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State Farm® 529 Savings PlanProgram Disclosure Statement and Participation Agreement
March 1, 2020
Use of this Program Disclosure StatementThis Program Disclosure Statement is for use by persons investingwith a State Farm VP Management Corp. (“State Farm”) RegisteredRepresentative in the State Farm 529 Savings Plan (“State FarmPlan” or the “Plan”). This Program Disclosure Statement containsimportant information about establishing and maintaining anaccount with the State Farm Plan. Investing is an important decision.Investors should carefully read this Program Disclosure Statement inits entirety to understand and consider the Plan’s investmentobjectives, risks, charges and expenses and discuss the contents ofthis Program Disclosure Statement with their State Farm RegisteredRepresentative before opening an account and making aninvestment decision. No one is authorized to provide informationthat is different from the information contained in this ProgramDisclosure Statement. Please keep this Program DisclosureStatement and all updates for future reference.
About the Nebraska 529 College Savings PlansThe State Farm Plan is one of four college savings plans issued bythe Nebraska Educational Savings Plan Trust and administered bythe Nebraska State Treasurer, who serves as trustee to each of thefour plans. The four plans offer a series of investment optionswithin the Nebraska Educational Savings Plan Trust. The fourplans are intended to operate as qualified tuition programs,pursuant to Section 529 of the U.S. Internal Revenue Code.
This Program Disclosure Statement describes only accounts heldthrough the State Farm Plan that are sold through State FarmRegistered Representatives. The other plans in the NebraskaEducational Savings Plan Trust may offer different investmentadvisors, different benefits, different fees, different costs, andsales commissions, if any, which may be more or less than thoserelative to accounts held in the State Farm Plan described in thisProgram Disclosure Statement. Some of these other plans aredesigned for direct investments without the use of a State FarmRegistered Representative and without the imposition of salescharges. You can obtain information regarding the other plans inthe Nebraska Educational Savings Plan Trust by contacting theNebraska State Treasurer at (402) 471-2455, or by visiting theNebraska State Treasurer’s website at treasurer.nebraska.gov.
Accounts in the State Farm Plan have not been registered withthe Securities and Exchange Commission (the “SEC”) or with anystate securities commission pursuant to exemptions fromregistration available for securities issued by a publicinstrumentality of a state. Neither the SEC nor any state securitiescommission has reviewed this Program Disclosure Statement.
No insurance and no guaranteesOpening an account in the State Farm Plan involves certain risks,including possible loss of the principal amount invested. Theserisks are highlighted in the Section of the Program DisclosureStatement, “Part 10 – Certain Risks to Consider.”
Except for the Bank Savings Static Investment Option,investments in the State Farm 529 Savings Plan are notguaranteed or insured by the Federal Deposit InsuranceCorporation (FDIC) or any other government agency and are
not deposits or other obligations of any depository institution.Investments are not guaranteed or insured by the State ofNebraska, the Nebraska State Treasurer, the NebraskaInvestment Council, State Farm or First National Bank ofOmaha or its authorized agents or their affiliates, and aresubject to investment risks, including loss of the principalamount invested. FDIC insurance is provided for the BankSavings Static Investment Option up to the maximum amountset by federal law, currently $250,000.
The value of your account may vary depending on marketconditions, the performance of the Investment Options youselect, the timing of purchase, and fees. The value of youraccount could be more or less than the amount you contributeto your account. In short, you could lose money. Accountowners should periodically assess, and if appropriate, adjusttheir investment choices with their time horizon, risk toleranceand investment objective in mind.
FDIC insurance is provided for the Bank Savings Static InvestmentOption only, which invests in an FDIC-insured omnibus savingsaccount held in trust by the Nebraska Educational Savings PlanTrust at First National Bank of Omaha. Contributions to, andearnings on, the investments in the Bank Savings StaticInvestment Option are insured by the FDIC on a per participant,pass-through basis to each account owner up to the maximumlimit established by federal law, which currently is $250,000.
Investments in the Goldman Sachs Financial SquareSM
Government Money Market Static Investment Option are notbank deposits and are not insured by the FDIC.
Participation in the State Farm Plan does not guarantee thatcontributions and the investment earnings, if any, will be adequateto cover future tuition and other qualifying post-high schooleducation expenses (“Qualified Higher Education Expenses”) orthat a Beneficiary will be admitted to or permitted to continue toattend an accredited college or university or other eligibleeducational institution (an “Eligible Educational Institution”).
For use only for Qualified Higher Education ExpensesThe State Farm Plan is intended to be used only to save forQualified Higher Education Expenses. The State Farm Plan andany tax information contained in this Program DisclosureStatement are not intended to be used, nor should it be used, byany taxpayer for the purpose of evading federal or state taxes ortax penalties. Taxpayers may wish to seek tax advice from anindependent tax advisor based on their own particularcircumstances.
Nebraska state tax deductionContributions by an account owner who files a Nebraska stateincome tax return, including the principal and earnings portions ofrollovers from another qualified college savings plan not issued bythe State of Nebraska, are deductible in computing the accountowner’s Nebraska taxable income for Nebraska income taxpurposes in an amount not to exceed $10,000 ($5,000 for marriedtaxpayers filing separate returns) in the aggregate for all..
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contributions to all accounts within the Trust in any taxable year.Contributions by a custodian of an UGMA or UTMA account whois also the parent or guardian of the Beneficiary of an UGMA orUTMA account may claim this deduction. See “Part 14 – Federaland State Tax Considerations” for important additionalinformation about state tax benefits.
Taxpayers and residents of other statesInvestors should consider before investing whether their ortheir Beneficiary’s home state offers any state tax or otherstate benefits such as financial aid, scholarship funds, andprotection from creditors that are only available forinvestments in such state’s qualified tuition program andshould consult their tax advisor, attorney and/or other advisorregarding their specific legal, investment or tax situation.
Privacy PolicyExcept as otherwise required by law, information regarding aState Farm Plan account owner or Beneficiary will not be sharedwith anyone other than the account owner, an authorizedrepresentative, or those employees and/or service providers whoaccess such information to provide services to the account owneror Beneficiary.
Conflicts with Applicable LawThis Program Disclosure Statement is for informational purposesonly. In the event of any conflicts between the description of thePlan contained herein and any requirement of federal or Nebraskalaw applicable to matters addressed herein, such legalrequirement would prevail over this Program DisclosureStatement and Participation Agreement.
Information is Subject to Change.Statements contained in this Program Disclosure Statement thatinvolve estimates, forecasts, or matters of opinion, whether or notexpressly so described herein, are intended solely as such and arenot to be construed as representations of fact or guarantee offuture performance.
Not an Offer to SellThis Program Disclosure Statement does not constitute an offer tosell or the solicitation of an offer to buy, nor shall there be anysale of a security described in this Program Disclosure Statementby any person in any jurisdiction in which it is unlawful for suchperson to make an offer, solicitation, or sale.
This Program Disclosure Statement is designed to comply withthe College Savings Plans Network Disclosure Principles,Statement No. 6 adopted July 1, 2017. You should carefullyread and understand this Program Disclosure Statement.Please keep this Program Disclosure Statement for futurereference.
This Program Disclosure Statement is dated March 1, 2020.
IMPORTANT LEGAL INFORMATION
THE STATE FARM PLAN AND ITS AUTHORIZED AGENTS ORSTATE FARM AFFILIATES MAKE NO REPRESENTATIONSREGARDING THE SUITABILITY OF THE INVESTMENT OPTIONSDESCRIBED IN THIS PROGRAM DISCLOSURE STATEMENT FORANY PARTICULAR INVESTOR. OTHER TYPES OF INVESTMENTSAND OTHER TYPES OF COLLEGE SAVINGS VEHICLES MAY BEMORE APPROPRIATE DEPENDING ON YOUR PERSONALCIRCUMSTANCES. YOU SHOULD CONSULT YOUR TAXADVISOR OR STATE FARM REGISTERED REPRESENTATIVE FORMORE INFORMATION.
NO BROKER, DEALER, REGISTERED REPRESENTATIVE,SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZEDTO GIVE ANY INFORMATION OR TO MAKE ANYREPRESENTATIONS OTHER THAN THOSE CONTAINED IN THISPROGRAM DISCLOSURE STATEMENT, AND, IF GIVEN ORMADE, SUCH OTHER INFORMATION OR REPRESENTATIONSMUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZEDBY THE STATE FARM PLAN, THE STATE OF NEBRASKA, THENEBRASKA INVESTMENT COUNCIL, THE NEBRASKA STATETREASURER, THE NEBRASKA STATE INVESTMENT OFFICER,STATE FARM OR FIRST NATIONAL BANK OF OMAHA.
THE INFORMATION IN THIS PROGRAM DISCLOSURESTATEMENT IS SUBJECT TO CHANGE WITHOUT NOTICE, ANDNEITHER DELIVERY OF THIS PROGRAM DISCLOSURESTATEMENT NOR ANY SALE MADE HEREUNDER SHALL,UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONTHAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THESTATE FARM PLAN SINCE THE DATE OF THIS DOCUMENT.
Business Continuity Plan Disclosure for State Farm VPManagement Corp.State Farm VP Management Corp. has developed a BusinessContinuity Plan on how we will respond to events that significantlydisrupt our business. Since the timing and impact of disasters anddisruptions is unpredictable, we will have to be flexible inresponding to actual events as they occur. With that in mind, weare providing you with this information on our business continuityplan.
Contacting Us – After a significant business disruption, if youcannot contact us as you usually do at 1-800-321-7520, you shouldcontact your registered State Farm agent or go to our web site atstatefarm.com®.
Our Business Continuity Plan – We plan to quickly recover andresume business operations as soon as possible after a significantbusiness disruption and respond by safeguarding our employeesand property, making a financial and operational assessment,protecting the firm’s books and records, and allowing ourcustomers to transact business. In short, our business continuityplan is designed to permit our firm to resume operations asquickly as possible, given the scope and severity of the significantbusiness disruption...
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Our business continuity plan addresses: data back-up andrecovery; all mission critical systems; financial and operationalassessments; alternative communications with customers,employees, and regulators; alternate physical location ofemployees; critical supplier, contractor, bank and counter-partyimpact; regulatory reporting; and procedures to help ensure thatour customers have prompt access to their funds and securities ifwe are unable to continue our business.
Our business continuity plan may be revised or amended. Ifchanges are made, an updated summary will be promptly postedon our website (statefarm.com) or you may obtain an updatedsummary by calling us at the number below and requesting that awritten copy be mailed to you.
Varying Disruptions – Significant business disruptions can vary intheir scope, such as only our firm, a single building housing ourfirm, the business district where our firm is located, the city wherewe are located, or the whole region. Within each of these areas,the severity of the disruption can also vary from minimal to severe.In a disruption to only our firm or a building housing our firm, wemay transfer our operations to a local site when needed andexpect to recover and resume business within one business day.In a disruption affecting our business district, city, or region, wewill transfer our operations to a site outside of the affected area,and expect to recover and resume business within three businessdays. In either situation, we plan to continue in business, transferoperations if necessary, and notify you through our web sitestatefarm.com, or our customer number how to contact us. In theunlikely event that the significant business disruption is so severethat it prevents us from remaining in business, our plan providesprocedures to help ensure that our customers have promptaccess to their funds and securities.
In all of the situations described above, in light of the varioustypes of disruptions that could take place and that everyemergency poses unique problems, it may take longer to resumeoperations during any particular disruption. If you have questionsabout our business continuity planning, you can contact us at1-800-321-7520.
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SUMMARY OF KEY FEATURES AND REFERENCE GUIDE
This section is intended to provide a summary of key features of the Plan. Before investing you should read and understand thecomplete detailed information contained in this Program Disclosure Statement and Participation Agreement. The capitalized terms in“Description” are defined in Part 16 – Glossary.
Plan StructureIssuer: Nebraska Educational Savings Plan Trust
Trustee: Nebraska State Treasurer
Investment Oversight: Nebraska Investment Council
Program Manager: First National Bank of Omaha
Distributor, MemberFINRA, SIPC: First National Capital Markets, Inc.
First National Capital Markets and First National Bank of Omaha are affiliated companies.
Selling Dealer: State Farm
Contact Information: State Farm® 529 Savings Plan Phone: 800.321.7520
P.O. Box 419096 8:00 a.m. to 8:00 p.m. Central Time
Kansas City, MO 64141-9096 Monday through Friday
Web: www.statefarm.com
Topic Description Reference Page
Nebraska StateIncome Tax Benefits
• Contributions by account owners, and custodians of an UGMA or UTMAaccount where the custodian is the parent or guardian of the Beneficiary of anUGMA or UTMA account, and rollovers by account owners may be deductibleup to $10,000 per tax return ($5,000 if married filing separately).
• Earnings grow free from Nebraska state income tax• The earnings portion of a Qualified Withdrawal is exempt from Nebraska
income tax• The earnings and principal portions of a rollover into the State Farm Plan from
another qualified 529 plan are exempt from Nebraska income tax
12, 51-52
Federal Tax Benefits • Contributions are not deductible for federal income tax purposes• Earnings grow tax-deferred from federal income tax• No federal income tax on Qualified Withdrawals• For federal gift and estate tax purposes, contributions are generally
considered completed gifts to the Beneficiary.
48-52
No Guarantees • Participation in the Plan does not guarantee that contributions and theinvestment return on contributions, if any, will be adequate to cover futuretuition and other higher education expenses, or that a beneficiary will beadmitted to or permitted to continue to attend an Eligible EducationalInstitution.
• Except as described herein for accounts invested in the Bank Savings StaticInvestment Option, investments in the State Farm Plan are not insured bythe FDIC.
• Investments in the State Farm Plan are not guaranteed or insured by theState of Nebraska, the Nebraska Investment Council, the Nebraska StateTreasurer, the Nebraska State Investment Officer, State Farm, First NationalBank of Omaha or its authorized agents or affiliates, or any other federal orstate entity or person.
• The value of your account could be more or less than the amount youcontribute to your account. In short, you could lose money.
2, 13, 36
Enrollment Form • Available through your State Farm Registered Representative• Download from www.statefarm.com
14
Account Ownership • Individuals, trusts, certain entities, and custodial accounts• Must have a Social Security or taxpayer identification number and a U.S.
residential street address• No joint account ownership
14-17
6
Topic Description Reference Page
Beneficiary • Must have a Social Security or taxpayer identification number• Does not need to have a Nebraska address• Can be changed at any time to another Member of the Family
18, 54, 56
Contributions • Contributions can be made by anyone but account owner retains ownership andcontrol of the account and its assets
• Can be made online, automatically contributed from a checking or savings account;by check; wire transfer; payroll deduction; or electronic funds transfer
• The minimum initial contribution amount is $250 per account unless the AccountOwner signs up for AIP or payroll deduction of at least $50 per month. The minimumsubsequent contribution amount is $50.
• Maximum Contribution Limit of $400,000 per Beneficiary for all accounts for thesame Beneficiary in all plans administered by the Nebraska State Treasurer. Assetscan grow beyond $400,000.
19-23
Investment Options • 1 Age-Based Investment Option• 7 Static Investment Options (All Equity, Growth, Moderate Growth, Balanced,
Conservative, Money Market, Bank Savings)• If an account owner has multiple accounts in the Plan for the same Beneficiary, or
multiple accounts among the State Farm Plan, the NEST Advisor Plan, the NESTDirect Plan or the TD Ameritrade 529 College Savings Plan, the account owner maychange the Investment Options in all accounts without tax consequences, so long asthe changes to all of the accounts are made at the same time and no morefrequently than twice per calendar year or upon a change of Beneficiary.
• Funds can be moved from one Investment Option to another twice per calendaryear for all accounts administered by the Nebraska State Treasurer or at any timewhen the Beneficiary is changed to a Member of the Family.
• Transferring assets among Plans administered by the Nebraska State Treasurer isconsidered an Investment Option Change.
24-38
Risk Factors Opening an account involves certain risks, including:• The risk that the value of your account may decrease, you could lose money,
including the principal you invest;• The risk of state or federal tax law changes;• The risk of Plan changes, including changes in fees; and• The risk that an investment in the Plan may adversely affect the account owner or
Beneficiary’s eligibility for financial aid or other benefits.
36-38
Performance • Performance of the Investment Options 39-40
Plan Fees andExpenses
• $25 annual account fee, waived for any account that exceeds $20,000 on the last dayof the period that the fee is assessed.
• No enrollment, investment change, transfer or withdrawal fee
42-45
Class A• Age-Based Investment Option Cost Range: 0.57% - 0.61%• Static Investment Option Cost Range: 0.20% - 0.61%*
• Up-Front Sales Load: 3.50%
* Except for the Money Market and Bank Savings Static Investment Options, thesecosts include a 0.25% Program Management Fee, a 0.02% State Administration Fee,and a 0.25% Class A distribution and marketing fee to cover administrative costs ofoverseeing, distributing and marketing the Plan. With respect to the Money MarketStatic Investment Option, the Program Management Fee is 0.25%, the StateAdministration Fee is 0.02% and the distribution and marketing fee is 0.00%. Withrespect to the Bank Savings Static Investment Option, the Program ManagementFee is 0.18%, the State Administration Fee is 0.02% and the distribution andmarketing fee is 0.00%.
7
Topic Description Reference Page
Distributions • Assets in the account can be used to pay for Qualified Higher EducationExpenses of the Beneficiary including: tuition, fees, room & board (withcertain limitations), books, supplies, equipment required for the enrollmentor attendance at an eligible post-secondary institution in the U.S. or abroadand the purchase of computer or peripheral equipment, computer software,or Internet access and related services, if such equipment, software, orservices are to be used primarily by the Beneficiary during any of the yearsthe Beneficiary is enrolled at an Eligible Educational Institution regardless ofwhether such technology or equipment is required by the EligibleEducational Institution. Computer software means any program designed tocause a computer to perform a desired function. Such term does notinclude any database or similar item unless the database or item is in thepublic domain and is incidental to the operation of otherwise qualifyingcomputer software. Computer software designed for sports, games, orhobbies is not included unless this software is predominantly educational innature.
• The earnings portion of withdrawals not used for qualified expensesgenerally are subject to federal income taxes, may be subject to anadditional 10% federal tax, and may be subject to state or local taxes.
46-47
Rollovers and Transfers • Funds can be rolled over from another 529 plan to this Plan or from this Planto another 529 plan once every 12 months for the same Beneficiary withoutbeing subject to federal tax.
• Funds can be rolled over from this Plan to an ABLE account for the sameBeneficiary without being subject to federal tax.
• A rollover to another Beneficiary who is a Member of the Family of thecurrent Beneficiary can take place at any time without federal income taxconsequences.
• Nebraska state income tax deductions are subject to recapture when aparticipation agreement is cancelled, the assets in an account are rolledover to another state’s qualified tuition program or ABLE program, or whena Non-Qualified Withdrawal is made.
• Liquidated assets from Coverdell ESA accounts, UGMA/UTMA assets andcertain U.S. Savings Bonds can be transferred to the Plan at any time.Restrictions and tax considerations may apply.
21, 47, 49
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TABLE OF CONTENTS
PART 1 – OVERVIEW 11The Trust and the Plan 11The Program Manager 11Contributing to an account 11Investment Options 11Federal income tax benefits 11-12Nebraska state tax deduction 12Taxpayers and residents of other states 12
PART 2 – LEGAL DESCRIPTION OF THE PLAN 13The Trust and Plan 13The Treasurer 13The Nebraska Investment Council 13The Program Manager 13No insurance and no guarantees 13The Plan is not a mutual fund 13
PART 3 – OPENING AND MAINTAINING ANACCOUNT 14Using State Farm Registered Representatives 14Who can open an account 14No limits on the number of accounts 14Restrictions 14Maximum limits on contributions 14Completing and submitting an Enrollment Form 14You can obtain an Enrollment Form by 14Required information 14Choosing an Investment Option 14Account ownership 14
Individual account owner 14-15Change in ownership 15Trusted Contact 15Death or legal incapacity of the account owner andsuccessor account owner 15Custodial accounts 15Accounts owned by minors 15-16Entity-owned accounts 16Trust accounts 16Accounts for infants 16
Maintaining and reviewing your account 16Program Manager’s right to terminate, freeze, suspend, orredeem your account 16Account opening error 17Documents must be in good order 17
PART 4 – BENEFICIARIES 18Beneficiary 18One Beneficiary 18Infant Beneficiary 18Scholarship account Beneficiary 18UGMA or UTMA or minor-owned account Beneficiary 18Changing the Beneficiary 18Member of the Family 18Death of a Beneficiary 18
PART 5 – CONTRIBUTING TO AN ACCOUNT 19Contributions 19Contribution restrictions 19Minimum contribution amounts 19
Limits on maximum contributions to an account 19Excess contributions 19Allocation of contributions 19Systematic Exchange Program 19Contributions by non-account owners 19-20Contribution methods 20Contributing electronically from your bank account 20
Automatic Investment Plan (AlP) 20Electronic Funds Transfer (EFT) 20-21
Checks 21Wire transfer 21Payroll deduction 21Rollover 21Coverdell Education Savings Account 21-22Redemptions from certain U.S. Savings Bonds 22Transfers within the State Farm Plan 22
Transfer to another account owner 22Transfer to another Beneficiary 22Transferring accounts among Nebraska-issued 529qualified tuition plans 22Potential tax consequences of a transfer 22
UGMA or UTMA accounts 22Transfers from a Upromise® by Sallie Mae® Account 22-23Contributions from Ugift® 23Contribution date 23Contribution pricing 23Contribution errors 23
PART 6 – INVESTMENT OPTIONS OVERVIEW 24Investment Options 248 Investment Options 24No investment direction 24Changing Investment Options 24
PART 7 – AGE-BASED INVESTMENT OPTION 25Age-Based Investment Option 250 to 2 years old Portfolio 253 to 5 years old Portfolio 256 to 8 years old Portfolio 259 to 10 years old Portfolio 2511 to 12 years old Portfolio 25-2613 to 14 years old Portfolio 2615 to 16 years old Portfolio 2617 to 18 years old Portfolio 2619 years and older Portfolio 26Description of the underlying investments 27
PART 8 – STATIC INVESTMENT OPTIONS 28Seven Static Investment Options 28All Equity Static Investment Option 28Growth Static Investment Option 28Moderate Growth Static Investment Option 28Balanced Static Investment Option 28Conservative Static Investment Option 28-29Money Market Static Investment Option 29Bank Savings Static Investment Option 29
FDIC insurance 29No other guarantees 29-30
Description of the underlying investments 31
PART 9 – DESCRIPTIONS OF THE UNDERLYINGINVESTMENTS 32DFA World ex-US Government Fixed Income 32
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Goldman Sachs Financial SquareSM Government MoneyMarket 32iShares Core US Aggregate ETF 32State Street MSCI® ACWI ex USA Index 32-33State Street S&P 500® Index 33Vanguard Extended Market ETF 33Vanguard Real Estate ETF 33-34Vanguard Short-Term Bond ETF 34Vanguard Short-Term Inflation-Protected ETF 34Bank Savings 34
FDIC insurance 34No other guarantees 34-35
PART 10 – CERTAIN RISKS TO CONSIDER 36Investment risks 36No insurance or guarantees 36Investment Options have certain risks 36
Call risk 36Concentration risk 36Credit risk 36ETF risks 36Extension risk 36Foreign investment risk 36Index sampling risk 36Interest rate risk 36Investment style risk 36-37Issuer risk 37Management risk 37Market risk 37Prepayment risk 37
Money Market and Bank Savings Static Investment Optionsare not as diversified as other Investment Options 37Program risks 37
Possible changes to the State Farm Plan 37Limitation on investment selection 37Illiquidity of account 37Acceptance to an Eligible Educational Institution isnot guaranteed 37Qualified Higher Education Expenses may exceed thebalance in your account 37Plan does not create Nebraska residency 37Laws governing 529 qualified tuition programs maychange 37-38
Impact on the Beneficiary’s ability to receive financial aid 38Medicaid and other federal and state benefits 38
PART 11 – PERFORMANCE 39No ownership in underlying investments 39Performance differences 39Customized performance benchmarks 41
PART 12 – PLAN FEES AND EXPENSES 42Class A accounts 42
Up-Front Sales Load waivers 42Class A distribution and marketing fee 42
Application of Class A Up-Front Sales Load and distributionand marketing fees to certain Investment Options orPortfolios 42Negative return 42Annual account fee 42-43Program Management Fee 43State Administration Fee 43Underlying investment fee 43
Other account fees 43Selling institution compensation 43Commission waivers 43Contributions from rewards programs 43Fee structure table 44Approximate cost of $10,000 investment 45
PART 13 – DISTRIBUTIONS FROM AN ACCOUNT 46Requesting a distribution from an account 46Temporary withdrawal restrictions 46Systematic Withdrawal Program (SWP) 46Qualified Withdrawal 46Eligible Educational Institution 46Distribution of a Qualified Withdrawal 46-47Non-Qualified Withdrawals 47Exceptions to the federal penalty tax 47Refunds from Eligible Educational Institution 47Rollovers 47
PART 14 – FEDERAL AND STATE TAXCONSIDERATIONS 48IRS Circular 230 Disclosure 48Qualified tuition program 48Federal tax information 48Qualified Withdrawals 48Qualified Higher Education Expenses 48-49Non-Qualified Withdrawal taxable 49Federal penalty tax on Non-Qualified Withdrawals 49Exceptions to the federal penalty tax 49Rollovers 49Change of Beneficiary 49Earnings portion 49Earnings aggregation 49-50Claiming a loss 50Estate and gift tax 50
Five-year election 50Change of Beneficiary 50-51
Coordination with education tax credits 51Coverdell Education Savings Accounts (ESAs) 51Lack of certainty 51Nebraska state income tax deduction 51Recapture of Nebraska income tax deduction 51Nebraska state income tax 51-52
PART 15 – OTHER CONSIDERATIONS 53Scholarships 53Contests 53Financial aid 53Bankruptcy 53Creditor protection 53Audits 53
PART 16 – GLOSSARY 54-55
EXHIBIT A – PARTICIPATION AGREEMENT 56-58
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PART 1 – OVERVIEW
The Trust and the PlanThe Nebraska Educational Savings Plan Trust (the “Trust”),established on January 1, 2001, is designed to qualify as atax-advantaged qualified tuition program under Section 529 ofthe Internal Revenue Code of 1986, as amended (the “Code”).Section 529 permits states and state agencies to sponsor qualifiedtuition programs under which you can contribute to an accountfor the benefit of any individual, including you (a “Beneficiary”).The Trust has a series of four plans, the State Farm 529 SavingsPlan (the “State Farm Plan” or the “Plan”), the NEST AdvisorCollege Savings Plan (“NEST Advisor Plan”), the NEST DirectCollege Savings Plan (the “NEST Direct Plan”), and the TDAmeritrade 529 College Savings Plan.
