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How It Works

The Distribution Process

How It Works

Owner or beneficiary may purchase qualified education expenses, in accordance with Federal and State tax codes (see below excerpt), such as, tuition, room and board, books, and school supplies. At time of purchase, the merchant’s local database will determine whether each item are qualified expenses. Once all items are deemed either qualified or non-qualified, the new total amount will be sent via the credit card network to the card holder’s financial institution to check for available funds. Items that are deemed non-qualified will not be able to be purchased through the use of the 529easy payment card. The merchant will ask for these non-qualified items to be purchased through another method; thereby ensuring ONLY qualified expenses are purchased.

Once all items to be purchased have completed the local qualification process, the 529easy payment card will then send a message to the Financial Institution to determine if funds are available in the owner’s 529 plan. If funds are in the form of securities, a small buffer (percentage to be determined by Financial Institution) must be in the account to protect against market movement. If funds are in the form of cash or cash equivalents, a buffer is not required. A trigger for the sale of securities (T) will occur on day of purchase or if after market hours, it will be on the next market day. The payment card will act as a credit card or escrow account until date of settlement. Per SEC Regulations, all securities transactions settle 3 days after trade day (T+3). At this time, the 529 plan will pay the debt on the 529easy payment card. If market fluctuation causes a negative balance in the 529 plan, it is the owners responsibility to reimburse the 529plan before the settlement date.

IRS Pub 970, Chapter 8
Qualified education expenses. These are expenses related to enrollment or attendance at an Eligible educational institution (defined later). As shown in the following list, to be qualified, some of the expenses must be required by the institution and some must be incurred by students who are enrolled at least half-time. See Half-time student, later.

  1. The following expenses must be required for enrollment or attendance of a Designated beneficiary (defined later) at an eligible educational institution.
    • Tuition and fees
    • Books, supplies, and equipment
  2. Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible educational institution.
  3. Expenses for room and board must be incurred by students who are enrolled at least half-time. The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts.
    • The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.
    • The actual amount charged if the student is resid- ing in housing owned or operated by the eligible educational institution.
  4. You will need to contact the eligible educational institution for qualified room and board costs.