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Starting in 2024, you can roll unused 529 assets to a Roth IRA established for the beneficiary subject to certain conditions.


Below are descriptions of certain key terms. Please refer to the Plan Description and Master Agreement for more complete definitions of these terms.

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529 Plan
A 529 plan is an education savings plan operated by a state or an educational institution and designed to help families set aside funds for college. It is named after Section 529 of the internal revenue code, which authorized these types of tax-advantaged savings plans in 1996. Earnings on 529 plans are tax-free if used for qualified higher education expenses. (Unqualified withdrawals may be taxable as ordinary income and subject to a 10% federal tax penalty.) The Pension Protection Act of 2006 made the tax-free character of 529s a permanent part of federal law.Back to top
A savings trust account established by an Account Owner pursuant to the Savings Trust Agreement for purposes of investing in one or more portfolios. Accounts are part of the Plan and are held in the name of the Plan on behalf of and for the benefit of the Account Owners and the Beneficiaries.Back to top
Account Owner
The individual or entity signing the Application and establishing an Account or any successor to such individual or entity. References in this Glossary to “you” or “your” mean the Account Owner in such capacity.Back to top
Age-Based Portfolios
Investment vehicles that aim to make investment decisions easier by placing you in a portfolio based on the beneficiary's age. Assets invested in Age‑Based Portfolios are automatically moved from one portfolio to another when the Beneficiary reaches the next age group. Portfolios for younger children will invest more heavily in equities, while older children's portfolios will tend to include more fixed income and money market investments.Back to top
Annual Rate of Return
The rate of return on your investment, expressed as a percentage of the total amount invested.Back to top
The Texas College Savings Plan® enrollment form used to collect eligibility information and establish an Account.Back to top
Asset Allocation
A strategy for maximizing gains while minimizing risks in your investment portfolio. Asset allocation involves dividing your assets on a percentage basis among different broad categories of investments, including equity, fixed income, and money market.Back to top
Automatic Investment Plan (AIP)
Contributions to your Account in a fixed amount of money in regular intervals. Funds are automatically deducted from the Account Owner's bank account or other financial institution, or through payroll deductions.Back to top
The individual identified by the Account Owner whose Qualified Higher Education Expenses are expected to be paid from the Account or, for Accounts owned by a state or local government or qualifying tax-exempt organization (otherwise known as a 501(c)(3) entity) as part of its operation of a scholarship program, the recipient of a scholarship whose Qualified Higher Education Expenses are expected to be paid from the Account. Any individual may be the Beneficiary of an Account, including the Account Owner.

A government entity or 501(c)(3) not-for-profit organization can establish an Account to fund scholarship programs without designating a Beneficiary at the time the Account is established.Back to top
The Texas Prepaid Higher Education Tuition Board.Back to top
Code, or IRC
The Internal Revenue Code of 1986, as amended.Back to top
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Eligible Educational Institution
Accredited post-secondary educational institution offering credit toward a bachelor's degree, an associate's degree, a graduate-level or professional degree, or another recognized post-secondary credential that is eligible to participate in certain federal student financial aid programs. Certain proprietary institutions, foreign institutions, and post‑secondary vocational institutions are also included, as are certain specified military academies.Back to top
Estimated Annual Asset-Based Plan Fees
You can find a more detailed description of the fees and expenses charged by the Plan in the Plan Description and Savings Trust Agreement.

• Program Management Fee— Fee paid to the plan manager for daily administration and investment-related services, such as audits, recordkeeping, and preparing and printing statements and reports.

• State Administrative Fee— Fee paid to the Board to administer and maintain the Plan, such as the cost of an independent audit, investment consultant fees, and outside legal counsel fees as necessary.

