TIAA-CREF chosen as new manager of California's 529 college-savings plan
TIAA-CREF, an investment firm specializing in the education industry, will be the new manager of California's 529 college-savings plan.
The state board that oversees the 529 plan voted to hire the firm in a meeting Monday. It was selected over Nebraska-based Union Bank & Trust Co.
TIAA-CREF will replace Fidelity Investments, which did not bid to continue running the $4.4-billion plan. Its contract expires in November.
The revamped savings program will include a new slate of investment options with average fees lower than the current plan. The annual cost of the age-based index-fund portfolios average 0.23%. The average cost of the actively managed equivalents is 0.58%.
In a key difference, the new plan will include offerings from four mutual-fund firms, including three outside companies. In addition to TIAA-CREF funds, there also will be offerings from T. Rowe Price, Pimco and Dimensional Fund Advisors. Fidelity offers only its own funds in the current plan.
A 529 plan is a state-sponsored program in which college savers invest in a variety of options, including stock, bond and money-market mutual funds. Gains are not subject to federal taxes or, in many cases, state taxes, as long as the money is used for specific college expenses, such as room and board.
-- Walter Hamilton