529 Plans

Important information about 529 revenue sharing arrangements

Description
A 529 plan is a college savings plan that allows individuals to save and invest on a tax-advantaged basis in order to fund future college and graduate school expenses of a child or other beneficiary.

Objective
To provide an account that individuals can use to save for qualified higher education expenses.

Selecting a 529 Plan
Anyone who wants to set aside dollars for higher education expenses should consider 529 plans. In choosing among 529 plans, however, you should consider that certain states offer tax incentives to in-state residents who invest in their home state's 529 plan. Whether a state tax incentive is available depends upon your state of residence. For tax advice, consult with your tax professional. For information concerning 529 plans, including information comparing the performance of different state 529 plans, please contact your local  financial advisor.

Product Features

• Contribution - A 529 plan may allow for contributions over $300,000, depending on the plan. However, contributions are gifts; therefore, the $12,000 annual gift limit should be considered. In addition, a special gifting provision applies to 529 plans; $60,000* can be contributed in one year to be prorated over five years, until the maximum contribution limit of the plan is reached.
  
  
• Eligibility - Anyone who plans to attend an eligible postsecondary educational institution can be the beneficiary of a 529 plan. The account holder maintains control of the account. If the beneficiary decides not to attend a postsecondary school, the account owner may change beneficiaries to another member of the family (first cousins included; if the new beneficiary is not related to the previous beneficiary, taxes may apply) of the original beneficiary.
  
  
• Distributions - Qualified distributions can be taken without federal income tax or penalty for any of the following: tuition, fees, books, supplies, equipment and room and board. Withdrawals used for expenses other than qualified education expenditures may be subject to federal, state and penalty taxes.
  

* If an account owner elects to treat a contribution as having been made over a five-year period and dies before the end of the five-year period, the portion of the contribution allocable to the remaining years in the five-year period (not including the year in which the account owner died) would be included in computing the account owner's gross estate for federal estate tax purposes. Account owners may be required to file a gift tax return in each of the five years. In addition, account owners may wish to consult their tax or estate-planning counsel to ensure that they obtain the tax consequences they desire.

529 Plans Available through Edward Jones

• AIM College Savings Plan (NE)
  
• Alliance Bernstein CollegeBound (RI)
  
• American Century Learning Quest 529 (KS)
  
• American Funds CollegeAmerica (VA)
  
• Calvert Funds 529 College Savings Plan (DC)
  
• Columbia Funds Future Scholar 529 College Savings Plan (SC)
  
• Columbia Funds New York's 529 College Savings Program Advisor Plan (NY)
  
• Fidelity Advisors 529 Plan (NH)
  
• Fidelity ScholarShare Advisor College Savings Program (CA)
  
• Franklin Templeton 529 College Savings Plan (NJ)
  
• Hartford SMART529 (WV)
  
• John Hancock Freedom 529 (AK)
  
• Upromise CollegeChoice Advisor 529 (IN)
  
• Legg Mason Scholars Choice 529 Plan (CO)
  
• MFS 529 Savings Plan (OR)
  
• Oppenheimer Funds 529 (OR)
  
• Oppenheimer Scholar's Edge (NM)
  
• Putnam CollegeAdvantage (OH)
  
• Union Bank and Trust Bright Directions College Savings Program (IL)
  
• Union Bank and Trust College Savings Plan (NE)
  
• Upromise Advisor 529 Plan (IA)
  
• Upromise MOST Advisor College Savings Plan (MO)
  
• VanKampen Higher Education 529 Plan (AL)
  
• Wells Fargo EdVest (WI)
  
  529 Plan Revenue Sharing Arrangements
  Edward Jones has made arrangements with American Funds and Putnam Investments, as program managers of 529 plans, to receive revenue sharing payments based, in part, on interests purchased by the firm's clients in the respective families' 529 plans. In addition, revenue sharing payments for the MOST Advisor College Savings Plan by Upromise Investments, Inc., begin if Edward Jones reaches an asset threshold of $50 million. Revenue sharing, as received by Edward Jones, involves a payment from a mutual fund company's investment adviser or the company that distributes a mutual fund company's shares or interests in 529 plans. American Funds is among the seven fund families that Edward Jones has designated as "preferred fund families." Edward Jones, its financial advisors and equity owners benefit financially from the receipt of revenue sharing payments. As a result, Edward Jones' receipt of revenue sharing payments creates a potential conflict of interest in the form of an additional financial incentive to the firm, its equity owners and financial advisors in connection with the sale of 529 plans sponsored by American Funds, Putnam Investments and Upromise Investments.

