All of the following statements concerning educational fund 529 Savings Plans are correct EXCEPT: (Points : 0.7)

Contributions are recognized on a five year pro rata basis.

Earnings grow on a tax deferred basis, unless used for qualified education expenses, and then distributions are tax free.

The primary benefit of a 529 Savings plan is the state income tax deduction for contributions.

Earnings are included in gross income and a 10% penalty is assessed if distributions are not used for qualified education expenses.