529 Purchase Protection and Guarantee Terms and Conditions

Last Updated: 01/29/2023

For purposes of these 529 Purchase Protection and Guarantee Terms and Conditions (the “Terms and Conditions”), the terms “we”, “us” or “Backpack” mean Backpack Payment Technologies, Inc. and any of its predecessors, successors, assigns, corporate parents, subsidiaries and affiliates, and each of their respective officers, directors, employees, agents and representatives.

Please read these Terms and Conditions carefully as they contain important information about your legal rights, remedies and obligations. By purchasing the 529 Purchase Protection and Guarantee, you agree to comply with and be bound by these Terms and Conditions, as well as Backpack’s Terms of Service and Privacy Policy.

General

THE SERVICE

The 529 Purchase Protection and Guarantee (the “Service”) is offered by Backpack to you to help maximize the use of your 529 funds. The Service is comprised of four main features; (1) an ability by you to submit expenses to us for certification of eligibility, (2) documentation and tracking of those certified expenses, (3) documentation and personnel support during an IRS audit, and (4) the 529 Purchase Protection Guarantee in the case Covered Taxes and Penalties are imposed on those same certified expenses.

The Service is provided for your personal, consumer use only unless otherwise specified. It is not intended for commercial or business use and such use is expressly prohibited. We will provide the Services described in these Terms and Conditions in return for your payment made upfront and your continued compliance with all provisions of these Terms and Conditions.

ABOUT THESE TERMS AND CONDITIONS These Terms and Conditions describe what is and is not included with the Service. Please read it carefully. We have tried to make it simple and easy to understand while also clearly describing the terms and conditions of your coverage. We also recognize that dealing with all things 529 can be confusing, so if you have any questions, please visit our Help Center and/or contact us.

IMPORTANT NOTE:

529 Purchase Protection and Guarantee is not an insurance policy. It is a data service we provide to you to certify certain qualified expenses as eligible, which we provide guarantees for in the form of reimbursement of Covered Taxes and Penalties resulting from IRS audits on 529 Funds spent Eligible Expenses.

Not all taxes and penalties are covered, even if it is due to something out of your control or something you were not aware of. Only those taxes and penalties meeting the conditions described in this Policy may be covered.

OUR PROMISE TO YOU

We think you will love our product and the service that comes with it. We also know that sometimes you want a little extra assurance that you made the right decision.

This is why we are proud to provide a 10 day money back guarantee. This guarantee begins the calendar day after your initial purchase of the Service.

Expenses

The guidance for determining what is and is not an eligible expense for 529 is set by the IRS and published in the annual IRS Publication 970. We have taken the guidance and simplified it into three categories of eligible expense.

You are able to submit expenses worth up to the Cost of Attendance (”COA”) limit set for each bucket. Cost of Attendance varies between Education Institutions, and is published on the official Education Website for the specific academic and calendar year.

Backpack provides three tiers of 529 Purchase Protection and Guarantee; Basic, Standard and Premium. These tiers aim to provide different levels of coverage of these categories depending on what best suits your needs.

Important: Any expenses you have used, or plan to use, to access other federal tax credits like the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Tax Credit (LLTC) are not eligible for the Service.

Eligibility

Each purchase of the Service only covers a single (one) 529 Account with a single (one) named Beneficiary. To be eligible to use the Service you must be in compliance with the following:

  1. The person that purchased the Service must be either the Account Owner or Beneficiary of the 529 Account.
  2. The named Beneficiary must be enrolled at least Half Time at an accredited Education Institution.
  3. Funds are withdrawn from the 529 Account in the same calendar year as they have been, or are to be, used to pay for eligible expenses.

If the Beneficiary on the 529 Account is changed within the Purchase Period, additional expenses can no longer be submitted under the same instance of the Service. All previously submitted expenses remain valid and eligible for the Guarantee.

Guarantee

GUARANTEE

The 529 Purchase Protection Guarantee (the “Guarantee”) is us standing behind our certification of what is an eligible expense and what is not an eligible expense for 529 use. The Guarantee means two things:

  1. We will provide you with documentation and personnel support in the event of an IRS audit on any expenses we have certified as eligible as part of the Service
  2. We will reimburse you for any Covered Taxes and Penalties imposed within the Protection Period, by the IRS or another government agency, because expenses we deemed eligible were deemed ineligible by the IRS.

