Products March 21, 2023

Ascensus Ugift Program Exceeds $3 Billion in Contributions

The program to allow friends and family to contribute to a beneficiary’s account has seen gift total grow by 50% in slightly more than a year.

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After years of progress, the Ascensus Ugift program, a free service that allows contributions to a beneficiary’s account, saw usage accelerate during the past year, resulting last month in all-time contributions topping the $3 billion threshold for gifts made to education savings accounts.

Originated in 2007, gifts are now made through the READYSAVE 529 mobile app or through the Ugift 529 website run by Ascensus LLC. Upon signing up, friends and family receive a unique code they can use to make contributions to the beneficiary’s 529 or ABLE account. Gifts may be made by ACH transaction or check, with no associated fees charged to the beneficiary or the contributor. The earnings on those accounts are not subject to federal income tax when applied to qualified education expenses.

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“Ascensus, through Ugift, has done a great job of making it easy for friends and families to contribute to 529 and ABLE plans,” says Andrea Feirstein, managing director of AKF Consulting Group.  

According to ISS Market Intelligence, which, like PLANADVISER, is owned by Institutional Shareholder Services Inc., the historical percentage of contributions from gifts was 2.8%, but in the fourth quarter of 2022, the percentage increased to 4%.

“The 4% in 4Q 2022 is higher than the historical figure of 2.8% due to market and economic volatility and expansion of gifting functionality, awareness and platforms,” says Paul Curley, associate director of 529 & ABLE solutions at ISS Market Intelligence.

Feirstein says Ascensus’ fintech innovation can dramatically increase the contribution percentage of gifting: “Imagine if every 529 plan embraced a gifting program; that percentage—and the absolute dollars contributed—would soar,” she says.

Ugift surpassed the $3 billion benchmark in late February. In January 2022, its all-time total was at $2 billion, which means it increased by a remarkable 50% in only 13 months, according to Ascensus data.

“Ugift is clearly having a meaningful impact for individuals and families saving for some of life’s most important needs,” said Peg Creonte, president of Ascensus’ Government Savings line of business, in a statement. “Our hope to provide an easy and transparent way for friends and family to contribute to a beneficiary’s account is being realized—and that’s very gratifying for us and the state 529 and ABLE partners we support.”

Since the end of 2019, Ascensus has seen 1.5 million new accounts open. As of December 31, 2022, Ascensus served 22 ABLE plans and 43 529 education savings plans.

“[Gifting] would be even more impactful if we could expand the reach to encompass employers and contributions through the workplace,” says Feirstein. “Continued innovation across the 529 and ABLE universe will attract assets from new and expanded channels, which will go a long way toward helping families achieve their education goals for their children.”

Data & Research March 21, 2023

Advisers Recommend Fiduciary Outsourcing Services, Mostly for Small Plans

More than 20% of advisers said clients spend between a quarter and half of their time on plan administrative tasks that could be outsourced.

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Plan advisers often recommend that clients use fiduciary outsourcing services, alleviating the administrative burden on both advisers and clients, according to new industry research.

Pentegra Services Inc. published a report titled, “Adviser Attitudes Toward 3(16) Fiduciary Outsourcing,” released in conjunction with the firm’s 3(16) Day, celebrating its expertise as a fiduciary services provider. The study polled advisers as to how they helped clients manage retirement plans using fiduciary outsourcing. More than 20% of advisers said their clients spend between 25 and 50 percent of their time on plan administrative tasks that could be outsourced.

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“Today, retirement plan administration has become increasingly complex. There are new regulations and increasing compliance burdens,” said Matt Mintzer, Pentegra’s executive vice president, in a statement. “For many employers as well as advisers, the time commitment can be overwhelming and distracts from the more critical responsibility of running a business—time that could be better spent focusing on growth and profitability.”

Fiduciary outsourcing helps to remedy many of the challenges presented by Mintzer. According to advisers, the leading advantages of fiduciary outsourcing are reducing administrative burdens and mitigating retirement plan risk.

However, 65% of advisers said less than one-quarter of their clients currently outsource fiduciary responsibility for 3(16) retirement plan administration. In contrast, only 16% of advisers expressed that 25% to 50% of clients use fiduciary outsourcing services.

What’s more, attitudes do not seem likely to change this year: More than 60% of advisers said that less than 25% of clients plan to add 3(16) fiduciary administrator services in 2023. Only 10% of advisers reported that 50% to 70% of clients will adopt these services.

In the results from the 2022 PLANSPONSOR Defined Contribution (DC) Survey, plan sponsors were asked if their plan employed a third party (TPA, adviser, recordkeeper, etc.) as a 3(16) fiduciary. Of those who responded, 28.2% responded that they do and that the third party has broad enough scope acceptance of the administrator role to include being named as the plan administrator in the plan document. 28.8% said they do employ a third party, but it has only limited scope acceptance of some of the administrative functions; responsibility outside of that scope is retained by plan officials. Of the remaining respondents, 28.1% replied, ‘No,’ and 14% were unsure. 

Additionally, advisers saw different market segments utilizing fiduciary outsourcing to varying degrees. Almost half of advisers said small retirement plans typically use these services, while less than 10% of large and mega plans do. The research returned similar percentages of respondents thought small-market segments could benefit from fiduciary outsourcing, while it is less relevant for large and mega plans.

Although not all clients are on board when it comes to fiduciary outsourcing, most advisers reported that they see the benefits to these services. When it came to familiarity with fiduciary outsourcing, half of advisers surveyed agreed with the statement, “very familiar, I recommend these services to my clients often.”

“3(16) fiduciary outsourcing offers a better way for plan sponsors and advisers to manage these responsibilities,” Mintzer said in the statement. “Clients and advisers enjoy the confidence that comes from having a professional handle the complexities and burdens that come with offering a retirement plan.”

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