Every year, trusted financial industry investment research and management company, Morningstar, reviews the nation’s 529 college savings programs. Once its analysis is complete, Morningstar ranks the 529 plans in a report released every November.
Ohio’s 529 Plan is pleased to announce that the CollegeAdvantage Direct 529 Plan maintained its silver rating for the eleventh year in a row. In addition, BlackRock CollegeAdvantage, Ohio’s Advisor 529 Plan retained its bronze ranking for the fourth year. This makes Ohio one of only three state programs that have both their Direct and Advisor 529 Plans ranked as medal-class college savings programs by Morningstar. The high ranking for both CollegeAdvantage 529 Plans highlights the strength of Ohio’s two college savings plans as well as the industry’s regard for Ohio’s 529 Plan as one of the best in the nation.
According to the 2023 Morningstar report by Hyunmin Kim, “The 2023 ratings revealed the continually rising standards across the industry. …. Asset managers no longer consider education savings plans as an afterthought to their existing multi-asset offerings; instead, we see increasing dedication of research and resources to specifically helping education savers. Stewardship standards continue to rise as well. Robust interaction between the state and its investment entity forms a baseline now, with more engaged state entities aggressively negotiating with external managers and advocating for its accountholders.”
According to Karen Zaya, a Morningstar analyst who wrote the reviews for both Ohio’s Direct and Advisor 529 Plans, “The Ohio CollegeAdvantage 529 Savings Plan provides investors access to solid investment management under the watch of a diligent steward for an attractive price, meriting a renewed Morningstar Medalist Rating of Silver. The continuity and laudable oversight of the Ohio Tuition Trust Authority, or OTTA, continue to support an Above Average Parent rating. Along with consultant Wilshire, OTTA has contributed to continual improvements of both this and the advisor-sold plan. Trisha Good, who has been with OTTA since 1996, was the plan CIO/CFO from 2010 until she assumed her current role as the plan's executive director and CIO following her predecessor's retirement in mid-2023. Solid succession planning allowed for a seamless transition.”
For the BlackRock CollegeAdvantage 529 Plan, Zaya says, “The Ohio BlackRock CollegeAdvantage 529 plan provides investors access to topnotch investment management under the watch of a diligent steward. These compelling qualities continue to support a Morningstar Medalist Rating of Bronze, despite the higher baseline price tag typical of advisor-sold offerings. Two teams from BlackRock's Multi-Asset Strategies and Solutions group bring significant expertise to this offering, supporting a renewed Above Average People rating. The firm's Retirement Solutions team is responsible for glide path design as well as the sub-asset-class level strategic-asset-allocation scheme. The Global Tactical Asset Allocation team actively manages the portfolios' exposures. Both teams are robustly staffed and feature long-tenured individuals.”
Morningstar research process to determine the ranking of a 529 plan, is based in four pillars. Ohio’s Direct 529 Plan ranked positive in all four pillars, making it one of only six plans nationwide to do so. The pillars are:
- Process — Did the plan hire an experienced asset allocator to design a thoughtful, well-diversified glide path for age-based portfolios? What suite of investment options are offered?
- People — What is Morningstar’s assessment of the underlying money managers’ talent, tenure, and resources?
- Parent — Are the program manager and investment manager good caretakers of college savings capital? Is the state managing the plan professionally?
- Price — Are the investment options a good value?
Other honors for Ohio’s Direct 529 Plan
Investopedia has picked Ohio’s 529 Plan as its best 529 plan for 2023 for our high performance ratings, age-based or customized portfolios, competitive fees, and FDIC-insured savings accounts and CDs. In their overview, Investopedia stated, “There are a lot of reasons to like Ohio’s CollegeAdvantage 529 plan—and a history of generating above-average returns is certainly one of them. According to performance reviews from Savingforcollege.com, the program is tops in the nation for 10-year returns. There’s no shortage of investment choices here, either. You can choose an age-based portfolio that becomes more conservative over time or a static risk-based portfolio that doesn't change its asset mix over time. You can also customize your basket of investments by choosing your own mix of stock and bond funds. The plans include funds from Vanguard and Dimensional Fund Advisors, as well as Federal Deposit Insurance Corporation (FDIC)–insured certificates of deposit (CDs) and bank accounts. From a fee standpoint, Ohio’s plan is one of the best around. Age-based options range between 0.15% and 0.31% annually, well below the national average. And risk-based and individual options are all 0.44% or less. No doubt that Ohioans have a strong incentive to sign up, with state tax breaks of up to $4,000 per beneficiary per year. However, with a stellar track record, numerous investment options, and low fees, people outside the Buckeye state will want to take notice as well.”
