When you save for your children’s higher education, you are investing in their future. If you have started your college savings in another state’s 529 program and want to move the funds to Ohio’s 529 Plan, CollegeAdvantage, it’s simple to do. Or if you have been saving in a Coverdell ESA or U.S. Savings Bond, you can also transfer those funds to an Ohio 529 account as well.
Direct 529 Rollover
With a direct rollover, the funds are transferred directly from your original account to the new account with Ohio’s 529 Plan, CollegeAdvantage. The account owner and beneficiary of your previous 529 plan must be the same for your new CollegeAdvantage Direct 529 account and the account type must be the same as well (Individual, Trust or UTMA/UGMA). The beneficiary is the student whose qualified higher education expenses will be paid for with the 529 funds.
There are no penalties or federal income tax consequences for rolling over your higher education savings from another state’s 529 plan to Ohio’s CollegeAdvantage Direct 529 Plan, as long as it has been more than 12 months since there was a an earlier rollover for the same beneficiary of the 529 account.
Your soon-to-be former 529 plan may impose restrictions or limitations on rollovers, so make sure to investigate this alternative thoroughly before requesting a rollover. You will also want to check with your tax advisor first to see if there are any tax ramifications for rolling over your former home state’s 529 plan if the program offered state income tax deductions or credits for contributions.
To start the direct rollover, you will need to open an Ohio 529 Direct Plan account first. When you are working on your online account application, you will come to the fourth step titled, “Pick A Funding Method.” Once there, select the “With a rollover or transfer” option. After you fill in the requested information, the website will generate a rollover form and a letter of acceptance, which instructs your original 529 plan provider that you want to transfer your assets to an Ohio 529 account. You will need to download, print, and mail these forms to the original 529 plan provider. Please be sure to check with your previous 529 plan to see if they require a Signature Guarantee (Medallion) to process the rollover request.
You will also need to provide Ohio’s 529 Plan with the basis, also known as the principal, and the earnings statement from your former 529 plan, which shows the earnings portion of the contribution. If Ohio’s 529 Plan does not receive such documentation within 60 days of receipt of the contribution, the entire amount of your contribution will be treated as earnings per IRS rules governing 529 plans. If your previous plan does not provide the principal and earnings statement with the rollover check, it is your responsibility to obtain this information from your previous 529 plan.
Indirect 529 plan rollover
To start your indirect rollover from another state’s 529 plan, you must first close your account with them. Each 529 program will have slightly different guidelines on closing an account with them. Make sure to read the program’s literature and connect with the program’s customer service department to make sure the process goes as smoothly as possible. While you are starting the closing process, you will also need to open an Ohio 529 account. To get you started on opening an Ohio 529 account, here is online step-by-step guidance to follow, which will match what you are seeing on the screen. Or you can complete and mail in the Account Application form. Starting the Ohio 529 account online will be the faster option.
Your former 529 plan program will send you a check for the balance in your account. You cannot receive the rollover balance as an ACH transaction; it must be a check. You will need to deposit that check in your personal banking account. Once the funds are in your banking account, you have 60 days to roll over those funds to your new Ohio 529 account with the Incoming Rollover Form. You can use the rollover as the first contribution to open the account or as a new contribution to your new Ohio 529 account. To complete this rollover, you will need to provide Ohio’s 529 Plan with the basis (or the principal) and earnings statement from your former 529 program. This information would be requested as part of the Indirect Rollover you requested from the other Plan. If you don’t supply Ohio’s 529 Plan with that documentation, the entire amount of your contribution will be treated as earnings per IRS rules governing 529 plans.
Ohio Tuition Trust Authority, the state agency that administers Ohio’s 529 Plan, CollegeAdvantage, has no responsibility to, and does not, monitor the timing of indirect rollovers, and will not accept or reject indirect rollovers based on timing. You must ensure compliance with the timing required under federal law to avoid tax consequences.
Indirect Coverdell ESA or U.S. Savings Bond rollover
You will start your indirect rollover of Coverdell ESA or U.S. Savings Bond in a slightly different way: You must first sell those assets. While you are starting this closing process, you will also need to open an Ohio 529 account. Here is the guidance to open an Ohio 529 account online or you can mail in the completed Account Application form. Starting the Ohio 529 account online will be the faster option.
When you contribute the former Coverdell ESA funds to an Ohio 529 account, you must also include an account statement or other documentation from the custodian financial institution showing the total amount contributed and the proportion of the assets that represent earnings, a basis (or the principal) and earning statement.
When you contribute the former U.S. Savings Bonds assets to an Ohio 529 account, you must also include an account statement, a Form 1099-INT, or other documentation from the financial institution that redeemed the bond showing how much of the proceeds represented interest and how much represented Principal. Qualified bonds are generally Series EE or I, and have multiple restrictions. See TreasuryDirect.gov under “Individuals,” “Planning & Giving,” and “Education Planning” for more information. Please consult your legal, financial, or tax advisor regarding restrictions on the rollover of U.S. Savings Bonds. There are limits to eligibility based on factors including but not limited to timing of bond issuance and income. You should contact the Bureau of Public Debt at treasurydirect.gov for eligibility criteria and income phase-outs for the Savings Bond Education Tax Exclusion, or the IRS at 1-800-829-1040.
Until Ohio’s 529 Plan receives the proper documentation, the entire amount of your contribution will be treated as earnings per IRS rules governing 529 Plans. Funds liquidated from a Coverdell ESA or Qualified U.S. Savings Bond must be contributed into Ohio 529 account and proper documentation must be received within 60 days of liquidating those accounts. Failure to comply with this timeline could result in tax consequences and/or treatment of the entire contribution as earnings.
What About A Guarantee Plan Transfer?
You can transfer your CollegeAdvantage Guaranteed Plan account to an Ohio Direct 529 Plan account or BlackRock CollegeAdvantage 529 Advisor Plan account. It will be considered an exchange of assets, not a rollover. As such, it is subject to the twice-a-year calendar year limitation placed on exchanges by IRS rules governing 529 plans. Here is the form to transfer your Guaranteed 529 Plan account to either an Ohio Direct 529 Plan or BlackRock CollegeAdvantage 529 Advisor Plan.
If you have any additional questions about rolling over funds from another state's college savings program to Ohio's 529 Plan, our Customer Service Representatives are happy to guide you through the process. You can reach them at 1-800-AFFORD-IT (233-6734) from 8:30 a.m.-6 p.m. ET Monday-Friday.
For more than 33 years, Ohio’s 529 Plan has been helping families across the nation save for their children’s higher education. Ohio’s 529 Plan covers qualified costs at any four-year college or university, two-year community college, trade or vocational school, apprenticeship approved by the U.S. Labor Department, or certificate program nationwide that accepts federal financial aid. Learn, plan, and start for as little as $25 today at CollegeAdvantage.