The State Farm Plan provides a convenient and tax-advantagedway to save for Qualified Higher Education Expenses. Eachaccount in the Plan represents an interest in the Trust and holdsunits of one or more underlying investment options (each an“Investment Option”) in the Plan.
The Nebraska State Treasurer acts as trustee for the Trust (the“Trustee”) and is responsible for the overall administration of thePlan.
The Nebraska Investment Council is responsible for theinvestment of the money in the Trust and the selection of allInvestment Options.
The Program ManagerThe Trustee entered into a Program Management Agreementwith First National Bank of Omaha (the “Program Manager”). Theseven-year contract ending December 17, 2017 was extended foran additional three-year term ending December 17, 2020. Underthis contract, the Program Manager provides day-to-dayadministrative and marketing services to the Plan. The ProgramManager is a subsidiary of First National of Nebraska, Inc., thelargest privately owned banking company in the United States.For more than 160 years, First National Bank of Omaha hasdedicated itself to providing quality products and superiorservice. First National of Nebraska, Inc. and its affiliates have$23 billion in managed assets and 5,000 employee associates.
The Program Manager has entered into a distribution agreementwith First National Capital Markets, Inc. (the “PrimaryDistributor”). First National Capital Markets is the underwriter.The Primary Distributor and Program Manager are affiliatedcompanies. You will be able to open an account and makecontributions to your account through your State Farm RegisteredRepresentative.
The Program Manager has entered into a sub-administrationagreement with State Farm. Under this contract, State Farm willassist in certain marketing and administrative services for thoseinterested in investing in the State Farm Plan.
Contributing to an accountThe Plan is open to residents of any state, not just residents ofNebraska. As long as you have a Social Security number ortaxpayer identification number, and a residential street address inthe United States (including Puerto Rico, Guam or the U.S. VirginIslands), you may open and contribute to an account regardless ofyour income or the age of the Beneficiary.
While there are no limits on the number of accounts an accountowner can own, no additional contributions may be made for thebenefit of a particular Beneficiary when the fair market value of allaccounts owned by all account owners within the Trust for thatBeneficiary exceeds $400,000 (the “Maximum ContributionLimit”). If, however, the market value of such accounts falls belowthe Maximum Contribution Limit, additional contributions will beaccepted. The $400,000 per Beneficiary Maximum ContributionLimit applies to all accounts for the same Beneficiary in all plansadministered by the Nebraska State Treasurer, including the StateFarm Plan, the NEST Advisor Plan, the NEST Direct Plan, and theTD Ameritrade 529 College Savings Plan.
Investment OptionsThe Plan has eight Investment Options from which to choose: oneAge-Based Investment Option and seven Static InvestmentOptions. The Age-Based Investment Option and StaticInvestment Options invest in specified allocations of domesticequity, real estate, international equity, international bond, fixedincome funds, and cash equivalent investments (money marketfunds). The Bank Savings Static Investment Option invests in anFDIC-insured savings account.
Account owners do not (1) own shares of the underlying funds or(2) in the case of the Bank Savings Static Investment Option,directly hold a savings account but, rather, own an interest in theInvestment Options offered by the Plan. Account owners may notdeposit directly into the Savings Account at a Bank branch orotherwise. See “Part 6 – Investment Options Overview.” TheInvestment Options have been reviewed and approved by theNebraska Investment Council.
Working with your State Farm Registered Representative you canchoose an Investment Option that is tailored to meet yourinvestment risk and return profile. Accounts are offered throughState Farm Registered Representatives to assist you indetermining whether an investment in the Plan is right for you.
Federal income tax benefitsInvestment earnings on your contributions accumulate on atax-deferred basis while in an account. Qualified Withdrawals areexempt from federal and Nebraska state income tax if they areused to pay for the Beneficiary’s Qualified Higher EducationExpenses. Qualified Higher Education Expenses include aBeneficiary’s tuition, fees, books, supplies, equipment requiredfor the enrollment or attendance of the Beneficiary at an EligibleEducational Institution and the purchase of computer orperipheral equipment, computer software, or Internet access and..
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11
related services, if such equipment, software, or services are to beused primarily by the Beneficiary during any of the years theBeneficiary is enrolled at an Eligible Educational Institutionregardless of whether such technology or equipment is requiredby the Eligible Educational Institution. Computer software meansany program designed to cause a computer to perform a desiredfunction. Such term does not include any database or similar itemunless the database or item is in the public domain and isincidental to the operation of otherwise qualifying computersoftware. Computer software designed for sports, games, orhobbies is not included unless this software is predominantlyeducational in nature. For Beneficiaries enrolled at an EligibleEducational Institution on at least a half time basis, theBeneficiary’s room and board expenses also qualify as QualifiedHigher Education Expenses.
The earnings portion (if any) of a Non-Qualified Withdrawal will betreated as ordinary income to the recipient and may also besubject to an additional 10% federal tax, as well as partialrecapture of any Nebraska state income tax deduction previouslyclaimed.
Nebraska state tax deductionContributions by an account owner who files a Nebraska stateincome tax return, including the principal and earnings portions ofrollovers from another qualified college savings plan not issued bythe State of Nebraska, are deductible in computing the accountowner’s Nebraska taxable income for Nebraska income taxpurposes in an amount not to exceed $10,000 ($5,000 for marriedtaxpayers filing separate returns) in the aggregate for allcontributions to all accounts within the Trust in any taxable year.Contributions by a custodian of an UGMA or UTMA account whois also the parent or guardian of the Beneficiary of an UGMA orUTMA account may claim this deduction. See “Part 14 – Federaland State Tax Considerations” for important additionalinformation about state tax benefits.
Taxpayers and residents of other statesInvestors should consider before investing whether their or theirBeneficiary’s home state offers any state tax or other statebenefits such as financial aid, scholarship funds, and protectionfrom creditors that are only available for investments in suchstate’s qualified tuition program and should consult their taxadvisor, attorney and/or other advisor regarding their specificlegal, investment or tax situation.
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PART 2 – LEGAL DESCRIPTION OF THE PLAN
The Trust and PlanThe State Farm Plan is one of four college savings plans issued bythe Nebraska Educational Savings Plan Trust. The Plan isauthorized by the State of Nebraska and is designed to qualify asa tax-advantaged qualified tuition program under CodeSection 529. The primary purpose of the Trust and Plan is topromote and enhance the affordability and accessibility of highereducation by offering a convenient and tax-advantaged way tosave for the cost of tuition and other Qualified Higher EducationExpenses. Amounts contributed to the Plan are invested in theTrust. The Trust holds the assets of the Plan, including allcontributions made to accounts established by account owners.
The TreasurerThe Plan is overseen by the Nebraska State Treasurer, as Trusteeof the Trust. As Trustee, the Nebraska State Treasurer isresponsible for the overall administration of the Plan. The Plan issubject to the rules and regulations established by the NebraskaState Treasurer. A copy of these rules and regulations is availableupon request to the Primary Distributor or your State FarmRegistered Representative.
The Nebraska Investment CouncilThe Nebraska Investment Council is responsible for investmentoversight for the Trust and the Plan. The Nebraska InvestmentCouncil is responsible for the investment of money in the Trustand the selection of all Investment Options offered through thePlan.
The Program ManagerThe Nebraska State Treasurer, as Trustee, has engaged theProgram Manager to administer and market the Plan on behalf ofthe Trustee. The Program Manager works with the Treasurer toprovide day-to-day administrative and marketing services to thePlan. The Primary Distributor works with the Program Manager toengage State Farm and State Farm Registered Representatives toassist in marketing the State Farm Plan accounts.
No insurance and no guaranteesExcept for the Bank Savings Static Investment Option,investments in the State Farm 529 Savings Plan are notguaranteed or insured by the FDIC or any other governmentagency and are not deposits or other obligations of anydepository institution. Investments are not guaranteed orinsured by the State of Nebraska, the Nebraska StateTreasurer, the Nebraska Investment Council, State Farm orFirst National Bank of Omaha or its authorized agents or theiraffiliates, and are subject to investment risks, including loss ofthe principal amount invested. FDIC insurance is provided forthe Bank Savings Static Investment Option up to themaximum amount set by federal law, currently $250,000.
The value of your account may vary depending on marketconditions, the performance of the Investment Options youselect, the timing of purchases, and fees. The value of your
account could be more or less than the amount you contributeto your account. In short, you could lose money.
FDIC insurance is provided for the Bank Savings StaticInvestment Option only, which invests in an FDIC-insuredomnibus savings account held in trust by the NebraskaEducational Savings Plan Trust at First National Bank ofOmaha. Contributions to, and earnings on, the investments inthe Bank Savings Static Investment Option are insured by theFDIC on a per participant, pass-through basis to each accountowner up to the maximum limit established by federal law,which currently is $250,000.
The Plan is not a mutual fundNeither the State Farm Plan nor your account is a mutual fund,and you do not own shares in the underlying investments held inthe Investment Options offered through the Plan. Investments inthe Plan are considered municipal fund securities, which are notregistered with the SEC or any state securities commission.
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13
PART 3 – OPENING AND MAINTAININGAN ACCOUNT
Using State Farm Registered RepresentativesAccounts in the State Farm Plan are only offered by the PrimaryDistributor and through State Farm Registered Representatives tooffer accounts to their customers. Contributions to a Plan accountwill be invested after applicable sales charges are deducted. Toopen an account, contact your State Farm RegisteredRepresentative directly for specific instructions or assistance onhow to complete and submit the Enrollment Form.
Who can open an accountAn account may be opened by an individual, certain entities(including a partnership, corporation, estate or association that isdomiciled in the United States), a custodian under a state’sUGMA or UTMA statute, or a trust to save for the Qualified HigherEducation Expenses of a Beneficiary. An account may also beestablished by a state or local government or a tax-exemptorganization described in Code Section 501(c)(3) as part of ascholarship program operated by the government or organizationwithout naming a specific Beneficiary when the account isopened. Each account owner must have a Social Security numberor taxpayer identification number and a residential U.S. streetaddress.
You may select multiple Investment Options for the account youopen for your Beneficiary when you complete the EnrollmentForm or at a later date. All Investment Options opened by you foryour Beneficiary will be placed into a single account.
No limits on the number of accountsA single account can include different Investment Options for thesame Beneficiary. Separate accounts may be established for thesame Beneficiary by different account owners. An account ownermay open multiple accounts for different Beneficiaries. Joint ormultiple account owners are not permitted.
RestrictionsWhen an account owner or the address is changed on an account,there is a 10-business-day hold before a withdrawal can be made.A withdrawal request must be signature guaranteed if the requestis within 10 business days of the change to have the withdrawalreleased before the hold period expires.
Maximum limits on contributionsWhile there are no limits on the number of accounts an accountowner can own, no additional contributions may be made for thebenefit of a particular Beneficiary when the fair market value of allaccounts owned by all account owners within the Trust for thatBeneficiary equals the $400,000 Maximum Contribution Limit. If,however, the fair market value of such accounts falls below theMaximum Contribution Limit, additional contributions will beaccepted. The Maximum Contribution Limit applies to allaccounts for the same Beneficiary in all plans administered by theNebraska State Treasurer, including the State Farm Plan, theNEST Advisor Plan, the NEST Direct Plan and the TD Ameritrade529 College Savings Plan.
Completing and submitting an Enrollment FormTo open an account, you must complete an Enrollment Form andreturn it to your State Farm Registered Representative. Bycompleting and submitting an Enrollment Form, you agree to bebound by the terms and conditions of the Program DisclosureStatement and Participation Agreement, which govern your rights,benefits and obligations as an account owner. The current versionof the Participation Agreement is included as Exhibit A to thisProgram Disclosure Statement.
Any amendments to the Code, Nebraska law, or regulationsrelating to the Plan may automatically amend the terms of yourParticipation Agreement, and the Trustee may amend yourParticipation Agreement at any time and for any reason by givingyou written notice of such amendments.
You can obtain an Enrollment Form by:Contacting your State Farm Registered Representative
Downloading the form at www.statefarm.com
Writing the State Farm Plan at:P.O. Box 419096Kansas City, MO 64141-9096
Calling the State Farm Plan at:800-321-75208:00 a.m. – 8:00 p.m. Central TimeMonday – Friday
Required informationThe Federal U.S.A. Patriot Act requires the Program Manager toobtain, verify, and record information that identifies each personwho opens an account. You are required to provide the accountowner’s name, street address, date of birth, citizenship status, andSocial Security or taxpayer identification number. Your accountwill not be opened if you do not provide the Program Managerwith this information. If the Program Manager is unable to verifyyour identity, it reserves the right to close the account at the nextcalculated unit price following such determination, at your risk, ortake other steps it deems reasonable.
Choosing an Investment OptionYou must select one or more Investment Options in an account foryour Beneficiary when you open an account or at a later date. AllInvestment Options selected by you for your Beneficiary will be placedinto a single account. See “Part 6 – Investment Options Overview.”
Account ownershipIndividual account owner – An individual account owner who hasreached the age of majority, with a valid Social Security number ortaxpayer identification number and a residential street address inthe United States, Puerto Rico, Guam or the U.S. Virgin Islands canopen an account. The account owner must register the accountwith a U.S. residential street address when an account is openedbut may also designate a U.S. Post Office box to receive mail.There may only be one account owner – joint or multiple account..
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14
ownership is not allowed. If an account owner changes his or heraddress on his or her account from a U.S. address to a foreignaddress contributions to the account will no longer be allowed.
Change in ownership – You may change ownership of youraccount to another individual or entity that is eligible to be anaccount owner. When you transfer ownership of your account, youare not required to change the Beneficiary. A change ofownership of an account will only be effective if the assignment isirrevocable and transfers all ownership rights. To be effective, atransfer of ownership of your account also requires the newaccount owner to complete and execute an Enrollment Form (andthereby enter into a Participation Agreement), and an AccountInformation Change Form completed by the current accountowner. You should consult your tax advisor regarding thepotential gift and/or generation-skipping transfer taxconsequences of changing ownership of your account.
Trusted Contact – You may designate someone you trust who isat least 18 years of age (a “Trusted Contact”) to act as a resourceif we lose contact with you or believe you and/or your assets areat risk. By choosing to provide information about a TrustedContact, you authorize us to contact this person and discloseinformation about your account to that person in the followingcircumstances: to address possible financial exploitation; toconfirm the specifics of your current contact information, yourhealth status, or the identity of any legal guardian, executor,trustee or holder of a power of attorney, or as otherwisepermitted by FINRA Rule 2165 (Financial Exploitation of SpecifiedAdults). Designating a Trusted Contact does not mean you areauthorizing him or her to act on your account. Instead, he or shecan be a resource to protect your account from suspected fraudor if you are unable to speak for yourself. We will not releaseinformation beyond what is necessary to protect you and/or yourassets from potential harm. To designate or change a TrustedContact please call the Plan.
Death or legal incapacity of the account owner and successoraccount owner – On your Enrollment Form, you may designate asuccessor account owner to take ownership of your account in theevent of your death or legal incapacity. A successor accountowner can be an individual, entity or trust but cannot be a minor.If you have already established an account, you may designate asuccessor account owner or change your designation bycompleting the appropriate form which may be obtained bycontacting your State Farm Registered Representative throughwhich you opened your account, submitting a form available onthe Plan’s website or by calling the Plan. If you do not designate asuccessor account owner, then the Beneficiary, rather than yourestate, shall be named the account owner.
Before the successor account owner will be permitted to transactbusiness in respect to your account, he or she will be required toprovide a certified copy of the death certificate, in the case of thedeath of the account owner, or an acceptable medicalauthorization or court order in the case of the legal incapacity ofthe account owner, and execute a new Enrollment Form,
accepting the terms of the then-current Program DisclosureStatement and Participation Agreement. If the new account owneris an entity or trust, appropriate documentation may be requiredto accompany the Enrollment Form.
Custodial accounts – If a custodian holding assets under a state’sUGMA or UTMA statute establishes an account, the minor forwhose benefit the custodian holds the UGMA or UTMA accountassets must be designated as the account owner and Beneficiaryof the account. The custodian must complete the EnrollmentForm and assume account owner responsibilities until theBeneficiary reaches the age of majority under the applicableUGMA or UTMA statute, at which time the Beneficiary will assumeaccount owner responsibilities. At the time the Beneficiaryreaches the age of majority, the custodian must submit asignature guaranteed letter of authorization, an Enrollment Formaccepting the terms of the then-current Program DisclosureStatement and Participation Agreement, and a certified copy ofthe Beneficiary’s birth certificate indicating that the Beneficiaryhas reached the age of majority.
The custodian must liquidate the assets from the current UGMAor UTMA account (which may be subject to federal and stateincome taxes) for deposit into the Plan’s custodial account.Money in a custodial account is irrevocable and is a permanentgift to the Beneficiary. Money in a custodial account can only beused for the Beneficiary’s expenses. However, any earningsportion of any Non-Qualified Withdrawal made before theBeneficiary reaches the age of majority will be included in theincome of the Beneficiary.
The custodian will not be permitted to change the account owneror Beneficiary of a custodial account or transfer assets to anotherBeneficiary. The custodian will be required to certify on awithdrawal form that the withdrawal is for the benefit of theBeneficiary. Any contributions to a custodial account holdingUGMA or UTMA funds will be subject to these restrictions.
A custodian can be changed on a custodial account by providingsupporting documentation in writing from the current custodian orsubmitting a valid court order appointing another person as thecustodian. The new custodian must complete an Enrollment Formavailable from a State Farm Registered Representative,downloading a form from the Plan’s website, or by calling the Plan.
None of the Program Manager or its agents or their affiliates, theTrustee, the Nebraska Investment Council, or the State ofNebraska will assume responsibility to ensure, or will incur anyliability for failing to ensure, that a custodian applies assets heldunder an UGMA or UTMA custodianship for proper purposes.Liquidating an UGMA or UTMA account for deposit into the StateFarm Plan may trigger tax consequences. Custodians shoulddiscuss the tax implications with their tax advisors beforetransferring funds to the State Farm Plan.
Accounts owned by minors – As of February 1, 2016 a minor mayonly be named an account owner in the event of the death or..
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15
legal incapacity of the account owner in which a successoraccount owner had not been designated for that account. If at thetime of the account owner’s death or legal incapacity theBeneficiary is a minor, the minor will become both the accountowner and the Beneficiary of the account. The parent or legalguardian of the minor Beneficiary must provide a letter ofinstruction, a certified copy of the account owner’s deathcertificate or other proof of legal incapacitation, and execute anew Enrollment Form, accepting the terms of the then-currentProgram Disclosure Statement and Participation Agreement.
For all minor-owned accounts opened prior to or after February 1,2016, the parent or legal guardian must assume account ownerresponsibilities until the Beneficiary reaches the age of majority asdesignated by his or her residential state. At the time theBeneficiary reaches the age of majority, the parent or legalguardian or the Beneficiary must submit a signature guaranteedletter of authorization, an Enrollment Form signed by theBeneficiary who has reached the age of majority accepting theterms of the then-current Program Disclosure Statement andParticipation Agreement, and a certified copy of the Beneficiary’sbirth certificate indicating that the Beneficiary has reached theage of majority.
As with UGMA or UTMA accounts, the parent or guardian will notbe permitted to change the account owner or Beneficiary of theaccount or transfer assets to another Beneficiary. The parent orguardian will be required to certify on a withdrawal form that thewithdrawal is for the benefit of the Beneficiary.
Entity-owned accounts – If the account owner is a partnership,corporation or other entity, the entity must provide a validtaxpayer identification number, and the name and title of acontact person authorized by the entity to act in its capacity. Theentity must be domiciled in the U.S. including Puerto Rico, Guam,and the U.S. Virgin Islands. The entity may be required to provideappropriate documentation to accompany the Enrollment Form.
When signing Plan forms or conducting a transaction, the personauthorized to act on behalf of the entity will certify that he or shecontinues to be authorized to act on behalf of the entity. TheProgram Manager will presume that any entity documentsprovided are valid, effective to bind the entity, and will have noliability for defective documentations submitted by the authorizedcontact person.
Trust accounts – If the account owner is a trust, the trustee shouldconsult with his or her legal and tax advisors before establishingthe account. This Program Disclosure Statement does not attemptto address the income or transfer tax consequences ofinvestments in the Plan made by a trust or the propriety of suchan investment under state trust law. The trustee may be requiredto submit documents when an account is opened. Call the Planfor more information.
Accounts for infants – All Beneficiaries must have a Social Securitynumber or taxpayer identification number. If you have an infant,
you cannot open an account until you obtain a Social Securitynumber or taxpayer identification number for that infant.
Maintaining and reviewing your accountThe Plan will send you confirmation statements each time financialtransactions are made (with the exception of age-band rolls, asystematic contribution through AIP, payroll deduction,systematic exchanges, or transfers from a Upromise® by SallieMae® Account) as well as when there are changes to your accountregistration. For quarters one, two and three, if there werefinancial transactions during the quarter, the Plan will also sendyou a quarterly statement that indicates the current accountbalance and financial transactions made during the quarter andtransactions from previous quarters within the same calendar year,if applicable. For the fourth quarter, the Plan will send all accountowners an annual statement that will include all financialtransactions during the entire year. All quarterly statements areavailable to view and download online at any time. You can checkyour account balances and transaction history online atwww.statefarm529.com, by contacting your State Farm RegisteredRepresentative, or by calling the Plan. Contributors who are notaccount owners will not receive any notification of a transactionnor will they have any right to the account or to receiveinformation about the account. Account owners can request thatan interested party receive duplicate statements.
Program Manager’s right to terminate, freeze, orsuspend, or redeem your accountThe Program Manager can terminate the account if the accountowner provided false or misleading information or if the accountreaches a zero balance. In addition, if there has been no activity inthe account and the Program Manager or its designee has notbeen able to contact the account owner for a period of at leastfive years, the account may be considered abandoned underNebraska state law. If the account is considered abandoned, itmay, without authorization from the account owner, betransferred to the Nebraska State Treasurer’s Unclaimed PropertyDivision. The Program Manager can freeze the account orsuspend account services if the Program Manager reasonablybelieves there is a dispute regarding the assets in the account,that fraudulent transactions may have occurred, upon notificationof the death of an account owner until the Program receivesrequired documentation in good order and reasonably believes itis lawful to transfer account ownership to the successor accountowner, or if there is suspicious conduct relating to the account.
Per FINRA Rule 2165 (Financial Exploitation of Specified Adults),the Plan may place a temporary hold on a disbursement of fundsor securities from the account of a specified adult if the Plan hasreason to believe that financial exploitation has occurred, isoccurring or has been occurring. A “Specified Adult” is (a) anatural person age 65 and older; or (b) a natural person age 18and older who the Plan believes has a mental of physicalimpairment that renders the individual unable to protect his or herown interests.
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Account opening errorlf the account owner believes that a new account’s InvestmentOption was not what the account owner indicated on theEnrollment Form, or if the Beneficiary’s age is incorrect, the Planmust be notified within 60 calendar days from the date theaccount opening confirmation was mailed. If you do not notify thePlan within 60 calendar days, you will be considered to haveapproved the information in the confirmation and to havereleased the State of Nebraska, the Nebraska Investment Council,the Trustee, the Nebraska State Investment Officer, State Farm,and the Program Manager or its authorized agents or theiraffiliates, of responsibility for all matters covered by theconfirmation. After 60 calendar days, the assets will remain in theInvestment Option until withdrawn or when the account ownerrequests an Investment Option change. The Program Managermay waive the 60-calendar-day notice requirement at its solediscretion in the event an error has occurred.
