Virginia College Savings Plan Overview

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Account

The separate VEST Account set up for each investment by a different Account Owner in a Portfolio. The same Account Owner may have multiple Accounts for the same Beneficiary in different Portfolios, and each investment by the same Account Owner will establish a separate Account as long as the Account Owner, the Beneficiary or the Portfolio is different. The same Account Owner may not establish multiple Accounts for the same Beneficiary in the same Portfolio.

Account Owner

Defined as "Contributor" in Section 23-38.75 of the Code of Virginia (1950), as amended, means a person who is at least 18 years of age and is either a U.S. citizen or a legal U.S. resident, or a corporation, partnership, trust, charitable organization, or any other persons described in Section 7701(a)(1) of the Internal Revenue Code of 1986, as amended (26 U.S.C.Section 7701(a)(1)), and who is reflected on the VCSP's records as the owner of record of the Account. There may only be one Account Owner per Account. Any person or entity may make Contributions to a VEST Account, but only the Account Owner may execute VEST Account transactions, including rollovers, transfers, cancellations or refund requests. All Contributions are deemed to come from the Account Owner for all tax reporting and other administrative purposes. Individuals who are not Account Owners have not established a customer relationship with VEST and have no legal rights with regard to a VEST Account. Any requests to change the Account Owner must be signed by both the current Account Owner (or the current Account Owner's personal representative) and the substitute Account Owner.

Agreement

The Program Description, as amended from time to time, including the VEST Account Agreement, and the signed, completed Application. "Agreement" also refers to a signed Account Owner Change Form, which incorporates the Program Description.

Application

The form (whether hard copy or online) completed and signed by the Account Owner and submitted to open a VEST Account for a designated Beneficiary.

Beneficiary

An individual who is named as the designated Beneficiary on the Application, the change of Beneficiary form, or on the rollover form provided for in the Program Description, and who is entitled to receive the benefits from a VEST Account. A Beneficiary must be either a U.S. citizen or a legal U.S. resident. A Beneficiary must have been born at the time the Application is submitted.

Board

The Board of the Virginia College Savings Plan.

Contributions

Funds contributed to an Account for the benefit of a designated Beneficiary and intended to pay for the designated Beneficiary's Qualified Higher Education Expenses at an Eligible Educational Institution. Contributions must be in the form of cash, not property or securities.

Disabled

Means that the beneficiary is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. An individual shall not be considered to be disabled unless proof of the existence thereof in such form and manner as may be required by applicable regulations is furnished.

Eligible Educational Institution

The definition of that term in Section 529 of the Internal Revenue Code of 1986, as amended. Generally, the term inlcudes accredited post-secondary educational institutions offering credit toward a bachelor's degree, an associate's degree, a graduate level or professional degree, or another recognized postsecondary credential. Certain proprietary institutions and post-secondary vocational institutions are also Eligible Educational Institutions. The institution must be eligible to participate in a student financial aid program under Title IV of the Higher Education Act of 1965 (20 U.S.C. Section 1088).

Member of the Family

Means the definition of that term in Section 529 of the Internal Revenue Code of 1986, as amended. "Member of the Family" means an individual who is related to the designated Beneficiary as follows: a son or daughter, or a descendent of either; a stepson or stepdaughter; a brother, sister, stepbrother, or stepsister; the father or mother, or an ancestor of either; a stepfather or stepmother; a son or daughter of a brother or sister; a brother or sister of the father or mother; a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law; the spouse of the designated Beneficiary or the spouse of any individual described above; or a first cousin of the Beneficiary. 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.

Net Asset Value

Means the value of each Unit in a Portfolio calculated each business day the New York Stock Exchange is open. Net Asset Value is computed by dividing the total value of each Fund that makes up a Portfolio, plus any receivables and less any liabilities of the Portfolio, by the number of outstanding Units of the Portfolio. The Net Asset Value for a Portfolio applicable to calculations related to a VEST Account, including Contributions and both Qualified and Non-qualified Distributions, is the Net Asset Value calculated for that Portfolio for the business day immediately preceding the day the Contribution is actually invested on behalf of the Account Owner in the Portfolio selected or the amount to be distributed is actually withdrawn from the Portfolio.

