State plan aims to help save for kids' education

OKLAHOMA CITY (AP) -- Just $25 is all it takes to open an account to save for a child's college education under a new program being run by a state agency. <br><br>The College Savings Plan, which

Wednesday, April 12th 2000, 12:00 am

By: News On 6

OKLAHOMA CITY (AP) -- Just $25 is all it takes to open an account to save for a child's college education under a new program being run by a state agency.

The College Savings Plan, which opens for business today, will be administered by the Board of Trustees of the Oklahoma College Savings Plan. State Treasurer Robert Butkin will serve as board chairman, and Higher Education Chancellor Hans Brisch will be vice chairman.

The Oklahoma plan is similar to plans in several other states. It is different than an Education IRA, which limits who can participate based on income and has a $500 annual contribution limit.

"Some kids might not be able to go to college without the help of a program like this," Butkin said Tuesday.

The plan allows anyone to set up an account to save for a child's college education. Businesses can set up a payroll deduction system where employees can make contributions as low as $15 per pay period. Contributions of $25 or more can be made by check or money order.

The money is invested and exempt from federal and state taxes until it is withdrawn to pay for college expenses, Butkin said. Withdrawals will be taxed at the student's rate, which is typically lower than the parent's rate.

The money can be used at any private and public college or university either in Oklahoma or out of state as long as the schools qualify for federal financial aid programs. The savings also can be used at a post-secondary vocational technical schools.

"This is not the type of program where politicians or bureaucrats pre-select which state universities or which colleges can participate," Butkin said. Multiple accounts can be opened for one beneficiary, but total contributions are limited to $100,000 per beneficiary. Anyone is eligible to set up an account, regardless of income level.

Tax-free contributions for a beneficiary can't be made during the same tax year to both the Oklahoma plan and an Education IRA. The IRA contribution would be subject to a federal excise tax.

The accounts will be managed by New York-based TIAA-CREF. The nonprofit company manages similar savings programs in New York, California, Missouri, Minnesota, Tennessee, Connecticut, Vermont and Kentucky, said Tom Pinto, the company's media relations director.

Those making contributions have no say in how the money is invested, he said.

For young beneficiaries, the money will be invested mostly inequity funds. As the child grows older, investments will be concentrated in less-risky money market and bond funds.

Pinto said the plan has a 75 to 80 percent chance of outpacing college tuition increases.

If a child does not need or use money in the savings plan, it can be rolled over to another beneficiary or withdrawn with a 10 percent penalty.