Ohio’s 529 Plan: Helping Families Save For College For 30 Years
Established Oct. 2, 1989, Ohio Tuition Trust Authority (OTTA) was originally created with the express purpose of helping middle-income families save for college. OTTA is the state agency that is the program administrator and sponsor of Ohio’s 529 Plan, CollegeAdvantage.
“We advocate Ohio’s 529 Plan as an alternative to student loan debt. For 30 years, Ohio has offered this viable alternative and has proven to be a trusted, enduring partner to thousands. Families recognized the economic threat of student loan debt and the merits of saving and investing in Ohio’s 529 Plan for education expenses after high school,” said Executive Director Tim Gorrell.
Our college savings story
By 1990, the first college saving accounts were opened in the Ohio Prepaid Tuition Program, now known as the CollegeAdvantage Guaranteed 529 Savings Plan. The unit-based prepaid tuition program was backed by the full faith and credit of the state of Ohio.
During the early years of OTTA, benefits were added to these qualified tuition programs. Internal Revenue Code Section 529 was created in 1996 and authorized tax exemptions for states and tax deferrals for participants who contributed to a state’s 529 program. Room and board was added as a qualified expense in 1997. Special gift and estate tax treatments were allowed for these accounts as well.
In 2000, OTTA launched CollegeAdvantage, in partnership with Putnam Investments, with two new variable 529 savings plans, the Direct and Advisor Plans. The State of Ohio also added a significant tax benefit, allowing contributors to CollegeAdvantage to deduct up to $2,000 per year, per beneficiary, from their state of Ohio income taxes with unlimited carry forward in future years for annual contributions over $2,000. In 2001, the federal government temporarily authorized qualified 529 plan withdrawals to be exempt from federal income tax. This tax benefit became permanent in 2006.
Due to rapidly rising tuition costs and investment pressures in the markets, the Guaranteed Savings Plan was closed to contributions and new enrollments on Dec. 31, 2003. The agency continues to service these existing accounts to pay higher education expenses for the original beneficiaries.
OTTA continued to expand and enhance the CollegeAdvantage Direct 529 Plan in 2004 with the addition of 15 new indexed options managed by The Vanguard Group. These investments are passively managed to match the performance of a particular market index. In 2005, FDIC-insured savings and CD options from Fifth Third Bank were added to the Direct Plan.
In 2009, OTTA was moved under the Office of the Chancellor within the Ohio Department of Higher Education.
“Whatever postsecondary education looks like for your family, we want to ensure that the experience is affordable for all students,” said Ohio Department of Higher Education Chancellor Randy Gardner. “The CollegeAdvantage plan has been a national leader in helping families save for college and invest in our students’ future. I congratulate the Ohio Tuition Trust Authority on its 30-year anniversary and wish it continued success in helping students achieve their dreams.”
Other significant Direct Plan structure changes were implemented in 2009 when Putnam was eliminated from the Direct Plan. With this change, customized Advantage Age-Based Portfolios were created for the Direct Plan and multiple investment partners were added for manager. During this time, a second Advisor Plan, offered by BlackRock, was added. The Putnam Advisor Plan relationship ended in 2010.
Ascensus was selected as Ohio’s 529 Plan recordkeeping and portfolio fund accounting firm in 2013. With this partnership, families can save for their children’s higher education through Upromise, a free rewards program. Upromise members can earn cash back from eligible purchases for their everyday purchases, which they can roll over into their Ohio Direct 529 Plan.
During OTTA’s 25th anniversary in 2015, OTTA’s administrative fee and the Vanguard fees were reduced, a cost-saving measure for account owners. Ascensus and BlackRock did the same in 2016 and 2018, respectively. Other investment options enhancements were implemented in recent years, including age-based glide path changes to the Vanguard Age-Based, BlackRock Age-Based, and Advantage Age-Based portfolios.
As the college savings industry matured, new federal- and state-level enhancements were implemented to further increase the tax advantages of saving in a 529 plan. With the Protecting Americans from Tax Hikes (PATH) Act of 2015, computers along with related services and technologies, were added as a qualified tax-free expenses. The PATH Act also created the framework to allow the re-contribution of qualified withdrawals refunded by a school to be redeposited without tax penalty. The Tax Cuts and Job Act of 2017 added another qualified 529 withdrawal: $10,000 for K-12 tuition. In January 2018, the State of Ohio tax deduction for contributions to CollegeAdvantage was doubled to $4,000 per year, per beneficiary, increasing the advantages of saving with Ohio’s 529 Plan.
Ohio’s 529 Plan now
Since the beginning, families have trusted Ohio’s 529 Plan with their college savings. On June 30, 2019, Ohio’s 529 Savings Program reached a new milestone with assets under management (AUM) of $12.4 billion in 642,229 accounts.
Ohio’s 529 Plan has topped three out of four of the long-term performance charts at Savingforcollege.com, a trusted college-savings industry resource. Savingforcollege.com provides unbiased research on 529 plans, financial aid, scholarships, and offers tools to help families estimate college expenses. Savingforcollege.com analyzes the performance of the nation’s 529 plans on a quarterly basis and ranks them. Ohio’s 529 Plan has consistently received high marks for its long-term investment performance. As of June 30, 2019, CollegeAdvantage Direct 529 Plan ranks first in the nation for the best investment performance in three different categories: one-year, five-year, and ten-year. Ohio’s 529 Plan was also ranked fifth nationwide for the best performance in the three-year category.
Savingforcollege.com consistently recognizes Ohio’s Direct 529 Plan as one of the best plans in the nation for both Ohio residents and non-Ohio residents. Ohio’s Direct 529 Plan is the only 529 college savings plans nationwide to earn a 5-Cap rating for both residents and non-residents from Savingforcollege.com, as of Aug. 8, 2019. Ohio’s Direct 529 Savings Plan has received this recognition multiple times for the plan’s attractiveness for Ohio residents and non-residents across the nation. Ohio’s 529 Plan is also one of only three 529 plans to receive 5-Cap ratings for both performance and fees from Savingforcollege.com.
For the last 30 years, Ohio’s 529 Plan has provided families across the nation flexible options and educational resources to invest for higher education expenses after high school. Ohio 529 Plan can be used at any four-year college or university, two-year community college, trade or vocational school, and certificate program across the country that has a Federal School Code. Open your tax-advantaged Ohio’s 529 Plan today at CollegeAdvantage.com. Someday your child is going to college. Someday starts with Ohio’s 529 Plan.
Posted on April 19, 2021