New Advantages to College Advantage
When saving for college education expenses for children or grandchildren, it is often our recommendation to start with a 529 plan. We’re fortunate in the State of Ohio to have one of the country’s best plans with several options to achieve a low cost, broadly diversified portfolio.
As many of our clients and readers either own a CollegeAdvantage Direct 529 Savings Plan or have family, neighbors, or friends who do, I wanted to discuss a recent announcement about changes coming to the plan. While the changes should be a net benefit to accountholders, any change can be a challenge and, in some cases, will require minor action on the part of accountholders.
The Announcement
The Ohio Tuition Trust Authority that oversees the CollegeAdvantage program is partnering with Upromise’s® investment arm for accounting and recordkeeping services. From my experience in banking, especially in the custody world, I can tell you that recordkeeping and accounting is one of the most expensive, labor intensive areas for a program such as this, so reaching out and consolidating services with a third party seems to make sense. All investment choices and other features of the program will remain in place and a few additional features will be available through Upromise® who administers 30 plans in 16 states.
The Changes
The biggest change will be access to Upromise’s® online account management which promises more features and user-friendliness that the current system. The ability to make one-time or ongoing contributions will be simplified and electronic delivery of statements, tax documents and Plan disclosures will be available. Those statements will now be plan specific for those of you who participate in more than one plan.
For those of you who already use Upromise® Rewards at your grocery store or other retailers, you’ll be able to link your 529 plan to your Upromise® account directly and use their Ugift® program to allow family and friends to make direct gifts.
Perhaps most importantly and requiring the most attention, new account numbers will be established in the new system. If you have these accounts linked to Mint.com, Quicken or similar personal accounting system, you’ll need to make an update there. If you make automated deposits into your plan through Direct Deposit, you’ll also need to update that payment stream with a new form available on the website.
The only investment change is a minor one, with the new plan swapping the Oppenheimer Main Street Small & Mid-Cap Index Fund for a similar, lower cost, Vanguard Strategic Equity Fund. If you hold the Oppenheimer fund, the change will be made for you automatically.
Fee Increase
The resulting cost involved proves to be minimal. The Ohio Trust Tuition Authority will reduce its administrative fee for Direct Plans from around 0.15% to 0.04%. The new administrative fee from Upromise® will run approximately 0.13%, for a net increase in administrative costs of 0.02%.
Timeline
Most changes take place the week of October 28th, starting this Friday, October 25th and the new site and enhancements being ready to go Monday, November 4th. Friday the 25th will be the last day a payroll deduction can be made under the current method. After that time, you’ll have to visit the website and walk through a new authorization form.
On October 30th, all transactions through the old system will cease. Between October 30th and Monday, November 4th, the system conversion will take place and the new system should be online and ready to go close to 8am on Monday the 4th. At that time you can re-establish your online access, set up new recurring bank transfers or print forms for reauthorizing payroll deductions.
Other Action Needed
In addition to making changes to account numbers and any automated, recurring contributions, the plan also recommends disposing of any existing deposit slips or other forms. New versions of all slips and forms will be available on the new site, still hosted here on or after Monday, November 4th.
Questions
As always, TAAG is here to help with anything involving your financial well-being. We’d be happy to sit down and walk through your online access in your next meeting, review other plan changes or answer any other questions regardin saving for college for a child, grandchild or loved one.
If you prefer contacting CollegeAdvantage directly, you may do so between 8:30am and 6:00pm Monday through Friday at (800) 233-6734 or by e-mail at CustomerService@CollegeAdvantage.com.
Have a great week!