Supplement to Ivy InvestEd 529 Plan Program Overview Dated September 2021
On March 8, 2022, the Arizona State Treasurer’s Office, and the Arizona State Board of Investment, issued a press release notifying interested parties that it had approved Ascensus College Savings Recordkeeping Services, LLC (“Ascensus”) to serve as the new Program Manager and Recordkeeper for the AZ 529 Advisor Sold Plan (the “Plan”), Goldman Sachs Asset Management, L.P. (“GSAM”) to serve as the Investment Manager and Goldman Sachs & Co. LLC (“GSCO”) to serve as Distributor of the Plan. This conversion (the “Conversion”) is scheduled to occur beginning on or about June 10, 2022 (the “Conversion Date”). On or immediately following the Conversion Date, the Ivy InvestEd 529 Plan (“Ivy 529 Plan”) will cease operations and Ivy Distributors, Inc. (“IDI”), the current Program Manager of the Ivy 529 Plan, will cease to serve in that capacity and will transfer all Ivy 529 Plan records and assets to Ascensus. At this time the Plan will be rebranded as The Goldman Sachs 529 Plan.
As a result of the anticipated Conversion, the investment options described in your Account Owner Agreement (the InvestEd Portfolios Age-Based Options, the InvestEd Portfolios Static Options, and the Individual Portfolios, together the “Portfolios”), will be closed to new investors at the close of business on June 6, 2022, and all sales efforts will cease. In addition, the final monthly exchange for account holders participating in the Age-Based Options will also occur on June 6, 2022.
In order to facilitate an orderly transfer of assets, records and management responsibilities to Ascensus, on Wednesday, June 8, 2022, after the close of the New York Stock Exchange (“NYSE”), the Plan will experience a “blackout period” during which time no transactions will take place. During this time, you will be unable to open or close a Plan account, change your investment options, deposit money into a Plan account (including any recurring contributions), request or receive a withdrawal, update your account information, or effectuate any other Plan transaction. Any transaction requests that the Plan receives in good order after the close of the NYSE on June 8, 2022, will be processed as soon as administratively reasonable on or after June 13, 2022.
The Age-Based and Static Option Portfolios will be fully converted to cash after the close of business on June 1, 2022, in advance of the Conversion. As a result, these assets will be out of the market, and you will not receive the benefit of any potential market appreciation, from June 2, 2022, through the Conversion Date. Following the successful completion of the Conversion, these assets will be re-invested in the new investment options offered within The Goldman Sachs 529 Plan and back in the market on June 13, 2022.
Additional information about these changes, including information about the fees and expenses, and the investment selections available through the Plan, will be sent to Plan participants by GSCO closer to the time of the Conversion. GSCO will also provide you with additional information regarding the limitations or restrictions on transactions and other-related activity under the Plan in advance of the Conversion.
You should contact The Goldman Sachs 529 Plan (GSAM.com/529Plan; 888-462-6209) for additional details and/or questions regarding the Plan following the Conversion.
This Supplement is dated May 2, 2022.
IVY INVESTED Frequently Asked Questions
The Ivy InvestEd℠ 529 Plan is a tax-advantaged 529 education savings plan designed to help prepare for future education goals.
Q. How can account funds be used for education needs?
A. Earnings in an Ivy InvestEd 529 Plan account grow federal income tax deferred. All withdrawals are federal income tax-free if they are applied to qualified higher education expenses. Qualified withdrawals are those that are used toward qualified education expenses at an eligible educational institution as determined by the Internal Revenue Service. While qualified withdrawals are currently federal income tax-free, they may also be state tax-free, depending on the account owner’s state. This information is based on current tax laws, regulations, rules and interpretations, which are subject to change at any time.
Q. What if the designated beneficiary receives a scholarship?
A. If the child or designated beneficiary receives a scholarship for higher education, the account owner may withdraw an equal amount from the Ivy InvestEd 529 Plan. Although the account owner would pay taxes on the earnings portion of the withdrawal, there would be no federal tax penalties associated with the withdrawal. Withdrawal amounts that exceed the amount of the scholarship that are NOT used for qualified higher education expenses of the designated beneficiary will be subject to income taxation on the earnings portion. An additional 10% federal penalty on the earnings may be incurred.1 The taxes will generally be applied at the tax rate of the person for whose benefit the withdrawal is made.
