The Vanguard Group and Upromise have teamed up with the State of Nevada to offer access to a new Section 529 college savings program, available on a national basis with lower cost expense ratios and some user-friendly additions, including online enrollment and account administration.
In fact, Upromise CEO George Bell told PLANSPONSOR.com that the program represents the “first end to end online enrollment and administration product” for the burgeoning 529 market. Upromise, which will administer the program, is perhaps best known for its affinity program, where retail companies rebate a small percentage of a Upromise member’s purchase of their products to the individual’s college savings account. Some 2.5 million consumers have already signed up for their free affinity program, according to Bell.
According to Vanguard, the 529 plan is expected to have all-in costs as low as 0.65%. That can have a significant impact on savings, according to Bell, and the projected expenses place the new program among the lowest five or so in the country. College savings fund expenses currently range anywhere form 2.5% to .35%, according to Bell.
In the program’s first stage, Upromise will unveil the Upromise College Fund for individuals in November. The second stage will bring the Vanguard 529 College Savings Plan online in December 2002. Employers will be able to tap into the program through Vanguard in the first quarter 2003 as the program’s third stage.
The Vanguard program includes three risk-based investment “tracks” designed to create conservative, moderate, and aggressive asset allocations. The portfolios will automatically adjust from a higher allocation of stocks for younger ages to a higher allocation of bonds and money market investments as the covered child nears college age.
In view of current market dynamics, Vanguard’s asset allocations within the portfolios are relatively conservative. For example, the so-called Conservative Investment Track automatically adjusts into a proportion of 75% bonds and 25% money market investments when a child reaches the age of 11 – “considerably more cautious than many of the age-based options available today”, Vanguard Chairman John J. Brennan noted in a press release.
The Upromise program, which has a minimum monthly investment of $50, will offer the same three risk-based tracks as the Vanguard offering, as well as eight individual portfolios composed of Vanguard Investments, as well as options managed by Strong Investments. Other advisors are likely to be added later, according to Bell.
In addition to the risk-based offerings, the Vanguard 529 College Savings Plan will also offer 18 Vanguard stock, bond, balanced, and money market portfolios, including five custom portfolios available only to plan participants. Families that have registered to participate in the Upromise loyalty service can direct those credits to their investments within the plan.
Investors in either program will be able to link their accounts to the free Upromise loyalty service via www.upromise.com , an affinity program that allows families to earn contributions on purchases at retail locations, restaurants, grocery and drug stores, and 100 online shopping sites.
Both plans are sponsored by the State of Nevada and will be administered by Upromise Investments, Inc., a wholly-owned broker dealer subsidiary of Upromise, Inc. The program in no way precludes the existing arrangements Upromise has with other 529 program providers, according to Bell.
While the platform has taken more than a year to build, Upromise’s Bell notes there will be more to come in the future. In addition to new fund advisors, they will be working with Vanguard to enhance ACH and payroll transactional capabilities. Additionally, rollover capabilities from other state programs, currently paper-based at present, may be enhanced as well.