Iowa Admin. Code r. 781-16.11

Current through Register Vol. 47, No. 13, December 25, 2024

Rule 781-16.11 - Qualified withdrawals

This rule establishes the procedures for the payment of qualified withdrawals.

(1) The participant must initiate a withdrawal for qualified or nonqualified withdrawals. The participant must file the appropriate form with the contractor.

(2) Qualified withdrawals will be paid in one of three ways once the form has been received by the contractor:

a. Directly to the eligible educational institution or K-12 institution only.

b. Directly to the participant.

c. Directly to the beneficiary at eligible educational institutions only.

(3) Withdrawals for the payment of tuition in connection with enrollment or attendance at a K-12 institution may not exceed a maximum of $10,000 per taxable year per beneficiary from all 529 plans.

(4) Each qualified withdrawal will be comprised partly of contributions and partly of earnings, based upon the same proportion that contributions and earnings comprise the participant's account at the time of the withdrawal.

(5) Funds that are distributed to a participant pursuant to this rule shall be reported to the IRS on a 1099-Q in the tax year in which the withdrawal is made. The participant will receive the 1099-Q for any withdrawal paid to the participant. The beneficiary will receive the 1099-Q for any withdrawal paid to the beneficiary or institution of higher education. The individual receiving the 1099-Q must determine whether the withdrawal was qualified or nonqualified.

(6) A participant may transfer any remaining balance in one account to an existing or new account for another designated beneficiary by completing a new participation agreement with the contractor.

(7) The Iowa state income tax treatment of contributions to and withdrawals from an account shall be as set forth in Iowa Code chapter 422.

Iowa Admin. Code r. 781-16.11

Amended by IAB December 21, 2016/Volume XXXIX, Number 13, effective 1/25/2017

Amended by IAB May 22, 2019/Volume XLI, Number 24, effective 6/26/2019