Analyzing 529 College Savings Plan Fees and ExpensesAnalyzer Home | Disclaimer | Glossary

Administration or Administrative Fee
 A charge for expenses incurred in the administration of a 529 college savings plan, which may include services such as record keeping, auditing, and preparing and printing statements and reports. This fee is deducted from your holdings based on a percentage of your assets in the plan.

You can find a description of the fees and expenses charged by a plan in the disclosure statement or plan description.

Annual Maintenance Fee
 Most 529 college savings plans charge annual maintenance fees. These fees usually range from $10 to $50. Many plans reduce or eliminate this fee for residents, if you make automatic contributions, or if you maintain a certain balance, typically $25,000.

You can find a description of the fees and expenses charged by a plan in the disclosure statement or plan description.

Breakpoints
  529 college savings plans with front-end loads or sales charges may enable you to reduce front-end sales charges as the amount of your investment increases to certain levels called "breakpoints." Check the disclosure statement or plan description to see if a breakpoint will reduce the front-end sales charge. For more information on breakpoints, please read our Investor Alert -- Mutual Fund Breakpoints: A Break Worth Taking.
Class
 A single 529 college savings plan or mutual fund may offer more than one "class" of shares to investors. Each class represents a similar interest in the planís or fundís portfolio, but has different fees and expenses. Here are the basic definitions of Class A, B, and C shares:
  • Class A Shares - These shares typically charge a front-end sales charge that is deducted from the initial investment.
  • Class B Shares - These shares typically do not charge a front-end sales charge. So, unlike Class A shares, all your money is immediately invested. Class B shares normally impose a contingent deferred sales charge (CDSC). The CDSC normally declines each year and is eliminated after a number of years. Class B shares often then "convert" into Class A shares. When they convert, they will begin to charge the same annual fund operating expenses as Class A shares. Before they convert, Class B shares usually have higher annual fund operating expenses than Class A shares.
  • Class C Shares - These shares typically do not charge a front-end sales charge. So, unlike Class A shares, all your money is immediately invested. Often Class C shares impose a small charge if you sell your shares within a short time of purchase, usually one year. Class C shares also typically impose higher annual fund operating expenses than Class A shares.

Some 529 plans and funds may offer additional classes of shares.

To learn more about mutual fund classes, you can read our Investor Alert, Understanding Mutual Fund Classes.

Contingent Deferred Sales Charge (CDSC)
 A common type of deferred sales charge in some 529 college savings plans and mutual funds. The CDSC normally declines each year and is eliminated after a number of years.
Convert
  Sometimes a share class will convert to another class of shares after a period of time. This means that you will begin to pay the fees and expenses charged by the class to which your plan or fund was converted. You can find out whether a share class converts to another class in the disclosure statement or plan description.
Deferred Sales Charge (Back-End Load)
 A deferred sales charge or contingent deferred sales charge (CDSC) is a charge you pay when you withdraw money from a 529 college savings plan or in an investment option within the plan. It is sometimes referred to as the back-end load. The charge may start out at 2.5% for the first year, and get smaller each year after that until it reaches zero. Not every college savings plan has a deferred sales charge. In some plans, a deferred sales charge also may be levied on certain classes of the plan.

You can find a description of the fees and expenses charged by a planís investment funds in the disclosure statement or plan description.

Disclosure Statement or Plan Description
 Similar to a mutual fundís prospectus, a 529 college savings planís disclosure statement or plan description (these terms are interchangeable) provides detailed information about the plan, including investment options and fees and expenses. You can find the disclosure statement or plan description on the 529 planís Web site, where it is usually in a downloadable PDF-format. On some fund Web sites, you must first click on ďstart to enrollĒ to get to a downloadable disclosure statement or plan description link.
Enrollment Fee
 Several 529 college savings plans charge a minimal enrollment fee. Currently, the highest enrollment fee is $90. Most enrollment fees are under $50.

You can find a description of the fees and expenses charged by a plan in the disclosure statement or plan description.

Foregone Earnings
 Foregone earnings is the amount you could have earned on your investment if the money spent on fees and expenses was invested. The expense analyzer calculates foregone earnings by taking the money used to pay fund fees and expenses and compounding it at the rate of return you selected. Deferred sales charges are not included in this calculation because you only pay them when you sell the investment.

For example, if you invest $10,000 in a fund with a 5% sale charge, then your net investment is $9,500. If the fund earned a return of 10%, and you held the shares for 1 year, then you did not receive $50 (10% x $500) in earnings. The $50 is the money you did not earn because your $500 was not invested. The payment of total annual fund operating expenses and other expenses and fees also would result in foregone earnings.

By purchasing and holding any mutual fund, investors will incur some level of fees and expenses. This figure should primarily be used to compare the opportunity cost of sales charges and expenses across mutual funds.

Management or Marketing Fee
 A charge paid to the 529 college savings planís managers for their services, which may include compensation for advising you about the plan as well as marketing expenses. The fee is based on a percentage of your assets in the plan.

You can find a description of the fees and expenses charged by a plan in the disclosure statement or plan description.

Mean
 The average of several values. The mean value is calculated by adding up all the values and dividing by the number of values in the set.
Example: Find the mean of these expense ratios:

0.95%, 0.35%, 0.91%, 0.87%, 0.55%

The total of these expense ratios is 0.95% + 0.35% + 0.91% + 0.87% + 0.55% = 3.63%

There are 5 expense ratios so divide by 5. 3.63/5 = 0.73. So the mean expense ratio is 0.73%.

Median
 This is the middle value in a set of data.
Example: Find the median of these expense ratios:

0.95%, 0.35%, 0.91%, 0.87%, 0.55%

First put the expense ratios in order. That makes it easier to find the median.

0.35%, 0.55%, 0.87%, 0.91%, 0.95%

The middle expense ratio is 0.87%. This is the median expense ratio.

Sales Charge (Front-End Load)
  Several college savings plans charge a sales charge when you buy certain investment options within a plan or purchase a plan through a broker or investment adviser instead of directly from the state. For example, suppose you want to spend $10,000 to purchase a 529 plan, and the plan imposes a front-end sales charge of 5%. You will be charged $500, and you will receive an investment with a market value of $9,500. Some plans may provide a discount if you:
  • Want to make a large purchase
  • Already hold other mutual funds offered by the same fund family
  • Commit to regularly purchasing the mutual fund's shares.

Read your planís disclosure statement or plan description to learn whether its investment funds impose a sales charge or load, and, if so, whether discounts or breakpoints are available to you.

Total Fees
  The total of sales charges, management or marketing fee, administration or administrative fee, underlying fund expenses, and other expenses and fees charged by a 529 college savings plan over the time period you selected.
Total Sales Charges
 The total of any front-end sales charges (front-end load) or deferred deferred sales charges sales charges.
Underlying Fund Expenses
 Because 529 college savings plan portfolios typically invest in a number of funds, they bear part of the fees and expenses of these underlying funds. This expense is expressed as a percentage of a fund's assets. These are fees you do not directly pay, but which are taken out of the fund's assets. Fund expenses include:
  • Management Fees - These fees include amounts paid to the fund's investment advisor for managing the fund's portfolio and providing other services, such as shareholder record keeping and preparing shareholder statements and reports.
  • 12b-1 Fees - Named after a Securities and Exchange Commission (SEC) rule, these fees include costs of distributing the fund shares to investors.
  • Other Expenses - These expenses include any other annual fund expenses.