Ohio’s 529 Plan was named one of Military Saves Savings Champion for our continual support of this important program. Military Saves is part of the nonprofit Consumer Federation of America and is an initiative of America Saves. Military Saves works with government agencies, defense credit unions, military banks, and nonprofit organizations to promote savings and debt reduction.
Forbes Advisor continues to rank Ohio’s 529 Plan as one of the six best college savings programs in the nation. According to their explanation: “Ohio’s 529 Plan comes with features in line with the other plans on our list, including low fees, a range of investment options and a tax deduction for Ohio taxpayers. … The plan also comes with a minimum contribution, both to open the account and for each contribution thereafter. But it is small ($25) and likely manageable for many plan participants.”
CNBC also continues to select Ohio’s 529 Plan as one of the ten best programs nationwide. As they wrote, “With the CollegeAdvantage (Ohio) 529 plan, anyone can sign up. There’s a good mix of investment options (including FDIC-insured accounts), low fees and plans from top companies like Vanguard, Dimensional Fund Advisors and Fifth Third Bank. There’s just a minimum contribution amount of $25 and Ohio residents can get a tax deduction.”
Money Inc. ranks Ohio’s 529 Plan, CollegeAdvantage, second in its list of the top ten 529 programs nationwide. They highlighted the “tax break for Ohio residents, a diverse selection of investment alternatives, and low fees.”
Clark Howard has placed Ohio’s Direct 529 Plan on his dean’s list, which is determined by fees and expenses. Only 529 plans with annual fees less than 0.20% are placed on the dean’s list.
Ohio’s 529 Plan tax advantages
Why save in Ohio’s 529 Plan? CollegeAdvantage helps families across the nation save money for their children’s future costs associated with college, vocational, trade, or technical school, as well as apprenticeships, while offering tax-advantaged benefits.
First, contributions and earnings grow tax free in a 529 plan, so all investment growth is yours to use to cover college costs. Second, a 529 withdrawal is tax free when used to pay qualified higher education expenses — those costs that are mandatory to attend the school or program. Third, an Ohio resident who contributes to a CollegeAdvantage 529 account – whether as the account owner or making a gift – can deduct their 529 contributions from their Ohio taxable income. The deduction is $4,000 per year, per beneficiary, with unlimited carry forward. This means that $4,000 per year is not a contribution cap. If an Ohio taxpayer contributes $12,000 in one tax year, they will continue to subtract $4,000 per year, per beneficiary, from their State of Ohio taxable income until all the contributions have been deducted.
Not just for four-year programs
529 plans can be used for whatever comes after high school, as higher education takes many forms. This list includes not just four-year universities and colleges, but also community colleges, trade and specialty schools, certificate programs, graduate school, law school, medical school, and apprenticeships.
Simply put, you can use the funds in your Ohio 529 Plan almost anywhere you are comfortable sending your child and your money. 529 plans can be used at any post-secondary school that accepts federal financial aid. If you want to confirm that the schools your child wants to attend accepts federal aid, then do a search to see if the institutions have a Federal School Code on the Free Application for Federal Student Aid (FAFSA). If the schools do, then you can use your 529 funds there.
While you may have saved in Ohio’s 529 Plan, you can use your funds at both Ohio schools and schools nationwide. 529 plans can be used across the United States at over 30,000 post-secondary institutions.
For more than 34 years, Ohio’s 529 Plan has been helping families across the nation save for their children’s higher education. Ohio’s 529 Plan covers qualified costs at any four-year college or university, two-year community college, trade or vocational school, apprenticeship approved by the U.S. Labor Department, or certificate program nationwide that accepts federal financial aid. Start, add, or give a gift with as little as $25 at CollegeAdvantage.com.