COVERED TAXES AND PENALTIES

The taxes and penalties covered by the Guarantee (”Covered Taxes and Penalties”) are eligible for reimbursement via our claims process. These include, but are not limited to, federal and state capital gains and/or income tax on investment earnings, 10% penalty on investment earnings, and any reimbursement of state tax deductions taken for contributions (only applicable in certain states that provide tax deduction programs for 529 contributions).

The imposition of these Covered Taxes and Penalties must be a direct result of using 529 funds from a 529 Account on expenses that we deemed eligible, but the IRS deemed not to be qualified education expenses under the IRS Publication 970. Backpack will provide reimbursement of Covered Taxes and Penalties to you as long as you satisfy the conditions set out in these Terms and Conditions and are able to provide the appropriate and required documentation as referred to in the Procedures section of this document.

TIME PERIODS

There are two important time periods to understand with regard to the Service; the Purchase Period (”Purchase Period”) and the Protection Period (”Protection Period”).

Untitled

The Service only provides coverage for Eligible Expenses made within the Purchase Period. The Purchase Period is the full calendar year in which you purchased the Service.

The Protection Period is the time period in which the Guarantee is valid. The Guarantee will expire three and a half years (or 42 months) after the Purchase Period. The Protection Period is approximately two months more than the Assessment Statute Expiration Date (ASED). Put simply, we aim to cover you for slightly more than the statute of limitations timeframe the IRS sets to be able to audit your tax returns. The date which is used to assess whether a transaction is inside or outside the Protection Period will be the date of the first IRS Notice Letter which details the eligible expenses you submitted as part of the Service. You are required to submit an IRS Notice Letter to us within 60 days of receipt.

Note that the Guarantee will not extend in the case the IRS audits you outside of the ASED because of an exception to the 3-year assessment date or a suspension of the time limit. You can read more about the ASED and reasons why the IRS may impose an exception or suspension of the limit here.

Procedures

Below are links to the important procedures you will need to follow to submit and certify expenses and make claims for reimbursement of Covered Taxes and Penalties under our Guarantee.

  1. Submit an expense
  2. Check how much coverage you have left for additional expenses
  3. What to do when you get a notice or audit letter by the IRS
  4. Make a claim for Covered Taxes and Penalties

Disclosures

BACKPACK TERMS OF SERVICE AND PRIVACY POLICY

By purchasing the Service and agreeing to these Terms and Conditions, you are also agreeing to Backpack’s Terms of Service and its Privacy Policy.

FRAUDULENT ACTORS AND CLAIMS  

The Service is specifically designed to help student families optimize and maximize the use of their 529. All expenses submitted to us, through any medium, as part of the Service, must be made by either the owner or the beneficiary of the 529 Account. Upon submitting an expense for eligibility certification or for making a claim, we may ask for additional documentation to validate this.

If we find reason to believe that you have submitted expenses that were not used for education purposes for the beneficiary of the 529 Account, or we suspect fraudulent or bad faith activities, we may deny your claim.

THIS IS NOT AN INSURANCE POLICY

529 Purchase Protection and Guarantee is not an insurance product. The Service is intended solely to cover specific expenses that are deemed eligible as part of the Service, for the specific Purchase Period and Protection Period.

Important 529 Definitions

  1. ASSESSMENT STATUTE EXPIRATION DATE (”ASED”): The IRS can usually assess tax, by law, within 3 years after your return was due, including extensions, or – if you filed late – within 3 years after we received your return, whichever is later. This time period is called the Assessment Statute Expiration Date (ASED).
  2. 529 ACCOUNT (”529 Account”): A qualified tuition program account, also referred to as a section 529 plan account.
  3. EDUCATIONAL INSTITUTION (”Education Institution”): Generally any accredited public, nonprofit, or proprietary (privately owned profit-making) college, university, vocational school, or other postsecondary educational institution. Also, the institution must be eligible to participate in a student aid program administered by the U.S. Department of Education. Virtually all accredited postsecondary institutions meet this definition. An eligible educational institution also includes certain educational institutions located outside the United States that are eligible to participate in the U.S. Department of Education's Federal Student Aid (FSA) programs.
  4. HALF TIME: A student is enrolled “at least half-time” if the student is enrolled for at least half the full-time academic workload for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled.
  5. INTERNAL REVENUE SERVICE (”IRS”): The Internal Revenue Service is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory tax law.