Documents must be in good orderIn order to timely process any transaction, such as opening anaccount in or processing a contribution to the Plan, all necessarydocuments must be in good order. Documents are in good orderwhen they are fully, properly and accurately completed, executed(where necessary) and received by the Program Manager or itsauthorized agents for processing. For example, in order for anEnrollment Form or a contribution to be received in good order,certain information must be provided. Where information ismissing, an Enrollment Form or a contribution is not received ingood order and processing may be delayed or the Form or thecontribution may be returned to you.
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PART 4 – BENEFICIARIES
BeneficiaryThe Beneficiary is the individual for whom Qualified HigherEducation Expenses are expected to be paid from the account.Any individual with a valid Social Security number or taxpayeridentification number can be a Beneficiary. A Beneficiary can beof any age and need not be a resident of the State of Nebraska orof the United States.
An account owner does not have to be related to the Beneficiary.However, if you change the Beneficiary in the future, the newBeneficiary must be a Member of the Family of the formerBeneficiary in order to avoid a taxable transaction.
One BeneficiaryEach account may have only one Beneficiary, but differentaccount owners may establish different accounts for the sameBeneficiary. An account owner may also name himself or herself asthe Beneficiary.
Infant BeneficiaryAll Beneficiaries must have a Social Security number or taxpayeridentification number. An account cannot be opened until youcan provide the Plan with the infant’s Social Security number ortaxpayer identification number.
Scholarship account BeneficiaryIf an account is established by a state or local government (oragency or instrumentality thereof) or an organization described inCode Section 501(c)(3) as part of a scholarship program operatedby the government or organization, the Beneficiary is not requiredto be identified on the Enrollment Form at the time the account isestablished. The government or organization shall designate theBeneficiary prior to any distributions for Qualified HigherEducation Expenses from the account.
UGMA or UTMA or minor-owned account BeneficiaryIf the source of contributions to an account was a state UGMA orUTMA funds or if the account is owned by a minor, the Beneficiaryof the account may not be changed even if the new Beneficiary isa Member of the Family of the original Beneficiary of the account.
Changing the BeneficiaryExcept as set forth below, an account owner may change theBeneficiary at any time without adverse federal income taxconsequences if the new Beneficiary is a Member of the Family ofthe former Beneficiary. Upon a change in Beneficiary, the accountowner may also change the Investment Options in which theaccount is invested.
However, upon a change of Beneficiary, the existing assets plusthe assets moved to the new Beneficiary’s account cannot resultin the total account values in all accounts in the Trust for the newBeneficiary to exceed the Maximum Contribution Limit.
If the new Beneficiary is not a Member of the Family of the formerBeneficiary, then the change is treated as a Non-Qualified
Withdrawal that is subject to federal and state taxes and anadditional 10% federal tax on any earnings, as well as partialrecapture of any Nebraska state income tax deduction previouslyclaimed.
To change the Beneficiary of an account, you should contact theState Farm Registered Representative through which youestablished your account. He or she will assist you in completingthe appropriate paperwork. Or you can visit the Plan’s website atwww.statefarm.com to download the appropriate form.
An account owner may change the Beneficiary at any time withoutadverse federal income tax consequences if the new Beneficiary isa Member of the Family of the former Beneficiary.
A Beneficiary cannot be changed on an UGMA or UTMA orminor-owned account.
Member of the FamilyA Member of the Family is defined as anyone who is related tothe Beneficiary in one of the following ways:
• A son or daughter, or a descendant 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 Beneficiary or the spouse of any of the
foregoing individuals; or• A first cousin of the Beneficiary.
For purposes of determining who is a Member of the Family, alegally adopted child or a foster child of an individual is treated asthe child of such individual by blood. The terms “brother” and“sister” include half-brothers and half-sisters.
Death of a BeneficiaryUpon the death of a Beneficiary, the account owner can changethe Beneficiary on the account, transfer assets to anotherBeneficiary who is a Member of the Family of the formerBeneficiary, or take a Non-Qualified Withdrawal. SomeNon-Qualified Withdrawals following the death of the Beneficiaryare not subject to the additional 10% federal tax. See “Part 13 –Distributions from an Account.”
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PART 5 – CONTRIBUTING TO AN ACCOUNT
ContributionsAnyone can contribute to a State Farm Plan account but only theaccount owner can (1) control how the assets are invested andused, (2) designate a Beneficiary, and (3) claim tax benefits relatedto the account, regardless of who contributed to it.
Contribution restrictionsAll contributions must be cash-equivalent and denominated inU.S. dollars. Cash is not accepted. The Program Manager will holdall contributions up to five business days before a withdrawal ofthose assets can occur.
Minimum contribution amountsThe minimum initial contribution amount is $250 per accountunless the Account Owner signs up for AIP or payroll deduction ofat least $50 per month. The minimum subsequent contributionamount is $50.
Limits on maximum contributions to an accountAdditional contributions to an account are not permitted whenthe fair market value of all accounts owned by all account ownerswithin the Trust for that Beneficiary equals the MaximumContribution Limit. If, however, the market value of such accountsfalls below the Maximum Contribution Limit, additionalcontributions will be accepted.
The $400,000 per Beneficiary Maximum Contribution Limit appliesto all accounts for the same Beneficiary in all plans administeredby the Nebraska State Treasurer, including the State Farm Plan,the NEST Advisor Plan, the NEST Direct Plan, and the TDAmeritrade 529 College Savings Plan. The Nebraska StateTreasurer may periodically adjust the Maximum ContributionLimit.
Excess contributionsThe Program Manager will notify you if you attempt to make acontribution to an account that exceeds the MaximumContribution Limit. The Program Manager will not knowinglyaccept and will reject contributions in excess of the MaximumContribution Limit. Contributions will be deposited up to theMaximum Contribution Limit and the remainder will be refundedless any amounts attributable to market losses suffered betweenthe date of the contribution and the date of the refund. If theProgram Manager determines that a contribution in excess of theMaximum Contribution Limit has been accepted, the excesscontributions and any earnings thereon will be promptlyrefunded. If a contribution is applied to an account and it is laterdetermined that the contribution resulted in exceeding theMaximum Contribution Limit, the excess contribution and anyearnings will be refunded to the account owner. Any refund of anexcess contribution may be treated as a Non-QualifiedWithdrawal.
Allocation of contributionsAt the time an account is established, you must select how youwant the contributions allocated among the Investment Options
you selected for future contributions (“Standing Allocation”).Additional contributions will be invested according to theStanding Allocation unless you provide us with differentinstructions. You may reallocate assets to different InvestmentOptions twice per calendar year and with a permissible change inthe Beneficiary. You can view your Standing Allocation any timeonline. You can change your Standing Allocation any time byaccessing the Plan’s secure website, by submitting a formavailable through your State Farm Registered Representative, bydownloading and submitting a form available on the Plan’swebsite, or by calling the Plan.
Systematic Exchange ProgramThe Systematic Exchange Program allows the exchange of aminimum of $200 from one Investment Option to anotherInvestment Option on a pre-scheduled basis (“SystematicExchange”).
In order to establish the Systematic Exchange Program, you mustdeposit a minimum contribution of at least $2,500 into a “source”Investment Option. When you establish a Systematic Exchange,you must select a preset dollar amount of $200 or more to beexchanged into each of one or more preselected “receiving”Investment Options over a preset period of time, either monthlyor quarterly. Any Age-Based, Static or Individual InvestmentOption can serve as the source Investment Option or receivingInvestment Option.
Systematic Exchange does not ensure a profit or protect againstloss in a declining market. Systematic Exchange commits you to apreset investment in the receiving Investment Option(s) selectedregardless of fluctuating prices.
If Systematic Exchange is selected at the time that an account isopened or after an account is opened and is selected for newcontributions, it will be considered the initial investment strategyfor that account and not be counted toward the investmentchange limit for that Beneficiary for the calendar year.
If Systematic Exchange is selected for money already depositedinto an account after an account is opened or if any changes to acurrent Systematic Exchange Program are made, that selection orchange will be counted toward the investment change limit forthat Beneficiary for the calendar year.
Before establishing a Systematic Exchange Program, you shouldcarefully consider with your State Farm Registered Representativethe risks associated with selecting and creating a SystematicExchange Program.
Contributions by non-account ownersAnyone can make contributions to an account. However, only theaccount owner and a custodian of an UGMA or UTMA accountwhere the custodian is the parent or guardian of the Beneficiary ofan UGMA or UTMA account, are eligible for a Nebraska stateincome tax deduction for contributions made by him or her. Inaddition, only the account owner maintains control over all..
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19
contributions to an account regardless of their source, includingthe right to change Investment Options and make withdrawalsfrom an account. For the purpose of an UGMA or UTMA or minor-owned account, the minor is the account owner.
Under current law, the gift and generation-skipping transfer taxconsequences of a contribution by anyone other than the accountowner are unclear. Accordingly, if a person other than the accountowner plans to make a contribution to an account, that personshould consult his or her own tax or legal advisors as to theconsequences of a contribution.
Contribution methodsContributions can be made to an account by:• Contributing electronically from your bank account• Check• Wire Transfer• Payroll deduction• Rollover from another qualified tuition program• Coverdell ESA• Redemption from certain U.S. Savings Bonds• Transfer within the State Farm Plan• UGMA or UTMA accounts• Transfer from Upromise® by Sallie Mae® Account• Contributions from Ugift®
Contributing electronically from your bank accountAccount owners can authorize contributions from their checkingor savings bank account into their State Farm Plan account forone-at-a-time contributions (an “Electronic Funds Transfer” or“EFT”) or prescheduled, ongoing contributions (“AutomaticInvestment Plan” or “AIP”), subject to certain processingrestrictions. The bank from which the contribution is drawn mustbe a member of the Automated Clearing House. You canauthorize these instructions when you complete an EnrollmentForm, or, after your account is opened, online by accessing thesecure website, by submitting a form available through your StateFarm Registered Representative, by downloading and submittinga form available on the Plan’s website, or by calling the Plan (ifyou have previously submitted certain information about the bankaccount from which the money will be withdrawn).
For both EFT and AIP you must provide the Plan with yourbanking instructions. For AIP you must also indicate the amountand frequency you want the ongoing contributions to occur. If theaccount owner does not own the bank account, the bank accountowner must authorize in writing the use of the other person’s bankaccount. This can be accomplished on the form that establishes orchanges bank account information for your account. The bankmust be a U.S. bank and the contribution must be in U.S. dollars.
You can initiate EFT contributions, change your bank, stop AIP, orchange your AIP contribution amount or frequency online byaccessing the secure website. You can also make such changes bysubmitting a form available through your State Farm RegisteredRepresentative or on the Plan’s website or by calling the Plan.
If your EFT or AIP contribution cannot be processed because ofinsufficient funds or incomplete or inaccurate information, or if thetransaction would violate processing restrictions, the Plan reservesthe right to suspend future EFT or AIP contributions. A $25 chargemay be assessed for rejected electronic transfers from bankaccounts against each account that was the proposed recipient ofthe attempted contribution. The account owner will also beresponsible for any losses or expenses incurred by the InvestmentOption.
We do not charge a fee for accepted EFT or AIP transactions.
Automatic Investment Plan (AIP)When you contribute to your account through AIP you areauthorizing us to receive periodic automated debits from achecking or savings account at your bank (if your bank is amember of the Automated Clearing House), subject to certainprocessing restrictions. Your AIP authorization will remain in effectuntil we have received notification of its termination from you andwe have had a reasonable amount of time to act on it. AIP debitsfrom your bank account will occur on the day you indicate,provided the day is a regular business day. If the day you indicatefalls on a weekend or a holiday, the AIP debit will occur on thenext business day (“debit date”). Quarterly AIP debits will bemade on the day you indicate (or the next business day, ifapplicable). You will receive a trade date of the business day onwhich the bank debit occurs.
The start date for an AIP must be at least three business days fromthe date of submission of the AIP request. If a start date for an AIPis less than three business days from the date of the submission ofthe AIP request, the AIP will start on the requested day in the nextsucceeding period.
A program of regular investments cannot assure a profit orprotect against a loss in a declining market.
Electronic Funds Transfer (EFT)If you have identified a checking or savings account from whichthe money will be withdrawn, you may authorize us to withdrawfunds by EFT for contributions into your account. EFTcontributions can be made online or by calling the Plan. The Planmay place a limit on the total dollar amount per day you maycontribute to an account by EFT. EFT purchase requests that arereceived in good order:
• Before 10 p.m. Eastern Time will be given a trade date of thenext business day after the date of receipt and will beeffective at that day’s closing price for the applicableInvestment Option or Portfolio. In such cases, the EFT debitfrom your bank account will occur on the second businessday after the request is received; or
• After 10 p.m. Eastern Time will be given a trade date of thesecond business day after the date the request is received,and they will be effective at that day’s closing price for theapplicable Investment Option or Portfolio. In such cases, theEFT debit from your bank account will occur on the third..
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20
business day after the request is received. Your trade datewill be on the business day prior to your debit date.
ChecksChecks should be made payable to “State Farm 529 SavingsPlan.” A contribution by mail coupon should accompany thecheck. Contribution by mail coupons are sent to you when anaccount is opened, when a transaction is performed, and instatement mailings. You can also download a contribution couponfrom www.statefarm.com. If a coupon is not available, include theaccount number and name of the Beneficiary on the check orinclude separate written instructions. All checks must be in goodorder. Some checks that will also not be accepted include:travelers checks, foreign checks, checks dated more than 180 daysfrom the date of receipt, post-dated checks, checks with unclearinstructions, starter checks or counter checks, credit card or bankcourtesy checks, promotional checks, third-party personal checksover $10,000, instant loan checks, and any other check we deemunacceptable. Money orders are not accepted. Third-partypersonal checks must be payable to you or the Beneficiary and beproperly endorsed by you or the Beneficiary to the State Farm®
529 Savings Plan.
A $25 charge may be assessed for returned checks against eachaccount that was the proposed recipient of the attemptedcontribution. The account owner may also be responsible for anylosses or expenses incurred in the Investment Options.
Checks should be made payable to “State Farm 529 SavingsPlan” and can be sent to the following address:
Mailing Address:State Farm 529 Savings PlanP.O. Box 419096Kansas City, MO 64141-9096
For faster delivery, consider using the overnight or courieraddress below.
Overnight or Courier Address:State Farm 529 Savings Plan920 Main Street, Suite 900Kansas City, MO 64105
Wire transferWire transfers are initiated from the contributor’s financialinstitution. Please call the Plan to obtain information regardingwire transfers.
Payroll deductionContributions can be made into a State Farm Plan from apaycheck if the employer permits direct deposit. Payrolldeduction is made with after-tax dollars. Account owners initiatepayroll deduction and any changes directly with their employer.
Mistakes made by the employer can only be remedied betweenthe employee and the employer. The Plan will not take anyresponsibility for mistakes made by the employer or employee.
You must complete payroll deduction instructions by logging intoyour account at www.statefarm529.com, selecting the payrolldeduction option, and designating the contribution amount in theinstructions. You will need to print these instructions and submitthem to your employer.
RolloverContributions may also be made by a rollover or direct transfer offunds from another qualified tuition program. Rollovers fromanother qualified tuition program are treated as a non-taxabledistribution from the distributing qualified tuition program if you(1) change the Beneficiary of the account to a Member of the Familyof the former Beneficiary, or (2) do not change the Beneficiary if therollover does not occur within 12 months from the date of anyprevious rollover to a qualified tuition program for the Beneficiary.
To initiate a rollover from another qualified tuition program youmust first open a State Farm Plan account. You have the option ofwithdrawing funds from the former account and, if that is the case,you must deposit the funds within 60 days into either (1) anotheraccount for the benefit of another Beneficiary who is a Member ofthe Family of the former Beneficiary, or (2) an account in the StateFarm Plan account for the benefit of the same Beneficiary.
You may instruct the Plan to contact another qualified tuitionprogram directly to request that funds from your account in thatprogram be sent to the State Farm Plan. Check with the otherqualified tuition program first to determine the best approach foryou to take. You can call the Plan for further instructions.
Under Internal Revenue Service (IRS) guidance, the ProgramManager is required to assume that the entire amount of anycontribution that is a rollover contribution from another qualifiedtuition program is earnings in the account receiving thecontribution unless the Program Manager receives appropriatedocumentation showing the actual earnings portion of therollover contribution.
Account owners who are Nebraska taxpayers who roll over fundsinto the State Farm Plan may be eligible for a Nebraska stateincome tax deduction. See “Part 14 – Federal and State TaxConsiderations.” The qualified tuition program from which youare transferring funds may impose other restrictions on a rollover,such as the recapture of any state income tax deductionpreviously claimed, so you should investigate this optionthoroughly before requesting a transfer.
Coverdell Education Savings AccountContributions may also be made by a rollover or direct transfer offunds from a Coverdell Education Savings Account (“ESA”)(formerly known as an Education IRA). Amounts distributed froman ESA and contributed to an account may be treated asnon-taxable distributions from the ESA. The Program Managerwill waive the Up-Front Sales Load for a rollover of fundsrepresenting proceeds of a BlackRock® Coverdell EducationSavings Account. Call the Plan for more information andinstructions...
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Under IRS guidance, the Program Manager is required to assumethat the entire amount of any contribution that is a rollovercontribution from an ESA is earnings in the account receiving thecontribution unless the Program Manager receives appropriatedocumentation showing the actual earnings portion of thecontribution.
Redemptions from certain U.S. Savings BondsSubject to certain limitations, redemption of certain qualifiedUnited States Savings Bonds may be tax-free if the proceeds arecontributed to a Plan account. Certain rules and requirementsmust be met. For more information consult IRS Publication 970and your financial, tax or legal advisor.
Under IRS guidance, the Program Manager is required to assumethat the entire amount of any contribution that is a rollovercontribution from a qualified United States Savings Bond isearnings in the account receiving the contribution unless theProgram Manager receives appropriate documentation showingthe actual earnings portion of the contribution.
Transfers within the State Farm PlanFunds can be transferred between existing State Farm Planaccounts that have different owners or Beneficiaries (or both). Youcan also transfer the entirety or a portion of the account’sbalance. To initiate a transfer within the State Farm Plan, you mustcomplete and submit a form available from your State FarmRegistered Representative or the Plan’s website, or by calling thePlan. The total account assets for all accounts held on behalf ofthe Beneficiary to whom the money is being transferred cannotexceed the Maximum Contribution Limit.
Transfer to another account owner – The State Farm Plan permitsa transfer of a portion or the entire amount of an account toanother account owner. If the new account owner does not havean account, he or she must complete an Enrollment Form beforethe transfer of assets can occur. The current account owner mustalso submit an Account Information Change Form. You shouldconsider consulting a tax advisor about the potential taxconsequences of a change in account owner.
Transfer to another Beneficiary – The State Farm Plan permits thetransfer of a portion or the entire amount of an account toanother Beneficiary with either the same account owner or adifferent account owner. If 100% of the assets are beingtransferred to another Beneficiary for the same account owner,and an account has not been opened for that account owner andBeneficiary, a Beneficiary Change Form must be completed. Thenew Beneficiary must be a Member of the Family of the formerBeneficiary.
Transferring accounts among Nebraska-issued 529 qualifiedtuition plans – Transferring a portion or the entire amount of aState Farm Plan account to another account within the Trust forthe same account owner and Beneficiary is considered anInvestment Option change and requires the account owner tocomplete a change on an appropriate form. This change counts
toward the account owner’s twice per calendar year InvestmentOption change limit.
Potential tax consequences of a transfer – Transferring funds to aBeneficiary who is not a Member of the Family of the formerBeneficiary is considered a Non-Qualified Withdrawal by the IRSand may be subject to federal and state income taxes and anadditional 10% federal tax on the earnings portion of the transfer,as well as partial recapture of any Nebraska state income taxdeduction previously claimed.
UGMA or UTMA accountsA custodian for a minor under a state UGMA or UTMA statutemay liquidate the assets held in the UGMA or UTMA account toopen an account in the Plan, subject to the laws of the state underwhich the UGMA or UTMA account was established. If thecustodian of an UGMA or UTMA account establishes an account,the minor for whose benefit the assets are held must bedesignated as the account owner and Beneficiary of the account,and the custodian will not be permitted to change the Beneficiaryof the account or transfer assets to another Beneficiary. Thecustodian will be required to certify on a withdrawal form statingthat the distribution from the UGMA or UTMA account will beused for the benefit of the Beneficiary of the account.
When the Beneficiary reaches the age of majority under theapplicable state UGMA or UTMA statute and the custodianshipterminates, the Beneficiary will become the sole account ownerwith complete control over the account. The custodian is requiredto notify the Program Manager when the minor attains the age ofmajority under the applicable state UGMA or UTMA statute.
All contributions once made to an UGMA or UTMA account,regardless of their source, become subject to the limitationsdescribed above at the time of their contribution into an UGMAor UTMA account.
The conversion of non-cash UGMA or UTMA assets to cash forcontribution to a State Farm Plan account may be a taxabletransaction. Before liquidating assets in an UGMA or UTMAaccount in order to contribute them to an account, you shouldreview the potential tax and legal consequences with your tax andlegal advisors. Moreover, none of the Treasurer, the ProgramManager, or the Plan assumes responsibility to ensure, or willincur any liability for failing to ensure, that a custodian appliesassets held under an UGMA or UTMA custodianship for properpurposes.
Transfers from a Upromise® by Sallie Mae® AccountIf you are enrolled in the Upromise service, you can link thataccount to your State Farm Plan account and have all or a portionof your savings automatically transferred to your State Farm Planfrom your Upromise® by Sallie Mae® Account on a periodic basis.The minimum amount for an automatic transfer made from aUpromise® by Sallie Mae® Account to your Plan account iscurrently $25 and is subject to change. However, you cannot usethe transfer of funds from a Upromise® by Sallie Mae® Account as..
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22
the initial funding source for your Plan account. Transfers from aUpromise® by Sallie Mae® Account are not considered adeductible contribution for Nebraska state tax purposes.
This Program Disclosure Statement is not intended to providedetailed information concerning Upromise. Upromise isadministered in accordance with the terms and procedures setforth in the Upromise Member Agreement (as amended from timeto time), which is available by going to www.upromise.com. TheUpromise service is an optional service offered by Upromise, Inc.,is separate from the Plan, and is not affiliated with the State ofNebraska or the Program Manager. Terms and conditions applyto the Upromise service. Participating companies, contributionlevels and terms and conditions are subject to change at any timewithout notice.
Contributions through Upromise are subject to the MaximumContribution Limit and are non-commissionable. Upromise is aregistered service mark of Upromise, Inc.
Contributions from Ugift®
This free to use service gives account owners a simple way to askfamily and friends to celebrate birthdays, holidays, and otherevents with a gift contribution to a State Farm Plan account. Giftcontributions received in good order will be held by the ProgramManager for approximately five business days before beingtransferred into your Plan account. Contributions from Ugift frompersons other than the account owner are not considered adeductible contribution for Nebraska state tax purposes.
Gift contributions through Ugift are subject to the MaximumContribution Limit. Gift contributions will be invested accordingto the Standing Allocation on file for your account at the time thegift contribution is transferred. There may be potential taxconsequences of gift contributions invested in your account. Youand the gift giver should consult a tax advisor for moreinformation. Ugift is an optional service, is separate from the Plan,and is not affiliated with the State of Nebraska or the ProgramManager. Ugift can be initiated from the Plan’s website by clickingon the Ugift logo. Ugift is a registered service mark of AscensusBroker Dealer Services, LLC.
Contribution dateContributions are considered received on the date thecontribution is reviewed and processed by the Program Manageror its authorized agents. Contributions to an account that arereceived in good order before the market close (typically 4 p.m.Eastern Time) on any day the New York Stock Exchange (NYSE) isopen for business are generally processed on that day for theInvestment Options you selected. Contributions to an accountthat are received in good order after market close, or on a day theNYSE is closed for business, generally will be processed on thenext business day. Contributions received through the NationalSecurities Clearing Corporation or through certain financialinstitutions must be made in accordance with settlementprocedures agreed to by the financial institution and the ProgramManager.
Contributions sent by U.S. mail that are postmarked on or beforeDecember 31 will be treated as having been made in that yeareven if the check was actually received by the Program Manageror its authorized agents in good order in the next year, providedthe checks are subsequently cleared. For EFT contributions, fortax purposes, the contributions will be considered in that year ifthe EFT was initiated on or before December 31 of such year,provided the funds are successfully deducted from your checkingor savings account by your financial institution.
Regardless of the calendar year for which a contribution isdeductible, the trade date of the contribution (and thus the priceof the units purchased with the contribution) will be determinedbased on the day the contribution is received by the ProgramManager or its authorized agents in good order, and with respectto AIP contributions you will receive the trade date of the businessday on which the debit occurs. For EFT contributions, thefollowing applies:
• Before 10 p.m. Eastern Time will be given a trade date of thenext business day after the date of receipt and will beeffective at that day’s closing price for the applicableInvestment Option or Portfolio. In such cases, the EFT debitfrom your bank account will occur on the second businessday after the request is received; or
• After 10 p.m. Eastern Time will be given a trade date of thesecond business day after the date the request is received,and they will be effective at that day’s closing price for theapplicable Investment Option or Portfolio. In such cases, theEFT debit will occur on the third business day after therequest is received. Your trade date will be on the businessday prior to your debit date.
