As a result of a last week’s meeting between State Treasurer Ben Westlund and the Oregon 529 College Savings Board, the state is looking into new ways to ensure that families across the board are able to place their money in safer post-secondary investments in the future.
The Oregon 529 College Savings Board decided Thursday to no longer include two mutual funds in its investment portfolio: the OppenheimerFunds Core Bond Fund and the Limited Term Government Bond Fund.
After the funds lost $100 million last year, it was decided that the bonds were more turbulent than former State Treasurer Randall Edwards and the Oregon 529 College Savings board anticipated.
“We have made the decision that Oregonians are better served by not being involved with these funds,” said James Sinks, College Savings Plan Communications director. “The funds were much more aggressive than we were led to believe.”
OppenheimerFunds, an investment firm based in New York City, is under investigation for mismanaging the state’s college funds. The Oregon Attorney General John Kroger’s office will continue the investigation with other states, including Illinois, New Mexico and Maine, into whether or not decisions made by the investment firm worsened declines for fund participants.
The state of Oregon has the jurisdiction to terminate its investment relationship with OppenheimerFunds without any financial consequences. Although the state has begun looking at other investment firms, it is waiting to finish its investigation to decide whether it will choose to prematurely sever its relationship with the mutual fund.
The contract with OppenheimerFunds expires at the end of the year.
Although the Oregon 529 College Savings plan is housed within the office of the state treasurer’s office and overseen by Michael Parker, the state’s investment supervisor, the actual funds are handled by outside investment firms.
In a statement Friday, Westlund assured citizens he is taking the necessary steps to ensure Oregonians’ money is handled more responsibly in the future.
“As a parent and an Oregonian, I want to ensure that Oregon families have the best options possible when it comes to saving and investing for college,” he said. “That means giving them more choices, examining costs, and taking swift action.”
Even with the turbulent financial climate of the stock market and other investments in the past year, Sinks is confident OppenheimerFunds is responsible for the significant losses within the savings plan.
“It was not just the 529 plan that performed poorly this year. The state’s 401ks and other investment portfolios had a tough year. However, the losses for folk who are just on the cusp of college were a lot more than what you would typically see for a bond fund,” he said.
To prevent future uncertainties in the market from discouraging families to invest in college savings plans, Westlund has proposed legislation that will allow families to pay for tuition at Oregon public, and possibly private, universities based on today’s rates. The plan would offer the same tax incentives as the current 529 plan. State Board of Higher Education member Kirby Dyess spoke in favor of the creation of a prepaid tuition option.
“The advantage of a prepaid plan is fairly obvious: It allows people other than parents to provide gifts for grandchildren nieces and nephews,” she said. “The objective at the end of the day is for more Oregonians to be able to go to college.”
The Oregon 529 Savings Plan is one of three college savings plans available to Oregonians. Each plan has its own investment options and program features; however, all of the plans provide significant state and federal tax advantages for investors.
The Oregon 529 Savings Plan allows families to invest in college and also receive a tax deduction as large as $4,000 per year. The network began in 2001, and has accrued roughly 100,000 accounts and $750 million in assets.
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Oregon College Savings Board suffers massive financial blow
Daily Emerald
January 26, 2009
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