Utah announced modifications to its Section 529 college savings plan today, including lower fees on some investment options and more flexibility in asset allocation.
The Utah Educational Savings Plan, which now has about $3 billion in assets under management and which offers investments from
The Vanguard Group Inc. to its participants, cut its administrative asset fee on three of its investment options. The fee on its Standard & Poor's index investment was lowered by 4 basis points to 0.18%, the fee on a bond investment vehicle was cut by 7 basis points to 0.15%, and the fee on an Federal Deposit Insurance Corp.-backed savings account will now be 0.18%, 4 basis points lower than before.
Though it lowers the plan's revenue, the move hopefully will bolster assets under management, said Lynne Ward, Utah Educational Savings Plan's executive director. “This is a way to allow more families to keep more money in college savings accounts and entice other families to do so,” she said in an interview. She said she and the other plan administrators would like to increase assets in the plan by 10% to 20% every year, she said.
Joseph Hurley, founder of Savingforcollege.com, pointed out that the move also helps Utah maintain its reputation for offering one of the lowest-cost 529 plans in the U.S. “That's has helped Utah's plan garner recommendations from some of the consumer publications,” he said, referring to Money Magazine and Morningstar Inc.
By allowing more flexibility in asset allocation, Utah also hopes to appeal to more-sophisticated investors who want to take greater control over allocating assets in their college savings plan, Ms. Ward said.
“It's targeted to the more sophisticated investor,” she said. “This gives them some flexibility in tailoring their college savings needs.”
One other change announced today is that the plan will now drop it annual account fee of about $15 per year for out-of-state investors who choose to look at quarterly statements online. In-state investors never had to pay the fee, but this change will benefit over three-quarters of the plan's investors, who come from out of state into the direct-sold plan.
“I was happy to see the out-of-state-account fee eliminated for participants who view statements online,” Mr. Hurley said. “That's a trend, too, to get rid of those account fees. Not too many plans have them anymore.”
