MutualFundWire.com
The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication
an InvestmentWires' Publication
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MutualFundWire.com
The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication |
|
Monday, December 30, 2002 PrePaid Plans Losing Favor 529 college savings plan appear to be getting less competition from pre-paid college savings plans. A number of states have recently either dropped their pre-paid plan, or significantly jacked up costs for the programs. Those moves may make the investment account-based 529 plans more enticing to parents. Both Colorado and Wisconsin have recently ceased sales of their prepaid plans. Meanwhile, Maryland and Illinois both raised the price of their program by more than 20 percent. In addition, Florida is limiting participation in its pre-paid plan to low-income families. Ohio is also looking at capping participation in its plan. In the case of Wisconsin, whose plan is run by Strong Funds, the state is encouraging families to invest in the stable value option of the EdVest 529 program rather than the pre-paid tuition option. The stable value option was added to the program on December 2 and sales to the prepaid option were halted on December 20. "The general impression the state had gotten and we saw was that it wasn't necessarily meeting everyone's needs, or else more people would be opening accounts and investing in them," said Sarah Henriksen, director of education planning at Strong. "We saw people were going into other portfolios." Unlike many other states, Wisconsin's did not match the returns of its pre-paid program to tuition price hikes. Instead, it paid the return of a bond portfolio. It says that historically the bond portfolio return has exceeded the tuition hikes. However, the lack of certainty may be one reason why the program failed to attract a large enough number of investors to maintain it. Wisconsin says that it now has 120,000 account holders with $600 million of assets in its program. Printed from: MFWire.com/story.asp?s=4252 Copyright 2002, InvestmentWires, Inc. All Rights Reserved |