SET with MET
Students may direct a refund amount to any out-of-state baccalaureate degree-granting institution or community college. Refund options are also available for full scholarship, military enlistment, death or disability, or not attending college.
For additional flexibility, MET provides termination and refund provisions if the student/beneficiary chooses to attend a Michigan independent (private) college or university or an out-of-state college. While MET does not provide full tuition at those institutions it does provide weighted average, average or lowest tuition of Michigan public colleges. See Contract Section 7 and pages 18 and 19 for the Termination Refund Provisions chart in 2018 MET Contract.
Because everyone’s life is full of changes; transferability is an important feature of MET. After the beneficiary of a MET contract turns 18 years old, all or a portion of the contract may be transferred to an immediate family member (as defined in the contract) without any tax implications. Typically, immediate family member is defined as the spouse, mother, father, brother, sister, legally adopted brother or sister, child, legally adopted child, niece, nephew or cousin of the first degree of the Beneficiary. Refer to the “Contract Definitions” section of your contract.
The original beneficiary of a MET contract has 15 years from their expected high school graduation date on the contract to use, terminate for a refund, or transfer their contract.
To transfer a MET contract the original beneficiary needs to complete Form 2781 Notice to Transfer a MET Educational Benefits Contract and submit a $25 transfer fee.
Limitations on Transferability:
Contracts that have been terminated for a refund, use at a Michigan private, or out-of-state institution are not eligible for transfer.
If the original beneficiary has earned more than half the credit hours required for a four-year undergraduate degree at a Michigan public university, any remaining benefits transferred must be used at a Michigan public institution or terminated for a refund payable to a higher education institution as defined in the contract.
A contract cannot be transferred to a beneficiary who already has 5 years (10 semesters) of MET educational benefits.
Rollovers from Other 529 Programs:
MET accepts rollovers from other 529 programs (including MESP) and from the redemption of a Coverdell Education Savings Account or a Qualified U.S. Savings Bond. However, MET contracts cannot be rolled over to other 529 programs until the beneficiary is age 18 or graduated from high school.
Students have 15 academic years from the expected high school graduation year to use tuition benefits. MET contracts can be purchased in one semester increments up to 8 semesters. Under the monthly purchase option, payments can be made over four, seven, 10 and 15 years. Payroll deduction is also offered through participating employers.
This tax discussion is included for general information only. Consult a tax advisor for advice on how the purchaser/beneficiary might be specifically affected as a result of program participation.
A purchaser may deduct the amount paid for a contract from taxable income when determining Michigan income tax for the year in which the contract is purchased. If a contract is purchased by a lump sum the entire contract price may be deducted. For monthly payment plans or pay-as-you-go, the total contributions made during a given tax year can be deducted.
Please Note: Deductions are taken on Michigan tax form Schedule 1, line 18.
MET is a qualified tuition program under Section 529 of the Internal Revenue Code. MET benefits used to pay college tuition and mandatory fees may be exempt from federal and Michigan income taxes. If, however, a MET contract is terminated and the refund is not used to pay qualified higher education expenses, contract "earnings" (the value of the refund over the amount paid for the corresponding portion of the contract) could be subject to federal and Michigan income taxes and a 10% federal excise tax. The person receiving the refund will be responsible for those taxes.