Employer-sponsored CollegeAmerica® distributions

Generally, qualified education expenses are expenses required for the enrollment or attendance of the beneficiary at an eligible educational institution. For a list of qualified expenses, as well as the tax implications of taking a nonqualified distribution, visit CollegeAmerica qualified education expenses. 

If distributions are used for purposes other than qualified education expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. States take different approaches to the income tax treatment of distributions. For example, distributions for K‑12 expenses may not be exempt from state tax in certain states. Consult a tax advisor for state-specific details.

Yes, Form 1099-Q is issued the year following the distribution. For additional information about how distributions affect taxes, visit Employer-sponsored CollegeAmerica tax information.

Distributions payable to the account owner or a third party are reported under the account owner’s SSN. 

Distributions payable to the beneficiary or the higher educational institution are reported under the beneficiary’s SSN.  

One way is to visit the Federal Student Aid website. Schools listed on this website with a federal school code are considered to be eligible educational institutions.  

 Yes. For beneficiaries who have not graduated from high school at the time a CollegeAmerica account is opened, the account owner has 30 years after the projected date of the beneficiary’s high school graduation to use all assets in the account.

For beneficiaries who have graduated from high school at the time an account is opened, the account owner has 30 years after the date the CollegeAmerica account was opened to use all assets in the account.

 No, the account owner can use the account to pay for qualified education expenses at an eligible educational institution in any state.  

 There is no minimum level of study, however if the student is enrolled on a less-than-half-time basis, distributions for room and board will not be considered qualified.  

Yes, as long as the other student is a member of the current beneficiary’s family. If so, the funds must be transferred to the new beneficiary first using the CollegeAmerica Account Change Request so the distribution is reported correctly. Also include the CollegeAmerica Distribution Request to expedite the request.

To learn more about who is considered a member of the family, review Managing CollegeAmerica accounts.

You can consult with a tax advisor and/or refer to IRS Publication 970, Tax Benefits for Education.

A contingent deferred sales charge (CDSC) could apply to distributions from Class 529-C share accounts or from Class 529-A share accounts whose shares were purchased at net asset value.

For an estimate of a CDSC, contact us.