FAQ
- What is a 529 college savings plan? »
- What is John Hancock Freedom 529? »
- What are some of the plan's major benefits? »
- Who can participate in the plan? »
- How are accounts structured? »
- Can my spouse and I set up a joint account? »
- Who can be a beneficiary? »
- Can I change the beneficiary? »
- Can the account holder be changed? »
- How much money do I need to open an account? »
- Who can contribute to an account? »
- How much can I invest? »
- Are contributions tax-deductible? »
- How do I contribute to my account? »
- What are my investment choices? »
- Where can I receive performance information on the portfolios? »
- Are any of the portfolios guaranteed? »
- Can I change my portfolio selection? »
- How can I use the money in my account? »
- Can the account be used to pay for any college? »
- Will participation in the plan affect my beneficiary's eligibility for financial aid? »
- When can I take a distribution from my account? »
- What if I do not use the money in my account for qualified education expenses? »
- Is paying off a student loan a qualified expense? »
- What if my beneficiary receives a scholarship? »
- What if my beneficiary does not go to college? »
- What if I move to another state? »
- What are the fees? »
- What are the federal income tax advantages? »
- What are the gift and estate tax advantages of an account? »
- I own a UGMA/UTMA account. Can I move those assets into a 529 savings plan? »
What is a 529 college savings plan?
Named for Section 529 of the Internal Revenue Code, these plans help individuals and families save for college in a tax-advantaged way.
What is John Hancock Freedom 529?
John Hancock Freedom 529, formerly marketed as Manulife College Savings, is a 529 savings plan offered by the Education Trust of Alaska, managed by T. Rowe Price Associates, Inc., and distributed by John Hancock Distributors LLC, through other broker-dealers with whom John Hancock Distributors LLC has entered into a selling agreement. It is intended to be a "qualified tuition program" under Section 529 of the Internal Revenue Code.
What are some of the plan's major benefits?
- A multi-managed platform
- Diversification by asset class and investment style
- Any account growth is tax-deferred
- Distributions for qualified educational expenses are federal tax-free
- Account holder maintains control over assets and distributions and
- Gift and estate tax benefits.
Who can participate in the plan?
Any U.S. citizen or resident alien can open an account, as can trusts, corporations, and other organizations. You are not restricted by age, income, or state of residence.
How are accounts structured?
Only one person - the account holder - can open and control an account. If the account holder is a minor, the account must have a custodian to act on behalf of the minor. Each account may have only one beneficiary (future student), but you may open as many accounts for as many different beneficiaries as you want.
Can my spouse and I set up a joint account?
Joint accounts are not permitted in this Plan. However, you and your spouse may each establish separate accounts for the same Beneficiary or you may both contribute to the same account.
Who can be a beneficiary?
Any U.S. citizen or resident alien - including the account holder - can be the beneficiary.
Can I change the beneficiary?
Yes, the account holder can change the
beneficiary at any time. If the beneficiary is changed, the new beneficiary must be a member of the family of the current beneficiary, as defined by the Internal Revenue Code.
Can the account holder be changed?
Generally, yes. However, special rules may apply for accounts with custodians. You may also name a successor account holder who takes over for you in the event of your death or legal incompetence. Since a change of account holder could have tax consequences, you may want to check with a tax adviser.
How much money do I need to open an account?
The minimum initial contribution is $1,000 per portfolio. If you are participating in the automatic purchase or payroll deduction programs, the minimum is $50 per portfolio, per month. The minimum subsequent contribution for any portfolio is $50.
Who can contribute to an account?
Anyone can contribute, not just the account holder.
How much can I invest?
You can invest until the combined account balances for a beneficiary reach $320,000. It is acceptable for earnings (but not contributions) to cause the total account value to go over this amount. This maximum may or may not cover all of your beneficiary's college expenses.
Are contributions tax-deductible?
Not at the federal level; state income tax treatment varies.
How do I contribute to my account?
- Check or money order;
- Electronic fund transfer from your financial institution account;
- By investing systematically through the automatic purchase program or, if applicable, payroll deduction program;
- By rollover from another qualified tuition program (529 plan), Coverdell Education Savings Account, or qualified U.S. Savings Bond; and/or
- By moving money from UGMA/UTMA accounts.
What are my investment choices?
The plan offers 22 portfolios representing four investment strategies.
- Enrollment-Based Portfolios
- Static Portfolios
- Lifestyle Portfolios
- Individual Portfolios
Where can I receive performance information on the portfolios?
You can receive performance information by clicking here, or you can call 1-866-222-7498. You can also find performance information as of the most recent quarter end in the Investor Quarterly, which you can obtain from your financial consultant.
Are any of the portfolios guaranteed?
Your account value is never guaranteed, so you could lose money (including your contributions) or not make money by investing in the plan. The JH Money Market Portfolio is not guaranteed; however, it is managed to preserve your investment principal.
An investment in the Money Market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency and there is no assurance that a $1.00 share price will be maintained. An investment in the Fund Investment return and principal value will fluctuate so that an investor's share when redeemed may be worth more or less than their original cost.
Can I change my portfolio selection?
