Michigan�s Section 529 Qualified Tuition Programs

							Michigan’s Section 529 Qualified
       Tuition Programs
• TIAA-CREF, TFI selected as manager of
  college savings programs in: California,
  Connecticut, Idaho, Kentucky, Michigan,
  Minnesota, Missouri, Mississippi,
  Oklahoma, Tennessee, Vermont, Georgia
• Total account balance can be used for
  qualified higher education expenses at any
  eligible higher education institution in the
  nation or abroad
          MESP Benefits
•   Minimal Contribution Amount $25
•   Maximum Contributions $235,000
•   State Income Tax Deduction
•   Tax Exempt Earnings until 2010
•   Federal Gift Tax Exemption
•   Low Fee Program
•   Three Investment Options
•   Matching Grant
          Investment Options
• Core Option
   – Managed Allocation - Age Based
• Supplemental Options
   – Guaranteed
   – 100% Equity
• IRC Sec. 529 Regulation - Account owner does
  not control how the savings are invested - can
  change once per calendar year
• Contributions gain or lose value based on
  performance of mutual funds
• No residency requirements
                         Matching Grant
Matching grant
   – The State will match $1 for every $3 contributed
   – Maximum $200 per beneficiary
   – Requirements -- when the MESP account is opened
      • Beneficiary must be 6 years old or under
      • Beneficiary must reside in Michigan
      • Household income of the beneficiary’s custodial parent(s) must
         be $80,000 (AGI) or less
      • Available only the 1st year the beneficiary is enrolled in the program
   – State ultimately determines who is eligible
   – Proceeds are invested in the TIAA-CREF Institutional Bond Fund
   – For tuition only
            Funding for Match
• Funding is appropriated annually by the
  Legislature:
  –   2000-01 - $10 million
  –   2001-02 - $1 million
  –   2002-03 - $1 million
  –   2003-04 - $1 million
  –   2004-05 - proposed $900,000
         Marketing the Match

•   Program Brochure
•   Enrollment Kit
•   MESP Web Site
•   Presentations
          Financial Overview

• As of October 31, 2003:
  – Total Accounts - 97,031
  – Assets - $479.5 million
  – Match Accounts - 12,608
     • Avg. Account Eligible for Match - $1,770
  – Match Funds - $2.3 million
     • Avg. State Match Account - $184
          SEED/IDA Partnership
• April 2003 - Meeting with State Treasurer
• May 2003 - Letter of Support for SEED Proposal
• July 2003 - SEED Grant Awarded
• Aug. to Oct. - Experimental Design Evaluation
  Discussions
• Nov. to April - Program Planning
    – Expectations, Roles & Responsibilities
• Fall 2004 - Expected Implementation
       SEED/IDA Partnership

• 500 Children will be enrolled
• Initial $800 deposit in each SEED Account
• Child’s family has 4 years to save additional
  $1,200 to be matched 1:1 by SEED
• SEED accounts will be placed in MESP as
  required by the experimental initiative
• Eligible for State Match
            SEED Initiative
• Implementation will begin with 3 & 4 year
  olds enrolled in the Head Start Program
• Currently 1,745 children & families
  enrolled in Head Start
• Federal Poverty level $18,100 for family of
  four
          SEED Demographic
•   More than 70% families are employed
•   36% are two parent families
•   64% single parent families
•   35% African American
•   8% Latino
•   54% Caucasian
•   Balance Native American, Asian and Multi-
    Ethnic
Issues To Be Decided

• Administrative
• What is the financial aid impact?
• Impact on eligibility for other means-tested
  programs
               QUESTIONS?
• Robin McMillan, MET & MESP
  – mcmillanr@michigan.gov
  – (517) 335-4767
• Don Jones, Oakland Livingstone Human Service
  Agency (OLHSA)
  – donj@olhsa.org
  – (248) 209-2620
• Eric Muschler, Michigan IDA Partnership
  – muschler@earthlink.net
  – (734) 542-3951