Non-qualified Distribution

A distribution from a VEST Account made for any reason other than for: (1) the properly documented Qualified Higher Education Expenses of the designated Beneficiary or (2) a qualified rollover to another qualified tuition program, including the Virginia Prepaid Education Program. Scholarship distributions are limited to the amount of the scholarship. Non-qualified Distributions will be subject to federal income tax on the earnings and Virginia state income tax on the earnings for Virginia taxpayers, as well as a federal penalty tax of 10% of the earnings, reported on the taxpayer's federal tax return. Non-qualified Distributions may require the recapture of some or all amounts, if any, that the Account Owner deducted from his or her Virginia taxable income due to Contributions to a VEST Account.

Pending Settlement Period

For either Contributions or Qualified or Non-qualified Distributions, the period of time between when either a Contribution or a request for a distribution is received and the time the Contribution is actually invested on behalf of the Account Owner in the Portfolio selected, or the amount to be distributed is actually withdrawn from the Portfolio. Contributions must be received in time to allow for deposit in order to be credited for a particular business day (normally by 11:00 a.m. EST). Contributions in good standing received and deposited by close of business each Friday (or the last business day of the week in the event of a holiday or if the VCSP is closed) will be invested in the selected Portfolio on the following Wednesday (or the next business day in the event of a holiday or if the VCSP is closed). Distribution requests in good standing received and processed by close of business each Friday (or the last business day of the week in the event of a holiday or if the VCSP is closed) will be withdrawn from the applicable Portfolio on the following Wednesday (or the next business day in the event of a holiday or if the VCSP is closed). The Net Asset Value used to determine the number of Units of a Portfolio purchased or liquidated will be the Net Asset Value calculated for the applicable Portfolio on the business day immediately preceding the date the Contribution is invested in the Portfolio or the distribution amount is withdrawn from the Portfolio. Any interest earned on Contributions during the Pending Settlement Period prior to investment in a Portfolio shall accrue to the VCSP and be used solely to defray administrative and operating expenses. The VCSP, at its sole discretion, may modify this settlement schedule without prior notice.

Portfolio

One of the investment options available to a VEST Account Owner. New age-based Portfolios will be created periodically since the asset allocations of the age-based Portfolios move over time to more conservative asset allocations. The Board reserves the right to make changes to the asset allocations of each Portfolio or to change or add managers or mutual funds at any time if it deems it appropriate to do so, and is not required to provide advance notice to Account Owners before making such changes. Notice of any material change in the asset allocations of the Portfolios or the investment managers or mutual funds described in this Program Description will be provided to Account Owners as soon as it is reasonably practical to do so. Such notification may be made via the VCSP's web site, www.Virginia529.com

Qualified Distribution

A distribution made for the properly documented Qualified Higher Education Expenses of the designated Beneficiary or a qualified rollover to another qualified tuition program.

Qualified Higher Education Expenses

The expenses allowed under Section 529 of the Internal Revenue Code of 1986, as amended. Generally, these include the following: (1) tuition, all mandatory fees, and the costs of textbooks, supplies, and equipment required for the enrollment or attendance of a designated Beneficiary at an Eligible Educational Institution; (2) expenses for special needs services in the case of a special needs beneficiary which are incurred in connection with such enrollment or attendance; and (3) the costs of room and board of a designated Beneficiary during any academic period during which the designated Beneficiary is enrolled at least half-time in a degree, certificate, or other program that leads to a recognized educational credential awarded by an Eligible Educational Institution. The allowable amount of room and board expenses for students living on campus is the actual amount invoiced by the Eligible Educational Institution. For students who live off campus or at home, the allowable amount for room and board expenses is the applicable room and board amount for that period used by the Eligible Educational Institution in determining its cost of attendance. A student will be considered to be enrolled at least half-time if the student is enrolled for at least half the full-time academic workload for the course of study the student is pursuing as determined under the standards of the institution where the student is enrolled. The institution's standard for a full-time workload must equal or exceed the standard established by the Department of Education under the Higher Education Act and set forth in 34 Code of Federal Regulations Section 674.2(b).

Underlying Fund

The mutual funds or separately managed investment accounts in which assets of the Portfolios are invested.

Units

Interests in a Portfolio that are purchased with Contributions to a VEST Account.