Each time you make a contribution you may select a different portfolio. In addition, changes to your existing investments for a particular beneficiary are permitted twice per calendar year (in 2009 only) and any time upon a change in the beneficiary. If you are contributing via payroll deduction and wish to change the direction of your contributions or add an investment option after an account has been set up, please contact John Hancock Freedom 529 at 1-866-222-7498.
How can I use the money in my account?
Your account balance can be used for any purpose. However, to receive the full federal tax benefit, the money must be used for qualified education expenses of the Beneficiary at an eligible educational institution, as defined by the IRS.
Can the account be used to pay for any college?
The account can be used for the beneficiary's attendance at any eligible institution of higher education that meets specific federal accreditation standards. These institutions include most four-year colleges and universities (both for undergraduate and graduate degrees), two-year institutions, proprietary and vocational schools, and some foreign schools that are eligible to participate in Financial Aid programs under Title IV of the Higher Education Act of 1965.
Will participation in the plan affect my beneficiary's eligibility for financial aid?
The treatment of investments in a 529 savings plan, such as this one, varies from school to school, but assets are typically not treated as assets of the student. However, any investment in a 529 plan may still affect a student's eligibility to get financial aid based on need. You should check with the schools you are considering regarding this issue.
When can I take a distribution from my account?
You can request a distribution at any time.
What if I do not use the money in my account for qualified education expenses?
If a distribution is not used for qualified expenses, any investment earnings will be subject to federal, and possibly state, income taxes, both at the rate of whomever receives the distribution. The distribution may also be assessed a 10% federal penalty tax on any earnings.
Is paying off a student loan a qualified expense?
No. Repayment of student loans is not considered a qualified education expense.
What if my beneficiary receives a scholarship?
There are a number of options for your account if your beneficiary earns a scholarship.
- You may use the account to pay for education expenses that are not covered by the scholarship.
- You may take a distribution from your account in an amount up to the amount of the scholarship without incurring a penalty tax; however, you may be subject to federal and state income taxes.
- You may leave the money in the account for use at a future date, such as for an advanced degree.
- You may change the beneficiary to another member of the current beneficiary's family.
What if my beneficiary does not go to college?
If your planned beneficiary does not go to college, you have three options:
- Leave the money in the account in case the beneficiary subsequently decides to attend college;
- Leave the money in the account and select a new beneficiary;
- Take a distribution from your account and pay both the 10% federal penalty and income taxes on your earnings.
What if I move to another state?
There are no residency requirements for the plan, so you can maintain your account and continue to make contributions.
What are the fees?
There are asset-based fees, sales charges and an annual account maintenance fee. The annual asset-based fees include the annual program fee which is determined by share class, as well as the expenses of the underlying mutual funds in which each investment option invests. For additional information on the annual asset-based fees, please refer to Section V, Fees and Expenses of our Plan Disclosure Document.
The annual account maintenance fee is $25. It is waived if:
Your client is contributing through the Automatic Purchase program;
The combined account balance for a Beneficiary is $25,000 or more; or,
The combined Account Holder's total balance (regardless of Beneficiary) is $75,000 or more.
If your client has more than one account for the same Beneficiary, the annual account maintenance fee will be prorated across all of these accounts.
If your client is investing through payroll deduction, the annual account maintenance fee is $15 and is waived if the combined Account Holder?s balance for a Beneficiary is $6,000 or more, or the combined total account balance (regardless of Beneficiary) is $75,000 or more.
The annual account maintenance fee is $25. It is waived if:
If your client has more than one account for the same Beneficiary, the annual account maintenance fee will be prorated across all of these accounts.
If your client is investing through payroll deduction, the annual account maintenance fee is $15 and is waived if the combined Account Holder?s balance for a Beneficiary is $6,000 or more, or the combined total account balance (regardless of Beneficiary) is $75,000 or more.
What are the federal income tax advantages?
Any earnings on the money you invest in your account will grow tax-deferred until they are distributed. All qualified distributions for education expenses will be exempt from federal income tax. (Earnings on non-qualified distributions will be subject to income tax and a 10% federal penalty.) Please note that state income taxes may continue to apply. Depending upon the laws of the home state of the account holder or beneficiary, favorable state tax treatment or other benefits offered by that home state may be available only for investments in the home state's 529 college savings plan. If your state or your designated beneficiary's state offers a 529 plan, you should consider any state income tax or other benefits it offers before investing. For more information, please contact your financial consultant.
What are the gift and estate tax advantages of an account?
Generally, gifts to an individual that exceed $13,000 in a single year are subject to the federal gift tax. However, for 529 plans, gifts up to $65,000 ($130,000 if married filing jointly) can be made in a single year for a beneficary and averaged over five years to qualify for exclusion from the federal gift tax. If you die with money remaining in your account, it will not be included in your taxable estate for federal estate tax purposes. (However, there are exceptions should you die within five years of making the contributions that were gifts using the five-year rule noted above.)
I own a UGMA/UTMA account. Can I move those assets into a 529 savings plan?
You can redeem assets from an UGMA/UTMA (Uniform Gift to Minors Act/Uniform Transfers to Minors Act) account, but you may be liable for income taxes on any gains upon redemption. Once the UGMA/UTMA proceeds are used to contribute to a 529 plan, the minor of the UGMA/UTMA must be named both the Account Holder and the Beneficiary of the 529 Account and cannot be changed. For more information, please consult your financial consultant.
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