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Important Changes to MNSAVES Matching Grant Program

Oct 05, 2020

MNSAVES’ Matching Grant Program was a popular initiative before the state offered a tax benefit for 529 plan contributions made by hard-working Minnesota families like yours. While it’s been some time since new participants could enroll in that Matching Grant Program, we wanted to announce a change that will make account management more user friendly for those who still have a Matching Grant account. With tuition invoices hitting your inboxes, you’ll see that making withdrawals will be different moving forward...and much easier.

Change #1 Elimination of Prorated Withdrawals

As account owners, you may now withdraw any amount from a Matching Grant Account for qualified redemptions. Withdrawals from your MNSAVES Individual Account is no longer required. Additionally, you do not need to redeem any amount from the Matching Grant Account when requesting a redemption from your Individual Account.

It’s important to note, however, that Matching Grant withdrawals for expenses like computers, software, technology expenses, K-12 tuition and Secure Act withdrawals are still classified as “not acceptable.”

Change #2 Withdrawals no longer have to be distributed only to the Beneficiary or Eligible Educational Institution

We heard from some of you that some flexibility in withdrawal distribution would make things a little easier for you, so in addition to Beneficiaries and Eligible Educational Institutions, withdrawals from a Matching Grant Account may now be made payable to the account owner or any third party.

Regulations Remaining Intact

Non-Qualified withdrawals from the Individual Account results in a prorated forfeiture of full or partial Matching Grant Account, based on the redemption amount. The forfeiture of the full or partial balance of Matching Grant Account for a change in beneficiary remains intact as well. You will face full or partial forfeiture of funds if you choose to roll them over to an out-of-state 529 plan based on how much is transferred out. If the account owner transfers only a portion of the Individual Account, then a prorated portion of the Matching Grant will be forfeited.

Matching Grant withdrawals may be requested through our phone center at 1-877-338-4646 Monday to Friday 7:00AM to 8:00PM CT.

New Redemption Exception

There are also changes to Matching Grant Program’s redemption exception. In the unfortunate event of the beneficiary’s death, the Matching Grant funds are forfeited unless the account owner uses the funds for the repayment of student loans for the sibling of the beneficiary. Additionally, in the event of the disability of the beneficiary, and the beneficiary is unable to utilize funds for Qualified Higher Education Expenses, the Matching Grant funds are forfeited unless the account owner uses the funds for repayment of student loans for the sibling of the beneficiary. In the event the beneficiary attends a military academy, and the beneficiary is unable to utilize funds for Qualified Higher Education Expenses, the Matching Grant funds are forfeited unless the account owner uses the funds for repayment of student loans for the sibling of the beneficiary.

It’s important to remember that within Minnesota state law, the Matching Grant funds are treated separately from the MNSAVES Individual Accounts. Under the guidance of the Office of Higher Education, unlike funds withdrawn from the Individual Accounts, use of the Matching Grant funds for student loan repayments under any of the above limited circumstances does not trigger a state taxable event.

To process this new exception, account owners will withdraw directly from the Matching Grant Account under their normal payment options of account owner, beneficiary, eligible educational institution, or third-party. And while there is no 1099Q impact, account owners need to maintain records for potential audit purposes.


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