Who is eligible to open a NextGen Account?
Any resident of the U.S. can set up a NextGen Account, regardless of income or state of residence. Contributors to NextGen Accounts are referred to as "participants." Eligible participants include parents, grandparents, other relatives, and family friends. The student for whose benefit the account is established is called the "beneficiary." There are currently no age limits on NextGen beneficiaries.

For what expenses can NextGen assets be used?
Qualified higher education expenses include tuition and fees, room and board, books and required supplies, and even certain expenses related to special needs beneficiaries at any accredited post-secondary institution which is eligible to participate in federal student assistance programs – including public universities, private colleges, graduate schools and vocational schools.

What schools qualify as eligible post-secondary institutions?
Note: Some foreign institutions are eligible.
In general, in order to be considered eligible, a school must meet two requirements: (1) it must meet the accreditation criteria as described in section 481 of the Higher Education Act of 1965 (as in effect on Aug 5, 1997) and (2) it must be eligible to participate in Title IV US federal financial aid programs. If a school has been assigned a federal school code by the Department of Education, then it has met these requirements and is eligible under Section 529. To see if a particular school does have a federal school code assigned (and therefore is eligible under Section 529), enter the name of the institution at the Department of Education’s website and check out the results.

What is the income tax treatment of NextGen Accounts?
Earnings grown free from federal income tax and are federally tax free upon withdrawal for qualified higher education expenses. Non-Maine residents should check with their tax professional regarding tax treatment in their state. Contributions are non deductible for federal income tax purposes.

You should consider whether your home state or your designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s 529 plan.

How much do I need to open an account?
The minimum investment required to open an account is $250. If you sign up for automated contributions to your NextGen Account of at least $50 per month, $150 per quarter, $300 per semi-annual period, or $600 per year, you can open an account by contributing as little as $50.

If you elect to have contributions invested in more than one portfolio, the minimum initial and subsequent investment is $25 per portfolio.

How much can I contribute to my NextGen Account?
Contributions can be made until the aggregate value of all accounts set up for the same beneficiary reaches $320,000. This limit is based on the average cost of higher education at an index of private colleges and universities. This limit will be adjusted periodically to reflect the changing costs of higher education.

Are there any special gift tax rules for contributors?
You may also be able to take advantage of a special gift tax election that applies to certain contributions to Section 529 plan accounts. This election generally allows you to contribute up to $60,000 per beneficiary in one year without federal gift tax implications, as long as you do not make any additional gifts to your beneficiary for the next 5 years. Married couples can generally contribute up to $120,000 per beneficiary in a single year. See the NextGen Program Description in the Enrollment Kit for more complete information.

How are my contributions invested?
You must first decide whether to invest in the Client Direct Series or the Client Select Series portfolios. After selecting the NextGen series that's right for you, you must choose how to allocate your contributions. The program offers you a choice of portfolios that give you the benefit of professional investment management.

The NextGen Client Direct Series - is designed for investors who are not seeking advice and guidance from a financial advisor.

The Client Direct Series includes dedicated portfolios of mutual funds managed by Massachusetts Financial Services Company (MFS), OppenheimerFunds Inc., or their affiliates, in addition to the existing Portfolios of funds managed by BlackRock. For more information about the Client Direct Series portfolios please contact College Plan Services at 1-877-4NEXTGEN (463-9843).

The NextGen Client Select Series - is designed for investors who want professional advice and guidance to help them simplify the challenging decision of how to invest to meet the rising costs of higher education. An investment professional will work with you to help define your investment strategy, your time horizon, your risk tolerance and other criteria to assist you in reaching your goal.*

The Client Select series includes dedicated portfolios of mutual funds managed by Massachusetts Financial Services Company (MFS) or Franklin Advisers, Inc. (Franklin Templeton Investments), OppenheimerFunds Inc., or their affiliates, in addition to the existing Portfolios of funds managed by BlackRock. For more information about the Client Select Series portfolios please go to askmerill.ml.com to locate a Merrill Lynch branch office or click here for other qualified NextGen distribution agents.

*Participation in the NextGen plan is not considered to be part of an investment advisory service. Accordingly, investors are responsible for monitoring and making investment decisions concerning investments in any portfolio under the Program.

Does the NextGen Plan guarantee a specific rate of return?
No. The NextGen Plan does not guarantee your investment or any specific rate of return. The value of your account may increase or decrease, based on the investment performance of the investment which you select.

What if my beneficiary does not attend college?
You can choose from several options:

• You can leave the money in the account. The money will continue to grow federal income tax-deferred and, if the beneficiary decides to attend college in the future, may be withdrawn tax-free for qualifying-education expenses.
• You can change the beneficiary to a qualifying family member of the current beneficiary with no penalty. For example, you may decide to transfer the money to an account to pay for the higher education expenses of a younger sibling.
• You can make a non-qualified withdrawal. You retain control of your NextGen Account and can decide to take your money back at any time with a 10% penalty on the earnings portion only. You will also owe ordinary income tax on any earnings at your rate.

Can I still benefit from Hope Scholarship and/or Lifetime Learning Credits if I contribute to a NextGen Account?
Yes. Contributing to a NextGen Account will not affect your eligibility to receive these tax credits. However, you must meet the federally mandated requirements for the Hope and Lifetime Learning credits. In general, single tax filers whose annual adjusted gross income does not exceed $40,000 and married taxpayers whose annual adjusted gross income does not exceed $80,000 can take full advantage of these credits. Taxpayers with incomes between $40,000 and $50,000 (single) and between $80,000 and $100,000 (married) are eligible to take partial advantage. Taxpayers with incomes above $50,000 (single) and $100,000 (joint) cannot use these credits at all.

Can I contribute to both a Coverdell Education Savings Account (Education IRA) and a NextGen Account in the same year?
Yes.

Can I transfer assets from an existing UGMA/UTMA custodial account to a NextGen Account?
If you have established a custodial account for a child under the Uniform Gift/Transfer to Minors Act (UGMA/UTMA), you may be eligible to liquidate those assets and deposit the proceeds into a NextGen Account. Certain restrictions may apply. See the Program Description in the Enrollment Kit for more complete information.

Can I transfer assets from another qualified tuition program or an Education IRA to a NextGen Account?
You may be able to roll over assets from another qualified tuition program or an Education IRA to a NextGen Account. You are generally permitted one rollover of assets from another qualified tuition program each year without having to change the beneficiary. See the Program Description in the Enrollment Kit for more complete information.