The Michigan Education Savings Plan (MESP) recently announced important enhancements to its 529 College Savings Plans. These changes take effect on June 15, 2020.
MESP is expanding the current investment lineup to include underlying investment options from Vanguard, Charles Schwab and iShares while maintaining the existing investment offerings from TIAA-CREF. In conjunction with the new investment offerings, account owners will see more of their 529 contributions put to work with a reduction in overall fees. On average, fees will be reduced by 44%, based on data provided by MESP.
The Age-Based Investment Options will automatically be converted to a new Enrollment Year Investment Option based upon the beneficiary’s age on June 12, 2020. There is no action required by the account owner to change the investments. The new investment selections will provide a similar investment allocation but with lower expenses. Your SYM team will continue to complete an annual review of the available investments and provide recommendations.
The new Enrollment Year Investment Options automatically adjust the investment allocation of equities and fixed income, becoming more conservative as the beneficiary of the account nears age 18, which builds on the Age-Based Investment Option model by offering additional flexibility. With the new and improved investment offerings, there are two additional static investment options, an Aggressive Allocation Option, and a Conservative Allocation Option, which round out the current Balanced Fund offering.
In order for the plan to implement these upgrades, a blackout period will occur at 4 p.m. on Thursday, June 11 until Monday, June 15 when the new site will go live. All current account owners will need to register on the new site by creating a new username and password on or after June 15. The new site offers the advantage of one consolidated account number for owners with multiple beneficiaries. Rather than maintaining separate account numbers for each beneficiary, existing account numbers will be transitioned to a new 9-character account number followed by a 2-character extension for each individual beneficiary under a master account. Account-holders also have the ability to select annual automatic increases to reoccurring contributions.
COVID-19 529 Refunds and Re-contributions
Account owners who received a refund for qualified expenses originally paid with 529 funds due to the impact of COVID-19 should consider re-contributing the proceeds to the 529 plan. Make this contribution within 60 days of the date the refund was issued or by July 15, 2020, whichever is later, to avoid paying federal and state income taxes and also a penalty for any monies not returned to the account.
Disclosure: The opinions expressed herein are those of SYM Financial Corporation (“SYM”) and are subject to change without notice. This material is not financial advice or an offer to sell any product. SYM reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. This is not a recommendation to buy or sell a particular security. SYM is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about SYM including our investment strategies, fees and objectives can be found in our ADV Part 2, which is available upon request. SYM-20-70.