Q. What if the designated beneficiary decides against using account funds for education needs?
A. One of the advantages of 529 plans is that account owners can change beneficiaries without penalty. If the child chooses not to use account funds for education needs, the account owner can change beneficiaries without penalty, as long as the new designated beneficiary is a member of the original designated beneficiary’s family, as defined by the tax laws. If the account owner chooses to withdraw the money he/she had accumulated in the Ivy InvestEd 529 Plan account for non-qualified expenses instead of passing it onto a new designated beneficiary, the earnings portion of the non-qualified withdrawal generally will be subject to income tax at the tax rate of the person for whose benefit the withdrawal is made. In addition, a 10% penalty on the earnings will apply.2
Q. Does the Ivy INVESTED 529 Plan offer estate-planning benefits?
A. Contributions to an Ivy InvestEd 529 Plan account are generally excluded from the account owner's taxable estate for federal tax purposes (assuming the donor is not the beneficiary). Thanks to the annual $15,000 gift tax exclusion ($30,000 in the case of a married couple), it is possible for grandparents, other relatives and friends to contribute substantial amounts to an account without incurring any gift tax. An election can be made (on the federal gift tax return) to spread up to $75,000 ($150,000 for married couples) to each beneficiary and spread the contribution over five years for gift tax purposes, as long as they do not make additional contributions to the same beneficiary during that five-year period. Please remember that if the contributor dies before the end of the five-year period, the portion of the gift allocable to the years remaining in the five-year period would be in the contributor’s estate for federal estate tax purposes. Consult a CPA or other tax advisor regarding the impact of gift, estate, and other tax consequences.
Q. If a person is invested in another 529 plan, can he/she transfer the account to an Ivy INVESTED 529 Plan?
A. Yes, transferring from one 529 plan to another requires completing a 529 Plan Transfer Request Form. The account owner may generally roll over an account without limit if the new account appoints a new designated beneficiary. In addition, the account owner may roll over an account with the same designated beneficiary one time during a 12-month period.3
Q. Are the Ivy INVESTED 529 Plan investments guaranteed?
A. No. Investments into 529 plans, including the Ivy InvestEd 529 Plan, are not guaranteed by the State of Arizona, the Arizona State Board of Investment, the Arizona State Treasurer’s Office, Ivy Distributors, Inc., or any affiliated or related party. All investments involve a certain degree of risk. The value of an Ivy InvestEd 529 Plan account will depend upon the performance of the investment portfolios in which the account is invested and will fluctuate. It is possible that the value of the account may be less than the amount originally invested. To become more familiar with the risks involved in investing in the Ivy InvestEd 529 Plan, please carefully review the Ivy InvestEd 529 Plan information contained in this section, including the Ivy InvestEd 529 Plan Program Overview and the InvestEd Portfolios Prospectus.
Q. Can the account owner still contribute to a designated beneficiary’s Coverdell Education Savings Account?
A. Yes. Account owners can contribute to both a Coverdell Education Savings Account and a 529 plan in the same year for the same designated beneficiary without penalty, subject to contribution limits.
Q. Does the account owner have to select a college, university, technical school, etc. now?
A. No, but the account owner may want to consider the type of post-secondary education the designated beneficiary plans to pursue. This may be of assistance in determining the amount the designated beneficiary may need for qualifying expenses.
Q. Can account owner borrow money against the Ivy INVESTED 529 Plan account?
A. No. Interest in the account may not be pledged as security for any kind of loan.
Q. Can the account owner and his/her spouse set up a joint account?
A. No. One person must establish each Ivy InvestEd 529 Plan account; however, anyone may contribute to the plan once it is established. For example, parents, grandparents, other relatives and friends may pool contributions in one designated beneficiary's account. Although only one person may be indicated as the account owner, a successor account owner should be designated on the Ivy InvestEd 529 Plan account application in the event of the account owner's death.4
Q. Can organizations establish Ivy INVESTED 529 Plan scholarship programs?
A. Not-for-profit entities, such as 501c(3) organizations and state and local governments have the ability to set up scholarship accounts within the Ivy InvestEd 529 Plan. There are many reasons that not-for-profit entities may find Ivy InvestEd 529 Plan scholarship accounts attractive. No designated beneficiary is named at the time a scholarship account is set up. In addition, there’s no maximum contribution limit. At the time the scholarship is awarded, the organization simply completes a transfer of ownership form for the portion of the account they wish to grant to any given recipient. This recipient must use the money for higher education expenses.
Q. Who manages the Ivy INVESTED 529 Plan?
A. The Ivy InvestEd 529 Plan is offered by Ivy Distributors, Inc. as program manager of the AZ529, Arizona’s Education Savings Plan. Ivy Distributors, Inc. is one of multiple financial institutions eligible to offer investments under the Program. InvestEd Portfolios are managed by Ivy Investment Management Company and are distributed by Ivy Distributors, Inc. Ivy Funds are managed by Ivy Investment Management Company and are distributed by Ivy Distributors, Inc.
Q. Is there a minimum amount the account owner must invest to open an Ivy INVESTED 529 Plan account?
A. To open an Ivy InvestEd 529 Plan account, the minimum initial investment is $250 per fund, and subsequent investments do not have a limit. To establish an account with an automatic monthly investment or Automatic Investment Service (AIS), the initial opening account minimum is $150 per fund, and subsequently, a minimum of $50 per month. To establish an account through payroll deduction or salary deferrals, there are no account minimums. As with any investment, there can be no assurance that periodic purchases using AIS will produce a profit or protect against
investment loss in declining markets. An account owner may open accounts with cash equivalents. Redemptions from other accounts may be taxable transactions.
