Nebraska is giving its Section 529 college savings plans a make-over by adding funds, lowering fees and increasing the sales commissions for financial advisers who sell its national plan.
The facelift comes as Nebraska taps First National Bank of Omaha to replace Union Bank and Trust Co. as program manager of its direct- and adviser-sold plans. The Nebraska state treasurer signed the contract with First National June 1.
Under the new agreement, First National will enter the 529 market and manage Nebraska's direct- and adviser-sold versions of College Savings Plan of Nebraska, as well as its TD Ameritrade Plan, which is available only through TD Ameritrade Holding Corp.'s platform, said Rachel Biar, assistant treasurer with the Nebraska Treasurer's Office. The plans combined have about $2 billion in assets.
Starting next year, the program management fee for the state's 529 plans will be reduced to 29 basis points, from 60 basis points. The state also is eliminating the $20 annual administrative fee, Ms. Biar said.
At the same time, the state is increasing the payouts to advisers who sell its plan.
Currently, there is a 3.5% upfront sales load on Class A shares of the plan, 3 percentage points of which goes to the adviser.
Under the new plan, the upfront sales charge will be 4.75%, 4 percentage points of which will go to the adviser. The trail will remain 0.25%.
For C shares, the plan will pay advisers 1%, up from 0.65%.
“We did an extensive study and determined that the current fees going to advisers were not industry standard,” said Deborah Goodkin, vice president in charge of college savings plans at First National.
The new plans are adding a slew of funds managed by American Century Investments, The Dreyfus Corp., Federated Investors Inc.,
Fidelity Investments, Goldman Sachs Asset Management, State Street Global Advisors, T. Rowe Price Group Inc.,
The Vanguard Group Inc. and First National's own fund family, FirstFocus Funds.
The plan also is adding an index-based, age-based fund option and index-based target risk option, Ms. Goodkin said.
“Under the existing plan, the direct- and adviser-sold plans looked very similar,” she said. “Now they won't.”
E-mail Jessica Toonkel Marquez at [email protected].
