Education savings near top of class

As one of the few investments showing recent promise, the Utah Educational Savings Plan on Thursday was ranked as one of the top five in the country.

Following a year when most 529 management firms went south, reporting unprecedented losses, Utah's plan kept on a continuing path of improvement.

Morningstar, an investment research firm, said, "Utah's 529 plan has long been a favorite of ours and remains a strong choice for its low costs, flexibility and tried-and-true Vanguard index funds. The plan's fees are a rock-bottom 0.22 (percent) to 0.35 percent, making it one of the cheapest plans in the country."

The firm dashed the UESP for taking what it called a "dangerously bold approach" in only one of its five age-based investment options — the S&P age-based option that puts 65 percent of an account in equities even for college-age beneficiaries. The publication called it the "most striking example of an overly aggressive asset allocation" and one to avoid. The other options, Morningstar noted, were far more sensible.

The ranking, which falls among various plans nationwide, is part of an annual report on 529s done by Morningstar, rating the best and worst college savings programs in the United States. The evaluation and ranking of 529 plans is based on several critical features, including asset allocation, fees, flexibility and the overall quality of the underlying investments.

Others rounding out the top five include the Ohio CollegeAdvantage 529, Indiana CollegeChoice 529 Direct Savings, the Virginia Education Savings Trust and the Virginia CollegeAmerica 529 Savings plans.

"It's gratifying that we are being recognized by Morningstar. It supports our strategies to increase the number of Utahns who attend and complete college," said Utah's Commissioner of Higher Education William A. Sederburg. "Saving for college has a direct impact on students' likelihood of both attending and completing college."

The UESP, which can be found online at uesp.org, also landed a spot on the Annual Best List in the May 2009 issue of Money as one of the best 529 plans — also because of its low fees and FDIC-insured savings account investment.

"UESP works hard for college savers," said UESP Director Lynne Ward. She said improvements to the plan over the past year, such as lower fees, new investment options and enhanced online account management, have helped secure more account holders.

UESP is administered by the Utah State Board of Regents and the Utah Higher Education Assistance Authority. The program manages approximately $2 billion in assets and more than 139,000 accounts, a majority of which are held by non-Utahns.

Utah's plan, like all 529 savings plans, boasts tax-free earnings when the money is used for qualified higher education expenses. Taxpayers also can claim a Utah state income tax credit of 5 percent on their contributions up to $1,740 per beneficiary, and the benefit is eligible for the life of the account.

"Our goals are to make it appealing and easy for families to save for future higher education expenses," Ward said.

E-MAIL: wleonard@desnews.com