Morningstar Releases Ratings for States’ 529 Plans

Morningstar Inc. announced its 529 medalist ratings on Thursday, with only Utah’s my529 Plan and Pennsylvania’s Pennsylvania 529 Investment Plan receiving the top rating of “Gold.”

According to Morningstar, the medalist ratings indicate which plans are best suited to help investors reach their goals. The rating tiers include Gold, Silver, Bronze, Neutral and Negative. This year, when considering 529 plans, Morningstar analysts assigned two Gold ratings, 15 Silver ratings, 17 Bronze ratings, 16 Neutral ratings and four Negative ratings.

“Since we debuted our 529 ratings in 2012, we’ve been pleased with the overall improvement in the 529 industry, namely through more sophisticated investment approaches, increased state oversight and lower fees,” Hyunmin Kim, manager research analyst at Morningstar, said in a statement. “Rightly, asset managers no longer consider education savings plans as an afterthought. With the right plan, families can effectively save for education and even kickstart retirement plans.”

Morningstar rated 54 of the nation’s largest 529 college-savings plans, which represent more than 90% of the industry’s approximately $415 billion in 529 plan assets as of August 31. The firm assigns ratings in three steps: assess the opportunity to add value, score pillars and derive the rating.

Morningstar analysts found that the 34 plans earning Gold, Silver or Bronze ratings had some combination of the following valuable features:

• Well-researched asset-allocation approach;
• Robust process for selecting and monitoring underlying investments;
• Well-resourced and experienced investment team;
• Stable and engaged oversight from the state; and
• Low fees.

In this year’s assessment, Morningstar analysts upgraded 10 plans and downgraded seven plans. The table below shows these changes: