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OppenheimerFunds Inc.| XX.X.2016
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Agenda College Savings Opportunity Advantages of a 529 Plan Why Bright Start® 529 Sales Ideas Some states offer favorable tax treatment to their residents only if they invest in the state’s own plan. Non-residents of Illinois should consider whether their state offers its residents a 529 Plan with alternative tax advantages and should consult with a tax advisor about any state or local taxes. Investments in the Plan are subject to market risk. You may lose money by investing in the Plan.
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College Savings Opportunity
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College Savings Opportunity Education Costs Outpace Inflation Source of data: The College Board—Trends in College Pricing, 2011. Average college costs include tuition, fees, books and supplies, room and board, transportation and other expenses as well as the assumed 5% annual rate of increase. This illustration uses the “Average Estimated Undergraduate Budgets, 2011-2012 (Enrollment-Weighted)” figures to project the hypothetical future costs. 2011-20122020-20212020-2030 The Future: The Rising Cost of a Four-Year Education
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College Savings Opportunity The Market Place 17.3 million undergrads in 2014 1 – Undergraduate enrollment is projected to increase 14% from 17.3 million to 19.8 million students between 2014 and 2025 By 2036, the average price of a 4 Year Private Institution will be $429,407 2 1. Source of data: National Center for Education Statistics, May 2016, U.S. Dept. of Education. 2. Source of data: College Board, Strategic Insight 2014; Cost includes Tuition, Fees and Room and Board
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College Savings Opportunity The Market Place The Pension Protection Act of 2006 preserved all the existing features of 529 plans, especially tax-free qualified withdrawals Total 529 savings plan assets increased to an estimated $253 billion as of 2015 1 1. Source of data: Strategic Insight Industry Analysis 2016
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Savings VehiclesTax Implications Attributes Section 529 Savings Plans Any earnings grow tax-free 1 High contribution limit Control over assets Change beneficiary at any time Estate and gifting benefits Covers a variety of expenses Low weighting in federal financial aid calculations No income restriction Coverdell Education Any earnings grow tax-free 1 Lowest annual contribution limit ($2,000) 2 Low weighting in federal financial aid calculations Income restrictions Section 529 Prepaid Tuition Plan Any earnings grow tax-free 1 No investment control Funds may not be transferable to out-of-state schools Low weighting in federal financial aid calculations if parent is account owner UGMA/UTMA At least part of investment earnings is not subject to tax and at least part is taxable at minor’s rate Minors gain control at a certain age and can use assets for any purpose Earnings are taxable High weighting in financial aid calculations – treated as student’s asset 1. Tax-free earnings as long as withdrawals are used for qualified higher education expenses. 2. May be subject to phase out. College Savings Opportunity Comparing Higher Education Savings Options
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Advantages of a 529 Plan
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Advantages of a 529 Plan Growth Potential Earnings have the potential to grow completely federal and possibly state income tax-free Account balances may grow faster than taxable investments Qualified withdrawals are federal and possibly state tax- free 1 1. Non-qualified withdrawals are subject to ordinary federal and any applicable state income tax and an additional 10% federal tax. In some states, nonqualified withdrawals are also subject to recapture of previous state tax deductions. This hypothetical illustration assumes an initial investment of $10,000 and a 5% annual rate of return. The taxable account assumes a 28% federal and 5% state tax rate. The illustration does not represent the performance of any specific account or investment and does not reflect any plan fees or sales charges that may apply. If such fees or sales charges were taken into account, returns would have been lower. $24,066 $18,096 Year The Benefits of Tax-free Growth
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Advantages of a 529 Plan Estate Planning Benefits Estate Planning Advantages Reduction of estate tax Contributions are considered completed gifts; excluded from the contributor’s taxable estate Ability to Accelerate Annual Gift Tax Exclusion Contribute up to $70,000/child in a single year ($140,000/couple 1 ) to take advantage of five years worth of tax-free gifts at one time 1. Account owners cannot make another tax-free gift to the same beneficiary for five-years from the original contribution. If the account owner dies within five years of the funding date, a prorated portion of the contribution allocable to the remaining years in the five year period, beginning with the year after the contributor’s death, will be included within his or her estate for federal estate tax purposes. Clients should consult their tax advisor.
