NU Online News Service, Nov. 13, 1:50 p.m. – Principal Financial Group Inc., Des Moines, Iowa, has agreed to sell 529 college savings plans from Alliance Capital Management L.P., New York, starting in January 2003.
Principal will sell the plans, which will appear under the Principal CollegeBound fund brand name, at the worksite through its retirement services operation and at the retail level through its network of financial advisors and brokers.
Alliance Capital will provide the investment management and administration services. The program will be based on the Rhode Island 529 college savings plan, which offers a choice of 15 investment options managed by Alliance Capital.
Section 529 of the Internal Revenue Code gives each state the authority to set up its own 529 college savings plan program. The code exempts taxpayers from paying federal income taxes on either contributions to or normal distributions from the plans. States can offer breaks on state income taxes to the state residents who participate in their plans.
Once a state sets up a 529 program, it can open the program to taxpayers throughout the United States, but the breaks on state income taxes help only residents of the sponsoring state.