Contribution pricingThe unit price for each Investment Option is calculated at theclose of regular trading on the NYSE each day the NYSE is openfor trading. The unit price is calculated by dividing the value ofthe Investment Option’s net assets by the total number of units inthe Investment Option outstanding. The unit price is based on thevalue of the Investment Option underlying investments as well asexpenses and fees for administering and managing the StateFarm Plan. See “Part 12 – Plan Fees and Expenses.”
Contribution errorsIf the account owner believes an error was made regarding his orher contribution, the Program Manager must be notified within 60calendar days. If you do not notify the Plan within 60 days, you willbe considered to have approved the information in theconfirmation and to have released the State of Nebraska, theNebraska Investment Council, the Trustee, the Nebraska StateInvestment Officer, State Farm, and the Program Manager and itsauthorized agents or their affiliates of responsibility for all matterscovered by the confirmation. The Program Manager may waivethe 60-calendar-day notice requirement at its sole discretion.
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PART 6 – INVESTMENT OPTIONS OVERVIEW
Investment OptionsContributions to an account, less any applicable sales charges,will be invested in the Investment Options you select on theEnrollment Form. The Investment Options invest in one or moreinvestments, trust accounts, or other investment vehicles asdesigned by the Nebraska Investment Council. The InvestmentOptions described in this Program Disclosure Statement allowaccount owners to direct funds to specific investment categoriesand strategies approved by the Nebraska Investment Council.These may include Investment Options investing in domesticequity, real estate, international equity, international bond, fixedincome and money market funds, and an FDIC-insured savingsaccount.
You do not (1) own shares in the underlying funds or (2) in thecase of the Bank Savings Static Investment Option, directly hold asavings account but, rather, own an interest in the InvestmentOptions offered by the Plan. However, you may obtainprospectuses of the current investments and other investments inwhich the Plan is invested at any time by contacting your StateFarm Registered Representative.
8 Investment OptionsThere are eight separate Investment Options. The followingInvestment Options are available:
• 1 Age-Based Investment Option• 7 Static Investment Options
The Age-Based Investment Option is designed to become moreconservative the closer the Beneficiary gets to college.
The seven Static Investment Options keep the same assetallocation between domestic equity, real estate, internationalequity, international bond, fixed income, and cash equivalentsover the life of your account.
No investment directionUnder federal law, neither you nor your Beneficiary may exerciseinvestment discretion, directly or indirectly, over contributions toan account or any earnings on those contributions. As a result,you are not able to select the securities in which your account isinvested. Instead, contributions are invested according to thepercentage you indicate into the Investment Option or Optionsyou select on the Enrollment Form. The percentage can bechanged online by accessing the Plan’s secure website, bycompleting and submitting a form available from your State FarmRegistered Representative, by downloading and submitting aform available on the Plan’s website, or by calling the Plan.
The Nebraska Investment Council may change the InvestmentOptions, the asset allocation within each of the InvestmentOptions, and the underlying investments in which each of theInvestment Options invest at any time without notice to you.Any such change in Investment Options, allocations within an
Investment Option, or change in underlying investmentswithin an Investment Option made by the NebraskaInvestment Council is not considered a change in investmentdirection by an account owner.
Changing Investment OptionsGenerally, an account owner may only change the InvestmentOptions in which their account is invested twice per calendar yearor upon a change of Beneficiary. Therefore an account ownershould carefully make their investment selection with theassistance of their State Farm Registered Representative at thetime they complete the Enrollment Form. You can change the wayyou want to invest future contributions any time by changing yourStanding Allocation. See Page 19 “Allocation of contributions.”
If an account owner has multiple accounts in the Plan for the sameBeneficiary, or multiple accounts among the State Farm Plan, theNEST Advisor Plan, the NEST Direct Plan or the TD Ameritrade529 College Savings Plan, the account owner may change theInvestment Options in all accounts without tax consequences, solong as the changes to all of the accounts are made at the sametime and no more frequently than twice per calendar year or upona change of Beneficiary.
Investment Options in which an account is invested can bechanged online by accessing the secure website, by completingand submitting a form available from your State Farm RegisteredRepresentative, by downloading and submitting a form availableon the Plan’s website, or by calling the Plan.
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24
PART 7 – AGE-BASED INVESTMENT OPTION
Age-Based Investment OptionThe Age-Based Investment Option adjusts over time so as theBeneficiary nears college the allocation becomes moreconservative.
The Age-Based Investment Option generally invests in a mix ofdomestic equity, real estate, international equity, internationalbond, fixed income funds, (including bond, short-term bond, andinflation-protected securities), and cash equivalent investments (amoney market fund) allocated based on the current age of theBeneficiary.
Each Aged-Based band adjusts over time (each age band is calleda Portfolio) so that as the Beneficiary nears college enrollmentage the Portfolio’s allocation between domestic equity, realestate, international equity, international bond, fixed incomefunds, and cash equivalent investments becomes moreconservative relative to the allocation in earlier years.
As a result of market gains and losses and earnings, the Portfoliomay differ over time from the target asset allocation describedbelow. To maintain the target asset allocation for the Portfolio theProgram Manager will rebalance the Portfolio at any time there isa positive or negative variance of two percent (2%) or more toretain the target asset allocation described below.
You should review the Age-Based Investment Option with yourState Farm Registered Representative before making a selectionfrom among the Investment Options offered through the Plan.
The Age-Based Investment Option is allocated primarily in equityor stock investment funds during the early years of theBeneficiary’s life. As the Beneficiary nears college age, the equityor stock allocation decreases, and the fixed income and themoney market allocations increase. When the Beneficiary attainsage 3, 6, 9, 11, 13, 15, 17 and 19, the Portfolios within the Age-Based Investment Option automatically realign with a decrease inthe stock or equity portion and an increase in the fixed incomeand the money market allocations. The Age-Based InvestmentOption seeks to provide capital appreciation. The strategy isbased on the understanding that the volatility associated withequity markets can be accompanied by the highest potential forlong-term capital appreciation.
Newborn to 2 years old PortfolioObjectives – For Beneficiaries newborn to two years old, thisPortfolio seeks to provide long-term growth by investing 94.75%of its assets in diversified investments of domestic andinternational equity funds, and 5.25% real estate funds.
Strategies – The Portfolio invests in funds according to a fixedformula that typically results in an allocation of 71.5% domesticequity funds, 5.25% real estate funds, and 23.25% internationalequity funds. The Portfolio manages cash flows to maintain thestated asset allocation. The stock holdings in the underlying
investments consist primarily of large-cap U.S. stocks and to alesser extent, mid- and small-cap U.S. stocks and foreign stocks.
3 to 5 years old PortfolioObjectives – For Beneficiaries three to five years old, this Portfolioseeks to provide long-term growth and some income by investing90% of its assets in diversified investments of domestic andinternational equity funds, 5% real estate funds, and 5% domesticfixed income funds.
Strategies – The Portfolio invests in funds according to a fixedformula that typically results in an allocation of 68% domesticequity funds, 5% real estate funds, 22% international equity funds,and 5% fixed income funds. The Portfolio manages cash flows tomaintain the stated asset allocation. The stock holdings in theunderlying investments consist primarily of large-cap U.S. stocksand to a lesser extent, mid- and small-cap U.S. stocks and foreignstocks.
6 to 8 years old PortfolioObjectives – For Beneficiaries six to eight years old, this Portfolioseeks to provide growth of capital and some current income byinvesting 80% of its assets in diversified investments of domesticand international equity funds, 5% real estate funds, and 15%domestic and international fixed income funds.
Strategies – The Portfolio invests funds according to a fixedformula that typically results in an allocation of 60% domesticequity funds, 5% real estate funds, 20% international equity funds,2% international bond funds, and 13% fixed income funds. ThePortfolio manages cash flows to maintain the stated assetallocation. The stock holdings in the underlying investmentsconsist primarily of large-cap U.S. stocks and to a lesser extent,mid- and small-cap U.S. stocks and foreign stocks.
9 to 10 years old PortfolioObjectives – For Beneficiaries nine to 10 years old, this Portfolioseeks to provide growth of capital and some current income byinvesting 70.5% of its assets in diversified investments of domesticand international equity funds, 4.5% real estate funds, 23%domestic and international fixed income funds, and 2% moneymarket funds.
Strategies – The Portfolio invests funds according to a fixedformula that typically results in an allocation of 53% domesticequity funds, 4.5% real estate funds, 17.5% international equityfunds, 2.5% international bond funds, 20.5% fixed income funds,and 2% money market funds. The Portfolio manages cash flows tomaintain the stated asset allocation. The stock holdings in theunderlying investments consist primarily of large-cap U.S. stocksand to a lesser extent, mid- and small-cap U.S. stocks and foreignstocks.
11 to 12 years old PortfolioObjectives – For Beneficiaries 11 to 12 years old, this Portfolioseeks to provide growth of capital and some current income byinvesting 61% of its assets in diversified investments of domestic..
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25
and international equity funds, 4% real estate funds, 31%domestic and international fixed income funds, and 4% moneymarket funds.
Strategies – The Portfolio invests in funds according to a fixedformula that typically results in an allocation of 46% domesticequity funds, 4% real estate funds, 15% international equity funds,3% international bond funds, 28% fixed income funds, and 4%money market funds. The Portfolio manages cash flows tomaintain the stated asset allocation. The stock holdings in theunderlying investments consist primarily of large-cap U.S. stocksand to a lesser extent, mid- and small-cap U.S. stocks and foreignstocks.
13 to 14 years old PortfolioObjectives – For Beneficiaries 13 to 14 years old, this Portfolioseeks to provide growth of capital and some current income byinvesting 51.5% of its assets in diversified investments of domesticand international equity funds, 3.5% real estate funds, 36.5%domestic and international fixed income funds, and 8.5% moneymarket funds.
Strategies – The Portfolio invests in funds according to a fixedformula that typically results in an allocation of 39% domesticequity funds, 3.5% real estate funds, 12.5% international equityfunds, 3.5% international bond funds, 33% fixed income funds,and 8.5% money market funds. The Portfolio manages cash flowsto maintain the stated asset allocation. The stock holdings in theunderlying investments consist primarily of large-cap U.S. stocksand to a lesser extent, mid- and small-cap U.S. stocks and foreignstocks.
15 to 16 years old PortfolioObjectives – For Beneficiaries 15 to 16 years old, this Portfolioseeks to provide current income and low to moderate growth ofcapital by investing 42% of its assets in diversified investments ofdomestic and international equity funds, 3% real estate funds,42% domestic and international fixed income funds, and 13%money market funds.
Strategies – The Portfolio invests in funds according to a fixedformula that typically results in an allocation of 32% domesticequity funds, 3% real estate funds, 10% international equity funds,4% international bond funds, 38% fixed income funds, and 13%money market funds. The Portfolio manages cash flows tomaintain the stated asset allocation. The stock holdings in theunderlying investments consist primarily of large-cap U.S. stocksand to a lesser extent, mid- and small-cap U.S. stocks and foreignstocks.
17 to 18 years old PortfolioObjectives – For Beneficiaries 17 to 18 years old, this Portfolioseeks to provide current income and low to moderate growth ofcapital by investing 32.5% of its assets in diversified investmentsof domestic and international equity funds, 2.5% real estate funds,41.5% in domestic and international fixed income funds, 2.5%inflation protected funds, and 17% money market funds.
Strategies – The Investment Option invests in funds according toa fixed formula that typically results in an allocation of 25%domestic equity funds, 2.5% real estate funds, 7.5% internationalequity funds, 4% international bond funds, 41.5% fixed incomefunds, 2.5% inflation protected funds, and 17% money marketfunds. The Portfolio manages cash flows to maintain the statedasset allocation. The stock holdings in the underlying investmentsconsist primarily of large-cap U.S. stocks and to a lesser extent,mid- and small-cap U.S. stocks and foreign stocks.
19 years and older PortfolioObjectives – For Beneficiaries 19 years and older, this Portfolioseeks to provide current income and some growth of capital byinvesting 23% of its assets in diversified investments of domesticand international equity funds, 2% real estate funds, 49%domestic and international fixed income funds, 5% inflationprotected funds, and 21% money market funds.
Strategies – The Portfolio invests in funds according to a fixedformula that typically results in an allocation of 18% domesticequity funds, 2% real estate funds, 5% international equity funds,4% international bond funds, 45% fixed income funds, 5%inflation-protected funds, and 21% money market funds. ThePortfolio manages cash flows to maintain the stated assetallocation. The stock holdings in the underlying investmentsconsist primarily of large-cap U.S. stocks and to a lesser extent,mid- and small-cap U.S. stocks and foreign stocks.
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The detailed asset allocation, mix of underlying investments, and the age ranges for each of the Age-Based bands are described in thefollowing table:
Domestic EquityU.S. Real
Estate
International
Equity
International
BondDomestic Fixed Income Cash Equivalents
Large CapSmall-Mid
Cap Core
Real Estate
Equity
International
EquityWorld Bond
Fixed
Income
Short-Term
BondTIPS Money Market
State Street
S&P 500®1
Index
Vanguard
Extended
Market ETF
Vanguard
REIT ETF
State Street
MSCI2 ACWI
ex USA Index
DFA World
ex-US Gov’t
Fixed Income
iShares
Core US
Aggregate
ETF
Vanguard
Short-Term
Bond ETF
Vanguard
Short-Term
Inflation
Protected ETF
Goldman Sachs
Financial
SquareSM Govt
Money Market3
N/A VXF VNQ N/A DWFIX AGG BSV VTIP FGTXX
Age 0-2 61.00% 10.50% 5.25% 23.25%
Age 3-5 58.00% 10.00% 5.00% 22.00% 5.00%
Age 6-8 52.00% 8.00% 5.00% 20.00% 2.00% 13.00%
Age 9-10 46.00% 7.00% 4.50% 17.50% 2.50% 17.50% 3.00% 2.00%
Age 11-12 40.00% 6.00% 4.00% 15.00% 3.00% 22.00% 6.00% 4.00%
Age 13-14 34.00% 5.00% 3.50% 12.50% 3.50% 23.50% 9.50% 8.50%
Age 15-16 28.00% 4.00% 3.00% 10.00% 4.00% 25.00% 13.00% 13.00%
Age 17-18 22.00% 3.00% 2.50% 7.50% 4.00% 26.50% 15.00% 2.50% 17.00%
19+ 16.00% 2.00% 2.00% 5.00% 4.00% 28.00% 17.00% 5.00% 21.00%
Description of the underlying investmentsEach of the underlying investments that comprise the Age-Based Investment Option (as shown above in the table) is described indetail, along with the risks associated with each underlying investment, in “Part 9 – Descriptions of the Underlying Investments.”
It is important to remember that none of the Nebraska State Treasurer, the Nebraska Investment Council, the Nebraska StateInvestment Officer, the State of Nebraska or its officials/employees, State Farm, or the Program Manager or its authorizedagents or any of their affiliates can guarantee a minimum rate of return. Except for the Bank Savings Static Investment Option,investments in the State Farm 529 Savings Plan are not guaranteed or insured by the FDIC or any other government agencyand are not deposits or other obligations of any depository institution. Investments are not guaranteed or insured by the Stateof Nebraska, the Nebraska State Treasurer, the Nebraska Investment Council, State Farm, or First National Bank of Omaha orits authorized agents or their affiliates, and are subject to investment risks, including loss of the principal amount invested.FDIC insurance is provided for the Bank Savings Static Investment Option up to the maximum amount set by federal law,currently $250,000. See “Part 10 – Certain Risks to Consider.”
1 The S&P 500® Index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by State Street. Standard & Poor’s® and S&P® are registeredtrademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). The productsare not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding theadvisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500® Index.
2 The MSCI ACWI ex USA Index is a trademark of MSCI Inc. State Street Bank and Trust Co. *Trust account managed by State Street Global Advisors Trust Company for thebenefit of the State Farm Plan. Not a mutual Fund and not otherwise registered with the SEC. See “Part 9 – Descriptions of the Underlying Investments” for moreinformation about the investments.
3 You could lose money by investing in this Investment Option. Although a money market fund seeks to preserve the value of an investment at $1.00 per share, it cannotguarantee it will do so. An investment in this underlying fund is not insured or guaranteed by the FDIC or any other government agency. The underlying fund’s sponsor hasno legal obligation to provide financial support to the underlying fund, and you should not expect that the sponsor will provide financial support to the underlying fund atany time.
27
PART 8 – STATIC INVESTMENT OPTIONS
Seven Static Investment OptionsThe Static Investment Options are asset allocation InvestmentOptions that invest in a set or “static” mix of domestic equity, realestate, international equity, international bond, fixed income,FDIC-insured bank savings account or money market funds. Theseven Static Investment Options keep the same asset allocationbetween domestic equity, real estate, international equity,international bond, fixed income, and money market funds overthe life of your account. Unlike the Age-Based Investment Option,they do not move to a more conservative allocation mix as theBeneficiary approaches college enrollment.
The seven Static Investment Options you may choose from arethe All Equity, Growth, Moderate Growth, Balanced,Conservative, Money Market and Bank Savings asset allocationinvestments. In consultation with your State Farm RegisteredRepresentative, your selection of any Investment Option shouldconsider among other factors, your investment goals andobjectives, and your tolerance for market volatility and investmentrisk.
Although the Static Investment Options keep the same assetallocation over the life of an account, as a result of market gainsand losses and earnings, the asset allocation of each of the sevenStatic Investment Options may differ over time from the targetasset allocation described below. To maintain the target assetallocation for each of the Static Investment Options, the ProgramManager will rebalance each of the Static Investment Options anytime there is a positive or negative variance of two percent (2%) ormore to retain the target asset allocation described below.
You should review each of the Static Investment Options with yourState Farm Registered Representative before making a selectionfrom among the Investment Options offered through the Plan.
All Equity Static Investment OptionObjectives – All Equity Static Investment Option seeks to providelong-term growth by investing 94.75% of its assets in diversifiedinvestments of domestic and international equity funds, and5.25% real estate funds.
Strategies – The Investment Option invests in funds according toa fixed formula that typically results in an allocation of 71.5%domestic equity funds, 5.25% real estate funds, and 23.25%international equity funds. The Investment Option manages cashflows to maintain the stated asset allocation. The stock holdings inthe underlying investments consist primarily of large-cap U.S.stocks and to a lesser extent, mid- and small-cap U.S. stocks andforeign stocks.
Growth Static Investment OptionObjectives – The Growth Static Investment Option seeks toprovide growth of capital and some current income by investing80% of its assets in diversified investments of domestic andinternational equity funds, 5% real estate funds, and 15%domestic and international fixed income funds.
Strategies – The Investment Option invests in funds according toa fixed formula that typically results in an allocation of 60%domestic equity funds, 5% real estate funds, 20% internationalequity funds, 2% international bond funds, and 13% fixed incomefunds. The Investment Option manages cash flows to maintain thestated asset allocation. The stock holdings in the underlyinginvestments consist primarily of large-cap U.S. stocks and to alesser extent, mid- and small-cap U.S. stocks and foreign stocks.
Moderate Growth Static Investment OptionObjectives – Moderate Growth Static Investment Option seeks toprovide growth of capital and some current income by investing61% of its assets in diversified investments of domestic andinternational equity funds, 4% in real estate funds, 31% indomestic and international fixed income funds, and 4% in moneymarket funds.
Strategies – The Investment Option invests in funds according toa fixed formula that typically results in an allocation of 46%domestic equity funds, 4% real estate funds, 15% internationalequity funds, 3% international bond funds, 28% fixed incomefunds, and 4% money market funds. The Investment Optionmanages cash flows to maintain the stated asset allocation. Thestock holdings in the underlying investments consist primarily oflarge-cap U.S. stocks and to a lesser extent, mid- and small-capU.S. stocks and foreign stocks.
Balanced Static Investment OptionObjectives – The Balanced Static Investment Option seeks toprovide a balance of growth of capital and current income byinvesting 51.5% of its assets in diversified investments of domesticand international equity funds, 3.5% real estate funds, 36.5%domestic and international fixed income funds, and 8.5% moneymarket funds.
Strategies – The Investment Option invests primarily in fundsaccording to a fixed formula that typically results in an allocationof 39% domestic equity funds, 3.5% real estate funds, 12.5%international equity funds, 3.5% international bond funds, 33%fixed income funds, and 8.5% money market funds. TheInvestment Option manages cash flows to maintain the statedasset allocation. The stock holdings in the underlying investmentsconsist primarily of large-cap U.S. stocks and to a lesser extent,mid- and small-cap U.S. stocks and foreign stocks.
Conservative Static Investment OptionObjectives – The Conservative Static Investment Option seeks toprovide current income and some growth of capital by investing23% of its assets in diversified investments of domestic andinternational equity funds, 2% real estate funds, 49% domesticand international fixed income funds, 5% inflation protectedfunds, and 21% money market funds.
Strategies – The Investment Option invests in funds according toa fixed formula that typically results in an allocation of 18%domestic equity funds, 2% real estate funds, 5% internationalequity funds, 4% international bond funds, 45% fixed income..
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funds, 5% inflation protected funds, and 21% money marketfunds. The Investment Option manages cash flows to maintain thestated asset allocation. The stock holdings in the underlyinginvestments consist primarily of large-cap U.S. stocks and to alesser extent, mid- and small-cap U.S. stocks and foreign stocks.
Money Market Static Investment OptionObjectives – The Money Market Static Investment Option seeks tomaximize current income to the extent consistent with thepreservation of capital and the maintenance of liquidity byinvesting exclusively in high quality money market instruments.The Investment Option pursues the investment objective byinvesting in U.S. Treasury and government agency obligations andrepurchase agreements.
Strategies – The Investment Option invests 100% in money marketinstruments.
You could lose money by investing in this Investment Option.Although a money market fund seeks to preserve the value ofan investment at $1 per share, it cannot guarantee it will doso. Investment in the Money Market Static Investment Optionis not insured or guaranteed by the FDIC or any othergovernment agency. The sponsor has no legal obligation toprovide financial support to the underlying fund, and youshould not expect that the sponsor will provide financialsupport to the underlying fund at any time.
Bank Savings Static Investment OptionObjectives – The Bank Savings Static Investment Option seeksincome consistent with the preservation of principal and invests allof its assets in a savings account (“Savings Account”) held at FirstNational Bank of Omaha (the “Bank”). The Savings Account is anomnibus savings account insured by the FDIC and is held in trustby the Nebraska Educational Savings Plan Trust at the Bank. TheBank also serves as Program Manager of the Plan.
Investments in the Bank Savings Static Investment Option willearn varying rates of interest. The interest rate generally will beequivalent to short-term deposit rates. Interest on the SavingsAccount will be compounded daily based on the actual number ofdays in a year (typically 365 days, except for 366 days in leapyears) and will be credited to the Savings Account on monthlybasis. The interest on the Savings Account is expressed as anannual percentage yield (“APY”). The APY on the Savings Accountwill be reviewed by the Bank on a periodic basis and may berecalculated as needed at any time. To see the current BankSavings Static Investment Option APY please go towww.statefarm.com or call 800.321.7520.
Strategies – The Investment Option invests 100% in an FDICinsured savings account.
FDIC insuranceSubject to the application of Bank and FDIC rules and regulationsto each account owner, funds in the Bank Savings StaticInvestment Option will retain their value as a result of the FDIC
insurance. In contrast, all other Investment Options of the Plan arenot insured by the FDIC.
FDIC insurance is provided for the Bank Savings Static InvestmentOption only, which invests in an FDIC-insured omnibus savingsaccount held in trust by the Nebraska Educational Savings PlanTrust at the Bank. Contributions to and earnings on theinvestments in the Bank Savings Static Investment Option areinsured by the FDIC on a per participant, pass-through basis toeach account owner up to the maximum limit established byfederal law, which currently is $250,000.
The amount of FDIC insurance provided to an account owner isbased on the total of: (1) the value of an account owner’sinvestment in the Bank Savings Static Investment Option, and(2) the value of all other accounts held by the account owner atthe Bank (including Bank deposits), as determined in accordancewith Bank and FDIC rules and regulations. Each account ownershould determine whether the amount of FDIC insuranceavailable to the account owner is sufficient to cover the total ofthe account owner’s investment in the Bank Savings StaticInvestment Option plus the account owner’s other deposits at theBank. The State Farm Plan, the Program Manager, the State ofNebraska, the Nebraska Investment Council, the Nebraska StateTreasurer, the Nebraska State Investment Officer or its authorizedagents or their affiliates are not responsible for determining theamount of FDIC insurance provided to an account owner.
No other guaranteesFDIC insurance is the sole insurance available for the BankSavings Static Investment Option. Furthermore, the Bank SavingsStatic Investment Option does not provide a guarantee of anylevel of performance or return or offer any additional guarantees.Like all of the Investment Options, neither the contributions intothe Bank Savings Static Investment Option nor any investmentreturn earned on the contributions are guaranteed by the State ofNebraska, the Nebraska Investment Council, the Nebraska StateTreasurer, the Nebraska State Investment Officer, State Farm, theBank or its authorized agents or their affiliates or any other federalor state entity or person.
Risks – To the extent that FDIC insurance applies, the BankSavings Static Investment Option is primarily subject to the riskthat the return on the underlying Savings Account will varybecause of changing interest rates and that the return on theSavings Account will decline because of falling interest rates.