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Advantages of a 529 Plan Contribute Your Way Lump Sum Contribute up to $400,000 per beneficiary 1 Automatic Investing Flexibility to contribute on your schedule Funding Flexibility Anyone, including family and friends, can contribute (parent, grandparent, relative or friend) Can even set up account for yourself No income level restrictions or age limitations 1. All accounts for the benefit of the same Designated Beneficiary within the Illinois 529 Program will be combined to determine whether this balance has been reached.
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Advantages of a 529 Plan You’re in Control Account Owner Control Select or choose the investment portfolios Select and change beneficiary at any time 1 Control use of assets for Qualified Higher Education Expenses Withdrawals Qualified withdrawals Nonqualified withdrawals Nonqualified withdrawals without an additional 10% federal tax 2 1. The Account Owner may change the Designated Beneficiary provided the new Designated Beneficiary is a member of the family of the current Designated Beneficiary. See the Program Disclosure Statement for more information. 2. The 10% federal tax penalty, but not the ordinary income tax, is waived where the withdrawal is attributable to the beneficiary’s death, disability, or receipt of a tax-free scholarship. The additional taxes are also reduced or eliminated in cases where tuition costs must be subtracted from 529-qualifying college costs because the Hope or Lifetime Learning credit is being claimed.
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Advantages of a 529 Plan Flexibility Use at any accredited public or private post-secondary institution Two- and four-year undergraduate programs Vocational and technical schools Graduate, professional, medical and law schools Applies to a wide range of Qualified Expenses 1 Tuition and Fees Room and Board Books, Supplies and Special Equipment 1. For withdrawals not used for qualified higher education expenses, earnings are subject to income taxes at the account owner’s rate plus a 10% federal tax additional tax.
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Why Bright Start?
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Why Bright Start Multi-manager approach Offers expertise from industry professionals across asset classes Consistency Competitive returns over time and across asset classes Investment Flexibility Age-based Portfolios Static Portfolios
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Choose How You’d Like to Contribute High Contribution Maximum Maximum Contribution Limit of $400,000 per designated beneficiary 1 Investment Minimums Actively Managed and Index Portfolios - $25 initial investment Subsequent Contributions Subsequent Contributions of $15 per investment portfolio 1. All accounts for the benefit of the same Designated Beneficiary within the Illinois 529 Program will be combined to determine whether this balance has been reached. Some states offer favorable tax treatment to their residents only if they invest in the state’s own plan. Non-residents of Illinois should consider whether their state offers its residents a 529 Plan with alternative tax advantages and should consult with a tax advisor about any state or local taxes.
