TOPEKA — Participants in Kansas’ Learning Quest education savings plans will find new investment options, updated tools to determine education costs and lower fees beginning in March when a new program manager takes over, the state’s treasurer said.
Steven Johnson said the plan manager’s contract came up for renewal and after considering five proposals, the state selected TIAA-CREF Tuition Financing Inc. to manage the Learning Quest 529 Education Savings Program.
Anyone can set up a 529 plan for children to be used for post-secondary education, whether that be college, technical school or an apprenticeship, Johnson said during a Kansas Reflector podcast. The process takes less than 10 minutes, as long as the applicant has the child’s Social Security number or they can input their own and change it later, he said.
“One of the benefits is that the growth is tax deferred, and if I use the funds in the future for the intended education purpose, it actually comes out tax free,” he said.
Tax benefits include a deduction of up to $3,000 per person per beneficiary, Johnson said. The dollars accrued in the 529 plan can be switched between children in the same family, he said.
ALTHOUGH THE Kansas Learning Quest plans are used by more than 228,000 families and have $14.5 billion in assets under management, Johnson would like to see more participation statewide.
“Part of our job is to make sure we get that word out,” he said. “In particular, we have counties that we don’t have any account owners, and we want to just make sure that people know that the tool is available. Our biggest challenge is just making sure people know how to use it and to take the time to sit down and actually set it up.”
The point in the process where the agency sees the most people quit setting up the account is choosing investments, Johnson said. One of the new additions to the program is an option to let the plan manager and the Treasurer’s Office manage the funds and make investment decisions.
Topping management concerns at the Treasurer’s Office is keeping costs low, Johnson said. Plan participants will see fee reductions with the update.
“That’s one thing that we looked at very closely,” he said. “We designed the portfolios and the funds that we selected to have that eye certainly to expenses, and more importantly, to the net return, or what return I get after those expenses.”
AS OF RIGHT now, the Kansas plans have the lowest cost to investors of any 529 plans in the country, he said, although those costs change frequently.
The average fee for an account owner invested in portfolios is 0.08%, he said.
“We’re able to get that efficient because of the size and scale that we have,” Johnson said. “The nearly $15 billion (in managed assets) allows us to be a really competitive player in what we ask for on the deals for those investments.”
Along with 529 plans for post-secondary education savings, the state has offered 529 ABLE plans for about 10 years to help people with disabilities invest, Johnson said.
An ABLE plan lets individuals with a disability save money and accrue assets that won’t interfere with the limits set for them to receive federal benefits like Supplemental Security Income, Johnson said.
“If I’m getting SSI or those types of things and I can’t have more than $2,000, this account gives me a chance to continue to accrue assets above that level and continue to receive those benefits that I rely on,” he said.