It is important to remember that none of the Nebraska StateTreasurer, the Nebraska Investment Council, the NebraskaState Investment Officer, the State of Nebraska or its officialsand employees, State Farm or the Program Manager or any ofits authorized agents or their affiliates can guarantee aminimum rate of return. Except for accounts invested in theBank Savings Static Investment Option, funds deposited in anaccount are not guaranteed or insured by the FDIC. Depositsin an account are not guaranteed or insured by the State ofNebraska, the Nebraska Investment Council, the Nebraska..
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29
State Treasurer, the Nebraska State Investment Officer, StateFarm, the Program Manager or its authorized agents and theiraffiliates, or any other party. The value of your account mayvary depending on market conditions, the performance of theInvestment Option you select, timing of purchases, and fees.The value of your account could be more or less than theamount you contribute to your account. In short you couldlose money. See “Part 10 – Certain Risks to Consider.”
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30
The detailed asset allocation and mix of underlying investments for each of the Static Investment Options are described in thefollowing table:
Domestic EquityU.S. Real
Estate
International
Equity
International
BondDomestic Fixed Income Cash Equivalents
Large CapSmall-Mid Cap
Core
Real
Estate
Equity
International
EquityWorld Bond Fixed Income
Short-Term
BondTIPS Money Market
FDIC
Insured
State Street
S&P 500®4
Index
Vanguard
Extended Market
ETF
Vanguard
REIT ETF
State Street
MSCI5 ACWI
ex USA Index
DFA World
ex-US
Government
Fixed Income
iShares Core
US Aggregate
ETF
Vanguard
Short-Term
Bond ETF
Vanguard
Short-Term
Inflation
Protected ETF
Goldman Sachs
Financial
SquareSM Govt MM6
Bank
Savings
N/A VXF VNQ N/A DWFIX AGG BSV VTIP FGTXX N/A
All Equity 61.00% 10.50% 5.25% 23.25%
Growth 52.00% 8.00% 5.00% 20.00% 2.00% 13.00%
Moderate Growth 40.00% 6.00% 4.00% 15.00% 3.00% 22.00% 6.00% 4.00%
Balanced 34.00% 5.00% 3.50% 12.50% 3.50% 23.50% 9.50% 8.50%
Conservative 16.00% 2.00% 2.00% 5.00% 4.00% 28.00% 17.00% 5.00% 21.00%
Money Market 100.00%
Bank Savings 100.00%
Description of the underlying investmentsEach of the underlying investments that comprise the seven Static Investment Options (as shown above in the table) is described indetail, along with the risks associated with each underlying investment, in “Part 9 – Descriptions of the Underlying Investments.”
It is important to remember that none of the Nebraska State Treasurer, the Nebraska Investment Council, the Nebraska StateInvestment Officer, the State of Nebraska or its officials/employees, State Farm, or the Program Manager or any of its affiliatescan guarantee a minimum rate of return. Except for the Bank Savings Static Investment Option, investments in the State Farm529 Savings Plan are not guaranteed or insured by the FDIC or any other government agency and are not deposits or otherobligations of any depository institution. Investments are not guaranteed or insured by the State of Nebraska, the NebraskaState Treasurer, the Nebraska Investment Council, State Farm, or First National Bank of Omaha or its authorized agents or theiraffiliates, and are subject to investment risks, including loss of the principal amount invested. FDIC insurance is provided for theBank Savings Static Investment Option up to the maximum amount set by federal law, currently $250,000. See “Part 10 –Certain Risks to Consider.”
4 The S&P 500® Index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by State Street. Standard & Poor’s® and S&P® are registeredtrademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). The productsare not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding theadvisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500® Index.
5 The MSCI ACWI ex USA Index is a trademark of MSCI Inc. State Street Bank and Trust Co. *Trust account managed by State Street Global Advisors Trust Company for thebenefit of the State Farm Plan. Not a mutual Fund and not otherwise registered with the SEC. See “Part 9 – Descriptions of the Underlying Investments” for moreinformation about the investments.
6 You could lose money by investing in this Investment Option. Although a money market fund seeks to preserve the value of an investment at $1.00 per share, it cannotguarantee it will do so. An investment in this underlying fund is not insured or guaranteed by the FDIC or any other government agency. The underlying fund’s sponsor hasno legal obligation to provide financial support to the underlying fund, and you should not expect that the sponsor will provide financial support to the underlying fund atany time.
31
PART 9 – DESCRIPTIONS OF THEUNDERLYING INVESTMENTS
This Part 9 describes the investments that serve as the underlyinginvestments in the Age-Based and Static Investment Options.Additional information discussing the risks of investing in theState Farm Plan Investment Options may be found in theunderlying fund prospectus (with the exception of the BankSavings Static Investment Option) which is available atwww.statefarm.com or upon request by calling the ProgramManager. Also see “Part 10 – Certain Risks to Consider.”
Descriptions of the underlying investments are taken from theprospectuses of the funds, as published by the investmentmanagers and described as follows. Each of the underlying fund’sinvestment managers have reviewed and approved thesedescriptions:
DFA World ex-US Government Fixed Income (DWFIX)The World ex-US Government Fund seeks its investmentobjective by investing in a universe of obligations issued primarilyby non-US government issuers and supranational organizationsand their agencies having investment grade credit ratings at thetime of purchase. As a non-fundamental policy, under normalcircumstances, the Fund will invest at least 80% of its net assets infixed income securities issued by foreign governments (includingpolitical subdivisions) and their authorities, agencies orinstrumentalities. Generally, the World ex-US GovernmentPortfolio will purchase fixed income securities that maturebetween five and fifteen years from the date of settlement. Undernormal circumstances, the Portfolio will generally maintain aweighted average duration of no more than one quarter yeargreater than, and no less than one year below, the weightedaverage duration of the Portfolio’s benchmark, the FTSE Non-USD World Government Bond Index, currency-hedged in USDterms, which was approximately 8.89 years as of December 31,2018. Because many of the World ex-US Government Fund’sinvestments may be denominated in foreign currencies, the Fundmay also enter into forward foreign currency contracts to attemptto protect against uncertainty in the level of future foreigncurrency rates, to hedge against fluctuations in currency exchangerates or to transfer balances from one currency to another.
Risks – As with all investments, there are certain risks of investingin the Fund. The Fund’s shares will change in value, and you couldlose money by investing in the Fund. The value of the debtsecurities may increase or decrease as a result of the following:market risk, foreign securities and currencies risk, foreigngovernment debt risk, interest rate risk, non-diversification riskand credit risk. Government agency obligations have differentlevels of credit support and, therefore, different degrees of creditrisk, income risk, derivatives risk, liquidity risk, securities lendingrisk, and cyber security risk.
Goldman Sachs Financial SquareSM Government MoneyMarket (FGTXX)The Fund seeks to maximize current income to the extentconsistent with the preservation of capital and the maintenance ofliquidity by investing exclusively in high quality money marketinstruments. The Fund pursues the investment objective byinvesting in U.S. Treasury and government agency obligations andrepurchase agreements.
Risks – Loss of money is a risk of investing in the Fund. Aninvestment in the Fund is not a bank deposit and is not insured orguaranteed by the FDIC or any other governmental agency.
You could lose money by investing in this Investment Option.Although a money market fund seeks to preserve the value ofan investment at $1.00 per share, it cannot guarantee it willdo so. An investment in this underlying fund is not insured orguaranteed by the FDIC or any other government agency. Theunderlying fund’s sponsor has no legal obligation to providefinancial support to the underlying fund, and you should notexpect that the sponsor will provide financial support to theunderlying fund at any time.
iShares Core US Aggregate ETF (AGG)The Fund seeks to track the investment results of the BloombergBarclays U.S. Aggregate Bond Index (the “Underlying Index”),which measures the performance of the total U.S. investment-grade bond market. The Underlying Index includes investment-grade U.S. Treasury bonds, government-related bonds, corporatebonds, mortgage-backed pass-through securities, commercialmortgage-backed securities and asset-backed securities that arepublicly offered for sale in the United States.
Risks – Fixed income risks include interest-rate and credit risk.Typically when interest rates rise, there is a corresponding declinein bond values. Credit risk refers to the possibility that the bondissuer will not be able to make principal and interest payments.Diversification may not protect against market risk or loss ofprincipal. An investment in this Fund is not insured or guaranteedby the Federal Deposit Insurance Corporation or any othergovernment agency and its return and yield will fluctuate withmarket conditions. Growth securities may be more volatile thanother types of investments, may perform differently than themarket as a whole and may underperform when compared tosecurities with different investment parameters. Furtherinformation on the investment strategies, risks and policies of thisFund can be found in the Fund’s prospectus and statement ofadditional information, which is available from the ProgramManager upon request.
State Street MSCI®7 ACWI ex USA Index8
Seeks an investment return that approximates as closely aspracticable, before expenses, the performance of the MSCI ACWIex USA Index over the long term.
7 The MSCI ACWI ex USA Index is a trademark of MSCI Inc.8 State Street Global Advisors Trust Company has been appointed as discretionary trustee over the assets invested in these trust accounts and may commingle the particular
trust property into a bank maintained common trust fund. These trust accounts are exempt from registration with the Securities and Exchange Commission.
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An investment in the strategy is subject to a number of risks,which include but are not limited to: cash position risk,concentration risk, conflicts of interest risk, counterparty risk,currency risk, custodial risk, cybersecurity risk, defensive investingrisk/temporary defensive positions, depositary receipts risk,derivatives risk, emerging markets risk, energy sector risk, equityinvesting risk, frontier markets risk, futures commission merchantrisk, futures contract risks, other exchange traded derivatives risk,geographic focus risk, hedging risk, IPO risk, index tracking risk,industrial sector risk, investment risk, large shareholder risk,leveraging risk, limited investment program risk, liquidity risk,market capitalization risk, market disruption and geopolitical risk,market risk, market volatility; government intervention risk,modeling risk, non-U.S. securities risk, index strategy/index risk,portfolio turnover risk, re-balancing policy risk, repurchaseagreement risk, restricted securities risk, risk of investment inother pools, securities lending risk; risks of investment of cashcollateral, settlement risk, significant withdrawal risk, small-, mid-and micro-cap companies risk, tax risk, risk considerations ofinvesting in China, and utilities sector risk. A detailed descriptionof the risks of investing in this strategy is included in the StrategyDisclosure Document, which is available from the ProgramManager upon request.
Risk management does not promise any level of performance orguarantee against loss of principal. State Street encouragesinvestors to seek the advice of well-qualified financial and taxadvisors, accountants, attorneys and other professionals beforemaking any investment or retirement decision.
State Street S&P 500®9 Index10
Seeks an investment return that approximates as closely aspracticable, before expenses, the performance of the S&P 500®
Index over the long term.
An investment in the strategy is subject to a number of risks,which include but are not limited to: cash position risk,concentration risk, conflicts of interest risk, counterparty risk,custodial risk, cybersecurity risk, derivatives risk, equity investingrisk, futures commission merchant risk, futures contract risks: otherexchange traded derivatives risk, geographic focus risk, growthstock risk, hedging risk, IPO risk, index tracking risk, investmentrisk, large shareholder risk, limited investment program risk,liquidity risk, market capitalization risk, market disruption andgeopolitical risk, market risk, market volatility; governmentintervention risk, modeling risk, index strategy/index risk, portfolioturnover risk, repurchase agreement risk, restricted securities risk,risk of investment in other pools, securities lending risk; risks ofinvestment of cash collateral, significant withdrawal risk, small-,mid- and micro-cap companies risk, tax risk, and value stock risk.A detailed description of the risks of investing in this
strategy is included in the Strategy Disclosure Document, which isavailable from the Program Manager upon request.
Vanguard Extended Market ETF (VXF)The Fund employs an indexing investment approach designed totrack the performance of the Standard & Poor’s CompletionIndex, a broadly diversified index of stocks of small- and mid-sizeU.S. companies. The S&P Completion Index contains all of theU.S. common stocks regularly traded on the New York StockExchange and the Nasdaq over-the-counter market, except thosestocks included in the S&P 500 Index. The Fund invests bysampling the Index, meaning that it holds a broadly diversifiedcollection of securities that, in the aggregate, approximates thefull Index in terms of key characteristics. These key characteristicsinclude industry weightings and market capitalization, as well ascertain financial measures, such as price/earnings ratio anddividend yield.
Risks – An investment in the Fund could lose money over short oreven long periods. You should expect the Fund’s share price andtotal return to fluctuate within a wide range. The Fund is subjectto the following risks, which could affect the Fund’s performance:
Stock market risk: The chance that stock prices overall will decline.Stock markets tend to move in cycles, with periods of rising pricesand periods of falling prices. The Fund’s target index tracks asubset of the U.S. stock market, which could cause the Fund toperform differently from the overall stock market. In addition theFund’s target index may, at times, become focused in stocks of aparticular market sector, which would subject the Fund toproportionately higher exposure to the risks of that sector.
The Fund is also subject to investment style risk and indexsampling risk. Because ETF Shares are traded on an exchange,they are subject to additional risks.
Vanguard Real Estate ETF (VNQ)The Fund employs an indexing investment approach designed totrack the performance of the MSCI® US Investable Market RealEstate 25/50 Transition Index, an interim index that will graduallyincrease exposure to other real estate-related investments whileproportionately reducing exposure to other stocks based on theirweightings in the MSCI US Investable Market Real Estate 25/50Index. The MSCI US Investable Market Real Estate 25/50 Index ismade up of stocks of large, mid-size, and small U.S. companieswithin the real estate sector, as classified under the GlobalIndustry Classification Standard (GICS). The GICS real estatesector is composed of equity real estate investment trusts (knownas REITs), which includes specialized REITs, and real estatemanagement and development companies. The Fund attempts toreplicate the Index by investing all, or substantially all, of its
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9 The S&P 500® Index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by State Street. Standard & Poor’s® and S&P® are registeredtrademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Theproducts are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representationregarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500® Index.
10 State Street Global Advisors Trust Company has been appointed as discretionary trustee over the assets invested in these trust accounts and may commingle theparticular trust property into a bank maintained common trust fund. These trust accounts are exempt from registration with the Securities and Exchange Commission.
33
assets - either directly or indirectly through a wholly ownedsubsidiary (the underlying fund), which is itself a registeredinvestment company - in the stocks that make up the Index,holding each stock in approximately the same proportion as itsweighting in the Index. The Fund may invest a portion of its assetsin the underlying fund.
Risks – An investment in the Fund could lose money over short oreven long periods. You should expect the Fund’s share price andtotal return to fluctuate within a wide range. The Fund is subjectto the following risks, which could affect the Fund’s performance:
Industry concentration risk: The chance that the stocks of REITsand other real estate-related investments will decline because ofadverse developments affecting the real estate industry and realproperty values. Because the Fund concentrates its assets in thesestocks, industry concentration risk is high.
This Fund is also subject to stock market risk, interest rate risk,investment style risk, asset concentration risk, non-diversificationrisk, and derivatives risk. Because ETF Shares are traded on anexchange, they are subject to additional risks.
Vanguard Short-Term Bond ETF (BSV)The Fund employs an indexing investment approach designed totrack the performance of the Bloomberg Barclays U.S. 1-5 YearGovernment/Credit Float Adjusted Index. This Index includes allmedium and larger issues of U.S. government, investment-gradecorporate, and investment-grade international dollar-denominated bonds that have maturities between one and fiveyears and are publicly issued. The Fund invests by sampling theIndex, meaning that it holds a range of securities that, in theaggregate, approximates the full Index in terms of key risk factorsand other characteristics. All of the Fund’s investments will beselected through the sampling process, and at least 80% of theFund’s assets will be invested in bonds held in the Index. TheFund maintains a dollar-weighted average maturity consistentwith that of the Index, which generally does not exceed threeyears.
Risks – The Fund is designed for investors with a low tolerance forrisk, but you could still lose money by investing in it. The Fund issubject to the following risks, which could affect the Fund’sperformance:
Interest rate risk: The chance that bond prices will declinebecause of rising interest rates. Interest rate risk should be low forthe Fund because it invests primarily in short-term bonds, whoseprices are much less sensitive to interest rate changes than are theprices of long-term bonds.
The Fund is also subject to income risk, credit risk, liquidity risk,and index sampling risk. Because ETF Shares are traded on anexchange, they are subject to additional risks.
Vanguard Short-Term Inflation-Protected ETF (VTIP)The Fund employs an indexing investment approach designed totrack the performance of the Bloomberg Barclays U.S. Treasury
Inflation-Protected Securities (TIPS) 0-5 Year Indexes. The Index isa market-capitalization-weighted index that includes all inflation-protected public obligations issued by the U.S. Treasury withremaining maturities of less than five years.
The Fund attempts to replicate the target index by investing all,or substantially all, of its assets in the securities that make up theIndex, holding each security in approximately the sameproportion as its weighting in the Index. The Fund maintains adollar-weighted average maturity consistent with that of thetarget index, which generally does not exceed three years.
Risks – The Fund is designed for investors with a low tolerance forrisk, but you could still lose money by investing in it. The Fund issubject to income fluctuations, which could affect the Fund’sperformance. The Fund’s quarterly income distributions are likelyto fluctuate considerably more than the income distributions of atypical bond fund. In fact, under certain conditions, the Fund maynot have any income to distribute. Income fluctuations associatedwith changes in interest rates are expected to be low, however,income fluctuations associated with changes in inflation areexpected to be high. Overall, investors can expect incomefluctuations to be high for the Fund.
The Fund is also subject to interest rate risk. Because ETF Sharesare traded on an exchange, they are subject to additional risks.
Bank SavingsBank Savings seeks income consistent with the preservation ofprincipal and invests all of its assets in a Savings Account held atthe Bank. The Savings Account is an omnibus savings accountinsured by the FDIC and is held in trust by the NebraskaEducational Savings Plan Trust at the Bank. The Bank also servesas Program Manager of the Plan.
Investments in the Savings Account will earn varying rates ofinterest. The interest rate generally will be equivalent to short-term deposit rates. Interest on the Savings Account will becompounded daily based on the actual number of days in a year(typically 365 days, except for 366 days in leap years) and will becredited to the Savings Account on monthly basis. The interest onthe Savings Account is expressed as an APY. The APY on theSavings Account will be reviewed by the Bank on a periodic basisand may be recalculated as needed at any time. To see thecurrent Bank Savings Static Investment Option APY please go towww.statefarm.com or call 800.321.7520.
FDIC insuranceSubject to the application of Bank and FDIC rules and regulationsto each account owner, funds in the Savings Account will retaintheir value as a result of the FDIC insurance. In contrast, all otherInvestment Options of the Plan are not insured by the FDIC.
No other guaranteesFDIC insurance is the sole insurance available for the SavingsAccount. Furthermore, the Savings Account does not provide aguarantee of any level of performance or return or offer any..
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additional guarantees. Investment returns earned are notguaranteed by the State of Nebraska, the Nebraska InvestmentCouncil, the Nebraska State Treasurer, the Nebraska StateInvestment Officer, State Farm, the Bank or its authorized agentsor their affiliates or any other federal or state entity or person.
Risks – To the extent that FDIC insurance applies, the risk that thereturn on the underlying Savings Account will vary because ofchanging interest rates and that the return on the SavingsAccount will decline because of falling interest rates.
It is important to remember that none of the Nebraska StateTreasurer, the Nebraska Investment Council, the NebraskaState Investment Officer, the State of Nebraska or its officialsand employees, State Farm, or the Program Manager or anyof its authorized agents or their affiliates can guarantee aminimum rate of return. Except for the Bank Savings StaticInvestment Option, investments in the State Farm 529 SavingsPlan are not guaranteed or insured by the FDIC or any othergovernment agency and are not deposits or other obligationsof any depository institution. Investments are not guaranteedor insured by the State of Nebraska, the Nebraska StateTreasurer, the Nebraska Investment Council, State Farm orFirst National Bank of Omaha or its authorized agents or theiraffiliates, and are subject to investment risks, including loss ofthe principal amount invested. FDIC insurance is provided forthe Bank Savings Static Investment Option up to themaximum amount set by federal law, currently $250,000. Thevalue of your account may vary depending on marketconditions, the performance of the Investment Option youselect, timing of purchases, and fees. The value of youraccount could be more or less than the amount you contributeto your account. In short, you could lose money. See“Part 10 – Certain Risks to Consider.”
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PART 10 – CERTAIN RISKS TO CONSIDER
Opening an account involves certain risks. Among other thingsdiscussed in this Program Disclosure Statement, you shouldcarefully consider the following risks before completing anEnrollment Form. You also should read this ProgramDisclosure Statement carefully before making a decision toopen an account.
Investment risksAn account’s value may decline. As with any investment, there canbe no assurance that the value of your account will grow at anyparticular rate or that it will not decline. The value of the securitiesin which the Investment Options invest will change due to marketfluctuations and a number of other factors, which will not be in thecontrol of the Nebraska Investment Council, the Trustee or theProgram Manager. If the value of these securities declines, youmay lose some or all of the principal in your account. None of theNebraska State Treasurer, the Nebraska Investment Council, theNebraska State Investment Officer, the State of Nebraska or itsofficials/employees, State Farm, or the Program Manager or anyof its affiliates guarantees any minimum rate of return or anyreturn on your account or that you will not lose some or all of theprincipal amount invested.
No insurance or guaranteesExcept as described herein for accounts invested in the BankSavings Static Investment Option, your account is not insured bythe FDIC. In addition, your account is not guaranteed or insuredby the State of Nebraska, the Nebraska Investment Council, theNebraska State Treasurer, the Nebraska State Investment Officer,State Farm, First National Bank of Omaha or its authorized agentsor their affiliates, or any other federal or state entity or person.
Investment Options have certain risksEach of the Investment Options is subject to certain risks that mayaffect performance. Set forth below is a list of the major risksapplicable to the Investment Options. In addition, see thedescriptions of each of the underlying investments in each of theInvestment Options. For a description of the risks associated withthe underlying investments of each Investment Option, see“Part 9 – Descriptions of the Underlying Investments.”
• Call risk. The chance that during periods of falling interestrates, issuers of callable bonds may call (redeem) securitieswith higher coupon rates or interest rates before theirmaturity dates. The fund would then lose any priceappreciation above the bond’s call price and would be forcedto reinvest the unanticipated proceeds at lower interest rates,resulting in a decline in the funds income.
• Concentration risk. To the extent that an Investment Optionis exposed to securities of a single country, region, industry,structure or size, its performance may be unduly affected byfactors common to the type of securities involved.
• Credit risk. The value or yield of a bond or money marketsecurity could fall if its credit backing deteriorates. In more
extreme cases, default or the threat of default could cause asecurity to lose most or all of its value. Credit risks are higherin high-yield bonds.
• ETF risks. Because ETF shares are traded on an exchange,they are subject to additional risks. The ETF shares madeavailable through the Plan are listed for trading on NYSE Arcaand can be bought and sold on the secondary market atmarket prices. Although it is expected that the market priceof an ETF share typically will approximate its net asset value(NAV), there may be times when the market price and theNAV vary significantly. Thus, the Plan may pay more or lessthan NAV when it buys ETF shares on the secondary market,and may receive more or less than NAV when it sells thoseshares. Although the ETF shares available through the Planare listed for trading on the NYSE Arca, it is possible that anactive trading market may not be maintained. Trading of ETFshares on NYSE Arca may be halted if NYSE Arca officialsdeem such action appropriate, if the ETF shares are delistedfrom NYSE Arca, or if the activation of market wide tradinghalts (which halt trading for a specific period of time when theprice of a particular security or overall market prices declineby a specified percentage).
• Extension risk. The chance that during periods of risinginterest rates, certain debt securities will be paid offsubstantially more slowly than originally anticipated, and thevalue of those securities may fall. Extension risk is generallylow for short-term bonds.
• Foreign investment risk. Foreign stocks and bonds tend tobe more volatile and may be less liquid than their U.S.counterparts. The reasons for such volatility can includegreater political and social instability, lower market liquidity,higher costs, less stringent investor protections, and inferiorinformation on issuer finances. In addition, the dollar value ofmost foreign currencies changes daily. All of these risks tendto be higher in emerging markets than in developed markets.
• Index sampling risk. The chance that the securities selectedfor a fund, in the aggregate, will not provide investmentperformance matching that of the fund’s target index.
• Interest rate risk. A rise in interest rates typically causesbond prices to fall. Bonds with longer maturities and highercredit quality tend to be more sensitive to changes in interestrates, as are mortgage-backed bonds. Short- and long-terminterest rates do not necessarily move the same amount or inthe same direction. Money market investments are alsoaffected by interest rates, particularly short-term rates, but inthe opposite way: when short-term interest rates fall, moneymarket yields usually fall as well. Bonds that can be paid offbefore maturity, such as mortgage-backed securities, tend tobe more volatile than other types of debt securities.
• Investment style risk. The chance that returns from the typesof stocks the Investment Option invests in (small, mid, or..
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36
large capitalization stocks) will trail returns from the overallstock market. Historically, these stocks have performed quitedifferently from the overall market.
