Section 529 plans offer a potentially efficient way to save for future college expenses.
Also known as qualified tuition programs, 529 plans are named for the section of the tax code that provides for their favorable tax treatment. They are designed to help fund the future college educations of children, grandchildren and others. Section 529 plans are usually established by individual investors, but businesses also may offer them as employee benefits.
Any adult may open a 529 plan for a future college student; the donor need not be related to the future student. The donor can invest a lump sum or make periodic payments. In either case, contributions are made with after-tax dollars. Any earnings at distribution for qualified expenses, such as tuition, books and room and board, are exempt from federal taxes. Most, but not all, states also allow tax-free withdrawals.
Your Lincoln Financial Securities (LFS) representative is prepared to help you determine whether a 529 plan suits your college-expense planning needs. Our firm offers access to variety of plan sponsors in many states.
Although qualified withdrawals are exempt from federal taxes, nonqualified withdrawals may be subject to taxes and a 10 percent penalty on any earnings. Investments in a 529 plan also may not perform well enough to cover the rising cost of college as anticipated. Investing in a 529 plan outside of your state of domicile may deny you the opportunity to take advantage of favorable state tax treatment or incentives.
If your state or your designated Beneficiary's state offers a 529 plan you may want to consider what, if any, potential state income tax or other benefits it offers, before investing. State tax or other benefits should be one of many factors to be considered prior to making an investment decision. Please consult with your financial, tax or other adviser about how these state benefits, if any, may apply to your specific circumstances. You may also contact your state 529 plan or any other 529 college savings plan to learn more about their features. Please contact your LFS representative to obtain a Plan Disclosure Document or prospectus for any of the underlying funds. The Plan Disclosure Document contains complete details on investment objectives, risks, fees, charges and expenses, as well as more information about municipal fund securities and the underlying investment companies that should be considered before investing. Please read the Plan Disclosure Document carefully prior to investing.
Revenue Sharing and Compensation
LFS provides access to a vast array of mutual fund and 529 plan products. With more than 7,000 mutual funds available from many mutual fund families, a considerable amount of training and distribution support is required in order to enable LFS representatives to become knowledgeable in the appropriate funds to offer their clients. Some of the mutual fund families participate by sending their employees to activities that are designed to facilitate the distribution of their products and education of LFS representatives through marketing and educational programs.
Some mutual fund families pay compensation to LFS and/or reimburse LFS for various expenses attendant to making these programs available to LFS representatives. Some mutual fund families send their employees to meetings and also reimburse LFS for the costs of marketing and educational programs. None of the expense reimbursements or other payments that are received by LFS are shared with LFS's representatives who sell these funds.
The mutual fund families that provide educational and marketing support and make expense reimbursements and other payments described are:
- American Funds
- Allianz Global Investors
- Delaware Investments
- Fidelity Advisor Funds
- Franklin Templeton
- ING Annuity and Asset Sales
- John Hancock
- JP Morgan
- Lord Abbett
- Oppenheimer Funds
- Pacific Life
- Principal Funds
- Putnam Investments
- Sammons Financial
Additionally, our clearing firms offer "No Transaction Fee" Programs with more than 1,500 no-load funds.
Participating mutual fund families pay a fee to Pershing, LLC® or National Financial Services, LLC® (NFS) as applicable to participate in these programs, and a portion of this fee is shared with LFS. None of the compensation that is received by LFS is shared directly with our representatives who sell these funds. Pershing and NFS also offer LFS payments for distribution assistance for assets held in brokerage account sweep money market funds. The payments are based on formulas determined by Pershing and NFS respectively.