Maryland Prepaid College Trust Earnings Rate Decision

In accordance with the “Claims Statute", a claim may be submitted only for an account that was open and existing on or after November 1, 2021 by:

• an MPCT account holder; or
• an MPCT qualified beneficiary for a distribution that was made to the qualified beneficiary or to an eligible educational institution on the beneficiary's behalf.

In addition, in accordance with the Claim Procedures established by the Treasurer on October 2, 2023 (the “Claim Procedures”), a claim may also be submitted on behalf of either the account holder or qualified beneficiary by a legal representative if the claim is presented in the name of the claimant and is signed by the legal representative. STO may require that any claim submitted by a legal representative be supplemented by evidence that the legal representative is authorized to submit a claim on behalf of the claimant.

No. A claim may only be filed with respect to an account that was open and existing on or after November 1, 2021.

No. A claim may only be filed with respect to a Maryland Prepaid College Trust account.

The State Treasurer's Office has established an online claim portal for the submission of claims. The online portal can be accessed here:

Please note that the online portal does not allow for the saving of draft claims. All information must be entered in one sitting. Please see the question below for a description of required information.

Claims may also be submitted by mailing a written notice of claim to:

In accordance with the Claims Statute and the Claim Procedures, a proper claim shall:

• Contain a concise statement of facts that sets forth the nature of the Claim;
• State the name, address, telephone number and email address, if any, of the Claimant;
• State the Prepaid Contract account number to which the Claim relates;
• Contain a demand for money damages;
• State the name, address, telephone number and email address of the legal representative for the Claimant, if any;
• Relate to a Prepaid Contract that was open and existing on or after November 1, 2021; and
• Be signed by the Claimant, or a legal representative on behalf of the Claimant.

No. Each claim must relate to only one account. For example, if an account holder has three accounts, the account holder should file three separate claims, regardless of whether the accounts relate to the same beneficiary or not.

For claims related to a full refund or rollover processed between November 1, 2021 and the implementation of the Treasurer's Earnings Rate Decision (“Earnings Claims”), account holders will be entitled to thedifference between the amount that was paid out at the time of refund or rollover and the amount that would have been paid out had the Treasurer's 6% retroactive earnings rate decision been effective as of November 1, 2021.

Per the Claims Statute, any claim by an account holder or a qualified beneficiary arising from the administration of the trust shall be made solely against the assets of the trust. As such, for all other claims, as fiduciary of MPCT, the State Treasurer will review each claim with consideration to the interests of all MPCT account holders and qualified beneficiaries and any impact on the funding of MPCT before making a determination.

Earnings Claims are currently being processed.

For all other claims, the State Treasurer, as fiduciary of MPCT, will review each claim and its impact on all participants and the funding of MPCT before making a determination. In order to determine the impact of these claims, it is necessary to first process all earnings claims. After that time, the Treasurer will be able to determine how much can be paid on other claims while maintaining the actuarial soundness of MPCT.

The timing of the payment of claims will also depend on the prompt response to requests for additional information from STO. If you file a claim, please check your email regularly for requests for additional information related to your claim. Failure to respond to requests for additional information in a timely manner may result in a denial of your claim.

Claimants will be notified when a claim is received, when an account is verified, if additional information is needed, and when a final determination is made. Pursuant to the Claims Statute, the State Treasurer makes the final determination with respect to MPCT claims.

Claims related questions can be emailed to claimsmd529@treasurer.state.md.us. You can also call 410-316-6367 with claims related questions.

Contributions made prior to November 1, 2021 in accounts that were open and active in the automated recordkeeping system on November 1, 2021, are eligible for application of the retroactive earnings rate as set forth in the Treasurer's Decision Memorandum dated July 10, 2023 and the MPCT Disclosure Statement. For accounts that received a refund or rollover of their full account value on or after November 1, 2021, a claim will need to be submitted by account holders to receive the retroactive earnings applicable to the amount refunded or transferred to another qualified tuition program.

The earnings rate for contributions made prior to November 1, 2021 is 6%, compounded monthly, applied retroactively to the date of contribution and effective until the earlier of: (1) the date all earnings are set to zero as discussed in the Treasurer's Decision Memorandum dated July 10, 2023, (2) the date benefits are withdrawn, or (3) the date of contract termination.

Contributions made on or after November 1, 2021, will accrue regular interest each year at an annual rate equal to the 10-year Treasury note rate, compounded monthly until the earlier of:

(1) the date all earnings are set to zero as discussed in the Treasurer's Decision Memorandum dated July 10, 2023, (2) the date benefits are withdrawn, or (3) the date of contract termination. The Treasury note yield applicable to contributions will be updated annually each June 30 and that yield will apply from July 1st of that year until June 30th of the following year. The yield for the 10-year Treasury note will be sourced from the Board ofGovernors of the Federal Reserve System (US), 10-Year Treasury ConstantMaturity Rate (DGS10), as retrieved from FRED, Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/series/DGS10). This is unchanged from the existing rate on these contributions.

No. Contributions to the MCPT will no longer accrue earnings beginning on a date no later than July 1, 2024 as set forth in the Treasurer's Decision Memorandum dated July 10, 2023 and the MPCT Disclosure Statement. However, the earnings accrued up until that date will remain a part of the account balance until disbursed. At least 60 days prior to the date the earnings rate is set to zero, account holders will be notified of the effective date of that change. Account holders who do not wish to be bound by these new contract terms may request a rollover to another qualified state tuition program or a refund.

