How the Plan Works
Beneficiaries
Contributions to the plan
Investments
Tax considerations
Withdrawals
If you leave the Company
You designate a beneficiary for your college savings account when you enroll. There are no age or income restrictions. Beneficiaries include:
- Any child (your child, your grandchild, your niece or nephew, or even a child who is not a member of your family)
- Another family member
- Yourself
The money stays under your control, not your beneficiary's, even if he or she turns 21.
If one child doesn't go to college, money in your account can be transferred to another recipient, as long as he or she is in the same family as the previous beneficiary.
When you enroll in the plan, you can contribute after-tax dollars to a college savings account. Your contributions are made through convenient payroll deductions. This amount will be subtracted from your wages or salary after federal and state income and Social Security taxes are withheld. You must contribute at least $50 per month to your college savings account.
The maximum amount you may contribute to the plan depends on your account balance (your contributions plus your investment earnings). When your account balance reaches $395,000 you may not contribute any more money. Your investment earnings, however, may continue to grow beyond the maximum.
To elect a new contribution amount or make a change, complete the 529 contribution form and send it to the Benefits Department. You may fax the completed form to 714-276-0693 or scan/email it to Benefits@us.medical.canon.
You may choose from a variety of investment options based on your beneficiary's specific situation and your preferred investment approach. For a description of each fund option, log on to the CollegeBound 529 website.
As with most investments, there is no guarantee that any fund option will achieve its investment goal. Whether or not—and the extent to which—your account grows depends on:
- The amount you contribute
- How your assets are invested
- When your beneficiary enrolls in higher education
For the most part, the 529 plan offers several federally-approved tax breaks:
- Earnings growth. Your investment earnings grow tax-free under the plan.
- Distributions. When you make a withdrawal for qualified education expenses, your distribution (your principal plus earnings) is free from federal income tax. If your withdrawal is for a non-qualified expense, the earnings on your investments will be taxed as ordinary income to you and an additional 10% penalty will apply to those investment earnings.
- Special gift and estate tax treatment. Contributions to your account are considered completed gifts for federal gift and estate tax purposes. That means they are excluded from your taxable estate. Restrictions apply, please consult your tax advisor for additional information or to discuss your unique situation.
Some states also offer a state income tax deduction or tax credit, but not all. Before you decide to contribute to this plan, you may want to consult with your tax advisor about your state's laws.
You can make a withdrawal at any time. Please note the following tax implications:
- If your withdrawal is for a qualified education expense, that money will be federally tax-free.
- If your withdrawal is for a non-qualified expense, your entire principal will be returned, but your earnings will be taxed as ordinary income to you and an additional 10% penalty will apply.
Because your contributions are made with after-tax dollars, you may continue participating in the plan even if you leave the Company. Instead of paying through payroll deductions, you will make your contributions to the investment manager directly.