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Before you know it, the next payment for your child’s higher education will be here. So while doing all your holiday planning for 2020, take time to prepare your Ohio’s 529 Plan, CollegeAdvantage, account in order to promptly pay the next round of your child’s higher education expenses for 2021. Here is some guidance on how to simplify the college savings withdrawal process from your CollegeAdvantage Direct 529 Plan.*
When will you pay the college costs?
First, decide when you will pay the upcoming college bills. If you are planning on paying these qualified higher education expenses in 2021, make the withdrawal request in 2021. In order keep with industry best practices and IRS guidelines, you should make a withdrawal from your 529 plan the same year that you will pay for the college costs.
Your 529 withdrawals must not exceed your child’s qualified higher education expenses. As is the case with all 529s, the burden of proof for tax purposes of the qualified expenses and withdrawals lies with you as the account owner. Retain all documentation and records of the 529-qualifed expenses and your corresponding withdrawals to pay them.
Next, start the withdrawal process by confirming that two-factor authentication is set up on your CollegeAdvantage Direct 529 Plan. As the name implies, you’ll need to verify your identity twice.
First, log in as normal to your Ohio 529 Plan account with your user name and password from a secure device. Second, select for a PIN (Personal Identification Number) to be sent to you by text, by phone, or by calling our Customer Service Department. Once you have the PIN, you will need to log in again within five minutes as the session is only valid for 10 minutes. If you miss that time period, you’ll need to request a new PIN. Once the PIN is entered, mark the device as trusted and the authentication process is complete. In order to keep the account secure, this process will repeat during the life of the account.
If you have more questions, visit the Two-Factor FAQ page or watch a video on the login page that describes the two-factor authentication process. As with any questions you may have, you can also call our Customer Service Department at 1-800-AFFORD-IT (1-800-233-6734), which is open from 8:30 a.m. – 6 p.m. ET Monday-Friday. Our office will be closed on Friday, Dec. 25, 2020, Friday, Jan. 1, 2021, and Monday, Jan. 18, 2021.
Update banking information
Next, verify that your home address and bank account information are correct on your account. If it’s not, update that information now. For security reasons, this information must be on file at Ohio’s 529 Plan for 15 calendar days before a withdrawal can be processed. To update your records online, select your beneficiary’s account. Then look on the left side of the screen, choose “View Profile and Document.” If you need to change your address, select “Profile” to edit your address. If you need to change bank accounts, select “Bank Information” to make the updates.
How to make an online withdrawal
After updating all your information, you will be ready to make a 529 withdrawal once you receive the higher education bills.
The fastest method to pay an accredited higher education institution is to make a withdrawal request online. Start the process by logging into your account. Next, select the beneficiary’s account from which you’d like to make a withdrawal in order to pay for that beneficiary’s qualified costs. Once you’ve picked the correct account, go to the left side of the screen and scroll down to the link, “Make a withdrawal.” After that, follow the prompts to make a withdrawal.
You will have three options on where to send the funds: to the school, to your bank account or check sent to you, or to your beneficiary’s bank account or a check sent to the beneficiary. Withdrawals requested before 4 p.m. ET Monday-Friday will be processed in three to five business days. If you choose for the withdrawal to be deposited into a bank account, it will be sent electronically. You will need to take into account some additional time for your banking institute to show that the funds have been deposited.
Once the 529 withdrawal is in your or your beneficiary’s bank account, use the school’s online portal to pay your child’s qualified higher education expenses. Make sure you enter the correct student ID number. Payment processing times will vary; check with the school bursar’s office to confirm the best time period to start the withdrawal process to ensure that the payment won’t be late.
If you’ve chosen for the withdrawal to go directly to the school, please be sure to provide Ohio’s 529 Plan with the correct student ID number for your child and the correct school address on the online withdrawal form. Ohio’s 529 Plan does not provide school addresses. The payment to cover your child’s higher education expenses will be mailed directly to the school. Depending on the United States Postal Service, as well as the school’s processing procedures, this can be a slower payment process. Again, ask the school bursar’s office how long this method would take and then make the withdrawal according to their provided timeline to avoid late penalties.
How to make a withdrawal with a paper form
You also the option to mail in a Withdrawal Request Form, which will be the slowest withdrawal and payment method. In order to save time, fill in and then submit the form online. However, you can also print, fill out, and mail in the withdrawal request to the address found on the top of the first page of the form. To have the payment sent directly to the school, review the “Paper Check Delivery to the School” information to fill in section 3C of the form. A check for the withdrawn funds will be mailed directly to the school.
You can also select to have the withdrawal mailed to your home or sent to your or your beneficiary’s bank account electronically. Once the funds are in a bank account, you can either mail a check to the school or use their online portal for payment of the education expenses. Again, this is will be slowest method of payment of the college expenses. If you choose to go this route, please start with the withdrawal process as early as possible to avoid any late penalties. You may want to verify with the school bursar’s office how long this process will take them to complete.
No matter which method you choose to make the withdrawal – whether online or by filling out paperwork - make sure to use the withdrawal funds to pay for the qualified higher education expenses in the same calendar as you made the withdrawal. As the account owner, you are responsible to maintain the records showing that the Direct 529 Plan withdrawals are used for qualified costs for the IRS.
End of year contributions
If you want to make additional deposits to your Ohio’s 529 Plan to pay of these upcoming qualified expenses, these new contributions must be in your account at least seven business days before those funds can be distributed. This and other information is covered in the Withdrawals section on page 16 of the CollegeAdvantage Direct 529 Savings Plan Offering Statement and Participation Agreement.
If you are an Ohio resident, then you could be eligible to deduct up to $4,000 of your Ohio’s 529 Plan contributions per beneficiary, per year, from your state taxable income. However, you can contribute even more! Contributions over $4,000 per beneficiary, per year, can be carried forward to future tax years until you’ve deducted all of your contributions are from your state taxable income. In order to have your contributions included in your 2020 total, they must be received in good order by CollegeAdvantage before 4 p.m. ET Thursday, Dec. 31, 2021.
The most important step to take is to prepare now for upcoming 529 withdrawals. By taking action now, your 529 account will be set up to pay your child’s high education costs on time. If you have any further questions, our Customer Service Department is available to help from 8:30 a.m. – 6 p.m. ET Monday-Friday at 1-800-AFFORD-IT (1-800-233-6734). If you’d like to do more research, explore Ohio’s 529 Plan —The Plan That Can — at CollegeAdvantage.com.
This article was originally posted in December 2019 and has been updated to reflect new information for 2020.
*Please note that this is the withdrawal process for CollegeAdvantage Direct 529 plan accounts only. The withdrawal process is different for the CollegeAdvantage Guaranteed 529 Plan. Please follow this guidance to make an Ohio Guaranteed 529 Plan withdrawal.
Posted on December 8, 2020