Edward Jones exclusively promotes preferred fund families and 529 plans managed by preferred fund families on this Web site and in other mutual fund and 529 plan marketing materials. The preferred fund families have greater access to Edward Jones' financial advisors to provide training, marketing support and educational presentations. While our financial advisors may sell, and our clients are free to select, any of the 529 plans listed above, there are financial incentives associated with the sale of 529 plans managed by preferred fund families. Virtually all of Edward Jones' transactions in interests in 529 plans involve the plans for which American Funds, a preferred fund family, or Putnam Investments serve as program managers. For the year ended Dec. 31, 2007, Edward Jones received approximately $125 million in revenue sharing payments. For that same period, Edward Jones' net income was $508 million. For more information on the preferred fund families, please visit Preferred Mutual Fund Families, Including Information about Revenue Sharing. For information on mutual funds generally, including information on mutual fund fees and expenses, please see Mutual Funds.

Calculation of Revenue Sharing
Revenue sharing is calculated in different ways by the different preferred funds, Federated Investors and Putnam Investments. For instance, some fund distributors or advisers pay Edward Jones a fee based on the value of assets under management. This is called an asset-based fee. This generally means that each year you maintain your holdings in a preferred mutual fund, Federated Investors or Putnam Investments, Edward Jones is paid by the fund company adviser or distributor. For example, if you made a $10,000 mutual fund purchase and held it for a year, and its value remained the same, Edward Jones would be paid by the adviser or distributor .075% or 7.5 basis points. That would translate to a $7.50 payment from the fund's distributor or adviser to Edward Jones for the $10,000 investment in your account. For every subsequent year you held that $10,000 mutual fund investment in your Edward Jones account, the fund's distributor or adviser would make a $7.50 payment to Edward Jones, assuming no change in the value of your $10,000 investment. Asset-based payments will increase or decrease from year to year with changes in the value of fund assets held by Edward Jones' clients. Again, this payment is not an additional charge to you by the mutual fund company or Edward Jones, but comes from the fund company investment adviser or distributor.

Other distributors or advisers may pay Edward Jones a fee for each share of the fund that Edward Jones sells. This is referred to as a sales-based fee and is based on the dollar value of your purchase. For example, a mutual fund distributor or adviser may pay Edward Jones .125% or 12.5 basis points for each dollar of shares purchased by you. Therefore, if you purchased $10,000 of that mutual fund, its adviser or distributor would pay Edward Jones $12.50 for that transaction. This payment is not an additional charge to you by the mutual fund company or Edward Jones, but comes from the fund company investment adviser or distributor.

There are, as noted above, other formulas and types of revenue sharing. The chart below summarizes Edward Jones' revenue sharing arrangements by identifying the fund family that is the program manager, the name of the entity that actually pays the revenue sharing to Edward Jones, the amount of revenue sharing that Edward Jones receives from each of the preferred families based on $10,000 of assets purchased ("Sales Fees") or held by a client pursuant to a 529 plan investment ("Annual Asset Fees"), and the total amount of revenue sharing in dollars that Edward Jones earned from each preferred fund family adviser or distributor in connection with 529 plan investments from January through December 2007.

1. Edward Jones receives ongoing asset fees based on your investment in your 529 plan. These fees will fluctuate based on the value of your investment.

2. Sales fees are based on the dollar amount invested in each 529 plan you purchase. Sales fees, unlike annual asset fees, are not ongoing fees.

3. The total earned represents revenue sharing recognized as revenue by Edward Jones for the period January 2007 through December 2007.

4. For the purpose of computing the annualized amount per $10,000 of assets, Edward Jones has categorized the entire revenue sharing arrangement with American Funds Distributors as an asset fee, since American Funds Distributors has not distinguished to Edward Jones the breakdown of the revenue arrangement between asset fees and sales fees. If the entire revenue sharing arrangement was categorized as sales fees, the amount would be $12.86 per $10,000 purchased. American Funds Distributors has not distinguished the portion of its annual revenue sharing payment that is attributable to Edward Jones’ sales of interests in the 529 plan for which American is the program manager.

5. Putnam Investments was a preferred fund family until April 29, 2008.

6. Revenue sharing payments for the MOST Advisor College Savings Plan by Upromise Investments, Inc., the distributor for the product, begin if Edward Jones reaches an asset threshold of $50 million. The maximum asset fees potentially to be earned by Edward Jones are $12.50 per $10,000 invested in the plan. To date, Edward Jones has not reached the requisite asset threshold, and therefore, no corresponding payment has been made by Upromise Investments, Inc.

For additional information on a particular 529 plan's payment and compensation practices, please review the plan's official statement. Investors should carefully consider the investment objectives, risks, and charges and expenses associated with 529 plans before investing. More information regarding 529 plans is available in the issuer's offering materials, which can be obtained from your local Edward Jones financial advisor. Please read them carefully before investing.

Investors should consider, prior to investing, whether their resident state or the resident state of the beneficiary offers any state tax or other benefits that are only available in that state's qualified tuition program.