The 2023 legislative session prioritized investigating and addressing ongoing issues with Maryland’s premier higher education savings plan. Here’s where things are at.
Maryland’s Prepaid College Trust has been in turmoil for over a year. The Prepaid College Trust is offered by Maryland 529 and managed by Intuition College Savings Solutions, LLC. It was designed to help individuals and families save for college in a tax-advantaged way.
However, over the last year, hundreds of Maryland families who bought into the Prepaid College Trust component of the plan have complained that the small independent agency administering the program locked them out of their accounts and/or suspended their interest payments. Recent reporting from The Frederick Post further explains the debacle and its timeline:
The Prepaid College Trust, unlike the state’s traditional 529 plan, let families lock in future tuition payments by purchasing semester credits. The agency invested the money it received from families, but a 2019 state audit said it had distributed earnings inequitably.
To rectify the problem, the Maryland 529 board told families in June 2021 that it would change the way it applied earnings. In addition, because of excess funds in the trust, account holders would earn 6 percent on balances held before Oct. 31, 2021, the board said. Account holders were delighted.
But last April, the agency shifted gears, and said a calculation error had incorrectly inflated the values of prepaid plans. Maryland 529 Executive Director Anthony Savia testified that in some cases, account balances more than doubled from previous years.
The agency suspended earnings on approximately 31,000 prepaid accounts last summer, claiming a calculation error produced inaccurate balances.
When families received new calculations that slashed the value of their accounts in half, it caused a huge uproar.
Notably, the prepaid trust manages roughly $1.1 billion in assets across the 31,000 accounts.
The 2023 legislative fix
The managing agency — called Maryland 529, after a section of the federal tax code that offers tax incentives to parents and other family members to save — became the talk of the General Assembly and 2023 legislative session, which sought to remedy the program’s ongoing issues. Early in session, the House Appropriations and Senate Budget and Taxation Committees held a joint public hearing on the issue.
Resulting from the public interest was a 2023 bill to dramatically reform Maryland 529 and the Prepaid College Trust. SB 959 passed the legislature and has since been signed into law by Governor Wes Moore. So, what’s next?
SB 959 reformed the program in several ways, and, respecting the already realized harm to Maryland families, on a relatively quick timeline. The now law:
- Abolishes Maryland 529’s 12-member board of directors; and
- Shifts control of the agency and College Investment Plan to State Treasurer Dereck Davis’ office by June 1.
Treasure Davis will also appoint a deputy treasurer to takeover managing the program and to decide the rate of return on prepaid accounts. The Treasurer’s office will also have the authority to resolve claims brought against the trust by account holders who are still contending with the earnings issue — backed by a legislative guarantee requiring Maryland to pay out all obligated benefits in a claims case.
The Treasurer’s Office requests account holders submit written correspondence and other information to MD529@treasurer.state.md.us by May 19.
