Maryland 529 may not fix errors until late this year

College savings plan has had issues with payouts since spring

Fixes to a state education financing agency that has come under fire in recent months may not come until late 2023, according to its executive director.

Almost 500 account holders who invested in a prepaid college savings plan with Maryland 529 have reported being unable to access their money since spring 2022 or have received far lower payments than anticipated. That’s sparked two recent General Assembly committee hearings and calls for state officials to investigate.

Former state Sen. Ed Kasemeyer, a Democrat who represented parts of Howard and Baltimore counties and sponsored legislation establishing the agency, joined Monday in those calls.

“The honor and reputation of Maryland is on the line,” he told The Baltimore Sun in an interview. “We owe these people an explanation and to figure out, if something went wrong, why did it go wrong?”

Maryland 529 is an independent state agency that offers parents two ways to finance their children’s higher education, via the Maryland College Investment Plan and the Maryland Prepaid College Trust. The investment plan is run similarly to a 401(k) and has not reported problems.

The prepaid trust allows parents to lock in tuition rates by purchasing semester credits from the time they open an account; the state pays the difference in tuition inflation. Some 3,900 people are actively receiving payments to pay their children’s college bills; the trust contains some 27,000 accounts in total.

Maryland 529 Executive Director Anthony Savia has acknowledged the number of accounts affected could be higher than the 500 families who reported problems. Those with younger children aren’t seeking to access funds yet or may not check accounts as often as those with college students.

The trust has faced setbacks since late 2021, when it switched program managers and discovered a calculation error led some accounts to receive higher interest payments than they were eligible for. The agency said that led it to suspend interest earnings on accounts in spring 2022 while it worked out a solution.

Maryland 529 initially said the program manager, Intuition College Savings Solutions, would implement electronic disbursements in early 2022, according to an August 2021 news release announcing the contract.

Both Savia and interim board chair Geoffrey Newman have said repeatedly that the agency has manually reviewed and fixed most account holders’ issues.

But in response to questions from members of the House Appropriations Committee, Savia said an automated resolution may come as late as the end of this year.

“We are working with the program manager to correct the automated system,” Savia said in a memorandum sent Thursday and obtained by The Sun.

“Maryland 529 cannot provide a timeline for the automated system ... [it] will continue with the manual process until it can ensure the Intuition process is working and can be automated on the Intuition platform — which will likely be late 2023,” Savia wrote in the memo, first reported by the Maryland Matters news site.

Lawmakers have called for state officials to investigate the agency’s operations since Savia and Newman appeared Tuesday before the Senate committees on Budget and Taxation and on Education, Energy and the Environment.

Following the hearing, Democratic Sen. Mary Washington of Baltimore wrote a letter to Democratic Attorney General Anthony Brown, asking him to investigate the agency “to understand the order of magnitude of what we are dealing with in totality, and to determine whether the long-standing administrative disarray within the College Savings Plans of Maryland are merely a matter of organizational incompetence and nothing more.”

A spokesperson for Brown’s office said via email Monday that it was “currently advising the 529 plan in addressing the challenges they are facing.”

The Maryland 529 board met virtually Monday. After reviewing minutes of past meetings and hearing from a parent, it went into closed session to discuss its response to a pending complaint under the Maryland Open Meetings Act and to talk about the details of a specific account with legal counsel.

Newman has led the panel since former chair Peter Tsirigotis resigned earlier this month, a day after he testified before the House committee.