Glossary

A

Account

An account in the plan.

Account application

The application to be completed and submitted to ScholarShare 529, along with payment to open an account and to participate in the plan. It incorporates by referencing the Plan Participation Agreement.

Account owner

The owner of an account in the plan; typically, the parent or grandparent, but it doesn’t need to be a family relation.

Active management

An investment approach that seeks to exceed the average returns of the financial markets. Active managers rely on research, market forecasts, and their own judgment and experience in selecting securities to buy and sell.

Additional tax

A 10% additional federal tax imposed on the earnings portion of a nonqualified withdrawal.

Asset allocation

The distribution of funds within an investment portfolio among various investment alternatives or asset classes. Typically, asset allocation is expressed in percentages; for example, 40% equities, 40% fixed income and 20% cash.

Asset classes

Different types of investments. Equities (stocks), fixed income (bonds) and money markets (short-term investments) are examples of asset classes.

Back to top

B

Balanced fund

A fund that seeks both growth and income, with stability of principal, through a portfolio that includes both stocks and bonds.

Beneficiary

The person named by the account owner in the account application. This is the future student who will be using the funds.

Bond

A bond is a type of debt security in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. A collection or grouping of financial bonds is known as a bond portfolio.

Back to top

C

Capitalization

The market value of a company’s outstanding securities, excluding current liabilities. Under $3 billion is generally considered small cap; $2 - $10 billion is mid-cap; and over $8 billion is large-cap.

Coverdell Education Savings Account (CESA or ESA)

A Coverdell ESA is a trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the designated beneficiary of the account. It may be used to save for K-12 and higher education expenses and limits contributions to $2,000 per year per child. Household income limitations may apply.

Custodial account

An account that is created for the benefit of a minor, with an adult (agent, bank, trust company or other organization) as the custodian in accordance with applicable state law. With custodial accounts, control of the account transfers to the beneficiary at the age of majority (18 or 21 depending on the state).

Custodian

An agent, bank, trust company or other organization that holds and safeguards an individual’s account assets for them.

Back to top

D

There are no glossary terms that begin with the letter “D.”

Back to top

E

Education IRA

See Coverdell Education Savings Account (CESA or ESA).

EGTRRA

EGTRRA is the Economic Growth and Tax Relief Reconciliation Act of 2001, as amended, and the Treasury regulations, pronouncement, and publications thereunder.

Eligible educational institutions

An eligible educational institution is any college, university, vocational or technical school deemed eligible to participate in federal student aid programs. This includes thousands of schools in the U.S. and some abroad. Use the Federal School Code Search on the FAFSA web site (https://studentaid.gov/) to search for a complete list of eligible colleges, universities, and vocational schools.

Entity account application

This is the account application used by trusts or estates, business entities, Internal Revenue Code Section 501(c)(3) organizations, or state/local governments. Download the Entity Account application.

Equities

Also called stocks. A security representing ownership rights in a company. A stockholder is entitled to share in the company’s profits, some of which may be paid out as dividends. A collection or grouping of financial equities is known as an equity portfolio.

ESG – Socially Responsible Investing

Socially responsible investing is an investment strategy that considers certain environmental, social and governance (ESG) criteria as part of portfolio construction. It considers both investment rationales for the companies in a portfolio, and how those companies compare to their industry peers based on ESG metrics. Responsible investing incorporates Environmental Social Governance (ESG) factors that may affect exposure to issuers, sectors, industries, limiting the type and number of investment opportunities available, which could result in excluding investments that perform well.

Expense ratio

Also called the Total Annual Asset-Based Fee. In ScholarShare 529, it includes the underlying mutual fund expenses, a Board Administrative fee, and the plan manager fee.

Back to top

F

Family member

A “member of the family” of a beneficiary is a person related to that beneficiary as follows: (a) a son or daughter, or a descendant of either; (b) a stepson or stepdaughter; (c) a brother, sister, stepbrother or stepsister; (d) the father or mother, or an ancestor of either; (e) a stepfather or stepmother; (f) a son or daughter of a brother or sister; (g) a brother or sister of the father or mother; (h) a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law; (i) the spouse of the beneficiary or of any of the other foregoing individuals; or (j) a first cousin of the beneficiary. For this purpose, a child includes a legally adopted child, and a brother or sister includes a half-brother or half-sister.

Fixed-income securities

Also called bonds. Essentially, these are loans that you make to a government or corporation (called the issuer) when it needs to raise the cash. They have a maturity date, which is the date the issuer is obligated to repay you the principal, or face amount, of the bond. Bonds also generally pay you interest until their maturity date. A collection or grouping of financial bonds is known as a bond portfolio.

