Ohio latest state to add ETFs to 529 plan

Ohio has become the latest state to add exchange-traded funds to its Section 529 college savings plan. The state today launched its new adviser-sold 529 plan with BlackRock Inc. The BlackRock CollegeAdvantage plan includes three iShares ETFs: the iShares S&P 500 Index ETF Ticker:(IVV), the iShares Russell 2000 Index ETF Ticker:(IWM), and the iShares MSCI EAFE Index ETF Ticker:(EFA). The firm also added three target-risk investment options to its plan. In concert with the new offerings, Ohio reduced the program management fee from 0.25% to 0.20%. “ETFs are incredibly low cost and are a very attractive investment option for our customer base,” said Mike Prescott, executive director of the Ohio Tuition Trust Authority. “Given that we have an exclusive partnership with BlackRock, which is the leader in the ETF space, this seemed like a great thing to do.” Ohio hired BlackRock in May to replace Putnam Investments as the manager of its $3.5 billion adviser-sold 529 plan, marking the end of a 10-year relationship with the firm. Ohio is the latest in a string of states, including Arkansas, Iowa, and Indiana to include ETFs in their adviser-sold plans. Just last week Connecticut announced it was including ETFs as part of its asset allocation funds in its new adviser-sold 529 plan with The Hartford Financial Services Group Inc. “It’s a way to lower costs of adviser-sold plans, said Andrea Feirstein, a 529 plan consultant. It’s interesting that states are adding ETFs, however, given that one of the benefits of these offerings is that investors can trade them rapidly, unlike mutual funds, she said. “You don’t really need that with a 529,” Ms. Feirstein said. Ohio added the ETFs because of their lower cost, Mr. Prescott said, noting that investors can only change investment options once a year. “This is really about giving them equity exposure to those indexes at the lowest cost possible,” he said.