Assets in prepaid 529 plans increased 2.6% in the first quarter of 2012 to $21.2 billion, the Financial Research Corp. announced on Monday. Assets are up nearly 11% from the fourth quarter of 2010.
Prepaid 529 plans allow parents to purchase tuition at current prices for a student who will use the tuition at an eligible school in a later year. Paul Curley, director of college savings research for FRC, compared 529 savings plans and prepaid plans to defined contribution and defined benefit plans.
With savings plans, he told AdvisorOne on Monday, “investors are open to market appreciation and depreciation in the plan over time.” With a prepaid plan, investors can purchase tuition or a percentage of tuition. With the money they spend up front, qualified expenses are already covered, he said.
New contributions to open plans increased 2% in the first quarter. Closed-plan contributions increased 1.4% and prepaid plans increased 1.4%. Distributions exceeded contributions in all three categories.
Total 529 plan assets reached $158.3 billion in the first quarter, a 9.6% increase over the fourth quarter and up over 8% since the first quarter of 2011. The total number of active accounts increased 1.5%.