Calif. to Close Part of 529 College Savings Plan

California will be closing its adviser-sold unit, a small portion of the 529 college-savings plan, in which residents invest in the plan through brokers and financial planners, reports the Los Angeles Times.

According to the article, earlier this year the state announced a revamp of its 529 ScholarShare plan, with mutual-fund giant TIAA-CREF replacing Fidelity Investments as program manager (see “TIAA-CREF Selected as Manager of Calif. 529 Plan“). TIAA-CREF will oversee the direct portion of the 529, which allows residents to invest directly in the program, instead of buying through brokers or other outside advisers.

The direct unit, which has assets of $3.9 billion in 277,343 accounts, is larger than the adviser unit, which holds $283 million in 22,565 accounts. Investors in the adviser program will automatically be shifted to the direct portion next spring.

TIAA-CREF will begin managing the direct program on November 7. Annual fees will range from 0.18% to 0.62%.

The state treasurer’s office tried to maintain the adviser program, but couldn’t find a company willing to manage it, the news report said.

“The decision to drop the adviser-sold plan was a difficult one and made only after ScholarShare made a concerted effort to keep it going,” Joe DeAnda, a spokesman for the California State Treasurer’s Office, said in a statement. “In the end, we were not able to find a manager that could deliver a competitive plan for our account-holders, and we felt the best option was to transfer them to our direct-sold plan.”