Oklahoma 529 College Savings Plan & SEED for Oklahoma Kids Study June 11, 2012

1. Oklahoma State Treasurer Ken Miller • Oklahoma 529 College Savings Plan & • SEED for Oklahoma Kids Study • June 11, 2012

2. Oklahoma College Savings Plan Board of Trustees • Chancellor for Higher Education Glen Johnson • State Superintendent Janet Barresi • State Auditor Gary Jones • Treasurer Ken Miller, chair • Brad Burnett, Norman • Aaron Curry, Norman • Randy Thurman, CPA, CFP, Oklahoma City Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

3. The Basics • Section 529 of the Internal Revenue Code • Qualified Tuition Programs (QTP) • Qualified Tuition Programs vary from state to state Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

4. The Benefits • Tax Related Benefits: • Contributions are Oklahoma income tax deductible up to $20,000 for families (Oklahoma 529 ONLY) • Contributions above the annual deductible can be carried forward for up to five years (Oklahoma 529 ONLY) • Withdrawals used for qualified higher education expenses are free from federal and Oklahoma state income taxes Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

5. Flexibility • All accredited colleges, universities or vocational schools throughout the world • All qualified higher education expenses • You may designate anyone as a beneficiary • Affordable initial & subsequent contributions • No adjusted gross income limitation Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

6. Flexibility • Many employers offer payroll deduction • Ability to change beneficiaries • Contingent account owner • Ability to assign account to another owner • $300,000 lifetime maximum account balance Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

7. Flexibility • Contributions can be made in a variety of ways: • Payroll deduction (if available) • Monthly ACH from bank account • By check Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

8. Low Cost • Low expense ratio – 0.40% plus cost of underlying funds (between 0.07% and 0.52%) • No application fee • No transfer fees • No annual administrative fees Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

9. Investment Strategy & Objective • Outpace tuition inflation • Maximize returns • Preserve capital Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

10. Investment Options • Options vary in strategy and risk • Diversified Equity Option • Balanced Fund Option • Fixed Income Option • Guaranteed Option • Conservative, Moderate & Aggressive Managed Allocation Options • U.S. Equity Index Option • Global Equity Index Option Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

11. Qualified Withdrawals • Qualified withdrawals must be used for expenses related to enrollment and attendance at an accredited higher education institution • Certain room and board expenses are considered a qualified higher education expense when the student is attending on at least a half-time basis Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

12. Qualified Withdrawal Examples • Tuition • Books • Room & Board • Required Supplies – such as art supplies, dance supplies, equipment Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

13. Non-Qualified Withdrawals • These are withdrawals from the account that are not used for qualified expenses • Non-qualified withdrawals can be made at any time • But there are consequences Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

14. Tax Consequences • Earnings portion of withdrawal is taxed at the account owner’s ordinary income rate for both federal and state tax purposes • Subject to federally-mandated 10% penalty on the earnings, except for withdrawals for death, disability or scholarship • Tax savings may be subject to recapture if a non-qualified withdrawal or rollover is taken within time limits Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

15. Additional Issues • Rollovers in or out are permitted under state and federal law • Inbound rollovers qualify for state tax deduction • Rebalance Investments allowed once per calendar year Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

16. Making Higher Education more accessible • Helps families save for college • Flexible and convenient • Professional money management • Provides state and federal tax advantages • Only 529 plan with an Oklahoma income tax deduction! Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

17. The Results • Since its start in April 2000, almost $160 million has been withdrawn from the plan for qualified higher education expenses • The plan currently contains more than $460 million in almost 50,000 accounts Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

18. The Study Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

19. The Purpose • Policy and research initiative designed to test the idea of universal and progressive accounts, lifelong asset building • SEED research is multi-method: Experiment, Account Monitoring, and In-depth Interviews • Oklahoma selected for the SEED OK experiment through a competitive process Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

20. The Method • An experiment with random sample of newborns from a statewide population • Oversamples of African Americans, Latinos, and American Indians • Random assignment to treatment group (n=1,358) and control group (n=1,346) • Integrated into an existing policy structure – the Oklahoma 529 Plan Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

21. Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

22. The Set Up • Auto-enrollment in the OCSP for treatment group newborns • Account owned by the state with treatment child named as beneficiary • $1,000 initial deposit into Balanced Fund Option • State-owned account can be used until child turns 30 Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

23. Design Features • Savings match for income-eligible treatments on their deposits of up to $250 per year for 4 years (2008-2011) • Follow-up telephone interviews with all treatments and controls in 2011 and possibly again later • In-depth interviews with select SEED OK participants from Fall 2009 through Spring 2010 and possible again later Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

24. The Tracking • SEED OK tracks three types of OCSP accounts for the child: • State-owned • Participant-owned (parent or caregiver) • Other private (relatives or friends) • Any control has access to open a 529 account in the SEED OK experiment Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

25. Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

26. The Questions • Can Child Development Accounts increase: • 529 account holding • Saving by participants • Total 529 assets • Later, SEED OK can assess child development and well-being. Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

27. Preliminary Results • 99.9% of treatments have OCSP accounts. 16.4% of participants opened their own accounts • That compares to 3.8% of Oklahoma households with children under 18 holding any OCSP account Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

28. Preliminary Results • Average savings of $43 by treatments vs. $13 by controls in their private accounts • Mean OCSP total assets are $1,080 for treatments vs. $40 for controls Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

29. The Impact • State-owned accounts: close to 100% success of automatic account opening with $1,000 deposit for treatment participants. One out of 1,361 declined account on religious grounds • Impacts of SEED OK on account opening and on deposit and savings amounts are statistically significant for the state-owned and participant-owned accounts, but not for other private accounts Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

30. Long-term Questions • The long-term test will be whether the experiment has any positive impacts on: • Parental attitudes and behaviors • Child development in early years • Child expectations for education • Child educational performance • Child health and other measures of well-being Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

31. Contact • Oklahoma 529 College Savings Plan • Toll-free 1-877-OK4SAVING (1-877-654-7284) • www.ok4saving.org • Tim Allen, Deputy Treasurer for Communications & Program Administration • (405) 522-4212 • tim.allen@treasurer.ok.gov Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov

32. Stay informed www.treasurer.ok.gov Oklahoma State Treasurer Ken Miller www.treasurer.ok.gov