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1. These investment strategies are not mutual funds and are described more fully in the Program Disclosure Statement. 2. Registered mutual funds. 3. An investment in the Fund is neither insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. 4. See the Program Disclosure Statement for details. 5. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. As of 9/30/16, the fund will no longer be referred to as Oppenheimer Institutional Money Market Fund. Advisor-sold Actively-Managed Age Based Portfolios Investment Options ■ Equity 5 -OFIPI Rising Dividends 1 -OFIPI Value 1 -OFIPI Capital Appreciation 1 -OFIPI Main Street Small Cap 1 -OFIPI Baring Focused EAFE Equity 1 -Oppenheimer Developing Markets Fund 2 ■ Fixed Income 5 -American Century Diversified Bond Fund 2 -Oppenheimer International Bond Fund Y 2 -OFIPI Enhanced Short-Term Government Index Portfolio 1 ■ Money Market 5 -Oppenheimer Institutional Government Money Market Fund 2, 3 ■ Other 5 -Fixed Income Securities plus Insurance Wrapper 4 Portfolio AllocationPortfolio Objective
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Select the investment approach Static Portfolios 5 ■ Equity 6 -OFIPI Rising Dividends 1 -OFIPI Value 1 -OFIPI Capital Appreciation 1 -OFIPI Main Street Small Cap 1 -OFIPI Baring Focused EAFE Equity 1 -Oppenheimer Developing Markets Fund 2 ■ Fixed Income 6 -American Century Diversified Bond Fund 2 -Oppenheimer International Bond Fund Y 2 -OFIPI Enhanced Short-Term Government Index Portfolio 1 ■ Money Market 6 -Oppenheimer Institutional Government Money Market Fund 2, 3 1. These investment strategies are not mutual funds and are described more fully in the Program Disclosure Statement. 2. Registered mutual funds. 3. An investment in the Fund is neither insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. 4. See the Program Disclosure Statement for details. 5. Once you invest in a portfolio, your money will remain in that portfolio until you instruct the Plan to move it to another portfolio or approach. None of these portfolios are designed to provide any particular total return over any period or investment time horizon. You should work with your financial advisor to determine which portfolios are appropriate to your situation. 6. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. As of 9/30/16, the fund will no longer be referred to as Oppenheimer Institutional Money Market Fund. Portfolio AllocationPortfolio Objective
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Investor Fees Competitive Total Expense Ratios 1 Class A Range: 0.73% to 0.96% Class C Range: 0.98% to 1.21% Investor Sales Charge Class A Maximum Initial Sales Charge of 3.50% 2 Class C Contingent Deferred Sales Charge of 0.50% 3 1. The numbers include a 0.15% Program Management Fee and a 0.03% State Administrative Fee. For Class A Units, a 0.25% Annual Asset-Based Charge is also included. For Class C Units, a 0.50% Annual Asset-Based Charge is also included. The Fees are subject to change at any time, and are assessed against assets over the course of the year and do not include sales charges or the annual account maintenance fee. 2. Payable at the time of purchase of Class A Units. Lower initial sales charges available for larger aggregate Contributions. Waived for certain Account Owners. 3. For Class C Units, payable with respect to each Contribution if you direct a Withdrawal, transfer or rollover from your Account within one year of a Contribution. Partially waived in limited circumstances.
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BreakpointInitial Sales ChargePayment to Broker Dealer Less than $250,000 3.50% 3.00% $250,000 - $499,000 2.50% 2.00% $500,000 - $999,000 2.00% 1.60% $1,000,000 or Greater 1 0.00% 1.00% 2 Financial Advisor Compensation Class A Unit 0.25% immediate trail commission to broker dealer Broker will receive 0.50% upfront commission on new contributions and a 0.50% trailing commission starting month 13 for new contributions. Class C Unit 1. May be subject to a contingent deferred sales charge if Class A Units are redeemed within 18 months of contribution. 2. A contingent deferred sales charge (CDSC) of 1.00% (but not more than the concession paid to the dealer) applies if shares are redeemed within 18 months after the end of the month in which purchased.
