DATE: March 11, 2004
CONTACT: Gus Wales
PHONE: (225) 922-2029
FAX: (225) 922-0790
START college saving program expands investment options and online account capabilities
The Student Tuition Assistance and Revenue Trust (START) Saving Program – Louisiana's Qualified Tuition Plan under Section 529 of the Internal Revenue Code – recently introduced five additional low-cost, broadly diversified investment options for college savings. The new investment options, which include equities, complement the existing fixed-return securities option currently offered by the program and managed by the Louisiana State Treasurer.
“We are very pleased to expand our line-up of investment options to help Louisiana residents better meet their college savings needs,” said State Treasurer John Kennedy. “By offering parents the option to invest in the stock market if they choose, we are making it possible for them to diversify their college savings investments. Having a broadly diversified portfolio is critical when you are saving to meet a particular goal, including something as important as a child’s education.”
START’s new investment options invest, either partially or entirely, in mutual funds managed by The Vanguard Group – a company that has provided investment management services for more than 25 years and currently manages approximately $725 billion in assets. In addition to Louisiana’s START Saving Program, Vanguard manages approximately $5 billion in assets for seven other state-sponsored 529 college saving plans.
“With the addition of the new investment options, our 529 plan is the best college savings plan for Louisiana citizens,” START Director Carol Fulco said. “We now offer all of the sought-after features of other college savings plans, plus the added advantage of state matching funds.”
In conjunction with the introduction of the new investment options, the Information Technology (IT) Division of LOSFA activated an extensive new software system equipped with the latest innovations for accessing and managing accounts online. START account owners accessing the START Web site at www.startsaving.la.gov can now manage their investments online, including selecting the investments, validating their electronic signatures, and even keep track of their investment’s performance on a daily basis. Prospective account owners may also learn more about START and enroll online if they choose.
“The previous software was quite competent in meeting the needs of START account owners,” IT Director Terry Tuminello said. “However, when the state Legislature decided to offer account owners additional investment options, the software system needed to be revamped.”
As part of an effort to reduce the risk of consumer identity theft, Tuminello noted that START has eliminated the use of Social Security Numbers (SSN) as the primary identification for account owners accessing their account online. Account owners will be assigned new identification numbers for logging onto the Website.
START is now offering the following six investment options:
Option One—Age-Based Option: This option is geared toward investors who do not want the burden of monitoring and periodically adjusting their college investment portfolios. Deposits are automatically moved, over time, among different portfolios and invested in portfolios with progressively more conservative asset allocations. When the Beneficiary is very young, assets are invested mainly in stocks. As the Beneficiary ages, assets are automatically shifted, according to a set schedule, toward more bonds and short-term reserves in order to protect the Account Owner’s capital and to reduce risk.
START Saving Portfolio Approximate Asset Allocation
0-5 Vanguard LifeStrategy Moderate Growth Portfolio 60% Stocks40% Bonds
6-10 Vanguard LifeStrategy Conservative Growth Portfolio 40% Stocks40% Bonds20% Short-Term Reserves
11-15 Vanguard LifeStrategy Income Portfolio 20% Stocks60% Bonds20% Short-Term Reserves
16+ Louisiana Principal Protection Option (Not Applicable)
Principal Protection Option: This option is the most conservative START Saving
Program investment plan and is managed by the Louisiana State Treasurer. This
option invests 100 percent of deposits and interest earned thereon in fixed
earnings investments such as government bonds, notes and certificates of deposit.
The state guarantees the return of your principal, so you cannot lose money,
but it does not guarantee any particular investment return. Every other option
involves some risk of loss of principal.
Option Three—Total Equity Option: This option invests 100 percent of each deposit in a Vanguard fund (Vanguard Total Stock Market Index Fund Admiral Shares) holding a broadly diversified portfolio of U.S. stocks, which allows Account Owners to seek the highest possible returns – and assume the highest possible risk – for their investment.
Option Four—Balanced Option: This option invests 50 percent of each deposit in a Vanguard fund (Vanguard Total Stock Market Index Fund Admiral Shares) holding a broadly diversified portfolio of U.S. stocks and 50 percent in fixed earnings investments such as government bonds, notes and certificates of deposit managed by the Louisiana State Treasurer (the state guarantees the return of principal on fixed earnings investments managed by the Louisiana State Treasurer).
Option Five—Equity-Plus Option: This option invests 75 percent of each deposit in a Vanguard fund (Vanguard Total Stock Market Index Fund Admiral Shares) holding a broadly diversified portfolio of U.S. stocks and 25 percent in fixed earnings investments such as government bonds, notes and certificates of deposit managed by the Louisiana State Treasurer (the state guarantees the return of principal on fixed earnings investments managed by the Louisiana State Treasurer).
Option Six—Principal Preservation-Plus Option: This option invests 25 percent of each deposit in a Vanguard fund (Vanguard Total Stock Market Index Fund Admiral Shares) holding a broadly diversified portfolio of U.S. stocks and 75 percent in fixed earnings investments such as government bonds, notes and certificates of deposit managed by the Louisiana State Treasurer (the state guarantees the return of principal on fixed earnings investments managed by the Louisiana State Treasurer).
Although authorized to assess certain fees, the Louisiana Tuition Trust Authority (LATTA) has not approved the imposition of fees. All costs of LATTA or the Louisiana Office of Student Financial Assistance (LOSFA) or the Louisiana State Treasurer in administering the START Saving Program and managing funds in fixed earnings options have been assumed by the State of Louisiana and paid from funds appropriated for that purpose. No fees or administrative costs are currently charged to an Account Owner or a Beneficiary or to the Fund for investments in fixed earnings and none are anticipated.
The START Saving Program is charged an investment management fee on the monies it invests in mutual funds managed by The Vanguard Group. This fee, known as the fund expense ratio, varies with each mutual fund up to 0.28 percent (or $2.80 per $1,000 invested) per year. These fees are deducted prior to the valuation of the funds’ net asset value, thereby reducing the value of the START Saving Program’s investments, which reduces the return to Account Owners who invested in options other than Option Two.
As an incentive to save, the state of Louisiana will annually match a percentage of the deposits made to an account during the calendar year, depending upon the category into which the account has been classified and the federal adjusted gross income reported by the Account Owner for that year. This match is called an Earnings Enhancement.
In addition, Account Owners can exempt up to $2,400 in deposits per START account per year from income reported on their state tax return. If the full $2,400 is not exempted in one year, the unused portion may be carried forward and applied to subsequent years.
Owners may move assets from
one investment option to another only once per calendar year. When options are
changed, future contributions will be invested in the new option. Account owners
who choose the new investment options have an opportunity to gain a higher return
than is currently available in Option Two. Yet, the opportunity must be balanced
against the risk of loss inherent in any investment that is not guaranteed.
Established in 1997, the Student Tuition Assistance and Revenue Trust (START) Saving Program – Louisiana’s Qualified Tuition Plan under Section 529 of the Internal Revenue Code – has over 12,000 account owners and manages more than $40 million in assets.
For more information, please call START toll-free at (800) 259-5626, Ext. 1012.