Texas is the latest state to replace its 529 program manager, it was announced yesterday. The state will be replacing AXA (or Enterprise Capital Management as it was previously known) with OFI Private Investments, an arm of OppenheimerFunds Inc. OFI will take over the account of 20,000 account holders who currently invest in the Texas 529 plan when AXA's contract expires Aug. 31. Interestingly, OFI Private Investments, who currently run plans in New Mexico and Oregon, will take over Illinois plan in mid-July. OFI was one of two fund mangers that bid to run the Texas plan; the other fund manger was Upromise.
From Dallas News
States have the option to change fund managers if they feel that the plan isn't being competitive, ie. the investment options in the plan are performing poorly, and in-state residents don't have enough incentive to stay with the in-state plan. Some may argue that state's that offer state tax deductions have an unfair advantage because in-state residents are more likely to invest in their respective state plans. That may be true in some case, it should deter from the fact that people will invest in plans that offer investment options with good performance records. The state tax deduction may not be enough of an incentive in a lot of states to make in-state state within that state’s plan.
Also, Pennsylvania, Maine and Kansas offer a state tax parity who offer the state tax deduction for investing in any state’s plan. There was a class action law suit that was brought against the state of Illinois for the state not offering the tax deduction to investors who invest in out-of-state plans. If more and more state’s offer the state tax parity then we’ll see a lot more turnover in 529 fund mangers. 529 fund managers better start doing their homework now!
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