California has picked TIAA-CREF to manage its college savings plan that has about $4 billion of assets.
The ScholarShare Investment Board, which oversees the state's 529 program, voted last week to award TIAA-CREF, of New York, a five-year contract for its plan sold directly to investors, Joe DeAnda, a spokesman for California Treasurer Bill Lockyer, said in a telephone interview.
Fees on average will be lower than those charged by the current manager, Fidelity Investments in Boston, which didn't bid for the contract. TIAA-CREF will have eight people in California dedicated to promoting the accounts, including two bilingual speakers, and will spend $10 million a year on marketing, or double that of Fidelity, DeAnda said.
"They bring with them tremendous knowledge and experience in helping families save and plan for college," Lockyer, who also is chair of the ScholarShare board, said of TIAA-CREF in a statement.
The 529 plans, named after a section of the U.S. tax code, are set up by states. Investment earnings generally are free of state and federal taxes when used to pay for eligible education expenses. California's program has about $4.4 billion of assets in more than 291,000 accounts, the statement said. Assets in 529s nationwide totaled $149 billion as of April, according to the research firm Morningstar Inc. in Chicago.
TIAA-CREF is the largest U.S. manager of retirement plans for teachers and academic researchers and also administers college savings plans in nine states, said spokesman Chad Peterson. The California contract provides for five yearlong extensions after the initial term, said Tom Dresslar, a spokesman for the treasurer's office.
College savings plans are "critical" because of the cost of education today, Dresslar said. Tuition and fees for in-state students at public four-year institutions averaged $7,605 for the 2010-11 school year, according to the College Board, a New York nonprofit. At private nonprofit four-year colleges and universities, it's $27,293.