• Issuer risk. Changes in an issuer’s business prospects orfinancial condition, including those resulting from concernsover accounting or corporate governance practices, couldsignificantly affect an Investment Option’s performance if theInvestment Option has sufficient exposure to those securities.
• Management risk. An Investment Option’s performancecould suffer if the investment fund or funds in which it investsunderperforms.
• Market risk. Securities prices change every business day,based on investor reactions to economic, political, market,industry and corporate developments. At times, these pricechanges may be rapid and dramatic. Some factors may affectthe market as a whole, while others affect particularindustries, firms, or sizes or types of securities. Market riskprimarily affects stocks, but also affects high-yield bonds and,to a lesser extent, higher quality bonds.
• Prepayment risk. The chance that during periods of fallinginterest rates, homeowners will refinance their mortgagesbefore their maturity dates, resulting in prepayment ofmortgage-backed securities held by the fund. The fundwould then lose any price appreciation above the mortgagesprincipal and would be forced to reinvest the unanticipatedproceeds at lower interest rates, resulting in a decline in thefund’s income.
Money Market and Bank Savings Static InvestmentOptions are not as diversified as other InvestmentOptionsThe Money Market Static Investment Option is designed to investin a single fund, or in the case of the Bank Savings StaticInvestment Option, an FDIC-insured savings account. TheseInvestment Options, by design, are not as diverse as theAge-Based and other Static Investment Options, which areinvested in a number of different investments. For the MoneyMarket and Bank Savings Static Investment Options, accountowners do not (1) own shares of a single fund or (2) in the case ofthe Bank Savings Static Investment Option, directly hold a savingsaccount but, rather, own an interest in the Investment Optionsoffered by the Plan. Performance differences for the MoneyMarket Static Investment Option and its underlying fund mayresult from differences in the timing of purchases and sales andfees charged. Performance for the Bank Savings Static InvestmentOption is based on the interest earned on the FDIC-insuredSavings Account. Account owners may not deposit directly intothe Savings Account at a Bank branch or otherwise. Except for theBank Savings Static Investment Option, the performance of eachof the Individual Investment Options may be more volatile thanthe other Static or Age-Based Investment Options. Part 11 of thisProgram Disclosure Statement describes performance in greaterdetail.
Program risks
• Possible changes to the State Farm Plan – The NebraskaState Treasurer, Nebraska Investment Council, State Farm,and the Program Manager reserve the right to make changesto the State Farm Plan at any time. These changes mayinclude changes to the underlying investments in which thePlan invests and changes to the expenses the Plan imposes. Ifthe underlying investments are changed, the fees andexpenses of the replacement investments may be higher orlower and the replacement investments may achieve differentperformance results than the investments the Plan currentlyutilizes.
• Limitation on investment selection – An account owner mayonly change the investment election for an account twice percalendar year or upon a change in Beneficiary. If an accountowner has multiple accounts in the Plan for the sameBeneficiary, or multiple accounts in the State Farm Plan,NEST Advisor Plan, the NEST Direct Plan, or TD Ameritrade529 College Savings Plan, the account owner may change theInvestment Options in all accounts without tax consequences,so long as the changes to all of the accounts are made at thesame time and no more frequently than twice per calendaryear or upon a change of Beneficiary.
• Illiquidity of account – Funds in your account will be subjectto the terms and conditions of the Plan and the ParticipationAgreement. These provisions may limit your ability towithdraw funds or to transfer these funds. Under nocircumstances may any interest in an account or the Plan beused as security for a loan.
• Acceptance to an Eligible Educational Institution is notguaranteed – There is no guarantee that a Beneficiary will beadmitted to, or permitted to continue to attend, any EligibleEducational Institution. If the Beneficiary does not attend anEligible Educational Institution, withdrawals from youraccount may be subject to state and federal taxes andpenalties.
• Qualified Higher Education Expenses may exceed thebalance in your account – Even if you make the maximumamount of contributions to your account, the balance maynot be sufficient to cover the Beneficiary’s Qualified HigherEducation Expenses.
• Plan does not create Nebraska residency – Neitheropening nor contributing to a Plan account creates Nebraskaresidency status for you or a Beneficiary for purposes ofdetermining the rate of tuition charged by a NebraskaEligible Educational Institution.
• Laws governing 529 qualified tuition programs maychange – There is a risk that federal and state laws andregulations governing 529 plans could change in the future.The proposed federal Treasury regulations that have been..
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issued under Code Section 529 provide guidance andrequirements for the establishment and operation of theTrust but do not provide guidance on all aspects of the Trust.Final regulations or other administrative guidance or courtdecisions might be issued that could adversely impact thefederal tax consequences or requirements with respect to theTrust or contributions to or withdrawals from your account.
In addition, Code Section 529 or other federal law could beamended in a manner that materially changes the federal taxtreatment of contributions to and withdrawals from youraccount. You should understand that changes in the lawgoverning the federal and/or state tax consequencesdescribed in this Program Disclosure Statement mightnecessitate material changes to the Trust for the anticipatedtax consequences to apply. Furthermore, the Trust has beenestablished pursuant to Nebraska law, the guidelines andprocedures adopted by the Nebraska State Treasurer, andapplicable securities laws. Changes to any of those laws orregulations may also affect the operation and tax treatmentof the Trust, as described in this Program DisclosureStatement.
Impact on the Beneficiary’s ability to receive financial aidThe eligibility of the Beneficiary for financial aid may dependupon the circumstances of the Beneficiary’s family at the time theBeneficiary enrolls in an Eligible Educational Institution, as well ason the policies of the governmental agencies, school or privateorganizations to which the Beneficiary and/or the Beneficiary’sfamily applies for financial assistance. Because saving for collegewill increase the financial resources available to the Beneficiaryand the Beneficiary’s family, it most likely will have some effect onthe Beneficiary’s eligibility. These policies vary at differentinstitutions and can change over time. Therefore, no person orentity can say with certainty how the federal aid programs, or theschool to which the Beneficiary applies, will treat your account.However, financial aid programs administered by agencies of theState of Nebraska will not take your account balance intoconsideration, except as may be otherwise provided by federallaw.
Medicaid and other federal and state benefitsThe effect of an account on eligibility for Medicaid or other stateand federal benefits is uncertain. It is possible that an account willbe viewed as a “countable resource” in determining anindividual’s financial eligibility for Medicaid. Withdrawals from anaccount during certain periods also may have the effect ofdelaying the disbursement of Medicaid payments. You shouldconsult a qualified advisor to determine how an account mayaffect eligibility for Medicaid or other state and federal benefits.
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PART 11—PERFORMANCE
The performance chart below includes performance for investments in the Plan as of December 31, 2019. Performance data for themost recent month-end is available on the Plan’s website at www.statefarm.com. Please keep in mind, past performance - especiallyshort-term past performance - is not a guarantee of future results. Investment returns and principal values will fluctuate, so that accountowners’ interests in an Investment Option may be worth more or less than their original cost. Current performance may be lower orhigher than the performance data cited.
No ownership in underlying investmentsAccount owners do not directly own shares of the underlying funds, or in the case of the Bank Savings Static Investment Option,directly hold a savings account, but rather own interests in the Investment Options of the Plan. As a result, the performance of theInvestment Options will differ from the performance of the underlying funds, even in circumstances where an Investment Option investsin a single, individual fund. This is due in part to the differences in the expense ratios of the underlying funds and the InvestmentOptions.
Performance differencesPerformance differences between an Investment Option and its underlying investments may also result from differences in the timing ofpurchases and fees. On days when contributions are made to an account, the Investment Options will not use that money to purchaseshares of an underlying investment until the next business day. This timing difference, depending on how the markets are moving, willcause the Investment Option’s performance to either trail or exceed the underlying investment’s performance.
When you invest in an Investment Option, you will receive units in the Investment Option as of the trade date. Your money will be usedby the Trust to purchase shares of an underlying investment. However, the settlement date for the purchase of shares of an underlyinginvestment typically will be one to three days after the trade date for your purchase of units. Depending on the amount of cash flowinto or out of the Investment Option and whether the underlying investment is going up or down in value, this timing difference andfees will cause the Investment Option’s performance either to trail or exceed the underlying investment’s performance.
Performance as of December 31, 2019Total Returns without Sales Charge11 Total Returns with Maximum Sales Charges12
Investment Option Name Average Annualized Since
Inception13
Average Annualized Since
Inception13
Inception Date
Benchmark14 1 year 3 year 5 year 1 year 3 year 5 year
Age-Based Investment Options15
Age-Based 0-2 27.92% — — 8.86% 23.44% — — 6.16% 8/3/18
Age-Based Benchmark 0-2 yr 28.64%
Age-Based 3-5 26.91% — — 8.86% 22.50% — — 6.16% 8/3/18
Age-Based Benchmark 3-5 yr 27.57%
Age-Based 6-8 24.86% — — 8.72% 20.45% — — 6.03% 8/3/18
Age-Based Benchmark 6-8 yr 25.42%
Age-Based 9-10 22.54% — — 8.38% 18.27% — — 5.69% 8/3/18
Age-Based Benchmark 9-10 yr 23.06%
Age-Based 11-12 20.17% — — 7.97% 15.92% — — 5.29% 8/3/18
Age-Based Benchmark 11-12 yr 20.75%
Age-Based 13-14 17.77% — — 7.48% 13.66% — — 4.82% 8/3/18
Age-Based Benchmark 13-14 yr 18.28%
Age-Based 15-16 15.32% — — 6.93% 11.23% — — 4.28% 8/3/18
Age-Based Benchmark 15-16 yr 15.87%
Age-Based 17-18 12.95% — — 6.31% 9.00% — — 3.67% 8/3/18
Age-Based Benchmark 17-18 yr 13.49%
Age-Based 19+ 10.53% — — 5.69% 6.71% — — 3.06% 8/3/18
Age-Based Benchmark 19+ yr 11.16%
Static Investment Options
All Equity Static 27.92% — — 8.86% 23.44% — — 6.16% 8/3/18
All Equity Static Benchmark 28.64%
Growth Static 24.86% — — 8.72% 20.45% — — 6.03% 8/3/18
Growth Static Benchmark 25.42%
Moderate Growth Static 20.17% — — 7.97% 15.92% — — 5.29% 8/3/18
Moderate Growth Static Benchmark 20.75%
Balanced Static 17.77% — — 7.48% 13.66% — — 4.82% 8/3/18
Balanced Static Benchmark 18.28%
39
Total Returns without Sales Charge11 Total Returns with Maximum Sales Charges12
Investment Option Name Average Annualized Since
Inception13
Average Annualized Since
Inception13
Inception Date
Benchmark14 1 year 3 year 5 year 1 year 3 year 5 year
Conservative Static 10.54% — — 5.62% 6.72% — — 3.00% 8/3/18
Conservative Static Benchmark 11.16%
Money Market Static16 1.89% — — 1.84% 1.89% — — 1.84% 8/3/18
FTSE 3-Month T-Bill 2.25%
Bank Savings Static 1.19% — — 1.20% 1.19% — — 1.20% 8/3/18
FTSE 3-Month T-Bill 2.25%
11 Total Returns calculated without Up-Front Sales Load.12 Total Returns calculated with maximum Up-Front Sales Load of 3.5%.13 Since Inception Returns for less than one year are not annualized.14 Each benchmark is not managed. Therefore, its performance does not reflect management fees, expenses or the imposition of front-end sales loads or contingent
deferred sales charges.15 Age Based Portfolios adjust automatically over time, becoming more conservative as your child reaches college age.16 You could lose money by investing in this Investment Option. Although the money market fund in which your Investment Option invests (the underlying fund) seeks to
preserve the value of $1.00 per share, it cannot guarantee it will do so. An investment in this Investment Option is not insured or guaranteed by the Federal DepositInsurance Corporation or any other government agency. The sponsor has no legal obligation to provide financial support to the underlying fund, and you should notexpect that the sponsor will provide financial support of the underlying fund at any time.
40
Customized performance benchmarksThe benchmarks for the Age-Based and the Static Investment Options represent customized composites of market indices for theavailable underlying investments weighted by its relative target allocation. Investors cannot directly invest in the compilation of thebenchmark indices.
S&P500®
Index
S&PCompletion
Index
MSCIUS REIT
Index
MSCIACWI
ex USAIndex
CitigroupWorld
GovernmentBond Index
ex USA
BloombergBarclay
US AggregateBond Index
BloombergBarclayUS Govt/Credit1-5 Yr
BloombergBarclay
U.S. TreasuryTIPS
0-5 Year
FTSE3-Month
T-Bill
FTSE3-Month
T-Bill
Age-Based Investment Option
Age 0-2 61.00% 10.50% 5.25% 23.25%
Age 3-5 58.00% 10.00% 5.00% 22.00% 5.00%
Age 6-8 52.00% 8.00% 5.00% 20.00% 2.00% 13.00%
Age 9-10 46.00% 7.00% 4.50% 17.50% 2.50% 17.50% 3.00% 2.00%
Age 11-12 40.00% 6.00% 4.00% 15.00% 3.00% 22.00% 6.00% 4.00%
Age 13-14 34.00% 5.00% 3.50% 12.50% 3.50% 23.50% 9.50% 8.50%
Age 15-16 28.00% 4.00% 3.00% 10.00% 4.00% 25.00% 13.00% 13.00%
Age 17-18 22.00% 3.00% 2.50% 7.50% 4.00% 26.50% 15.00% 2.50% 17.00%
19+ 16.00% 2.00% 2.00% 5.00% 4.00% 28.00% 17.00% 5.00% 21.00%
Static Investment Options
All Equity 61.00% 10.50% 5.25% 23.25%
Growth 52.00% 8.00% 5.00% 20.00% 2.00% 13.00%
Moderate Growth 40.00% 6.00% 4.00% 15.00% 3.00% 22.00% 6.00% 4.00%
Balanced 34.00% 5.00% 3.50% 12.50% 3.50% 23.50% 9.50% 8.50%
Conservative 16.00% 2.00% 2.00% 5.00% 4.00% 28.00% 17.00% 5.00% 21.00%
Money Market 100.00%
Bank Savings 100.00%
41
PART 12 – PLAN FEES AND EXPENSES
Class A accounts
a. Generally, Class A accounts bear an initial sales charge (anUp-Front Sales Load) of 3.50%, which will be deducted at thetime a contribution is made to an account. The initial salescharge will occur for assets that are rolled into the Plan, withthe exception of a rollover from a BlackRock® CoverdellEducation Savings Account in which there will be no initialsales charge.
No Class A Up-Front Sales Load applies to the Class Aaccounts that invest in the (i) Money Market Static InvestmentOption; or (ii) Bank Savings Static Investment Option.
b. The Up-Front Sales Load will be reduced for contributions thatexceed certain aggregate asset amount levels outlined below.Rights of Accumulation and Letter of Intent may apply for thepurposes of calculating the aggregated asset amount.
A Letter of Intent entitles you to a lower Class A Up-Front SalesLoad provided you fulfill the terms of the Letter of Intent. Byindicating your intent to purchase the aggregated assetamounts described below in your signed Enrollment Form youagree to make specified investments of $250,000 or more in theState Farm Plan in the 13-month period following the date ofyour application. You understand that if you do not make theadditional investments within the 13-month period, the PrimaryDistributor reserves the right to redeem shares from youraccount to make up the difference between the applicableClass A Up-Front Sales Load and the reduced Class A Up-FrontSales Load you paid when you entered into the Letter of Intent.Rights of Accumulation apply to all investments made by anaccount owner and members of the immediate family of anaccount owner in the State Farm Plan with combined assets thatreach the breakpoint discount level in Class A units describedbelow:
Aggregated Asset Amount Up-Front Sales Load
Less than $250,000 3.50%
$250,000 – $499,999 3.00%
$500,000 or More 0%
The majority of the Up-Front Sales Load is paid to State Farmwith the remainder going to the Program Manager (see Sellinginstitution compensation).
Up-Front Sales Load waiversThe Program Manager may waive the Up-Front Sales Load forClass A accounts under the following circumstances:
1. Purchases by current State Farm Agents, or by any currentemployee of State Farm or State Farm VP Management Corp.Registered Representatives who work for a State Farm Agent,and any member of the immediate family of such person.
2. Purchases by any employee of an investment firm whoseunderlying funds are in the State Farm Plan and any member ofthe immediate family of such person; and
3. Purchases by any employee of the Program Manager or itsaffiliates.
A member of the immediate family includes a spouse, parent,legal guardian, child, sibling, stepchild, and father- or mother-in-law of the account owner or prospective account owner.
Class A distribution and marketing feeClass A accounts generally bear an annual distribution andmarketing fee of 0.25% that is accrued daily as a percentage ofaverage daily net assets and will be deducted from eachInvestment Option or Portfolio.
No distribution and marketing fee applies to the Class A accountsthat invest in the Money Market Static Investment Option or BankSavings Static Investment Option.
There is no charge incurred on a Class A account upon awithdrawal.
Application of Class A Up-Front Sales Load anddistribution and marketing fees for certain InvestmentOptions or PortfoliosIf assets are transferred from the Money Market Static InvestmentOption or Bank Savings Static Investment Option to another StateFarm Plan Investment Option:
• When exchanging to a Class A Investment Option, theClass A Up-Front Sales Load will apply to any amount thathad not previously been subject to the Class A Up-FrontSales Load by virtue of such prior investment.
Negative returnThe Program Manager will endeavor to maintain a positive or zeroreturn on the Goldman Sachs Financial SquareSM GovernmentMoney Market Static Investment Option by foregoing a portion ofits Program Management Fee earned on that Investment Option.However, the Program Manager cannot guarantee any return onGoldman Sachs Financial SquareSM Government Money MarketStatic Investment Option, or that the return on this InvestmentOption will not be negative.
Annual account feeThe annual account fee of $25 will be assessed against thebalance in the account. For accounts established prior toAugust 3, 2018, accounts will be charged the annual maintenancefee in December of each year. For accounts established afterAugust 3, 2018, the annual account maintenance fee will becharged each year in or near the anniversary of the month whenthe account was established.
In the event the account balance is less than $25, the availablebalance will be assessed. If there is a redemption of all units with aresulting withdrawal prior to the annual fee being assessed, thefee will be taken from the withdrawal proceeds on a pro-ratabasis. The annual account fee will be assessed regardless of which..
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Investment Option(s) an Account Owner chooses. The accountfee will be waived for any account that exceeds $20,000 on thelast day of the period that the fee is assessed.
Program Management FeeThe Program Manager receives a management fee equal to 0.25%of the average daily net assets in each Investment Option.However, with respect to the Bank Savings Static InvestmentOption, the Program Manager receives a management fee equalto 0.18% of the average daily net assets in that InvestmentOption. This fee accrues daily as a percentage of average dailynet assets and will be deducted from each Investment Option.This fee will reduce the value of an account.
The Program Manager will also receive a fee from Goldman SachsFund, which is an affiliate of the Program Manager, to assist withthe ongoing marketing and distribution associated with itsProgram Manager duties under the Plan. Account owners are notseparately charged for this fee. The Trustee reserves the right toincrease or decrease fees as the Trustee deems appropriate.
State Administration FeeAn administration fee equal to 0.02% of the average daily netassets in each Investment Option will be allocated to the state’scosts to administer, market, and distribute the Plan. This feeaccrues daily as a percentage of average daily net assets and isdeducted from each Investment Option. This fee will reduce thevalue of an account.
Underlying investment feeThe underlying investments that comprise an Investment Optioncharge a fee called a weighted average underlying fund expenseratio which ranges from 0.00% to 0.18% of the average daily netassets in each underlying investment. This fee will reduce thevalue of an account.
Other account feesThere are no account opening fees associated with the StateFarm Plan.
Fee or Charge Type Amount
Enrollment/account opening None
Annual account (waived for any account thatexceeds $20,000 on the last day of the period thatthe fee is assessed) $25*
Cancellation/withdrawal None
Change in Beneficiary None
Change in investment Portfolios None
Returned check Up to $25*
Rejected ACH or EFT Up to $25*
Outgoing wire Up to $25*
Overnight delivery $15** charged against the account
Selling institution compensation17
Class A shares are sold through State Farm, which has a sellingagreement with First National Capital Markets, the PrimaryDistributor. Except as described below, State Farm will becompensated by the Program Manager as indicated below.
The Program Manager also may make additional payments toState Farm for marketing, promotional, distribution and investorservicing activities, subject to the approval of the Nebraska StateTreasurer and the Nebraska Investment Council.
Class A selling institution compensation – The Up-Front Sales Loadand the related selling compensation will be reduced forcontributions that exceed certain aggregate asset amount levels asoutlined as follows. Rights of Accumulation and Letter of Intent mayapply for the purposes of calculating the aggregated asset amount.
Class A
Aggregated AssetAmount
Up-FrontSalesLoad*
Up-FrontSales LoadRetained byState Farm
Distributionand MarketingFee Charged*
Distributionand Marketing
Fee Paid toState Farm**
Less than $250,000 3.50% 3.25% 0.25% 0.25%
$250,000 - 499,999 3.00% 2.75% 0.25% 0.25%
$500,000 or more none none 0.25% 0.25%
* Fee starts accruing immediately** Payment made monthly
Also see “Application of Class A Up-Front Sales Load anddistribution and marketing fees for certain Investment Options orPortfolios” above for more information.
The Program Manager reserves the right to modify these feearrangements, subject to the approval of the State of NebraskaTreasurer and the Nebraska Investment Council.
Commission waiversState Farm will not receive commissions for contributions intoClass A Investment Options that have received an Up-Front SalesLoad waiver.
Contributions from rewards programsContributions into a State Farm Plan account from a Upromise®
by Sallie Mae® Account or other rewards programs are notsubject to Class A Up-Front Sales Loads.
17 With the exception of investments in the Money Market Static Investment Option and the Bank Savings Static Investment Option.
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Fee structure tableSpecific fees, expenses and sales charges are outlined in the table below.
Class A
Weighted Average
Operating
Expense Ratio18
Program
Management
Fee
State
Administrative
Fee
Distribution and
Marketing Fee
Total Extimated
Annual Asset-Based
Fees19
Additional Investor
Expenses – Maximum
Up-Front
Sales Load20
AGE-BASED INVESTMENT OPTION
Age 0-2 0.05% 0.25% 0.02% 0.25% 0.57% 3.50%
Age 3-5 0.05% 0.25% 0.02% 0.25% 0.57% 3.50%
Age 6-8 0.05% 0.25% 0.02% 0.25% 0.57% 3.50%
Age 9-10 0.05% 0.25% 0.02% 0.25% 0.57% 3.50%
Age 11-12 0.06% 0.25% 0.02% 0.25% 0.58% 3.50%
Age 13-14 0.07% 0.25% 0.02% 0.25% 0.59% 3.50%
Age 15-16 0.07% 0.25% 0.02% 0.25% 0.59% 3.50%
Age 17-18 0.08% 0.25% 0.02% 0.25% 0.60% 3.50%
19+ 0.09% 0.25% 0.02% 0.25% 0.61% 3.50%
STATIC INVESTMENT OPTIONS
All Equity 0.05% 0.25% 0.02% 0.25% 0.57% 3.50%
Growth 0.05% 0.25% 0.02% 0.25% 0.57% 3.50%
Moderate Growth 0.06% 0.25% 0.02% 0.25% 0.58% 3.50%
Balanced 0.07% 0.25% 0.02% 0.25% 0.59% 3.50%
Conservative 0.09% 0.25% 0.02% 0.25% 0.61% 3.50%
Money Market21 0.18% 0.25% 0.02% 0.00% 0.45% 0.00%
Bank Savings21 0.00% 0.18% 0.02% 0.00% 0.20% 0.00%
18 Weighted Average Operating Expense Ratio is the weighted average of each underlying investment’s expense ratio as of December 31, 2019.19 Total Estimated Annual Asset-Based Fees include the Weighted Average Operating Expense Ratio, the Program Management Fee, the State Administration Fee, and the
distribution and marketing fee.20 The Up-Front Sales Load decreases as an account owner’s eligible assets increase. The Up-Front Sales Load may be waived for certain account owners. There is no Up-
Front Sales Load if you purchase units in an amount of $500,000 or more.21 The Program Manager has waived the distribution and marketing fee and the Up-Front Sales Load.
44
Approximate cost of $10,000 investment
The following table compares the approximate cost of investing in the Plan over different periods of time. This hypothetical is notintended to predict or project investment performance. Past performance is no guarantee of future performance. Your actual cost maybe higher or lower. The tables are based on the following assumptions:• A $10,000 contribution is invested for the time periods shown;• A 5% annually compounded rate of return on the amount invested throughout the period;• The account is redeemed at the end of the period shown to pay for qualified expenses (the table does not consider the impact of
any potential state or federal taxes on the redemption nor any potential state tax recapture of previous state tax deductions);• The total estimated annual asset based fees remain the same as those shown in the fee structure tables;• The investor pays the applicable maximum initial Class A Up-Front Sales Load; and• Calculations include the annual account fee22 of $25.
INVESTMENT PERIOD
One Year Three Years Five Years Ten Years
AGE-BASED INVESTMENT OPTION
Age 0-2 Class A $431 $601 $781 $1,281
Age 3-5 Class A $431 $601 $781 $1,281
Age 6-8 Class A $431 $601 $781 $1,281
Age 9-10 Class A $431 $601 $781 $1,281
Age 11-12 Class A $432 $604 $786 $1,293
Age 13-14 Class A $433 $607 $791 $1,304
Age 15-16 Class A $433 $607 $791 $1,304
Age 17-18 Class A $434 $610 $796 $1,316
Age 19+ Class A $435 $613 $802 $1,328
STATIC INVESTMENT OPTIONS
All Equity Class A $431 $601 $781 $1,281
Growth Class A $431 $601 $781 $1,281
Moderate Growth Class A $432 $604 $786 $1,293
Balanced Class A $433 $607 $791 $1,304
Conservative Class A $435 $613 $802 $1,328
Money Market Class A $71 $219 $376 $811
Bank Savings Class A $45 $139 $237 $503
22 The account fee will be waived for any account that exceeds $20,000 on the last day of the period that the fee is assessed.
45
PART 13 – DISTRIBUTIONS FROM ANACCOUNT
Requesting a distribution from an accountThere is no Beneficiary age or other deadline by whichdistributions from your account must begin. To request adistribution, the account owner may complete and submit a formto the Program Manager by mail. You can initiate a QualifiedWithdrawal online by logging into your account atwww.statefarm529.com. You can also request a QualifiedWithdrawal, Non-Qualified Withdrawal or Rollover out of the StateFarm Plan by completing and submitting a form available throughyour State Farm Registered Representative or the Plan’s website,or by calling the Plan.
The Program Manager employs procedures it considers to bereasonable to confirm that instructions communicated bytelephone or Internet are genuine, including requiring certainpersonal identifying information prior to acting upon telephone orInternet instructions. None of the Program Manager, itsauthorized agents, the Trust, or the Trustee will be liable forfollowing telephone or Internet instructions that are reasonablybelieved to be genuine.
The Program Manager will review each withdrawal request todetermine that all information needed to process such request hasbeen received. Withdrawal requests will be satisfied as soon aspracticable following the Program Manager’s receipt and review ofa properly completed form. The Plan typically will process awithdrawal form sent by mail and initiate payment of a distributionwithin two business days of receipt of the request. During periodsof market volatility and at year-end, withdrawal requests may takeup to five business days to process. Please submit your withdrawalrequests well in advance of the start of each academic period. Seealso “Temporary withdrawal restrictions” below regardingwithdrawals of recent contributions to an account.
Although the Program Manager is required to report theearnings portion of any withdrawal to tax authorities, it issolely the responsibility of the person receiving thewithdrawal to calculate and report any resulting tax liability.
Temporary withdrawal restrictionsIf you made a contribution that was in good order, you will not beable to make a withdrawal of that contribution from your accountfor five business days after deposit. When an account owner or theaddress is changed on an account there is a 10-business-day holdbefore a withdrawal can be made. A withdrawal request must besignature guaranteed if the request is within 10 business days ofthe change to have the withdrawal released before the holdperiod expires. There is a 15-calendar-day hold on ACHwithdrawals after bank information is added or changed.
Systematic Withdrawal Program (SWP)You may choose to establish periodic, pre-scheduled withdrawalsfor Qualified Higher Education Expenses from your State FarmPlan account. The Plan will file IRS Form 1099-Q annually for
distributions taken for all withdrawals, including those usingsystematic withdrawals. You can have up to two SWPs on youraccount. If the balance in your Investment Option is less than theSWP amount specified, the SWP instructions will be stopped. ASWP distribution will be held for up to five business days forcontributions that have not yet cleared or, 10 business days if theaccount owner or address has been changed on the account andthe SWP is within 10 business days of that change. Thedistribution will be released when the specified waiting period hasbeen satisfied.
Qualified WithdrawalQualified Withdrawals from your account are free from federalincome tax. A Qualified Withdrawal is a withdrawal that is used topay the Qualified Higher Education Expenses of the Beneficiary.Qualified Higher Education Expenses include tuition, fees, books,supplies and equipment required for the enrollment or attendanceof the Beneficiary at an Eligible Educational Institution. Expensesfor the purchase of computer or peripheral equipment, computersoftware, or Internet access and related services, if such equipment,software, or services are to be used primarily by the Beneficiaryduring any of the years the Beneficiary is enrolled at an EligibleEducational Institution regardless of whether such technology orequipment is required by the Eligible Educational Institution.Computer software means any program designed to cause acomputer to perform a desired function. Such term does notinclude any database or similar item unless the database or item isin the public domain and is incidental to the operation of otherwisequalifying computer software. Computer software designed forsports, games, or hobbies is not included unless this software ispredominantly educational in nature. Reasonable room and boardexpenses are also considered Qualified Higher Education Expensesfor students enrolled on at least a half-time basis.
Eligible Educational InstitutionAn Eligible Educational Institution is an institution that is eligibleto participate in federal student aid programs under Title IV of theHigher Education Act of 1965 (20 USC 1088). These are generallyany accredited college or university, including trade and technicalschools, in the United States and abroad that participates infederal financial aid programs. To check if a specific school is anEligible Educational Institution go to the U.S. Department ofEducation Website at www.fafsa.ed.gov.
Distribution of a Qualified WithdrawalA Qualified Withdrawal may be distributed as follows:
• To the account owner at the address on the account;• To the Beneficiary at the address on the account; or• Directly to the Eligible Educational Institution at the address
on the withdrawal form.
Because money in your account may be withdrawn free fromfederal income tax only if it is used to pay the Beneficiary’sQualified Higher Education Expenses, you should retaindocumentation of all of the Beneficiary’s Qualified HigherEducation Expenses for your records. The account owner orBeneficiary, not the Plan nor the Program Manager, is solely..
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46
responsible for determining if a withdrawal is a QualifiedWithdrawal or Non-Qualified Withdrawal and whether a federalpenalty applies.
Non-Qualified WithdrawalsTo the extent that a withdrawal is a Non-Qualified Withdrawal,any earnings portion of such Non-Qualified Withdrawal will beincludable in your income for Nebraska state income tax purposesand subject to partial recapture of any Nebraska state income taxdeduction previously claimed.
In general, a Non-Qualified Withdrawal is also includable in yourincome for federal income tax purposes and subject to anadditional 10% federal tax. Certain exceptions to this rule apply.For example, under Nebraska law, withdrawals from the StateFarm Plan that are used to pay for a Beneficiary’s K-12 tuition,costs associated with the Beneficiary’s apprenticeship program(s),or student loan repayments for the Beneficiary and/or theBeneficiary’s siblings are Non-Qualified Withdrawals and theearnings portion of the withdrawal will be includable in yourincome for state income tax purposes and is subject to recapture.However, the withdrawal is not includable in your income forfederal income tax purposes or subject to an additional 10%federal tax.
The account owner or the Beneficiary is responsible fordetermining whether a withdrawal is a Non-Qualified Withdrawaland, if so, making the appropriate filings with the IRS and payingthe additional 10% federal tax on earnings. More information isavailable in “Part 14 – Federal and State Tax Considerations”about how the earnings portion of a Non-Qualified Withdrawal iscalculated and the other tax consequences of a Non-QualifiedWithdrawal.
Exceptions to the federal penalty taxThe additional 10% federal tax does not apply to Non-QualifiedWithdrawals if:
• Paid to the estate of the Beneficiary on or after the death ofthe Beneficiary;
• Used to pay for the Beneficiary’s K-12 tuition, up to thefederal limit (currently $10,000);
• Used to pay for fees, books, supplies or equipment required forthe Beneficiary’s participation in a registered apprenticeshipprogram;
• Used to pay the principal or interest on a qualified educationloan of the Beneficiary and/or the Beneficiary’s sibling, up tothe federal lifetime limit ($10,000 per qualifying individual);
• Made because the Beneficiary is disabled. A person isconsidered to be disabled if he or she shows proof that he orshe cannot do any substantial gainful activity because of hisor her physical or mental condition. A physician mustdetermine that his or her condition can be expected to resultin death or to be of long-continued and indefinite duration;
• Included in income because the Beneficiary received a tax-free scholarship, up to the amount of scholarship received bythe Beneficiary;
• Made on account of the attendance of the Beneficiary at aU.S. military academy (such as the United States NavalAcademy at Annapolis). This exception applies only to theextent that the amount of the distribution does not exceedthe costs of advanced education (as defined inSection 2005(d)(3) of Title 10 of the U.S. Code) attributable tosuch attendance; or
• Included in income only because the Qualified HigherEducation Expenses were taken into account in determiningthe American Opportunity and Lifetime Learning Tax Credits.
You should consult your own tax advisor regarding the applicationof any of the above exceptions.
Refunds from Eligible Educational InstitutionRefunds of any Qualified Higher Education Expense from anEligible Educational Institution, to the extent that the portion ofthe refund is from a previous Qualified Withdrawal, must berecontributed back into the Beneficiary’s account within 60 daysof receipt of the refund otherwise the refund is considered a Non-Qualified Withdrawal.
RolloversYou may direct a transfer of money from your account to anaccount in another qualified tuition program or an Achieving aBetter Life Experience Act (“ABLE”) program for the same oranother Beneficiary (a “rollover”). Alternatively, you may make awithdrawal from your account and re-deposit the withdrawnbalance within 60 days into an account in another qualified tuitionprogram or ABLE program for the same or another Beneficiary. Ifthe Beneficiary stays the same, the transfer will be treated as a taxfree qualified rollover as long as the transfer does not occur within12 months from the date of a previous rollover to a qualifiedtuition program account for the same Beneficiary. If you changeBeneficiaries, the transfer will be treated as a qualified rolloveronly if the new Beneficiary is a Member of the Family of theformer Beneficiary.
You may transfer money in your State Farm Plan account to anEnable Savings Plan or Enable Savings Plan Alabama account(both issued by the State of Nebraska) without adverse taxconsequences, provided the transfer is a qualified rollover.However, if you roll over money in your State Farm Plan accountto any ABLE program not issued by the State of Nebraska, theearnings portion of the rollover will be subject to Nebraska stateincome tax. In addition, the rollover will be subject to recapture ofany Nebraska state income tax deduction previously claimed bythe account owner. Not all ABLE program sponsors may acceptrollovers from a 529 college savings plan; you should contact yourtax advisor for more information.
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PART 14 – FEDERAL AND STATE TAXCONSIDERATIONS
IRS Circular 230 DisclosurePursuant to U.S. Treasury Department regulations, the followingstatement is provided: Any information contained in this ProgramDisclosure Statement is not intended or written to be used, andcannot be used, by a person as tax advice for the purpose ofavoiding any penalties that may be imposed under the InternalRevenue Code. In addition, the information contained in thisProgram Disclosure Statement was written to support thepromotion or marketing of the transaction(s) or matter(s)addressed in this Program Disclosure Statement. Each taxpayershould seek advice based on the taxpayer’s particularcircumstances from an independent tax advisor.
The following discussion summarizes certain aspects of federal andstate income, gift, estate and generation-skipping transfer taxconsequences relating to the State Farm Plan and contributions to,earnings of, and withdrawals from the accounts. The summary isnot exhaustive and is not intended as individual tax advice. Inaddition, there can be no assurance that the IRS or NebraskaDepartment of Revenue will accept the statements made hereinor, if challenged, that such statements would be sustained in court.The applicable tax rules are complex, and certain of the rules areat present uncertain, and their application to any particular personmay vary according to facts and circumstances specific to thatperson. The Code and regulations thereunder, and judicial andadministrative interpretations thereof, are subject to change,retroactively and/or prospectively. A qualified tax advisor shouldbe consulted regarding the application of law in individualcircumstances.
This summary is based on the relevant provisions of the Code,Nebraska state tax law and proposed Treasury regulations. It ispossible that Congress, the Treasury Department, the IRS, theState of Nebraska and other taxing authorities or the courts maytake actions that will adversely affect the tax law consequencesdescribed and that such adverse effects may be retroactive. Nofinal tax regulations or rulings concerning the State Farm Planhave been issued by the IRS and, when issued, such regulations orrulings may alter the tax consequences summarized herein ornecessitate changes in the Plan to achieve the tax benefitsdescribed. The summary does not address the potential effectson account owners or Beneficiaries of the tax laws of any stateother than Nebraska.
Qualified tuition programThe State Farm Plan is designed to be a qualified tuition programunder Code Section 529.
Federal tax informationContributions to a qualified tuition program are not deductiblefor federal income tax purposes.
There are two primary federal income tax advantages to investingin a qualified tuition program, such as the State Farm Plan:
• Investment earnings on the money you invest in the Plan willnot be subject to federal income tax until they are distributedsince they are not includable in the federal gross income ofeither the account owner or the Beneficiary until funds arewithdrawn, in whole or in part, from an account; and
• If the investment earnings are distributed as part of aQualified Withdrawal, they are free from federal, and in mostcases state, income tax.
The tax treatment of a withdrawal from an account will varydepending on the nature of the withdrawal, that is, whether thewithdrawal is a Qualified Withdrawal or a Non-QualifiedWithdrawal.
Qualified WithdrawalsIf a Qualified Withdrawal is made from an account, no portion ofthe distribution is includable in the gross income of the accountowner or the Beneficiary.
A Qualified Withdrawal is a withdrawal that is solely used to paythe Qualified Higher Education Expenses of the Beneficiary.
Qualified Higher Education ExpensesQualified Higher Education Expenses include:
• Tuition• Fees• Books• Supplies• Equipment• Computers
that are required for the enrollment or attendance of theBeneficiary at an Eligible Educational Institution.
Qualified Higher Education Expenses also include expenses forspecial needs services in the case of a special needs Beneficiary atan Eligible Educational Institution.
Expenses for the purchase of computer or peripheral equipment,computer software, or Internet access and related services, if suchequipment, software, or services are to be used primarily by theBeneficiary during any of the years the Beneficiary is enrolled atan Eligible Educational Institution regardless of whether suchtechnology or equipment is required by the Eligible EducationalInstitution. Computer software means any program designed tocause a computer to perform a desired function. Such term doesnot include any database or similar item unless the database oritem is in the public domain and is incidental to the operation ofotherwise qualifying computer software. Computer softwaredesigned for sports, games, or hobbies is not included unless thissoftware is predominantly educational in nature.
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In addition, reasonable room and board expenses are consideredQualified Higher Education Expenses for students enrolled on atleast a half-time basis at an Eligible Educational Institution.
Non-Qualified Withdrawal taxableThere are also potential federal income tax disadvantages to aninvestment in a qualified tuition program. To the extent that adistribution from an account is a Non-Qualified Withdrawal, theportion of the Non-Qualified Withdrawal attributable to investmentearnings on the account will generally be ordinary income to therecipient of the withdrawal for the year in which the withdrawal ismade. A few exceptions to this are when a Non-QualifiedWithdrawal is used to pay the Beneficiary’s K-12 tuition, costsassociated with the Beneficiary’s apprenticeship program(s), orstudent loan repayments for the Beneficiary and/or theBeneficiary’s siblings. The earnings on such withdrawals will not beincluded in the recipient’s income for federal tax purposes, up tothe federal limit. No part of the earnings portion of a Non-QualifiedWithdrawal will be treated as capital gain. Under current law, thefederal tax rates on ordinary income are generally greater than thetax rates on capital gain. The contribution portion of a withdrawal isnot includable in gross income.
A Non-Qualified Withdrawal is a distribution from an account thatis not a Qualified Withdrawal, a qualified rollover, or a refund ofany Qualified Higher Education Expenses from an EligibleEducational Institution that is recontributed back into theBeneficiary’s account within 60 days of receipt of the refund fromthe Eligible Educational Institution.
Federal penalty tax on Non-Qualified WithdrawalsAdditionally, to the extent that a distribution is a Non-QualifiedWithdrawal, the federal income tax liability of the recipient will beincreased by an amount equal to 10% of any earnings portion ofthe withdrawal distribution.
Exceptions to the federal penalty taxThe additional 10% federal tax does not apply to Non-QualifiedWithdrawals if:
• Paid to the estate of a Beneficiary on or after the death ofthe Beneficiary;
• Used to pay for the Beneficiary’s K-12 tuition, up to thefederal limit (currently $10,000);
• Used to pay for fees, books, supplies or equipment required forthe Beneficiary’s participation in a registered apprenticeshipprogram;
• Used to pay the principal or interest on a qualified educationloan of the Beneficiary and/or the Beneficiary’s sibling, up tothe federal lifetime limit ($10,000 per qualifying individual);
• Made on account of the disability of the Beneficiary. A personis considered to be disabled if he or she shows proof that heor she cannot do any substantial gainful activity because of
his or her physical or mental condition. A physician mustdetermine that his or her condition can be expected to resultin death or to be of long-continued and indefinite duration;
• Included in income because the Beneficiary received a tax-free scholarship, up to the amount of the scholarshipreceived by the Beneficiary;
• Made on account of the attendance of the Beneficiary at aU.S. military academy (such as the United States NavalAcademy at Annapolis). This exception applies only to theextent that the amount of the distribution does not exceedthe costs of advanced education (as defined inSection 2005(d)(3) of Title 10 of the U.S. Code) attributable tosuch attendance; or
• Included in income only because the Qualified HigherEducation Expenses were taken into account in determiningthe American Opportunity and Lifetime Learning Tax Credits.
You should consult your own tax advisor regarding the applicationof any of the above exceptions.
RolloversNo portion of a qualified rollover is includable in the gross incomeof the account owner or the Beneficiary, or subject to theadditional 10% federal tax.
Change of BeneficiaryA change in the Beneficiary of an account is not treated as adistribution if the new Beneficiary is a Member of the Family ofthe former Beneficiary. However, if the new Beneficiary is not aMember of the Family of the former Beneficiary, the change istreated as a Non-Qualified Withdrawal by the account owner.
A change in the Beneficiary of an account or a transfer to anaccount for another Beneficiary may have federal gift tax orgeneration-skipping transfer (“GST”) tax consequences.
Earnings portionIf there are earnings in an account, each distribution from anaccount consists of two parts. One part is a return of thecontributions to the account. The other part is a distribution ofearnings in the account. A pro rata calculation is made as of thedate of the distribution of the earnings portion and thecontributions portion of the distribution.
For any year in which there is a withdrawal from an account, theProgram Manager will provide an IRS Form 1099-Q. This form willset forth the total amount of the withdrawal and identify theearnings portion and the contribution portion of any withdrawal.
Earnings aggregationAll Plan accounts for the benefit of a single Beneficiary and havingthe same account owner must be treated as a single account forpurposes of calculating the earnings portion of each withdrawal.Therefore, if more than one account is established for a..
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Beneficiary that has the same account owner and a Non-QualifiedWithdrawal is made from one or more of those accounts, theamount includable in taxable income must be calculated basedon the earnings portion of all such accounts.
Thus, the amount withdrawn from an account may carry with it agreater or lesser amount of income than the earnings portion ofthat account alone, depending on the earnings portion of allother accounts for that Beneficiary with the same account owner.In the case of a Non-Qualified Withdrawal, this aggregation rulemay result in an account owner being taxed upon more or lessincome than that directly attributable to the earnings portion ofthe account from which the withdrawal was made.
Claiming a lossA loss can only be claimed when all funds in an account havebeen withdrawn and the total distributions from that account areless than the total contributions made to that account. If there is aloss on an account, those losses are not capital losses but claimedas a miscellaneous itemized deduction, subject to a limit of twopercent (2%) of adjusted gross income for federal income taxpurposes. Please consult with your own tax advisor regarding anyloss on an account.
Estate and gift taxFor federal gift and GST tax purposes, contributions to anaccount are considered a completed gift from the contributor tothe Beneficiary. Accordingly, except as described below, if anaccount owner dies while there is a balance in the account, thevalue of the account is not includable in the account owner’sestate for federal estate tax purposes. However, amounts in anaccount at the death of the Beneficiary are includable in theBeneficiary’s gross estate.
An account owner’s contributions to an account for a Beneficiaryare eligible for the gift tax annual exclusion. Contributions thatqualify for the gift tax annual exclusion are generally alsoexcludible for purposes of the federal GST tax, unless an electionis made on the federal gift tax return to the contrary. A donor’stotal contributions to an account for the Beneficiary in any givenyear (together with any other gifts made by the donor to theBeneficiary in the year) will not be considered taxable gifts andwill generally be excludible for purposes of the GST tax if the giftsdo not in total exceed the annual exclusion for the year. Currently,the annual exclusion is $15,000 per donee ($30,000 for a marriedcouple that elects on a federal gift tax return to “split” gifts). Thismeans that in each calendar year you may contribute up to$15,000 to a Beneficiary’s account without the contribution beingconsidered a taxable gift, if you make no other gifts to theBeneficiary in the same year.
The annual exclusion is indexed for inflation and therefore isexpected to increase over time.
Five-year electionIn addition, if your total contributions to an account for aBeneficiary during a single year exceed the annual exclusion for
that year, you may elect to have the amount you contributed thatyear treated as though you made one-fifth of the contribution thatyear, and one-fifth of the contribution in each of the next fourcalendar years. You must make this election on your federal gifttax return by filing IRS Form 709.
This means that you may contribute up to $75,000 in a single yearto an account without the contribution being considered ataxable gift, provided that you make no other gifts to theBeneficiary in the same year in which the contribution is made andin any of the succeeding four calendar years. Moreover, a marriedcontributor whose spouse elects on a federal gift tax return tohave gifts treated as “split” with the contributor may contributeup to twice that amount ($150,000) without the contribution beingconsidered a taxable gift, provided that neither spouse makesother gifts to the Beneficiary in the same year and in any of thesucceeding four calendar years. An election to have thecontribution taken into account ratably over a five-year periodmust be made by the donor on a federal gift tax return.
For example, an account owner who makes a $75,000 contributionto an account for a Beneficiary in 2018 may elect to have thatcontribution treated as a $15,000 gift in 2018 and a $15,000 gift ineach of the following four years. If the account owner makes noother contributions or gifts to the Beneficiary before January 1,2023, and has made no excess contributions treated as giftssubject to the one-fifth rule during any of the previous four years,the account owner will not be treated as making any taxable giftsto the Beneficiary during that five-year period. As a result, the$75,000 contribution will not be treated as a taxable gift and alsowill generally be excludible for purposes of the GST tax. However,if the account owner dies before the end of the five-year period,the portion of the contributions allocable to years after the year ofdeath will be includable in the account owner’s gross estate forfederal estate tax purposes.
Change of BeneficiaryA change of the Beneficiary of an account or transfer of anaccount to another Beneficiary may have federal gift taxconsequences. An account owner may change the Beneficiary ortransfer an account without gift tax consequences if the newBeneficiary is a Member of the Family of the replaced Beneficiaryand the new Beneficiary is assigned to the same generation as thereplaced Beneficiary. If the new Beneficiary is a Member of theFamily assigned to a younger generation than the replacedBeneficiary, the change will be treated for federal gift taxpurposes as a gift. Federal gift tax law is unclear as to whether thegift will be considered made by the account owner or by thereplaced Beneficiary.
A change of the Beneficiary of an account or a transfer to anaccount for another Beneficiary may also have GST taxconsequences. A change or transfer will be considered a GST ifthe new Beneficiary is two or more generations younger than thereplaced Beneficiary.
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A change of account ownership may also have gift and/or GST taxconsequences. Accordingly, account owners should consult theirown tax advisors for guidance when considering a change ofBeneficiary or account ownership.
Coordination with education tax creditsAn American Opportunity or a Lifetime Learning Tax Credit maybe taken in the same year that funds from your Plan account arewithdrawn. The use will not effect participation in or receipt ofbenefits from a State Farm Plan account as long as any withdrawalfrom the State Farm Plan account is not used for the sameexpenses for which the credit was claimed. Please consult yourown tax or legal advisor if you plan to claim these tax credits.
Coverdell Education Savings Accounts (ESAs)An individual may contribute money to, or withdraw money from,both a State Farm Plan account and an education savings accountin the same year. The same expenses, however, cannot countboth as “qualified education expenses” for education savingsaccount purposes and Qualified Higher Education Expenses forState Farm Plan purposes. Accordingly, to the extent the totalwithdrawals from both programs exceed the amount of theQualified Higher Education Expenses incurred that qualifies fortax-free treatment under Code Section 529, the recipient mustallocate his or her Qualified Higher Education Expenses betweenboth such withdrawals in order to determine how much may betreated as tax-free under each program. Please consult your tax orlegal advisor for further details.
Lack of certaintyAs of the date of this Program Disclosure Statement, proposedregulations have been issued under Code Section 529 upon whichtaxpayers may rely at least until final regulations are issued. Theproposed regulations do not, however, provide guidance onvarious aspects of the State Farm Plan. It is uncertain when finalregulations will be issued. Therefore, there can be no assurancethat the federal tax consequences described herein for accountowners and Beneficiaries are applicable. Code Section 529 orother federal law could be amended in a manner that wouldmaterially change or eliminate the federal tax treatmentdescribed above. The Program Manager and Trustee intend tomodify the State Farm Plan within the constraints of applicablelaw for the Plan to meet the requirements of Code Section 529.
