California to close part of 529 college-savings plan


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California is dropping a portion of its 529 college-savings plan.

Early next year, the state will close its “advisor-sold” unit, a small portion of the 529 in which residents invest in the plan through brokers and financial planners.

The state this year announced a revamp of its 529 ScholarShare plan, with mutual-fund
giant TIAA-CREF replacing Fidelity Investments as program manager.

TIAA-CREF will oversee the so-called “direct” portion of the 529, in which residents invest directly in the program (as opposed to buying through brokers or other outside advisors, which normally involves additional fees).


The “direct” unit, which has assets of $3.9 billion in 277,343 accounts, is much larger than the “advisor” unit, which holds $283 million in 22,565 accounts. Investors in the advisor program will automatically be shifted to the direct portion next spring.

TIAA-CREF will begin managing the direct program Nov. 7. Annual fees will range from 0.18% to 0.62%.

The state treasurer’s office tried to maintain the advisor program but couldn’t find a company willing to manage it.

“The decision to drop the advisor-sold plan was a difficult one and made only after ScholarShare made a concerted effort to keep it going,” Joe DeAnda, a spokesman for the treasurer’s office, said in a statement. “In the end, we were not able to find a manager that could deliver a competitive plan for our account-holders, and we felt the best option was to transfer them to our direct-sold plan.”


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-- Walter Hamilton

Emory University’s School of Theology celebrate during a commencement ceremony in Atlanta. Credit: David Goldman / Associated Press