Congress, SEC Continue to Focus on 529 College Savings Plans

Washington, DC, July 22, 2004 - Rep. Michael Oxley, chairman of the House Committee on Financial Services, recently sent SEC Chairman William Donaldson a letter urging the SEC to focus on several issues relating to state-sponsored 529 college savings plans.

Background
In February of this year, Rep. Oxley requested detailed information on state-sponsored 529 college-savings plans from the SEC. In addition to answering questions raised by Rep. Oxley, Chairman Donaldson announced the creation of a task force, the Chairman's Task Force on College Savings Plans, which has been charged with closely reviewing issues raised by the structure and sale of college savings plans.

Rep. Oxley's recent letter also notes that congressional hearings in June and July of this year have "underscored the need for substantial reform of these investment vehicles." It further notes that, "if investors are able to discern and compare the fees associated with these plans, market forces will work to reduce those fees - so long as states do not discriminate against investors who would like to select out-of-state plans."

Among other things, Rep. Oxley has asked Chairman Donaldson to consider:

the voluntary nature of the disclosure guidelines being drafted by the College Savings Plan Network;
states that discriminate against investors who choose out-of-state plans by not providing tax relief on contributions to and withdraws from such plans;
the current fee disclosure requirements;
ensuring that investors receive performance information alongside relevant benchmarks together with "a written commentary explaining why the investment options did better or worse than their benchmarks"; and
ensuring that 529 plan investors are provided at least "one low-cost investment option," such as a broad-based index fund or low-cost actively managed fund.

Rep. Oxley also asked the SEC to address whether legislation, SEC rulemaking, or the imposition of rules or guidelines by another regulatory authority is necessary to implement reforms in these areas.

ICI Position
Institute research reveals that saving for education is one of the primary financial goals of mutual fund shareholders. The Institute has expressed strong support for measures to conform individual states' tax treatment of 529 plan withdrawals to federal tax treatment, legislation that would make permanent the tax-free treatment of qualified withdrawals from Section 529 college savings plans, and proposals that would permit the offer and sale of 529 plan securities through employer payroll deduction programs.

Related Links
Additional information about the benefits of saving for education, including an online brochure that helps individuals better understand how state-sponsored 529 plans are helping millions of Americans save for higher education, is available on this website.