Is Gerber Life College Plan a qualified or nonqualified program?

[Coleen3]

In terms of what? Did you get a 1099-R? Are you asking if it is a 529 plan? It isn't.

[gmartinez]

Yes, I got a 1099-R. I am not taking the money out. I am rolling over any earnings since this account is for my son college plan Thru Gerber Life company. But I am not sure if this plan is qualified or not. Thank you. Gabriela

[Coleen3]

It seems to be a life insurance policy. What code is in Box 7?

[gmartinez]

Well, it includes life insurance, but it is more for college savings. It has the number 7.

[gmartinez]

I just talked with someone from Gerber Company and the lady told me that this plan is Nonqualified plan since I am reporting the earnings every period and this plan is not like an IRA plan. Does this sound good for you?

[Coleen3]

Yes. I assumed non-qualified, but there may have been other ramifications. The code 7 makes it easy.

[Coleen3 · Accepted solution]

It is a non-qualified plan. Just enter it exactly as it appears and follow the interview questions.

Non Qualified money is “after tax” money.

When you invest outside of a “Qualified” plan, you do not get to write off this investment on your taxes. Put simply, money invested into Non Qualified plans will not get an upfront tax break. Additionally, the investment earnings could be taxable each year. It all depends on the type of investment you use.

For example, if you place your Non Qualified investment dollars into a CD at the bank, you will have to pay tax on the interest earnings every year. Each year, the bank will send you a 1099 tax form showing you the amount of interest earned. You are required to pay taxes on those earnings for that specific tax year. Note that you will have to pay a tax on these earnings regardless of whether you took the money out of the Bank CD or not