Back to top

G

Growth fund

A mutual fund that generally invests in stocks of companies is believed to have above-average potential for growth in revenue and earnings. These stocks typically have low dividend yields and above-average prices in relation to such measures as earnings and book value.

Back to top

H

High-yield bond

A bond that has a rating of BB or lower and that pays a higher yield to compensate for its greater risk. Also known as junk bonds.

Back to top

I

Index fund

A passively managed mutual fund that seeks to match the performance of a particular market index.

Inflation-indexed securities

Bonds issued by the U.S. government, government agencies, or corporations whose principal and interest payments—unlike those of conventional bonds—are adjusted over time to reflect inflation.

International stock fund

A mutual fund that invests in the stock of companies located outside of the United States.

Investment portfolios

The plan investment options in which you may invest your contributions.

IRA

Individual Retirement Account (IRA) is a tax-deferred or tax-free retirement account established by an individual that permits the individual to set aside up to a certain amount per year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later or, in the case of a Roth IRA, are tax-free on withdrawal. See a tax advisor for more detailed information.

IRS

The Internal Revenue Service is the nation’s tax collection agency and administers the Internal Revenue Code enacted by Congress.

Back to top

J

There are no glossary terms that begin with the letter “J.”

Back to top

K

Kiddie tax

A special tax law for dependent children under 18 at the end of the year (or full-time students younger than 24) who have unearned income that is in excess of an annually determined threshold. Extra income beyond this threshold becomes taxable at the guardian’s rate.

Back to top

L

There are no glossary terms that begin with the letter “L.”

Back to top

M

Medallion signature guarantee

Available from many domestic banks, trust companies, credit unions and other financial institutions, this is a special signature guarantee that ensures the authenticity of a signature for the transfer of a security.

Money market fund

A mutual fund designed to provide safety of principal and current income by investing in securities that mature in one year or less, such as bank certificates of deposit, commercial paper and U.S. Treasury bills. Money market funds seek to maintain a stable $1 net asset value. Money market funds have the lowest risk of any type of mutual fund but may offer the lowest potential for gains.

Mutual fund

A professionally managed portfolio of securities that pools the assets of individuals and organizations to invest toward a common objective such as current income or long-term growth.

Back to top

N

Net Asset Value (NAV)

Also known as share price. The market value of a mutual fund’s total assets, minus liabilities, is divided by the number of outstanding shares.

Back to top

O

There are no glossary terms that begin with the letter “O.”

Back to top

P

Participant/You

The individual or entity that opens an Account in the Plan.

Passive management

A low-cost investment strategy in which a mutual fund attempts to match—rather than outperform—a particular stock or bond market index; also known as indexing.

Plan

The Plan is the ScholarShare 529 College Savings Plan.

Plan Manager

The plan manager for ScholarShare 529 is TIAA-CREF Tuition Financing, Inc. (TFI).

Portfolio

A collection of financial investments, such as stocks, bonds and cash equivalents, as well as their mutual, exchange-traded and closed-fund counterparts held by an investment company, hedge fund or individual.

Back to top

Q

Qualified higher education expenses

Qualified higher education expenses include tuition, fees, and the cost of books, supplies, and equipment required for the enrollment and attendance of the beneficiary at an eligible educational institution, as well as certain room and board expenses. Computers and related technology such as internet access fees, software or printers are also qualified education expenses. The student must be the primary user of the equipment.

Qualified higher education expenses also include certain additional enrollment and attendant costs of a beneficiary who is a special needs beneficiary in connection with the beneficiary’s enrollment or attendance at an eligible institution. For this purpose, an eligible educational institution generally includes accredited postsecondary educational institutions offering credit toward a bachelor’s degree, an associate degree, a graduate-level degree or professional degree, or another recognized postsecondary credential.

In addition, the following expenses can be withdrawn free from federal tax:

• Expenses for fees, books, supplies, and equipment required for the participation of a designated beneficiary in an apprenticeship program registered and certified with the Secretary of Labor under the National Apprenticeship Act.
• Up to $10,000 annually per student, in aggregate from all 529 plans, can be withdrawn free from federal tax if used for tuition expenses at a public, private, or religious elementary, middle, or high school.
• Repayment of up to $10,000 (including principal and interest) on any qualified education loan of either a 529 plan designated beneficiary or a sibling of the designated beneficiary. To be a qualified expense, the loan repayment amount for an individual is subject to a lifetime limit of $10,000.

Please see the state tax treatment of withdrawals section in the Plan Description for more information.

Qualified withdrawal

Any withdrawal from an account used to pay for the qualified higher education expenses of the beneficiary at an eligible educational institution as well as certain room and board expenses. Computers and related technology such as internet access fees, software or printers are also qualified education expenses. The student must be the primary user of the equipment.

