Fixed income overview part 2 Flashcards
Prepaid tuition unit plans
sold per unit basis owners purchase units each year that represent a fixed percentage of a years tuition. No limit on the number of units that can be purchased each year
Prepaid Tuition Contract Plans
allow a purchaser to buy a contract which covers a specified number of years of tuition. payments may be installments or lump sum and differ based on the age of the future student.
Prepaid tuition and inflation
A prepaid tuition plan provides a hedge against inflation.
Prepaid tuition and out of state schools
Typically the plan will pay to the out of state school what would have been paid to an in state school.
EGTRA
The economic growth and tax relief act of 2001. allows private colleges to issue prepaid tuition plans.
Prepaid tuition plan residence
Either the beneficiary or owner can be a state resident. doesn’t require that both be.
529 Plans
Holdings
They invest in everything including stocks
529 Plans
Investment risk strategies
Many plans offer conservative, moderate and aggressive funds. As the child ages people tend to move from aggressive to moderate. some plans shift automatically
College savings plans contribution limits
Most states limit contribution to the cost of providing seven years of post secondary education.
account owner
college savings plans vs. 529 plans
The contributor establishing the account is the owner of a 529.
The child is the owner of a college savings plan
529 plans
state residence
State residency is not a requirement
funds can be used to attend any state college regardless of the state the 529 plan was opened in.
529 plans
Contributions and taxation
some states may offer deductions of contributions.
Federally the contributions are taxed.
529 Plan Contribution types
only cash may be contributed to a 529
529 Plans and tuition assistance
College savings plans assets don’t reduce financial aid.
529 plan usage
While the funds can be used to pay for qualified education expenses they can also be used to purchase prepaid tuition units….
529 plan
treatment of non qualified withdrawals
it’s a ratio. The percentage returned as principal is non taxable. The percentage deemed not principal is subject to taxes and a 10% penalty
529 plan 10% penalty waivers
- death
- disability
- receipt of a scholarship payment or allowance…..
529 Plan state taxes
Out of state plans
earnings from out of state programs are usually taxable..
529 plan room and board
- living at home = the costs are defined as the amount determined by the institution
- residing in student housing =standard allowance based on most of the schools residents normally charged. If the actual exceeds this calc the actual amount is allowed
- all other students = those expenses reasonably incurred
529 distributions reporting
must be sent by 1/31
529 plan beneficiary death
- distribution to the deceased bene’s estate
- distribution to the contributor
- a new beneficiary that is related to the decedant….
No exemption from estate taxes if paid to the beneficiaries estate
529 plan rollover limits
plan to plan rollovers are limited to one per 12 months.
rollovers changing beneficiaries have no limit.
coverdell
2000 contribution limit, education from k thru secondary.
If not used by age thirty it must be distributed and is subject to penalty…
college education tax credit
4000
Underwriters and official statements
the SEC requires an underwriter to review an official statement for offerings of 1 million or more.
customer affirmation of independent judgement
May affirm orally or in writing on a trade by trade basis.
MSRB RULE MAKING
sec > FEDERAL REGISTER > DRAFT CIRCULATED > PUBLIC COMMENT > SEC APPROVAL
Municipal securities broker annual fee
1000 due every october 31.
annual municipal adviser fee
3,000 for each MA-i and is due april 30th.
under writing assessment
.0275 per 1000 of par
commercial paper and muni funds are exempt
Transaction assessment
1 cent per 1000 for sales under rule g-14.
exempts muni funds and securities that mature in less than 9 months.
technology fee
1 dollar per each inter dealer transactions.
fee due date
30 days of invoicing
Rule making Board make up
21 members
four year terms
11 are independent
10 from the industry
bank examinatin
once every two years by there DEA
Finra registered muni securities dealer exam
1 every 4 years
Requests for information from a DEA
15 days
BANK DEA’s
FRB EXAMINES Federal Reserve banks
FDIC examines National Banks
Office of the comptroller examines= Local Chartered banks.
SIPC Membership
all broker dealers registered with the SEC must be members
SIPC
exemptions
banks that deal exclusively with municipal securities
firms that deal exclusively with U.S. Government securities
Firms that deal exclusively in redeemable investment company securities
SIPC COVERAGE
500k per customer not account no more than 250K in cash
SIPC Seperate customer rules
- All accounts on behalf of a deceased person regardless of executor are a single account
- Each corporate and partnership account is entitled to separate customer status from it’s directors partners and owners
- trust accounts are separate
Joint accounts are separate from the joint owners individual accounts
SIPC
DOESNT COVER
Claims of officers or partners of the failed firm
Claims of other member firms for proprietary accounts
Claims of subordinated Lenders
Claims of Persons who own 5% or more of the equity of the failed firm
SIPC does not cover currencies or futures contracts
SIPC LOGO
members must display “we are a member of SIPC” With the logo in offices and advertisements
Official Statement
Principal approval
Not classified as an advertisement so it doesn’t require principal approval