Q. How does the account owner make a withdrawal from an Ivy INVESTED 529 Plan account?
An account owner may withdraw money from an Ivy InvestEd 529 Plan account by completing the appropriate forms. Withdrawals will be classified as either qualified or non-qualified. A qualified withdrawal is a withdrawal used for “qualified higher education expenses” for the enrollment or attendance of a designated beneficiary at an eligible educational institution. Tax-free distributions for tuition at private and/or religious institutions (K-12) up to $10,000 per student per tax year may also be considered qualified withdrawals (state and local taxes may apply). A non-qualified withdrawal is a withdrawal that is not used for qualified higher education expenses or tuition at private and/or religious institutions (K-12). Non-qualified withdrawals are generally subject to income taxes on the earnings portion of the withdrawal and an additional federal tax penalty of 10% on the earnings. The account owner may also make penalty-free withdrawals if the designated beneficiary receives a scholarship, dies or becomes permanently disabled. There would be a tax on the earnings portion of this type of withdrawal. Please consult a tax advisor for more information about individual circumstances. To make a withdrawal from an Ivy InvestEd 529 Plan account, the account owner must complete an Ivy InvestEd 529 Plan Withdrawal Form.
1 The earnings portion of any non-qualified withdrawals (i.e., generally those not used for qualified higher education expenses) is subject to a federal tax and possibly state tax. In addition, the earnings portion of a non-qualified withdrawal is subject to an additional federal penalty in the form of an additional 10% tax on the earnings portion of the withdrawal. The 10% penalty does not generally apply to certain distributions made after the death or disability of the designated beneficiary or after the receipt of certain scholarships.
2 There may be federal gift or generation skipping transfer tax consequences if the new designated beneficiary is a member of a younger generation than the prior designated beneficiary.
3 Although the U.S. Department of Education has advised several 529 plans regarding the treatment of accounts in 529 plans for financial aid purposes, the treatment is subject to change by regulations, legislation or otherwise. Specific educational institutions may also treat 529 plan investments in a different manner. Accounts for which the designated beneficiary is also the account owner may be treated as if it were an asset of the parent for financial aid purposes.
4 The tax treatment and state law probate treatment of the designation of a successor account owner and the transfer of ownership to such successor is not certain and may vary depending on the particular facts and state law involved.
Significant EventOn December 2, 2020, Waddell & Reed Financial, Inc., the parent company of Ivy Investment Management Company, the investment adviser of the Ivy Funds, and Macquarie Management Holdings, Inc., the US holding company for Macquarie Group Limited’s US asset management business (“Macquarie”), announced that they had entered into an agreement whereby Macquarie would acquire the investment management business of Waddell & Reed Financial, Inc. (the “Transaction”). The Transaction closed on April 30, 2021. The InvestEd Portfolios and the Ivy Funds, as part of Delaware Funds by Macquarie, are now managed by Delaware Management Company, and Delaware Distributors, L.P. is now the distributor of the Ivy Funds and the InvestEd Portfolios. Ivy Distributors, Inc. remains the program manager and distributor to the Ivy InvestEdSM 529 Plan, which is part of AZ529, Arizona’s Education Savings Plan. Ivy Distributors, Inc. is one of multiple financial institutions eligible to offer investments under AZ529.
Risk factors: Past performance is not a guarantee of future results. An investment in the Ivy InvestEd 529 Plan is subject to risk. Your investment return and principal value will fluctuate, and your investment, when redeemed, may be worth more or less than your original cost.
The Ivy InvestEd 529 Plan is offered by Ivy Distributors, Inc. as part of AZ529, Arizona’s Education Savings Plan. Ivy Distributors, Inc. is one of multiple financial institutions eligible to offer investments under AZ529.
Before investing, investors should carefully consider the investment objectives, risks, charges and expenses of the Ivy InvestEd 529 Plan. This and other information is found in the InvestEd Portfolios prospectus, and the Ivy Funds prospectus, the Ivy InvestEd 529 Plan Program Overview, and the InvestEd 529 Plan Account Application. All of these items are available from these links or from a financial professional. Please read the prospectus carefully before investing.
Before investing, non-residents or taxpayers of states other than Arizona should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors than those offered under the Ivy InvestEdSM 529 Plan. Please consult your tax professional regarding your personal tax situation.
Accounts are not insured by the State of Arizona, AZ529, Arizona’s Education Savings Plan, the Arizona State Treasurer’s Office or any other governmental entity, Ivy Distributors, Inc., or any affiliated or related party, and neither the principal deposited nor any investment return is guaranteed by any of the above referenced parties. The Arizona State Treasurer’s Office is the Administrator of AZ529, Arizona’s Education Savings Plan.
The information provided may include references to concepts that have legal, accounting and tax implications. It is not to be construed as legal, accounting or tax advice, and is provided as general information to assist in the understanding the issues discussed. Ivy Distributors, Inc., nor their associates offer tax, legal, or accounting advice. You may want to consult with your accountant or tax professional to discuss your personal situation. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon and risk tolerance.