While the SEC does not directly regulate state run 529 plans, it is getting ready to scrutinize the fees they charge. In a recent letter to Michael Oxley (R., Ohio), chairman of the House Financial Services Committee, SEC Chairman William Donaldson confirmed the SEC plans a task force to examine 529 plans.

The letter from Donaldson, which was obtained by Dow Jones Newswires, was sent in response to a letter Oxley wrote on February 4 asking about the disclosure and transparency in these plans.

The goals of the task force will to determine whether investor in 529 plans receive enough information about fees and expenses in the plans. The task force will consist of staffers from the Investment Management and Market Regulation, Economic Analysis, Investor Education and General Counsel Divisions.

In the letter, Donaldson described 529 plans as "complicated and likely difficult for parents to understand."

In an attachment to Donaldson's letter Annette Nazareth, director of Market Regulation at the SEC, noted that fee and expense disclosures vary markedly among programs, making it "difficult" for investors to fully understand the options that are available to them. She also noted that many plans offer little or no information about the funds making up the program.

"It appears that fees associated with 529 plans include enrollment or application fees, annual account maintenance fees ... and are in addition to the fees of the investment companies in which the 529 plan invests," Nazareth wrote.

Because the SEC does not oversee the state run college savings plan system, look for it to instead create disclosure standards for broker-dealers and other institutions distributing the products that it does regulate. 

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE