For the second consecutive year, two plans in the Nebraska Educational Savings Trust earned bronze ratings in the annual review of the largest 529 college savings plans in the nation by Morningstar, an independent investment research firm in Chicago, Nebraska State Treasurer Don Stenberg reported today.
The NEST Direct college savings plan and the NEST Advisor college savings plan were among 29 plans that Morningstar said “rose above their typical peers” in its Morningstar Analyst Ratings for 2014. The two Nebraska plans were among 21 college savings plans receiving a bronze rating. Four plans received the top rating – a gold – and four others received a silver rating.
“These forward-looking, qualitative ratings signal Morningstar’s conviction in the plans’ abilities to outperform their relevant benchmark and peer groups on a risk-adjusted basis over the long term,” Morningstar said in a news release about the gold-, silver-, and bronze-rated plans.The plans are evaluated on five key pillars – process, performance, people, parent, and price.
Morningstar said the NEST plans are compelling choices for Nebraskans.
In addition to the top-tier ratings of gold, silver, and bronze, Morningstar assigned neutral ratings to 32 plans and negative ratings to three. Some states’ college savings plans were too small to be evaluated.
“We are pleased with this rating and with the positive comments Morningstar made about our NEST college savings plans,” said Stenberg, who is Trustee of the Nebraska Educational Savings Trust. First National Bank of Omaha is program manager. All investments are approved by the Nebraska Investment Council.
In its analysis, Morningstar said attractive tax benefits made the NEST Advisor and NEST Direct plans solid choices for Nebraska residents in particular. Nebraskans are now able to deduct from theirstate income taxes up to $10,000 forcontributions to a NEST account for a couple filing jointly or for an individual.
In addition, “The underlying investment options are a mostly compelling bunch,” the Morningstar analysis said.
“Modest adjustments continue to add to this plan’s appeal,” the analysis said about each of the two NEST plans. Specifically, each plan “slightly tweaked its age-based tracks, boosting the equity stake at certain points along three of its four age-based tracks,” Morningstar said.
“This decision to up each track’s equity stake was based on program manager First National Bank’s long-term view of risk and return outcome as well as the potential impact of a prolonged low-interest-rate environment. While a higher equity stake may increase volatility, it also helps college savings contend with ever-increasing tuition rates,” the analysis said.
“As program manager for NEST, First National Bank of Omaha takes very seriously our role in ensuring that we provide excellent plans with a wide range of investment choices and outstanding customer service,” said Deborah Goodkin, Managing Director at First National Bank of Omaha. “We continually improve the plans and are proud that these efforts have again been recognized by Morningstar.”
Morningstar said compared with most advisor-sold plans, the NEST Advisor plan’s expenses are attractive and below the norm of their respective peer groups. And compared with most direct-sold plans, NEST Direct’s expenses are reasonable, Morningstar said.
“We have been pleased to add more than 20,000 new accounts a year over the past four years as more and more families both in Nebraska and across the nation entrust their savings and their children’s educational futures with NEST,” Stenberg said. “This confirmation by Morningstar builds on the momentum we have established and encourages us to work even harder to let more people know about our excellent college savings program.”
“We look forward to sharing this great news with our investors,” said Rachel Biar, director of the college savings program for the Treasurer’s Office. “The results of the Morningstar ratings are much anticipated by those of us who have a passion for 529 plans as well as consumers looking to find the best information possible when making their college savings decisions.”