and Mandatory Fees established by the Board for that Eligible
Institution. If a Beneficiary is awarded a scholarship to an Eligible Institution other than
a West Virginia Public Eligible Institution and attends that Eligible Institution, the
Prepaid Tuition Plan Benefit paid will be the Current Tuition Value established by the
Board for that year.
4.4 Termination following the Projected Enrollment Year.
If at a time four years or more past the Beneficiary’s Projected Enrollment Year, the
Account Owner submits a written request to cancel a paid in full Account, the Account
Owner will receive a refund for all unused benefits based on the Current Tuition Value in
effect at that time rather than the refund amount defined in Section 7.2.
Section 5. Substitution, Conversions, and Assignments
5.1 Substitution of Designated Beneficiary. Effective January 15, 2015, You will no
longer be able to change the Designated Beneficiary. Prior to January 15, 2015, the
Account Owner may transfer the Prepaid Tuition Plan Benefits to an Eligible Family
Member of the original Designated Beneficiary. An Actuarial Assessment may be
required to complete the substitution if the substitute Designated Beneficiary’s Projected
Enrollment Year is different from that of the prior Designated Beneficiary.
5.2 Assignment or Transfer. Except as specifically provided in this Participation
Agreement, You may not assign or transfer the Account, nor any interest, rights or
benefits in the Account. The Accounts may not be used as security for a loan.
5.3 Transfer of Account Owner. You may request to transfer ownership of your
Account to another Account Owner, provided the transfer is accomplished without
consideration. An application to change the Account Owner must be submitted to the
20
Program Manager on an approved form and be signed by both You and the new Account
Owner. In the event of the death or disability of the Account Owner, Account ownership
will be transferred to the Successor Owner, if one is designated, as described in Section
5.43, and no Fee will be assessed. If no Successor Owner is designated, the Program
Manager may allow another interested party to assume the Account Owner’s rights and
responsibilities upon request of the Account Owner’s executor or legal representative and
in accordance with West Virginia law.
5.4 Designation of a Successor Owner. The Account Owner may designate, on the
Application, a Successor Owner of the Account. This designation may be revoked by the
Account Owner at any time, and will be automatically revoked upon receipt by the
Program Manager of a subsequent designation in valid form bearing a later execution
date. The designation and any subsequent designation must be submitted in writing on a
form provided or approved by the Program Manager and will be effective upon receipt
and approval by the Program Manager. This right of designation shall extend to the
Successor Owner in the event the Successor Owner becomes the Account Owner.
Section 6. Time for Exercising Prepaid Tuition Plan Benefits
6.1 Advanced Exercise. For Designated Beneficiaries who are enrolling in an Education
Institution prior to fall semester of the Projected Enrollment Year, the Account Owner
may request advanced use of the Prepaid Tuition Plan Benefits if your Account is paidin-full. In cases of advanced exercise, the Benefit value may be actuarially adjusted so
that the advanced exercise does not adversely affect the Trust Fund. Requests for
advanced exercise of Benefits should be submitted at least thirty (30) days prior to the
date that the Designated Beneficiary plans to enroll in an Eligible Institution. Advance
use of Prepaid Tuition Plan Benefits is limited to a maximum of two (2) semester units of
Benefits each year.
6.2 Exhaustion/Expiration of Prepaid Tuition Plan Benefits. Prepaid Tuition Plan
Benefits under the Account will be considered exhausted at such time as all Prepaid
Tuition Plan Benefits purchased under the Account for the Designated Beneficiary are
paid. Effective January 1, 2015, Prepaid Tuition Plan Benefits expire three years after
the Designated Beneficiary’s Projected Enrollment Year plus the number of years (or
partial years) that would be required to utilize any unused Prepaid Tuition Plan Benefit
Units purchased in the Account for the Designated Beneficiary (the “Expiration Policy”).
For example, the Prepaid Tuition Benefits on an Account with 4 Units (each Unit is a
semester, for a total of 2 years) and a Designated Beneficiary who will graduate from
high school in 2015 (so that the Projected Enrollment Year is 2015) will expire at the end
of the calendar year in 2020 (2015 plus 3 years plus 2 years). Once the Prepaid Tuition
Plan Benefits expire, the Current Tuition Value of the unused Prepaid Tuition Plan
Benefits shall be paid to the Account Owner. If the Account Owner cannot be located the
amount to be paid shall be presumed abandoned and reported and remitted as unclaimed
property in accordance with W.Va. Code §36-8-1 et seq., and the Account Owner and
Designated Beneficiary shall cease to have any interest in the Trust Fund, any Prepaid
Tuition Plan Benefits, and any Account or other Payments. However, if you take a
21
Qualified Distribution in an Account prior to July 30, 2015, the above Expiration Policy
will not apply. Instead, the remainder of your Prepaid Tuition Plan Benefits will expire
ten (10) years after the Designated Beneficiary’s Projected Enrollment Year, regardless
of whether the Prepaid Tuition Plan Benefits have been exhausted.
