Bills seek to abolish Maryland 529 board

Legislation would move college savings agency under the state treasurer; the organization has faced criticism since last year

Two General Assembly bills aim to abolish the board of Maryland 529, the beleaguered state higher education savings agency, and move the organization under the auspices of the state treasurer by June, a change State Treasurer Dereck Davis supports.

Del. Cathi Forbes, a Baltimore County Democrat, has introduced the House version of the legislation and Sen. Joanne Benson, a Prince George’s County Democrat, is the chief sponsor of an identical bill in her chamber.

Maryland 529 is named for the federal tax code section that allows parents to invest money for their children’s education and later withdraw it tax-free. The agency has faced criticism since last year, when parents who invested in its Maryland Prepaid College Trust said Maryland 529 suspended access to their accounts without warning, leaving them to scramble to pay their children’s tuition.

Maryland 529 blamed the debacle on an interest calculation error discovered during the botched transition to a new program manager. Affected parents disputed that, saying the agency board reneged on a contract clause entitling them to a higher compounded monthly interest rate.

The legislation, according to Forbes’ bill, specifies the treasurer’s office would succeed the Maryland 529 board and would transfer responsibility for administering its programs to that office by June 1. A copy of the Senate bill was not yet available Wednesday afternoon.

Davis, who is an ex officio member of the Maryland 529 board, said during his reelection speech last week that the program was “under siege” and he would support folding it into his office’s operations.

Senate President Bill Ferguson also touted Benson’s upcoming bill at a Friday news conference.

Several states’ 529 agencies, like those of California, Delaware, Illinois and Mississippi, are overseen by their respective treasurers.

A spokesperson for Davis’ office declined to comment further, but said his office would “continue to closely monitor the progression” of the bills.

“It’s a complicated issue, and the advocates have done a good job of explaining their concerns to us,” Forbes said. “The General Assembly wants to solve the problem for account holders as soon as possible. It has to start anew.”

Benson and Maryland 529 did not respond Wednesday afternoon to requests for comment.

The agency oversees two college savings plans: the prepaid college trust and the Maryland College Investment Plan, which operates similarly to a 401(k) and is managed by an outside firm. That plan has not reported any problems.

Under the emergency legislation, which would go into effect as soon as it’s enacted, the treasurer could offer a rebate to account holders if agency assets exceeded 30% or more, and would be in charge of contracting with an outside firm to audit the agency. The Office of Legislative Audits would be in charge of specifically auditing the Maryland Prepaid College Trust.

The legislation also includes details for a provisional work group made up of parents, lawmakers, the state treasurer and staff from his office, an idea that’s similar to one in a bill introduced earlier in the Senate that lawmakers from that chamber discussed last week.

Under Forbes’ bill, parents would not be able to purchase tuition credits or invest money in the Maryland Prepaid College Trust after June 1, and the treasurer would not be able to allow the transfer of any funds to that plan, effectively dissolving it as an option going forward, according to the proposal.

Investors in the prepaid college trust would not be able to transfer assets out of that program to any other Maryland 529 program after Jan. 1, 2025.

“I thank Delegate Forbes and the leadership in the General Assembly for doing the hard work to get to the root causes of the Maryland 529 debacle,” said Brian Savoie, a prepaid trust account holder who has organized parents for legislative action.

“The long-term future for these programs within the Treasury seems like the right place,” Savoie said. “We need to help families now. I urge Treasurer Davis and others to act deliberately, but expeditiously, to help parents who have now been waiting for nearly a year.”

Lawmakers in both General Assembly chambers have promised to take action regarding the prepaid trust since the fall, when parents began agitating for their help. The calculation problem may affect all 28,000 prepaid trust account holders, according to Maryland 529 Executive Director Anthony Savia.