Morningstar released its latest rating of 529 College Savings Plan, upgrading six, downgrading six, initiating coverage of two and dropping coverage of two others.
In all, Morningstar rates 63 of the country’s largest 529 college savings plans, which represent 97% of the more than $240 billion in plan assets as of the end of the third quarter.
Currently just three plans merit a gold rating; last year four plans received a gold rating, and 10 plans are rated silver this year. In addition, 20 plans are rated bronze, 27 neutral and three negative. All three plans with negative ratings are advisor-sold.
Morningstar's ratings are based on five factors:
-
the design of investment options, including the glide path of age-based portfolios
-
the relative value of those investment options compared with those of the fund’s peers
-
assessment of the underlying money managers
-
the stewardship practices of plan administrators and parent firm
-
risk-adjusted performance
“The 529 industry as a whole continues to improve as individual plans hone their strategies and reduce the fees levied on plan participants,” said Leo Acheson, Morningstar’s lead research analyst for 529 plans, in a statement. “We’ve upgraded a number of plans that have moved toward best practices and downgraded those that haven’t kept pace.”
Despite the downgrades and elimination of some plans, “the industry continues to take steps in the right direction, with a number of plans cutting fees, beefing up their asset-allocation resources and processes or improving the quality of their investment lineups,” said Acheson.
That's good news for investors and advisors whose preferred means to save for college are 529 plans. Their earnings grow tax deferred and distributions are tax free so long as the funds are used for qualified college costs such as tuition, room and board, mandatory fees and books. In some states contributions are deductible from state income taxes.
Here are the 16 best and worst 529 college savings plans based on Morningstar’s list. Please note all AUM figures, provided by Morningstar, are as of September 30, 2016, unless otherwise noted.
Best College Savings Plans
1. Vanguard 529 College Savings Plan
Rating: Gold
Issuing State: Nevada
Program Manager: Ascensus
Distribution: Direct
Total AUM: $13.36 billion
2. Utah Education Savings Plan
Rating: Gold
Program Manager: Utah Educational Savings Plan
Distribution: Direct
Total AUM: $9.35 billion (as of Aug. 31, 2016)
3. Virgina529 inVEST
Rating: Gold (upgraded from silver)
Program Manager: Virgina College Savings Plan
Distribution: Direct
AUM: $3.44 billion
4. Maryland College Investment Plan
Rating: Silver (downgraded from gold)
Program Manager: T. Rowe Price
Distribution: Direct
AUM: $4.59 billion
5. T. Rowe Price College Savings Plan
Rating: Silver (downgraded from gold)
Issuing State: Arkansas
Program Manager: T. Rowe Price
Distribution: Direct
AUM: $2.2 billion (as of June 30, 2016)
6. MOST Missouri's 529 Plan
Rating: Silver (upgraded from neutral)
Program Manager: Ascensus
Distribution: Direct
AUM: $2.58 billion
7. Bright Directions College Savings Program
Rating: Silver
Issuing State: Illinois
Program Manager: Union Bank & Trust
Distribution: Advisor
AUM: $2.04 billion (as of August 31, 2016)
8. CollegeAdvantage 529 Savings Plan
Rating: Silver
Issuing State: Ohio
Program Manager: Ohio Tuition Trust Authority
Distribution: Direct
AUM: $4.31 billion
9. CollegeAmerica
Rating: Silver
Issuing State: Virginia
Program Manager: American Funds
Distribution: Advisor
AUM: $52.02 billion
10. Michigan Education Savings Program
Rating: Silver
Program Manager: TIAA Tuition
Distribution: Direct
AUM: $4.49 billion
11: New York’s 529 Program (Direct)
Rating: Silver
Program Manager: Ascensus
Distribution: Direct
AUM: $19.09 billion
(Note: The advisor-sold version of this program is rated bronze)
12. ScholarShare College Savings Plan
Rating: Silver
Issuing State: California
Program Manager: TIAA Tuition
Distribution: Direct
AUM: $6.93 billion
13. CollegeBound Saver (Direct)
Rating: Silver (newly covered)
Issuing State: Rhode Island
Program Manager: Ascensus
Distribution: Direct
AUM: $200.57 million (as of October 25, 2016)
(Note: the advisor-sold version of this plan, called CollegeBound 529 is rated bronze)
|
Worst College Savings Plans
14. College Access 529
Rating: Negative
Issuing State: South Dakota
Program Manager: Allianz Global
Distribution: Advisor
AUM: $1.04 billion (as of 10/28/2016)
15. Ivy Funds InvestEd 529 Plan
Rating: Negative
Issuing State: Arizona
Program Manager: Waddell & Reed
Distribution: Advisor
AUM: $449.52 million (as of January 1, 2013)
16. The Hartford SMART 529
Rating: Negative
Issuing State: West Virgina
Program Manager: Hartford Life
Distribution: Advisor
AUM: $1.58 billion
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Bernice Napach
Bernice Napach is a senior writer at ThinkAdvisor covering financial markets and asset managers, robo-advisors, college planning and retirement issues. She has worked at Yahoo Finance, Bloomberg TV, CNBC, Reuters, Investor's Business Daily and The Bond Buyer and has written articles for The New York Times, TheStreet.com, The Star-Ledger, The Record, Variety and Worth magazine. Bernice has a Bachelor of Science in Social Welfare from SUNY at Stony Brook.
