Osborn: New manager to take over college savings plan
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BY NANCY HICKS / Lincoln Journal Star
State Treasurer Shane Osborn has replaced a much criticized college savings plan with one by a more highly ranked investment manager, a move Osborn hopes will earn better ratings for Nebraska.
The college savings plans offer Nebraskans state income tax deductions, up to $5,000, when they invest for a young person’s college education. Investors avoid federal and state income taxes as long as the money is used for qualified college or trade school expenses.
Oppenheimer Funds Inc. will become the new program distributor for the State Farm portion of Nebraska’s college savings program, Osborn announced at news conferences this week.
The State Farm plan was previously managed by Invesco AIM Capital Management Inc. and Invesco Aim Distributors Inc.
Investment researcher Morningstar named the AIM College Savings Plan on its worst college plan list three years in a row. This year Morningstar noted that despite attempts to improve the plan, it remained too expensive compared with its peers.
Osborn recently has notified AIM that Nebraska would be canceling its contract with the company in December 2009, the earliest the state can cancel. In the meantime, the treasurer has replaced the AIM product sold by State Farm with Oppenheimer-managed portfolios.
Specifically, OFI Private Investments, a subsidiary of Oppenheimer is the new program distributor for the State Farm College Savings Plan. AIM plans can still be sold as a Nebraska college savings plan but won’t be under the State Farm umbrella.
The switch to Oppenheimer-managed plans will provide significant fee reductions and should mean that all Nebraska plans will be in the top tier of college savings (529) plans, Osborn said. “It will provide a better value for shareholders,” he said.
“It means I don’t have to explain anymore why we have plans in the top-ranked tiers and plans at the bottom,” Osborn said at the news conference Wednesday.
Two Nebraska plans, the College Savings Plan of Nebraska, managed by Union Bank, and the TD Ameritrade 529 College Savings Plan, this year were among the top 10 performing plans in studies of plans sold directly to investors, based on a study by SavingforCollege.com.
The Oppenheimer plan helped the Illinois College Savings Program move from among the worst performers to one of the top 10 college savings plans in Morningstar rankings this year. Nebraska’s plan is very similar to the Illinois plan, but not identical, according to Bill Raynor, vice president for national sales at Oppenheimer Funds.
Raynor also encouraged Nebraskans to use the college savings plans even with the current market problems. “You can’t stop saving for college. It’s (college) not going to get any cheaper,” he said.
Nebraska’s plans have not done any worse than other plans during the recent market downturn, and the state had a 5 percent increase in new accounts this year, Osborn said. There was about $1.82 billion invested in the state’s college savings plans as of Sept. 30, according to Osborn.
Nebraska’s penetration rate — the percent of youth under 18 with college savings plans in their name — has grown to 9.74 percent, and is the highest in the country, Osborn said.
Reach Nancy Hicks at 473-7250 or nhicks@journalstar.com.
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