Nebraska state income tax deductionContributions, including the principal and earnings portions ofrollovers from another qualified college savings plan not issued bythe State of Nebraska by an account owner who files a Nebraskastate income tax return, are deductible in computing the accountowner’s Nebraska taxable income for Nebraska income taxpurposes in an amount not to exceed $10,000 ($5,000 for marriedtaxpayers filing separate returns) in the aggregate for allcontributions to all accounts within the Trust in any taxable year.Contributions by a custodian of an UGMA or UTMA account whois also the parent or guardian of the Beneficiary of an UGMA orUTMA account may claim this deduction. Minors filing a Nebraskastate income tax return are eligible to take deductions for his or
her contributions to his or her UGMA or UTMA account or to hisor her minor-owned account.
For contributions to be deductible for a given calendar year, theymust be postmarked prior to the end of that year (forcontributions sent by U.S. mail, the contribution must bepostmarked prior to the end of that year).
The following contributions are not eligible for the Nebraska statetax deduction:
• A parent or guardian’s contribution into a minor-ownedaccount
• Contributions by a custodian of an UGMA or UTMA accountwho is not the parent or guardian of the Beneficiary of anUGMA or UTMA account
• Contributions by any other person who is not the accountowner or parent or guardian custodian of an UGMA or UTMAaccount of the Beneficiary of an UGMA or UTMA account
• Contributions to an account from Ugift, Upromise® by SallieMae® Account or any other rewards program
Recapture of Nebraska income tax deductionNebraska law currently provides for the partial recapture of theNebraska state income tax deduction if a Participation Agreementis cancelled, when a Non-Qualified Withdrawal is made, or iffunds are rolled over to a qualified tuition program or ABLEprogram sponsored by another state or entity. Additionally, to theextent that a distribution constitutes a Non-Qualified Withdrawal,the Nebraska Department of Revenue will subject the distributionto partial recapture of the Nebraska state income tax deductionclaimed in prior years.
In general, an account owner or, the custodian of the UGMA orUTMA account where the custodian is the parent or guardian ofthe Beneficiary of an UGMA or UTMA account, must increase hisor her Nebraska taxable income by the amount of the cancellationdistribution, rollover to another state’s qualified tuition or ABLEprogram, or Non-Qualified Withdrawal but only to the extentpreviously deducted. Before cancelling a ParticipationAgreement, rolling funds to another state’s qualified tuitionprogram or ABLE program, or requesting a Non-QualifiedWithdrawal, you should consult with your own tax or legal advisor.
Nebraska state income taxThe earnings credited to an account will not be includable incomputing the Nebraska taxable income of either the accountowner or the Beneficiary of the account so long as the earningsremain in the account. There are no Nebraska state income taxesdue on investment earnings paid out as a Qualified Withdrawal orincluded in a qualified rollover to an ABLE plan issued by theState of Nebraska.
However, there are Nebraska state income taxes due oninvestment earnings paid out as a Non-Qualified Withdrawal or..
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included in a qualified rollover to a qualified tuition program orABLE plan not issued by the State of Nebraska. For Non-QualifiedWithdrawals distributed to the Beneficiary, the Beneficiary isresponsible for Nebraska state income tax on the earnings. ForNon-Qualified Withdrawals distributed to the account owner, theaccount owner is responsible for the Nebraska state income taxon the earnings.
The account owner or Beneficiary will not be required to includeany amount in computing Nebraska taxable income as a result of:(1) a permissible change of a qualifying Beneficiary of an account;or (2) a transfer of amounts from an account of a Beneficiary to theaccount of a different qualifying Beneficiary, provided that in eachcase the new Beneficiary is a Member of the Family of thereplaced Beneficiary and that the transfers occur either directly orby deposit to the new account within 60 days of the withdrawalfrom the prior account.
Before investing in the State Farm Plan, you should considercarefully the following:
• Investors should consider before investing whether theiror their Beneficiary’s home state offers any state tax orother state benefits such as financial aid, scholarshipfunds, and protection from creditors that are onlyavailable for investments in such state’s qualified tuitionprogram;
• Any state-based benefit offered with respect to aparticular 529 college savings plan should be one of manyappropriately weighted factors to be considered inmaking an investment decision; and
• You should consult with your financial, tax or otheradvisor to learn more about how state-based benefits(including any limitations) would apply to your specificcircumstances. You may also wish to contact your homestate or any other 529 college savings plan to learn moreabout the features, benefits and limitations of that state’s529 college savings plan.
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52
PART 15 – OTHER CONSIDERATIONS
ScholarshipsIf the Beneficiary of your account receives a scholarship, all of thefunds in that Beneficiary’s account may not be needed to pay hisor her Qualified Higher Education Expenses. If you choose towithdraw funds from the account, any earnings portion of thewithdrawal will be includable in your federal gross income, but theportion of the withdrawal up to the amount of the scholarship willnot be subject to the additional 10% federal tax.
You may also change the Beneficiary on your account to cover theQualified Higher Education Expenses of the new Beneficiarywithout adverse federal income tax consequences if the newBeneficiary is a Member of the Family of the former Beneficiary.
ContestsThe Plan may periodically participate in scholarship contestswhich award Plan contributions to contest winners. In somecircumstances, contest participation may be limited to accountowners who physically reside in Nebraska. In other instances, thatscholarship contest may be open to all account ownersnationwide.
Financial aidThe eligibility of the Beneficiary for financial aid may dependupon the circumstances of the Beneficiary’s family at the time theBeneficiary enrolls in an Eligible Educational Institution, as well ason the policies of the governmental agencies, school or privateorganizations to which the Beneficiary and/or the Beneficiary’sfamily applies for financial assistance. These policies vary atdifferent institutions and can change over time. Therefore, noperson or entity can say with certainty how aid programs, or theschool to which the Beneficiary applies, will treat your account.However, financial aid programs administered by agencies of theState of Nebraska will not take your account balance intoconsideration, except as may be otherwise provided by federallaw. For federal financial aid purposes, your account balance willbe included in the calculation of your expected familycontribution but only to the extent of approximately 5.64% ofqualified assets.
BankruptcyThe Bankruptcy Abuse Prevention and Consumer Protection Actof 2005 protects many Code Section 529 accounts in federalbankruptcy proceedings. Your account will be protected if theBeneficiary is your child, stepchild, grandchild, or step grandchild(including a child, stepchild, grandchild, or step grandchildthrough adoption or foster care) subject to the following limits:
• Contributions made to all Code Section 529 accounts for thesame Beneficiary more than 720 days before a federalbankruptcy filing are completely protected;
• Contributions made to all Code Section 529 accounts for thesame Beneficiary during the period between 365 days, and720 days before a federal bankruptcy filing are protected upto $6,225; and
• Contributions made to all Code Section 529 accounts for thesame Beneficiary 365 days before a federal bankruptcy filingare not protected against creditor claims in federalbankruptcy proceedings.
Your own state law may offer additional creditor protections. Youshould consult your legal advisor regarding the effect of anybankruptcy filing on your account.
Creditor protectionThe legislation establishing the Trust is interpreted in accordancewith Nebraska law. Nebraska law generally provides that anyamount credited to an account is not susceptible to any levy,execution, judgment or other operation of law, garnishment orother judicial enforcement, and that an amount is not an asset orproperty of either the Beneficiary or the account owner forpurposes of any state insolvency or inheritance tax laws.
As of the date of this Program Disclosure Statement, courts haveyet to interpret, apply or rule on matters involving aninterpretation of the Nebraska legislation. None of the Trust, theNebraska State Treasurer, the Nebraska Investment Council, theNebraska State Investment Officer, State Farm, the ProgramManager, or the Primary Distributor makes any representations orwarranties regarding protection from creditors. You shouldconsult your legal advisor regarding this law and yourcircumstances.
AuditsNebraska law requires the Trust to be audited by a certified publicaccountant or the Nebraska State Auditor. The Trust’s auditedfinancial statements may be viewed or downloaded attreasurer.nebraska.gov. The Trustee has currently engagedHayes & Associates, L.L.C., Omaha, Nebraska, to perform theannual audit.
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PART 16 – GLOSSARYAge-Based Investment Option means an Investment Optionthat invests in a mix of domestic equity, real estate, internationalequity, international bond, fixed income and cash equivalentinvestments based on the current age of the Beneficiary. TheAge-Based Investment Portfolio adjusts over time (each age bandis called a Portfolio) so that as the Beneficiary nears collegeenrollment age the asset allocation between domestic equity, realestate, international equity, international bond, fixed income andcash equivalent investments becomes more conservative relativeto the allocation in earlier years. See “Part 7 – Age-BasedInvestment Option.”
Beneficiary means the individual designated in the EnrollmentForm as the Beneficiary of an account at the time the account isestablished, or the individual designated as the new Beneficiary ifthe account owner changes the Beneficiary of an account. TheBeneficiary must be a U.S. citizen or resident alien with a SocialSecurity number or taxpayer identification number. A Beneficiarymay be of any age. In the case of an account established by astate or local government or a Section 501(c)(3) organization aspart of a scholarship program, the Beneficiary is any individualreceiving benefits accumulated in the account as a scholarship.See “Part 4 – Beneficiaries.”
Code means the Internal Revenue Code of 1986, as amendedfrom time to time.
Enrollment Form means the State Farm 529 Savings PlanEnrollment Form signed by an account owner establishing anaccount and agreeing to be bound by the terms of the ProgramDisclosure Statement and Participation Agreement. A separateEnrollment Form is required for each account.
Eligible Educational Institution means an eligible educationalinstitution, as defined in Code Section 529. This generally includesany accredited post-secondary educational institution in theUnited States offering credit toward a bachelor’s degree, anassociate’s degree, a graduate level or professional degree oranother recognized post-secondary credential. Certainproprietary institutions, post-secondary vocational institutions andforeign schools also are Eligible Educational Institutions. Theseinstitutions must be eligible to participate in U.S. Department ofEducation student aid programs.
Investment Option means any of the Investment Optionsavailable under the Plan. An account owner must designate anInvestment Option or Options on the Enrollment Form for eachaccount. The Plan currently has Age-Based and Static InvestmentOptions. See “Part 6 – Investment Options Overview.”
Maximum Contribution Limit means no additional contributionsmay be made for the benefit of a particular Beneficiary when thefair market value of all accounts owned by all account ownerswithin the Trust for that Beneficiary exceeds $400,000. If, however,the market value of such accounts falls below the MaximumContribution Limit, additional contributions will be accepted. The
$400,000 per Beneficiary Maximum Contribution Limit applies toall accounts for the same Beneficiary in all plans administered bythe Nebraska State Treasurer, including the State Farm Plan, theNEST Advisor Plan, the NEST Direct Plan, and the TD Ameritrade529 College Savings Plan.
Member of the Family means an individual who is related to theBeneficiary in any of the following ways:
• A son or daughter, or a descendant 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 Beneficiary or the spouse of any of the
foregoing individuals; or• A first cousin of the Beneficiary.
For purposes of determining who is a Member of the Family, alegally adopted child or foster child of an individual is treated asthe child of such individual by blood. The terms brother and sisterinclude a brother or sister by the half-blood.
Non-Qualified Withdrawal means any distribution from anaccount to the extent it is not a Qualified Withdrawal, a qualifiedrollover or a refund of any Qualified Higher Education Expensesfrom an Eligible Educational Institution that is recontributed backinto the Beneficiary’s account within 60 days of receipt of therefund from the Eligible Educational Institution. The earningsportion of a Non-Qualified Withdrawal will generally be treated asincome subject to state and federal income tax and an additional10% federal penalty tax, as well as partial recapture of anyNebraska state income tax deduction previously claimed. See“Part 14 – Federal and State Tax Considerations.”
Participation Agreement means the legally binding contractbetween an account owner and the Trust. However, the Trusteemay amend the Participation Agreement at any time.
Plan means the State Farm® 529 Savings Plan. See “Part 1 –Overview.”
Program Manager means First National Bank of Omaha, itsauthorized agents or any of its affiliates. See “Part 1 – Overview.”
Qualified Higher Education Expenses means the Beneficiary’squalified higher education expenses, as defined in CodeSection 529(e)(3). Currently, tuition, fees, books, supplies andequipment required for the enrollment or attendance of aBeneficiary at an Eligible Educational Institution are consideredQualified Higher Education Expenses. Expenses for the purchase ofcomputer or peripheral equipment, computer software, or Internetaccess and related services, if such equipment, software, or services..
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are to be used primarily by the Beneficiary during any of the yearsthe Beneficiary is enrolled at an Eligible Educational Institution arealso considered Qualified Higher Education Expenses regardless ofwhether such technology or equipment is required by the EligibleEducational Institution. Computer software means any programdesigned to cause a computer to perform a desired function. Suchterm does not include any database or similar item unless thedatabase or item is in the public domain and is incidental to theoperation of otherwise qualifying computer software. Computersoftware designed for sports, games, or hobbies is not includedunless this software is predominantly educational in nature.Reasonable room and board expenses are included as QualifiedHigher Education Expenses for those students enrolled on at least ahalf-time basis.
In addition, in the case of a special needs Beneficiary, QualifiedHigher Education Expenses include expenses for special needsservices that are incurred in connection with such Beneficiary’senrollment or attendance at an Eligible Educational Institution.
Qualified Withdrawal means a withdrawal from an account thatis used to pay the Qualified Higher Education Expenses of theBeneficiary. A Qualified Withdrawal generally is not subject tofederal income tax. See “Part 13 – Distributions from an Account.”
Static Investment Option means an Investment Option that mayinvest in domestic equity, real estate, international equity,international bond, fixed income and cash equivalents.Contributions and earnings are invested in a set asset or staticallocation. Unlike the Age-Based Investment Option, the StaticInvestment Options’ asset allocations do not adjust as theBeneficiary ages. See “Part 8 – Static Investment Options.”
Trust means the Nebraska Educational Savings Plan Trust. See“Part 1 – Overview.”
Trusted Contact means someone you trust who is at least 18years of age who acts as a resource if we lose contact with you orbelieve you and/or your assets are at risk. See “Part 3 – Openingand Maintaining an Account.”
Trustee means the Nebraska State Treasurer. See “Part 1 –Overview.”
Upromise® by Sallie Mae® Account means an account maintainedwith Upromise that is separate from the Plan and not affiliated withthe Nebraska State Treasurer, the Nebraska Investment Council, orthe Program Manager. See “Part 5 – Contributing to an Account.”
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EXHIBIT A – PARTICIPATION AGREEMENT
Pursuant to the terms and conditions of this ParticipationAgreement for the State Farm® 529 Savings Plan (the “Plan”), theaccount owner, by completing and signing an Enrollment Form,hereby requests the Nebraska Educational Savings Plan Trust (the“Trust”) to open (or in the case of a successor account owner, tomaintain) an account for the Beneficiary on the Enrollment Form.
The Participant (“you”), the Trust, which holds the assets for thePlan, the Nebraska State Treasurer (“Trustee”) and First NationalBank of Omaha, as the Program Manager (“Program Manager”),and its authorized agents agree as follows:
Section 1. Accounts and Beneficiaries. (a) Openingaccount. The purpose of this Participation Agreement is toestablish an account for the Qualified Higher Education Expensesof the Beneficiary named in the Enrollment Form.
(b) Separate accounts. The Trust will maintain a separate accountfor each Beneficiary. Each account is governed by aParticipation Agreement. All assets held in your account areheld for the exclusive benefit of you and the Beneficiary asprovided by applicable law.
(c) Naming and changing Beneficiaries. You will name theBeneficiary in the Enrollment Form. You can change theBeneficiary at any time, subject to limitations imposed byfederal and state law. To avoid adverse income taxconsequences, the new Beneficiary must be a Member of theFamily of the former Beneficiary, as that term is defined underSection 529(e)(2) of the Internal Revenue Code of 1986, asamended, or any other corresponding provision of future law(the “Code”). The designation of the new Beneficiary will beeffective upon receipt of the appropriate form, properlycompleted.
(d) Choice of Investment Option. Money invested in an account isinvested in the Investment Option or Options designated inthe Enrollment Form by you. The account owner may changethe Investment Option or Options in which money is investedtwice every calendar year or upon a change of Beneficiary. Tochange the Investment Option or Options in which youraccount is invested, you should contact your State FarmRegistered Representative.
Section 2. Contributions. (a) All contributions must be in cashequivalents. Cash equivalents means only (i) checks, (ii) payrolldeductions made by your employer, (iii) electronic funds transfersfrom your bank, (iv) automatic investment plan, (v) funds wiredthrough the Federal Reserve System, or (vi) a rollover fromanother 529 qualified tuition program.
(b) Minimum contributions. The minimum initial contributionamount is $250 per account. A contribution need not be madeevery year. If you use a payroll deduction plan or monthlyautomatic deductions from your bank account, the minimuminitial or subsequent contribution is $50 per account.
(c) Additional contributions. You may make additionalcontributions at any time.
(d) Maximum Contribution Limit. The Trustee will set a MaximumContribution Limit for each Beneficiary. You may not makeadditional contributions to any account for a Beneficiary whenthe fair market value of all accounts owned by all accountowners within the Trust for that Beneficiary equals theMaximum Contribution Limit. If, however, the fair market valueof such account falls below the Maximum Contribution Limit,additional contributions will be accepted. The Trust will informyou of the Maximum Contribution Limit for each year.Currently, the Maximum Contribution Limit is $400,000. The$400,000 per Beneficiary Maximum Contribution Limit appliesto all accounts for the same Beneficiary in all plansadministered by the Trustee, including the Plan, the NESTAdvisor Plan, the NEST Direct Plan, and the TD Ameritrade 529College Savings Plan.
Section 3. Distribution From Accounts. You may direct theTrustee to distribute part or all of the money in an account atany time.
(a) You must complete the appropriate form or follow such otherprocedures for the withdrawal of money in an account as theProgram Manager may designate. The Program Manager maychange the form or modify the procedures for withdrawingmoney from an account from time to time.
(b) You acknowledge the earnings portion of a Non-QualifiedWithdrawal, as defined in the Program Disclosure Statement,will be included in your income for federal and state incometax purposes and may be subject to an additional 10% federaltax, as well as partial recapture of any Nebraska state incometax deduction previously claimed.
(c) Notwithstanding any other provision of this Agreement, theTrustee or the Program Manager may terminate an account atany time upon a determination that you or the Beneficiary haveprovided false or misleading information to the Trust, theProgram Manager or an Eligible Educational Institution. TheTrustee will pay you the balance remaining in the account, lessany fees, if applicable.
Section 4. Your Representations and Acknowledgments.You hereby represent and warrant to, and agree with, the Trust,the Trustee and the Program Manager as follows:
(a) You acknowledge that you are aware that the creation of anaccount under the Trust subjects your contributions to salescharges and ongoing fees which are not applicable if youestablish an account directly with the Trust without theassistance of a State Farm Registered Representative.
(b) I have accepted, read, and understand the Program DisclosureStatement for the State Farm Plan and have carefully reviewedall the information contained therein, including informationprovided by or with respect to the Trust and the Program..
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Manager. In making a decision to open an account and enterinto this Participation Agreement, I have not relied upon anyrepresentations or other information, whether oral or written,other than as set forth in the Program Disclosure Statementand this Participation Agreement. You also agree that you havehad the opportunity to review and hereby approve andconsent to all compensation paid or received by any partyconnected with the Trust or any of its investments.
(c) You acknowledge and agree that the value of any account willincrease or decrease based on the investment performance ofthe Investment Option of the Trust in which the account is theninvested. YOU UNDERSTAND THAT THE VALUE OF ANYACCOUNT MAY BE MORE OR LESS THAN THE AMOUNTINVESTED IN THE ACCOUNT. You agree that all investmentdecisions will be made by the Nebraska Investment Council orany other adviser hired by the Trust, and that you will not directthe investment of any funds invested in the Trust, eitherdirectly or indirectly. You also acknowledge and agree thatnone of the State of Nebraska, the State Investment Officer,the Nebraska Investment Council, the Trust, the Trustee, StateFarm, or the Program Manager or any other adviser orconsultant retained by or on behalf of the Trust makes anyguarantee that you will not suffer a loss of the amount investedin any account.
(d) You understand that so long as the Program Manager isperforming services for the Trust, it may follow the directives ofthe Trustee and the Nebraska Investment Council. Whenacting in such capacity, the Program Manager will have noliability to you or any other Beneficiary of this Agreement.
(e) You acknowledge and agree that participation in the StateFarm Plan does not guarantee that any Beneficiary: (i) will beaccepted as a student by an Eligible Educational Institution;(ii) if accepted, will be permitted to continue as a student;(iii) will be treated as a state resident of any state for tuitionpurposes; (iv) will graduate from any Eligible EducationalInstitution; or (v) will achieve any particular treatment underapplicable state or federal financial aid program. You alsoacknowledge and agree that none of the State of Nebraska,the Trust, the Trustee, the Program Manager or any otheradviser or consultant retained by or on behalf of the Trustmakes any such representation or guarantee.
(f) You acknowledge and agree that no account will be used ascollateral for any loan. Any attempted use of an account ascollateral for a loan will be void.
(g) You acknowledge and agree that the Trust will not loan anyassets to you or the Beneficiary.
(h) You acknowledge and agree that the Trust is established andmaintained by the Treasurer of the State of Nebraska, pursuantto state law, and is intended to qualify for certain federalincome tax consequences under Code Section 529. You furtheracknowledge that such federal and state laws are subject to
change, sometimes with retroactive effect, and that neither theState of Nebraska, the Trust, the Trustee, the ProgramManager nor any adviser or consultant retained by the Trustmakes any representation that such state or federal laws willnot be changed or repealed.
(i) You acknowledge and agree that the Trust is the record ownerof the shares of any underlying investments in which eachInvestment Option is invested and that you will have no rightto vote, or direct the voting of, any proxy with respect to suchshares.
(j) If you are establishing an account as a custodian for a minorunder UGMA/UTMA, you understand and agree that youassume any responsibility for any adverse consequencesresulting from the establishment of an account.
(k) You understand and agree that your account and thisAgreement are subject to the rules and regulations as theState Treasurer may promulgate in accordance with Nebraskalaw. You also understand and agree that all decisions andinterpretations by the Trustee, the Nebraska InvestmentCouncil, or the Program Manager in connection with the Planshall be final and binding on you and your Beneficiary and anysuccessors.
Section 5. Fees and Expenses. The Trust will make certaincharges against each account in order to provide for the costs ofadministration of the accounts and such other purposes as theTrustee shall determine appropriate.
(a) Program Management Fee. Each Investment Option is subjectto a program management fee at an annual rate of 0.25%(0.18% for the Bank Savings Static Investment Option) of theaverage daily net assets, which is accrued daily and reflected inthe price of each Investment Option.
(b) Investment Management Fees. You acknowledge and agreethat each of the underlying investments also may haveinvestment management fees and other expenses, which willbe disclosed or made available on an annual basis.
(c) State Administration Fee. Each Investment Option is subject toa state administration fee at an annual rate of 0.02% of theaverage daily net assets, which is accrued daily and reflected inthe price of each Investment Option.
(d) Change in fees. You acknowledge and agree that the chargesdescribed above may be increased or decreased as theTrustee and Nebraska Investment Council shall determine tobe appropriate.
(e) Sales Loads, Redemption Fees, and Administrative Fees. Anaccount is subject to the fees set forth in the ProgramDisclosure Statement.
Section 6. Necessity of Qualification. The Trust intends toqualify for favorable federal tax treatment under Code..
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Section 529. You agree and acknowledge that qualification underCode Section 529 is vital and agree that the Trustee may amendthis Participation Agreement upon a determination that such anamendment is required to maintain such qualification.
Section 7. Reporting. The Trust, through the ProgramManager, will make quarterly reports of account activity and thevalue of each account. Account information can also be obtainedvia the Plan’s secure website.
Section 8. Account Owner’s Indemnity. You recognize thateach account will be established based upon your statements,agreements, representations and warranties set forth in thisParticipation Agreement and the Enrollment Form. You agree toindemnify and to hold harmless the Trust, the Trustee, theNebraska Investment Council, the Nebraska State InvestmentOfficer, State Farm, the Program Manager and its affiliates, FirstNational Capital Markets, Inc. (the “Distributor”) and anyrepresentatives of the Trust, the Trustee, the Program Manager,or the Primary Distributor from and against any and all loss,damage, liability or expense, including costs of reasonableattorneys’ fees to which they may be put or which they may incurby reason of, or in connection with, any breach by you of youracknowledgments, representations or warranties or any failure ofyou to fulfill any covenants or agreements set forth herein. Youagree that all statements, representations and warranties willsurvive the termination of your account.
Section 9. Amendment and Termination. Nothingcontained in the Trust or this Participation Agreement shallconstitute an agreement or representation by the Trustee oranyone else that the Trust will continue in existence. At any time,the Trustee may amend this Participation Agreement or suspendor terminate the Trust by giving written notice of such action tothe account owner, so long as, after the action, the assets in youraccounts are still held for the exclusive benefit of you and yourBeneficiaries.
Section 10. Governing Law. This Agreement shall begoverned and interpreted in accordance with the laws of the Stateof Nebraska. All parties agree that exclusive venue and jurisdictionfor any legal proceedings related to this Participation Agreementor the State Farm Plan shall be in the State of Nebraska.
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State Farm® 529 Savings PlanP.O. Box 419096Kansas City, MO 64141-9096
800.321.7520www.statefarm.com
State Farm® 529 Savings PlanProgram Disclosure Statement
March 1, 2020
SFPDS0320
