SAVINGS INCENTIVES AND INVESTMENT MANAGEMENT FEES: A STUDY OF THE 529 COLLEGE SAVINGS PLAN MARKET

In: Contemporary economic policy: a journal of Western Economic Association International, Band 32, Heft 4, S. 826-842

Abstract

This paper analyzes the 529 College Savings Plan market using a plan level panel data set covering the years 2002–2006. The results show evidence of limited market competition and a positive relationship between state tax benefits and 529 plan fees. A $100 increase in potential taxable income benefit from investing in a 529 plan is associated with a 3–6 basis point increase in investment management fees for direct‐sold 529 College Savings Plans. This suggests that government policies designed to make college more affordable could enable investment firms to charge excess fees. (JEL G11, H24, I22)