Section 7. Cancellation and Cancellation Distributions
7.1 General. Participation in the Prepaid Tuition Plan is strictly voluntary. The Account
is not a debt instrument and may be cancelled at any time upon receipt by the Program
Manager of a written cancellation request signed by the Account Owner. Upon
cancellation, the Account cancellation value will be distributed to the Account Owner.
Account cancellation Distributions will be issued within four weeks of receipt of the
appropriate documentation. A request for an Account cancellation Distribution must be
received by the Program Manager before exhaustion of Prepaid Tuition Plan Benefits
described in Section 6.2.
7.2 Account Cancellation Distributions.
(a) When determining the Account cancellation value to be distributed, the value will
be adjusted for the amount of any Plan Benefits previously distributed on the Account.
(b) Account cancellation value: The Account cancellation value is the lesser of the
following two calculations, as of the last day of the month prior to receipt of the
cancellation request:
(1) The Payments accumulated at the actual rate of return, with realized and
unrealized gains and losses, earned on Trust investments less administrative
expenses, or
(2) The Payments accumulated at a 1.5% annual rate of return, less administrative
expenses.
The account cancellation value calculation also applies to valuation of an Account for
purposes of rolling it over.
7.3 Death or Disability of Designated Beneficiary. If a request for a voluntary Account
cancellation distribution is made due to the death or disability of the Designated
Beneficiary, the value of Prepaid Tuition Plan Benefits will be calculated in accordance
with the methods described under Section 7.2.
Section 8. Miscellaneous Provisions
8.1 Notices, Changes, and Choices. All notices, changes, requests, and choices made
under the Account, such as for change of Designated Beneficiary, change of Account
Owner, change of payment method or authorization or change of Successor Owner, must
be submitted by You, the Account Owner, in a form acceptable to the Program Manager,
and received by the Program Manager in order to be considered. Neither the Board nor
the Program Manager is responsible for the validity of such documentation.
22
If acceptable to the Board, notices, changes, requests, and choices will take effect as of
the date the notice is received in good order by the Program Manager unless the Board or
the Program Manager has already acted in reliance on prior specified dates. It is the
responsibility of the Account Owner to notify the Program Manager if the Account
Owner, the Designated Beneficiary, or the Successor Owner’s address, name or Social
Security number changes.
8.2 Successor Owner’s Rights. A Successor Owner’s rights under the Account are
limited solely to right of survivorship in the event of the Account Owner’s death or
disability, at which time the Successor Owner will become the new Account Owner,
upon submission of proof of the death or disability to the Program Manager. Prior to the
death of the Account Owner, the Successor Owner has no right to direct Account
changes, conversions, transfers or cancellations. Refunds will be made payable to the
Account Owner only. An Account Owner may modify or terminate the Account and
receive a refund without the consent or authorization of the Successor Owner.
8.3 Additional Fees and Costs. Tuition and Mandatory Fees covered at West Virginia
Public Eligible Institutions included within the Benefits paid under the Prepaid Tuition
Plan shall be specified annually by the Board. The Designated Beneficiary is responsible
for the cost of any additional fees and costs not paid as a Benefit under the Prepaid
Tuition Plan and this Participation Agreement. Such additional fees and costs may
include, but are not limited to, college application fees, health fees, course-specific and
program-specific fees, laboratory fees, meal plan fees, security deposits, parking fees, and
so forth.
8.4 Disclaimers. Nothing in the Participation Agreement will be construed as a promise
or guarantee by the Board, the Treasurer, the State of West Virginia, or any other person
or entity associated with the Prepaid Tuition Plan that a Designated Beneficiary will be:
(a) admitted to a West Virginia Public Eligible Institution,
(b) admitted to a particular Eligible Institution,
(c) allowed to continue to attend an Eligible Institution after having been admitted,
(d) graduated from an Eligible Institution, or
(e) determined to be a resident of West Virginia for the purposes of qualifying for in-state
Tuition and Mandatory Fees charged at the Eligible Institution chosen by the Designated
Beneficiary.
If the Designated Beneficiary does not qualify for in-state Tuition and Mandatory Fees at
the time of his or her college enrollment, he or she will be responsible for paying any
difference between the Prepaid Tuition Plan Benefit and the amount of Tuition and
Mandatory Fees due for a non-resident student at that institution.
