529咨询计划中的计划使用（pdf）

Copyright © 2021 by the Investment Company Institute. All rights reserved. The content contained in this document is proprietary property of ICI and should not be reproduced or disseminated without ICI’s priorconsent. The information contained in this document should be used solely for purposes of assisting firms in making independent andunilateral decisions relevant to their respective business operations. It is not intended to be, and should not be construed as, legal advice. 529 Plan Use Within Advisory Programs Contents 1Introduction 2Background 2Types of 529 Plans2Prepaid Tuition Plans2529 Education Savings Plans 3Important Attributes and Tax Features of 529 Education Savings Plans 3Flexibility3Professional Money Management3Federal and State Benefits 4Supporting 529 Plans In Advisory Arrangements 4Offering an Advisory or Institutional Share Class as Part of an Existing 529 Plan5Building an Advisory Model 529 Plan6Additional Considerations 7Conclusion Introduction Fund investors have numerous ways in which to receive and pay for investment advice from financial professionals.1Traditionally, many investors have participated in a commission-based model through a broker-dealer, where thefee for advice is tied to and included with the transaction to acquire or sell shares. In recent years, some investorsseeking advice have migrated toward an asset-based fee model offered by a registered investment adviser (RIA) orwithin a fee-based advisory program at a broker-dealer. The RIA, acting in the best interest of the investor, createsan asset allocation among recommended securities and periodically rebalances the investor’s accounts to maintainan optimal asset allocation over time. The investor is charged an asset-based fee for advice that is based on apercentage of the investor’s assets under management in the advisory program. The fee is often withdrawn fromone or more account positions held within the advisory program. While advisory programs have included mutual fund shares for quite some time, their use has been far less commonfor qualified tuition plans created under Section 529 of the Internal Revenue Code.2A 529 plan is a tax-advantagedinvestment vehicle that encourages saving for the education expenses of a designated beneficiary and is sponsoredby a state, state agency, or educational institution. Recently, members of the Investment Company Institute’s Broker-Dealer Advisory Committee’s 529 Plan TaskForce began exploring how 529 plans could be offered in advisory programs. Task force members noted that some529 plan attributes may present unique challenges when offered in an advisory program, especially the treatmentof advisory fees and investment option changes. To date, there is only one advisory model 529 plan available,although some 529 plans offer advisory or institutional share classes for use by intermediaries in fee-basedadvisory programs. In response, a working group of the task force prepared this white paper to explore the useof 529 plans by intermediaries within advisory programs, highlighting key considerations for 529 plan programmanagers3and intermediaries. Regulation Best Interest Effective June 30, 2020, the Securities and Exchange Commission adopted Regulation Best Interest (Reg BI)regarding standards of conduct for broker-dealers when making a recommendation on any securitiestransaction or investment strategy to a retail customer, such as investing through a commission-based versusadvisory arrangement.4For organizations offering 529 plans in both arrangements, factors such as investmenttime horizon, available age- or target-based options, and investment change limits may lead to differentrecommendations on the appropriate arrangement for different retail customer situations. Background Enacted into law in 1996 and named after Section 529 of the Internal Revenue Code, 529 plans have experiencedcontinual growth in assets and accounts, as well as expanded potential use as a tax-advantaged investment supportingeducation.5While originally created to support the pursuit of higher education, changes in the past decade haveexpanded 529 plan use to cover K–12 education, apprenticeships, and some student loan payments. Assets held by529 plans reached an all-time high in the fourth quarter of 2020, with $425.2 billion in assets and 14.8 million accounts.6 Types of 529 Plans There are two types of plans: prepaid tuition plans and 529 education savings plans. Education savings plans are themost popular choice: they made up 94 percent of all 529 plan assets and 93 percent of accounts at year-end 2020. Prepaid Tuition Plans Prepaid plans offer “tuition units” or “contracts” by a state administrator or private entity at today’s rates to prepaythe future cost of college tuition. Plans often limit what is covered (e.g., excluding books or room and board) and arerestricted to the state or institution of issuance. By their very nature of prepaying today to cover tuition “tomorrow,”p