MSRB to issue more guidance on college savings vehicles by year-end; could be complicated for distributors
Firms that distribute Section 529 college savings plans would be required to report on the amount of money flowing into and out of the plans each quarter and provide other additional plan information, according to a proposal outlined yesterday.
The Municipal Securities Rulemaking Board proposal would require brokers and other entities acting as an underwriter or distributor for 529 plans to provide total plan assets, quarterly contributions and withdrawals, the number of active accounts, and total rollover distributions. They also would have to submit information about the types of investment portfolios in each plan, the MSRB said.
The self-regulatory organization for the muni-securities market would make relevant market data about 529 plans publicly available to allow investors to compare plan features, possibly even costs and fees. The MSRB already collects and makes public 529 plan offering and disclosure documents, including annual financial reports.
“By gathering market information, the MSRB will have a better understanding of the size and growth of the 529 plan market, which will help inform its rulemaking,” said MSRB executive director Lynnette Kelly Hotchkiss.
The MSRB also said that it will issue additional guidance before the end of the year regarding the distribution and sale of 529 plans, but it wouldn't provide additional details on what is under consideration.
The MSRB is asking for comments on its proposal by Aug. 31. The proposal asks whether all or just certain information provided should be made available to the public through the Electronic Municipal Market Access system, which already provides detailed market information about muni bonds.
The College Savings Plans Network already collects some of this information and presents it on its website to allow for comparisons between plans. However, plan distributors aren't required to report their figures to this body, which is an affiliate of the National Association of State Treasurers.
The network estimates that total assets in 529 plans grew by 18% last year to $157 billion, from $133 billion in 2009.
Joe Hurley, who is the founder of Savingforcollege.com, which tracks the universe of 529 plans, said providing fee and cost data each quarter may be complicated for companies that distribute 529 plans.
Mutual fund expense ratios that are reported to the Securities and Exchange Commission are recalculated every quarter, but 529 plans don't issue new pricing or expense summaries that often, he said.
If firms must provide quarterly asset figures for the underlying investments in the plans, that will become useful competitive information, Mr. Hurley said. Firms will be able to see what types of investments are gaining or losing popularity, he said.
