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Facts About Minnesota's 529 Plan

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By    |   Tuesday, 19 May 2015 04:40 PM

When President Barack Obama talked during January 2015's State of the Union address about a proposal to end the tax exemption enjoyed by those who have 529 plans, perhaps he underestimated how much investors enjoy their college-saving portfolios. After outrage throughout much of the country, Obama withdrew his idea.

Tax benefits make 529 plans appealing to those who use them. These plans allow investors to deposit money, watch it grow in the market, and then withdraw it tax-free so it can be used for college education purposes. Here are five facts about Minnesota's 529 plan.

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1. Minnesota offers just one plan, a savings plan that's managed by TIAA-CREF Tuition Financing, Inc. As U.S. News & World Report explains, the state "offers one age-based option in which assets shift into more conservative investments as the beneficiary approaches college age."

2. Minnesota's 529 plan is neither tax deductible nor gives a tax credit. Prior to July 2011, the state offered a matching grant program for contributions made to the 529 plan, but that benefit has since been discontinued, according to the Minnesota College Savings Plan website.

3. The minimum contribution for the 529 plan is $25, but if the deposit comes directly via payroll deductions, that minimum figure drops to $15. The annual management fee for the plan falls between 0.27 percent and 0.41 percent, according to U.S. News & World Report, while the administrative fee is 0.013 percent.

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4. The state's lone 529 plan has not garnered great reviews. In 2012, Morningstar, an independent research firm, gave the state's 529 plan its worst rating and called it "off the mark," Daily Finance reported. That report called the plan's fees high and criticized the state for withdrawing its matching grant program.

5. The state's plan has shown improvement.
In October 2014, Morningstar upgraded Minnesota's 529 plan from a negative rating to a neutral rating. Business Wire explained the changes to the 529 plan in 2014: "This past August, Minnesota renegotiated its contract with program manager TIAA-CREF, and as a result plan fees were reduced by more than 0.50 percent. At the same time, the plan smoothed out the rolldown in equities of its age-based options as they approach college age. Morningstar says this more gradual shift in allocation should help college savers lessen the effect of moving out of equities just after a market dip when there's the potential to lock in losses."

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When President Barack Obama talked during January 2015's State of the Union address about a proposal to end the tax exemption enjoyed by those who have 529 plans, perhaps he underestimated how much investors enjoy their college-saving portfolios.
529 plan, Minnesota, facts
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2015-40-19
Tuesday, 19 May 2015 04:40 PM
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