Municipal college savings programs, also known as 529 savings plans, took a drubbing during a recent congressional hearing in which experts testified that investors are often being gouged on fees, Dow Jones Newswires reports.
During the House Subcommittee on Capital Markets hearing this week, Morningstar analyst Dan McNeela outlined a torturous process in which investors are potentially subjected to poor fee disclosure and excessive charges. Some plans, McNeela pointed out, charge enrollment and broker fees on top of administrative expenses. Indeed, it was a long day for some 529 plan providers.
The committee found no evidence that 529 fees had yet eclipsed the tax benefits outlined in government provisions for the plans, but the subcommittee members formed a consensus that the plans had fallen down on the job of disclosing costs to investors. The Securities and Exchange Commission previously reported that 529 plans often include more layers of fees than an average mutual fund.
Despite lack of disclose in some 529 plans, subcommittee chairman Richard Baker (R-LA) recommended a course of action in which the states provide a uniform solution rather than turning to the overburdened SEC for additional regulations.