8.5 Guarantee and Discontinuation. As provided in West Virginia Code §18-30-2, the
State of West Virginia considers the operation of the Trust Fund a proper governmental
function and purpose of the state in assisting its citizens to access higher education.
Accordingly, You, the Account Owner, have an Agreement with the Board providing that
23
as long as the Prepaid Tuition Plan continues to operate and You have paid all required
Payments, Fees and Actuarial Assessments, the Designated Beneficiary will receive the
Prepaid Tuition Plan Benefits specified in the Enrollment Confirmation. Furthermore,
You understand and acknowledge that:
(a) all Payments made by Account Owners are pooled in the Trust Fund and invested
with the objective of earning income sufficient to meet the Trust Fund’s contracted
obligations and pay the administrative costs of maintaining the Prepaid Tuition Plan;
(b) only the assets of the Trust Fund are available to guarantee the contractual obligations
to Account Owners and Designated Beneficiaries;
(c) this Participation Agreement does not obligate the general revenue or any other fund
of the State of West Virginia, nor does it obligate any Eligible Institution;
(d) no recourse shall be had against the State of West Virginia, the Board of Trustees of
the West Virginia College Prepaid Tuition and Savings Program, the West Virginia State
Treasurer’s Office, Hartford Life Insurance Company, The Hartford Financial Services
Group, investment managers or any depository institution in connection with the Prepaid
Tuition Plan or any Account or any Prepaid Tuition Plan Benefits;
(e) neither the Accounts, nor the Prepaid Tuition Plan Benefits due thereunder, shall be
considered to constitute a debt or liability of the State of West Virginia, and neither the
credit nor the taxing power of the State of West Virginia are pledged to paying Prepaid
Tuition Plan Benefits;
(f) in the event the continued operation of the Trust Fund is determined not to be in the
best interest of the State of West Virginia, the West Virginia Legislature may, through
appropriate action, discontinue the Prepaid Tuition Plan;
(g) all legal and beneficial interests in the assets held in the Trust Fund are vested in the
State for its exclusive benefit;
(h) in the event the Prepaid Tuition Plan is discontinued and after all current expenses are
paid, the assets of the Trust Fund will be paid out on a pro rata basis of funds held by the
Board on behalf of current Account Owners; and
(i) exercise of full Prepaid Tuition Plan Benefits under the Account guarantees the
Designated Beneficiary receipt of services and not the receipt of funds.
8.6 Grievances. A petition may be filed with the Chairman of the Board to seek relief
from the procedures and policies of the Board. An appeal of the decision of the Chairman
may be made to the Board.
24
8.7 Investment Direction. No Account Owner or Designated Beneficiary may direct the
investment of any contributions to the Prepaid Tuition Plan or any funds of the Trust
Fund or any earnings thereon, directly or indirectly.
8.8 Account Reports. The Prepaid Tuition Plan shall provide separate accounting for
each Designated Beneficiary.
8.9 Exemption from Creditor Process. Moneys in the Trust Fund are exempt from
creditor process, and are not subject to attachment, alienation, garnishment or other
process, and Payments made on behalf of a Designated Beneficiary to the Trust Fund are
exempt from the property of an estate in bankruptcy proceedings.
8.10 Interpretation and Venue. This Participation Agreement shall be interpreted under
and governed by the laws of the State of West Virginia. Venue for any action arising
from or related to the Participation Agreement, the Application, the Enrollment
Confirmation, or the Prepaid Tuition Plan shall be in the Circuit Court of Kanawha
County, West Virginia, or the United States Southern District for West Virginia.
8.11 Headers. Any heading used in this Participation Agreement is for reference
purposes only, and shall not be construed as having any meaning.
8.12 Severability. In the event that any clause or portion of this Participation Agreement
is found to be invalid or unenforceable by a court of competent jurisdiction, that clause or
portion shall be severed from the Participation Agreement and the remainder of the
Participation Agreement shall remain in full force and effect.
8.13 Entire Agreement. The Application, Participation Agreement, and Enrollment
Confirmation constitute the entire and exclusive statement of the agreement between the
parties, and supersede any and all prior agreements, oral or written, and any
communications between the parties relating to the Prepaid Tuition Plan.
8.14 Amendments. This Participation Agreement may be amended, modified, altered
and changed by the Board at any time. Notice will be provided to any affected Account
Owner of any amendment, modification, alteration or change made by the Board at the
address on file with the Program Manager. The current Participation Agreement governs
all Accounts, regardless of when an Account was opened or modified.
25