There are three primary reasons why contributions will no longer accrue earnings on or after July 1, 2024. First, to ensure that the 6% retroactive earnings rate is affordable, future benefits needed to be reduced. Second, the apparent original intent of the Maryland General Assembly in creating MPCT was to serve as a defined benefit plan, not an investment plan. Third, the change will align MPCT benefits with almost all the prepaid tuition plans offered by other states. The State Treasurer's goal is that, moving forward, the benefit that MPCT pays out will be the defined benefit of prepaid tuition rather than a benefit that is driven by earnings on contributions.

No. While earnings will not continue to accrue, the earnings accrued to the date of the change will not disappear and will be included when calculating an account's value even after the change to zero earnings.

MPCT is closed to new enrollments and, at a date on or before July 1, 2024, will stop paying earnings on balances. Despite this change, MPCT will remain open and active for account holders and will function as a traditional defined benefit plan. Account holders who want to have future tuition costs covered will continue to receive the tuition benefits available to them under their contracts.

There are several reasons why the calculated figure may be different. For example:

• More than 18 months passed between distribution of the 2021 year-end statements and automation; updated account values reflected contributions, distributions and additional earnings during that time period;
• Updated account values were the result of the implementation of a ledger system applying earnings on contributions and distributions from accounts as they occurred; and
• In the methodology used to determine the 2021 year-end account values, all earnings stopped accruing once a beneficiary reached their Projected Enrollment Year. The implementation of the ledger system allows earnings to continue to accrue until all amounts in the account have been exhausted.

The Treasurer, in making the July10, 2023 decision, focused on equity for all plan participants, affordability, and sustainability for the Trust. The July 10, 2023 decision helps to ensure that benefits will be available in the future. Account holders can have confidence that the program will do what it was intended to do - provide future tuition benefits.

As set forth in the MPCT Disclosure Statement, an account holder can terminate their contract and receive a refund in an amount determined pursuant to the terms of the contract. Please note that there are tax consequences associated with a decision to terminate your account. An account holder should consult with a tax professional regarding such consequences and review Key Federal Tax Issues and Key State Tax Issues on pages 20 and 22, respectively, of the MPCT Disclosure Statement.

Refunds and rollovers can be processed directly through the automated recordkeeping system. Click here to download the appropriate form.

To request a refund or rollover to another Qualified Tuition Program, please download and complete the Refund Request Form under the heading “Request a Refund for your Account”.

Completed forms can be uploaded via the automated recordkeeping system which can be accessed here.

Please note that rollover distributions are permitted from MPCT to another qualified state tuition program subject to limitations imposed by the IRS. In particular, there is a restriction that permits only one rollover per beneficiary per 12-month period, as explained in the MPCT Disclosure Statement (see Article VI Rollovers and Refunds).*

*On January 25, 2024, the Department of the Treasury and the Internal Revenue Service issued Notice 2024-23 announcing special relief for taxpayers impacted by recent system issues affecting the Maryland Prepaid College Trust as described in the notice. Click here to read the full report.

Yes, a rollover distribution is permitted from MPCT to the MCIP or another qualified state tuition program, subject to limitations imposed by the IRS. In particular, there is a restriction that permits only one rollover per beneficiary per 12-month period, as explained in the MPCT Disclosure Statement (see Article VI Rollovers and Refunds).* Based on current IRS regulations, a rollover, however, will not be treated as a taxable distribution if either of the two scenarios below is satisfied.

• The beneficiary of the MPCT account and the MCIP account is the same, provided that only one tax-free rollover from a MPCT account to a MCIP account (or to any other 529 account) may occur in a 12-month period for the same beneficiary.*
• The MCIP account beneficiary is a member of the family of the MPCT account beneficiary. Because the beneficiaries are different, the 12-month rule does not apply. However, gift taxes or generation-skipping transfer taxes may apply with respect to a rollover to a MCIP account with a different beneficiary unless the beneficiary is in the same or higher generation, so you should consult with a tax advisor when considering such a rollover.

*On January 25, 2024, the Department of the Treasury and the Internal Revenue Service issued Notice 2024-23 announcing special relief for taxpayers impacted by recent system issues affecting the Maryland Prepaid College Trust as described in the notice. Click here to read the full report.

From a federal law perspective, the accounts cannot be “merged.” Instead, the transfer of funds from one account to another is considered a rollover. In the following example, the same beneficiary has three MPCT accounts:

• Account 1 (Account Holder - Mom);
• Account 2 (Account Holder - Dad); and
• Account 3 (Account Holder - Dad)

In this situation, the rollover from Account 1 to Account 3 and the rollover from Account 2 to Account 3 would be considered two rollovers for one beneficiary. As such, if it occurs within a single 12-month period, one of the rollovers would be considered a taxable distribution.* The same would be true if Account 1 and Account 2 were both rolled over to a MCIP account for that same beneficiary in a single 12-month period. When considering a rollover, please be advised that Chapter113, the recently enacted reform legislation, requires an account holder to rollover funds as a condition of accepting a settlement.

*On January 25, 2024, the Department of the Treasury and the Internal Revenue Service issued Notice 2024-23 announcing special relief for taxpayers impacted by recent system issues affecting the Maryland Prepaid College Trust as described in the notice. Click here to read the full report.