Four plans continued to merit Morningstar Analyst Ratings of Gold. These plans for the most part follow industry best practices, offering some combination of the following features: low fees, a strong set of underlying investments, a solid manager selection process, a well-researched asset allocation approach, an appropriate set of investment options to meet investor needs, and strong oversight from the state and program manager. These features improve the odds that a plan will continue to be a strong option for investors. Gold-rated plans have all or a vast majority of these attributes.
Morningstar also identified five plans that earn Negative ratings; four of which were downgraded from Neutral in 2018. According to Morningstar, these plans lack compelling traits and have at least one flaw that makes them worth avoiding, such as high fees. In fact, two plans that feature Vanguard as the investment manager and Ascensus as the program manager were downgraded to Negative from Neutral because of excessively high fees for Vanguard's typically low-cost index funds. The Arkansas GIFT College Investing Plan and North Dakota's College SAVE have similar investment lineups and investment processes as other plans that use Vanguard as the investment manager, like the Gold-rated Vanguard 529 College Savings Plan. However, Arkansas and North Dakota are relatively small and therefore charge high program management fees that erode Vanguard's usual edge in price. "There's little incentive for even in-state college savers to stay in the plans when similar fare is offered at a much more palatable price," Morningstar said. Morningstar analysts downgraded three of Nebraska's plans — one of which is included among the Negative rated plans, TD Ameritrade 529 College Savings Plan — because they haven't cut fees as aggressively as most peers. --- Related on ThinkAdvisor:
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