PROVIDENCE, R.I. (WPRI) – Rhode Island’s $6.7-billion 529 college savings plan, the CollegeBoundfund, is already showing signs of improvement after General Treasurer Seth Magaziner replaced its longtime manager.
The research firm Morningstar released a new set of annual ratings for 529 plans this week and gave Rhode Island’s relaunched direct-to-consumer CollegeBoundfund Saver plan its second-highest rating, Silver, and its advisor-sold CollegeBound 529 plan its third-highest rating, Bronze.
“The direct-sold plan offers extremely low fees for Rhode Island residents – the plan’s primary investors – earning it a Silver rating,” Morningstar said. “(Nonresidents should look elsewhere, because they must pay much higher fees than Rhode Islanders.)”
“The advisor-sold plan’s fees aren’t as compelling, though they land below average compared with similarly sold peers that blend active and passive management,” the analysis continued. “The plan receives a Bronze rating.”
Previously, the CollegeBoundfund had ranked among the lowest-rated 529 plans in the country on Morningstar’s list.
Another research organization, SavingForCollege.com, has previously ranked the Rhode Island 529 plan’s investment performance as one of the weakest in the country, but has given the revamped plans its top rating of five stars.
The new ratings follow Magaziner’s decision to replace AllianceBernstein, the company which had run the CollegeBoundfund since 2000, with a partnership between two other companies, Invesco and Ascensus, which overhauled the plans.
“This is really exciting,” Magaziner told Eyewitness News on Thursday. “It shows that the turnaround of the CollegeBound program is working.”
“We were thrilled because, to be honest, we weren’t even sure we were going to get a rating this year because the changes are so new,” he said. The changes were put in place about three months ago, he said. Officials plan to step up their marketing of the CollegeBoundfund using the new rankings, he said.
Congress created the tax-advantaged 529 plans, named for the section of the IRS code that regulates them, to help families save money to pay for college. Each state can set up a 529 program and market it across the country, which has led to competition for accounts nationwide, and Rhode Island was one of the first to do so.
CollegeBoundfund currently has about 300,000 accounts which contain roughly $6.7 billion, the lion’s share of which belong to out-of-state residents, according to the treasurer’s office. About 25,000 accounts containing $250 million belong to Rhode Islanders.