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Fund Spy

What Our New Approach Means for 529 Plan Ratings

We've updated our methodology -- and low-cost options benefit.

Executive Summary
In July we announced our plans to update the Morningstar Analyst Rating methodology for 529 plans. You can find a comprehensive summary of the changes here, but to recap: The modifications include removing the Performance Pillar as a standalone assessment; refocusing the Parent Pillar to reflect only our assessment of the plan’s state trustee; increasing our emphasis on the investment manager in the People Pillar; and assessing a plan’s fees irrespective of its underlying investment approach (active versus passive) or how it’s distributed (advisor-sold versus direct-sold). In this piece we’ll examine the potential impact of the methodology enhancements on the future Morningstar Analyst Ratings, using the current pillar assessments and the current fees of plans’ age-based options. We plan to publish our new ratings, with updated pillar evaluations, later this month.

Key Takeaways From Our Pro Forma Analysis