California's 529 plans put out for bid

The state of California is hoping to take advantage of lower fees and other investor-friendly trends in the college savings plan market by asking companies to submit proposals to run its two Section 529 college savings plans. In a request for proposals, California has asked firms interested in managing one or both its 529 plans to discuss fees, investment choices, customer service, marketing and other factors. It also indicated that it would like the company to offer non-proprietary investment options. California's two plans, one sold directly to individuals and the other an adviser-sold plan, are managed by Fidelity Investments and offer Fidelity investment choices. It's contracts run out in November. Proposals are due May 2. “The primary goal in doing this RFP now is to test the market, as it has changed a great deal since Fidelity came on,” said Joe DeAnda, a spokesman for the California treasurer. The RFP “is not a reflection upon Fidelity as manager,” he said. Many 529 savings plans have cut fees in the past year, including those in Alaska, Connecticut, Iowa, Maryland, Michigan, Nevada, Pennsylvania and Virginia. Increasingly, college savings plans are moving to an open architecture, in which plans offer investment products from multiple companies, said Joseph Hurley, chief executive of Savingforcollege.com. “With an open architecture, there's less risk that the program will falter because one particular fund family falters,” he said. A Fidelity spokeswoman said that the company will review California's RFP. Fidelity manages four other direct-sold 529s in Arizona, Delaware, Massachusetts and New Hampshire. It also manages an adviser-sold plan in New Hampshire. “We've had four good years with a strong and successful relationship with the [California] ScholarShare program,” said Teri Ginsburg, a spokeswoman for Fidelity. E-mail Liz Skinner at lskinner@investmentnews.com.