Qualified higher education expenses also include certain additional enrollment and attendant costs of a beneficiary who is a special needs beneficiary in connection with the beneficiary's enrollment or attendance at an eligible institution.

In addition, the following expenses can be withdrawn free from federal tax:

• Expenses for fees, books, supplies, and equipment required for the participation of a designated beneficiary in an apprenticeship program registered and certified with the Secretary of Labor under the National Apprenticeship Act.

• Up to $10,000 annually per student, in aggregate from all 529 plans, can be withdrawn free from federal tax if used for tuition expenses at a public, private, or religious elementary, middle, or high school.

• Repayment of up to $10,000 (including principal and interest) on any qualified education loan of either a 529 plan designated beneficiary or a sibling of the designated beneficiary. To be a qualified expense, the loan repayment amount for an individual is subject to a lifetime limit of $10,000.

Please see the state tax treatment of withdrawals section in the Plan Description for more information.

Back to top

R

Registered apprenticeship programs

An Apprenticeship Program registered and certified with the Secretary of Labor under section 1 of the National Apprenticeship Act.

Rollover

A tax-free transfer of funds from one qualified 529 plan to another within a specific time frame, usually 60 days. You are permitted to transfer funds from another 529 college savings plan to an account in ScholarShare 529 for the same beneficiary once within a 12-month period without incurring federal income tax. The 529 college savings plan from which you are transferring funds may be subject to differences in features, costs, and surrender charges. You should consult with your tax advisor or the other 529 college savings plan. State and local taxes may apply.

Back to top

S

Section 529

Section 529 of the Internal Revenue Service Code, the section that specifies the requirements for qualified tuition college savings programs (529 plans).

Securities

The general name is used to describe stocks, government obligations, corporate bonds or ownership rights, such as options or futures.

Socially responsible investing

An investment strategy that considers certain environmental, social and governance criteria as part of portfolio construction. It looks at both investment rationales for the companies in a portfolio, and how those companies compare to their industry peers based on ESG metrics. Responsible investing incorporates Environmental, Social Governance (ESG) factors that may affect exposure to issuers, sectors, limiting the type and number of investment opportunities available, which could result in excluding investments that perform well.

Successor account owner

The successor account owner is the person designated by the account owner on the account application to succeed to ownership of the account upon the account owner’s death.

Back to top

T

Taxable withdrawal

Any withdrawal from an account that is: (1) paid to a beneficiary of, or the estate of, the beneficiary on or after the beneficiary’s death or attributable to the permanent disability of the beneficiary; (2) made on account of the receipt by the 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; (3) made on account of the beneficiary’s attendance at a military academy, but only to the extent of the costs of education attributable to such attendance; or (4) equal to the amount of the beneficiary’s relevant qualified higher education expenses that is taken into account in determining the beneficiary’s Hope Scholarship/American Opportunity Tax Credit or Lifetime Learning Credit.

TIAA-CREF Tuition Financing, Inc.

TIAA-CREF Tuition Financing, Inc. (TFI) is an affiliate of TIAA, a financial services organization with more than 100 years of investment experience.

Total return

A percentage change, over a specified time period, in a mutual fund’s net asset value, adjusted to reflect the reinvestment of all dividend and capital gain distributions.

Back to top

U

UGMA

Uniform Gift to Minors Act. Laws adopted by most states allow an adult to contribute to a custodial account in a minor’s name without having to establish a trust or name a legal guardian. Thus, minors can have securities bought and money invested in their names, but the custodian is responsible for managing the funds in the account. The custodian has a fiduciary duty to manage the account prudently, but once the minor reaches the age of majority, he/she has complete rights to the funds in the account. The assets are the legal property of the minor, and the parent has no legal control over the uses of the proceeds of the account. All withdrawals from the account are taxed at the minor’s rate. Putting money into a UGMA account can negatively impact the chances for financial aid since financial aid officers may weigh children’s assets more heavily than parents’ assets.

Unit

An ownership interest in an investment portfolio that is purchased by contributing to an account.

UTMA

Uniform Transfers to Minors Act. Law that extends the Uniform Gift to Minors Act’s definition of a gift to include real estate, fine art, patents and royalties.

Back to top

V

There are no glossary terms that begin with the letter “V.”

Back to top

W

There are no glossary terms that begin with the letter “W.”

Back to top

X

There are no glossary terms that begin with the letter “X.”

Back to top

Y

There are no glossary terms that begin with the letter “Y.”

Back to top

Z

There are no glossary terms that begin with the letter “Z.”

Back to top

0-9

1099Q

An IRS form an individual receives if withdrawals were made from a 529 or Coverdell Education Savings Account (ESA) during the previous tax year. The form is used by the individual to fill out both federal and state tax returns.

Back to top