Parents turn to former Maryland 529 employee for answers on source of calculation error

Group lost thousands they planned to use for their children’s higher education

A group of parents lobbying for legislative action to address concerns over the Maryland 529 college savings agency have turned to a former employee to understand how they lost thousands of dollars they planned to use for their children’s higher education.

Spencer Fell, 52, who said he worked at Maryland 529 from June 2005 to July 2021 as a customer service representative and later as a supervisor in that area, spoke Friday morning to The Baltimore Sun ahead of his appearance at an afternoon news conference call organized by parents with Maryland 529 accounts.

Maryland 529 is an independent state agency that allows people to invest money for educational purposes and withdraw it tax-free. It came under public scrutiny this winter after parents said the organization cut off access to their Maryland Prepaid College Trust accounts and barred them from accruing interest, leading to shortfalls of tens of thousands of dollars.

The agency blamed the issue on a calculation error discovered during a transition to a new company to manage the program in late 2021.

Parents dispute that, saying the Maryland 529 board reneged on a contract clause entitling prepaid trust account holders to a higher compounded monthly interest rate.

Executive Director Anthony Savia said the problem may affect all 28,000 prepaid trust accounts, including 4,000 people currently accessing benefits to pay their children’s tuition.

Maryland 529 oversees two college savings programs: the prepaid trust and the Maryland College Investment Plan. The prepaid trust allows parents to purchasing semester credits, locking in tuition prices from the time they open an account; the state pays the difference in tuition inflation.

The investment plan operates like a 401(k). It’s managed by an outside investment firm and has not reported any problems.

Parents held their news conference with Fell, who said he came forward to shed light as a former employee on the agency’s decision to recalculate account earnings, something he said he warned his superiors — when he left the agency — would come with negative consequences.

“I feel the agency has lost sight of its mission statement,” he said.

Fell said that when he first joined the agency, he was instructed to assure customers that they were entitled to 100% of their account earnings if they held accounts for three years or more and wanted to switch investment programs.

“I was always instructed that the disclosure statement was our bible and I was told never to deviate from that,” he said.

That changed in early 2020, Fell said, when the organization said it would transition to the new program manager and that, going forward, account holders who wanted to switch their investments to a different program would no longer receive all of their earnings because of a new formula.

Fell said he pointed out to his supervisor, the director of finance, that legacy account holders had not consented to having their investment contracts altered retroactively, but was told the agency “legally [had] the right to change the terms [of the contract] anytime we want.”

Maryland 529 published a statement Thursday saying parents were given incorrectly inflated account statements in 2021 as a result of the botched program transition, and that it is working to review account holders’ complaints.

Savia, through a spokesperson, declined to confirm the details of Fell’s employment with the agency, though state salary records show he worked there, and declined to comment on his statements because Maryland 529 was not invited to the media call.

“As stated in the Maryland 529 board update to account holders, the agency’s focus is on completing the manual reviews of accounts for those account holders who have requested them and on finalizing the reprogramming for the automated recordkeeping system,” Savia said in a statement. “I encourage account holders who have questions to complete a request for account support through the Maryland 529 website.”

Fell said that while he resigned in July 2021, he had been told his position and seven others would be terminated when the contract with the new program manager began.

The accounts issue has sparked General Assembly hearings and prompted lawmakers to introduce this week House Bill 1290 and the identical Senate Bill 959. The legislation would wind down the prepaid trust program, abolish the Maryland 529 board and move the agency under the control of State Treasurer Dereck Davis, a Democrat.

More than 700 parents have organized via social media and testified at General Assembly hearings, agitating to recoup their lost earnings.

Fell said he hoped the legislature would solve the question of who would be eligible for repayment, and how much money they would receive if Davis eventually phases out the trust program.

“If [Maryland 529] is being honest and it is just something that can be fixed,” he said, “then they need to reevaluate this decision to completely pull up the emergency brake on how benefits have been paid in the past and maybe make some kind of compromise.”