College funding plan keeps getting held back
© St. Petersburg Times
Florida's long-promised expansion of its college savings program has hit a snag that will delay its introduction for several months.
Approved by the Legislature three years ago, the tax-sheltered savings program has been moving from conception to reality at the speed of molasses. The idea is to offer an array of investment options, much like mutual funds, as an alterative to the guaranteed tuition plan offered by the Florida Prepaid College Program.
Now, just before the new offering's planned launch, the state has parted ways with TIAA-CREF, the New York company selected to manage it.
"We had a difference of opinion in a lot of different areas," said Stanley Tate, chairman of the board that oversees the Florida Prepaid College Program and the new savings program. Marketing strategy was a particular sore spot, with the state adamant that it would not offer financial advisers a commission to sell the plan.
TIAA-CREF officials described the breakup as a "mutual parting of the ways."
Tate said the state plans to manage the new program in house, just as it does the existing prepaid program. He said only two additional employees will be required because many functions, such as investment management and advertising, will be contracted out.
Tate said he hopes the program will be ready to begin accepting participants in July. He said implementation has taken so long because he wanted to be sure it was done right.
"I'd rather waste time than money," he said. "I want to be sure that every dollar is utilized well."
The new program is a 529 college savings plan, named after a section of the tax law. Like other state plans, Florida's will offer a menu of investment choices. Savings in 529 plans accumulate tax-deferred and can be withdrawn tax-free if the money is used for college expenses. Most other states offer such a plan, frequently in partnership with a brokerage firm or mutual fund company.
Although there are no guarantees, the savings plans offer the potential for higher returns than the existing prepaid college program, which allows the purchase of future tuition and dormitory rentals at today's prices. The prepaid plan will continue to be available.
-- Helen Huntley can be reached at email@example.com or (727) 893-8230.
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