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Operational Considerations Commissions Initial Sales Charges are transmitted bi-monthly and Commission Trails are transmitted quarterly Confirms/Statements Daily Confirms for all financial transactions except automated contributions Quarterly account statements Confirm/Statement copies will arrive in batch for all advisors of record in your branch Account Access As Financial Advisor of record, you can get account and investment information from the OppenheimerFunds service number Can view account and investment information from 529 Connect
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529 Sales Ideas
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529 Sales Ideas College Saving is a Retirement Issue Education is key Saving for college and retirement should go hand-in-hand Delaying college savings can ultimately delay plans for retirement This hypothetical illustration assumes an initial investment of $10,000 and a 5% annual rate of return. The taxable account assumes a 28% federal and 5% state tax rate. The illustration does not represent the performance of any specific account or investment and does not reflect any plan fees or sales charges that may apply. If such fees or sales charges were taken into account, returns would have been lower. $24,066 $18,096 Year The Benefits of Tax-free Growth
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529 Sales Ideas Increase Ticket Size with 529 Sales Present your high-powered, short-on-time clients with one or more of our ready-made solutions: IDEA 1: Introduce the Advantages of Custodial 529 Plans vs. UGMA/UTMA Accounts IDEA 2: Don’t Lose Assets to Required Minimum Distributions IDEA 3: Offer Clients with Trusts a More Tax-efficient Way to Save for College IDEA 4: Encourage High Net Worth Clients to “Power Fund” their 529 Plan
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529 Sales Ideas Idea 1: UGMA/UTMA Conversion Current Tax and Financial Aid Rules Make This Strategy More Beneficial UGMA/UTMA earnings above $1,050 per year taxed at parent’s tax rate until the child is age 18 Using UGMA/UTMA assets to fund a 529 plan reduces financial aid weighting from 20% to a maximum of 5.6% if the student is a dependent student Client Benefits Increased tax efficiency Improve financial aid treatment Eliminates the need to file an annual tax return for the UGMA/UTMA account each year Can move upwards of $300,000 — subject to applicable gift tax limitations
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529 Sales Ideas Idea 2: Don’t Lose Assets to RMDs! Retain RMD assets and provide IRA clients with a second opportunity for tax-free growth! Benefits for the client: Opportunity for clients to give the gift of a lifetime… Education While retaining control
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529 Sales Ideas Idea 3: Trust Assets = 529 Assets Benefits Eliminate annual taxation of trust earnings Eliminate the need to file an annual tax return for the trust assets Revocable Trusts Remove assets from federal and possibly state taxable estate Irrevocable Trusts Since the trust assets are a completed gift, can fund up to $294,000
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529 Sales Ideas Idea 4: Encourage High Net Worth Clients to “Power Fund” Their 529 Plan Gift tax laws may be keeping affluent clients from getting as much as they can from their college savings account Special gift and estate tax treatment allows contributions of $70,000 ($140,000 for a married couple) in one lump sum per beneficiary free of federal and possibly state gift tax Show them how they can do more using a 529 college savings plan
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529 Sales Ideas Summary College Savings equates to potential opportunity Bright Start College Savings Program can be an effective way for your clients to save for college Bright Start College Savings Program may be a better alternative for existing college savings vehicles
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529 Sales Ideas Next Steps Identify potential and existing College Savings Plan clients Consider key factors and concepts on 529 plans to help support clients’ college savings goals Present Bright Start as a viable way to save for college
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Questions? Have Questions on 529 Plans? Need Sales Assistance? OppenheimerFunds’ 529 Sales Support Team Can Help. Visit our website at brightstartadvisor.com Or call 1.877.43.BRIGHT (1.877.432.7444)
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Thank you
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Disclaimers The Bright Start® College Savings Program is administered by the State Treasurer of the State of Illinois and distributed by OppenheimerFunds Distributor, Inc. OFI Private Investments Inc., a subsidiary of OppenheimerFunds, Inc., is the program manager of the Plan. Some states offer favorable tax treatment to their residents only if they invest in the state's own plan. Investors should consider before investing whether their or their designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program and should consult their tax advisor. These securities are neither FDIC insured nor guaranteed and may lose value. Before investing in the Plan, investors should carefully consider the investment objectives, risks, charges and expenses associated with municipal fund securities. The Program Disclosure Statement and Participation Agreement contain this and other information about the Plan, and may be obtained by visiting brightstartadvisor.com or calling 1.877.43.BRIGHT (1.877.432.7444). Investors should read these documents carefully before investing. For Institutional Use Only. This material has been prepared by OppenheimerFunds Distributor, Inc. for institutional investors only. It has not been filed with the FINRA, and may not be reproduced, shown or quoted to, or used with, retail investors. This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or for use to avoid penalties that may be imposed under U.S. federal tax laws. Contact your attorney or other advisor regarding your specific legal, investment or tax situation. The Bright Start® College Savings Program is distributed by OppenheimerFunds Distributor, Inc., Member FINRA, SIPC Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008 ©Copyright 2016 OppenheimerFunds Distributor, Inc. All rights reserved. AV0000.205.0916 September, 2016
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