• Underlying Investment Fund Expenses— Fee deducted directly from the underlying investments by the investment manager for each underlying investment in a portfolio. This expense is captured as part of the weighted average expense ratio for each portfolio.
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Financial Advisor
Any individual or entity that is appropriately licensed and who has entered into an agreement with the Plan Distributor to distribute Savings Trust Agreements and interests in the Plan represented by Accounts to public investors. This term may include brokers and financial intermediaries such as investment advisors or banks.Back to top
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The Internal Revenue Service.Back to top
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Maximum Texas Program Contribution Limit
The maximum contribution balance (currently $500,000 per Board approval) per Beneficiary aggregated across all accounts in Texas‑sponsored 529 Plans that cannot be exceeded through additional contributions. Accounts that have reached the limit may continue to accrue earnings, but additional contributions are prohibited.Back to top
Member of the Family
For purposes of changing the Beneficiary, the definition of a “Member of the Family” of the Beneficiary is:

1. a son or daughter, or a descendant of either
2. a stepson or stepdaughter
3. a brother, sister, stepbrother, or stepsister
4. the father or mother, or an ancestor of either
5. a stepfather or stepmother
6. a son or daughter of a brother or sister
7. a brother or sister of the father or mother
8. a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law
9. the spouse of the Beneficiary or of any of the foregoing individuals
10. a first cousin

For purposes of determining who is a “Member of the Family,” a legally adopted child of an individual shall be treated as the child of such individual by blood. The terms “brother” and “sister” include half-brothers and half-sisters.Back to top
Net Asset Value (NAV)
Equal to a portfolio's total assets less its total liabilities. For portfolios with multiple classes, Net Asset Values are determined separately for each share class. NAV per share is equal to the portfolio's share class Net Assets divided by its number of shares outstanding.Back to top
Non-qualified Withdrawals
A distribution from an Account that is not used to pay for Qualified Higher Education Expenses. Non-qualified withdrawals are subject to ordinary federal income tax, an additional 10% federal tax on earnings, and any applicable state income tax or recapture of state tax deductions.Back to top
The Texas College Savings Plan, which is a 529 plan.Back to top
Plan Governing Documents
The primary instruments governing the agreement between the Plan and the Account Owner.

• Plan Description— Similar to a mutual fund's prospectus, the Plan Description provides detailed information about the Plan, including investment options, fees, and expenses.

• Savings Trust Agreement— The Savings Trust Agreement is the contract between the Account Owner and the Board, which establishes the Account and the obligations of the Board and the Account Owner.Back to top
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Qualified Higher Education Expenses
Undergraduate and graduate tuition, fees, books, supplies, and equipment required for a Beneficiary's enrollment or attendance at an Eligible Educational Institution. The term includes computers and peripherals, software (except for non-educational sports, games, or hobby software), and internet service if used primarily by the Beneficiary while enrolled at an Eligible Educational Institution. Expenses for special needs services incurred in connection with enrollment or attendance at an Eligible Educational Institution are also included in the definition. The term also includes reasonable room and board for beneficiaries who are enrolled at least half-time at an Eligible Educational Institution.

Qualifying expenses also include fees, books, supplies, and equipment necessary to participate in a registered apprenticeship program, and up to $10,000 (lifetime per student) can be used to repay student loans for the Beneficiary or the Beneficiary's sibling. Additionally, 529 Plans may be used for K-12 tuition for private, public, or religious school (up to $10,000 per year per Beneficiary).

The tax consequences of using 529 Plans for elementary or secondary education tuition expenses will vary depending on state law and may include recapture of tax deductions received from the original state as well as penalties. You should consider consulting with a tax or legal advisor to determine any such consequences.Back to top
Qualified Withdrawals
A distribution from an Account that is used to pay for Qualified Higher Education Expenses for the Beneficiary at an Eligible Educational Institution. These withdrawals are tax free when used to cover expenses such as tuition, room and board, books, supplies, and other equipment intended for college use.Back to top
Risk-based Portfolios
Investment vehicles featuring the flexibility to choose from among several investment options that may align with your tolerance for risk, your time horizon, and other factors.Back to top
A transfer of funds from one qualified 529 Plan account to another qualified 529 Plan account. If the transfer is completed within 60 days and is made to an account for the same Beneficiary or a Member of the Family, the rollover may be considered a tax-free transaction. Please see the Plan Description for specific situations. Funds in a qualified 529 plan account may also be rolled over to a qualified ABLE program account tax free before January 1, 2026, provided certain conditions are met.Back to top
Section 529
Section 529 of the Internal Revenue Code specifies the requirements for qualified tuition programs (529 Plans).Back to top
Successor Account Owner
A successor account owner becomes the owner of the account in the event of the death of the Account Owner.Back to top
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Underlying Investments
One or more mutual funds or other investment vehicles in which assets of a portfolio are invested.Back to top
An interest in a portfolio that is purchased with contributions to an Account.Back to top

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