This year has brought several developments for the 529, ABLE and State-run Retirement industries, sparking new considerations for Programs. This AKF Summer Update includes highlights to keep in mind in the months ahead.
529: Morningstar Season Has Begun
- 2023 RFI released with meaningful changes. Last week's release of the 2023 RFI officially launches the 2023 rating season. This year's RFI may look similar to the 2022 version but we see some meaningful changes, including several new questions on the Parent.
- New head of Morningstar 529 ratings. Hyunmin Kim replaced Patty Oey as the head of 529 Morningstar ratings. The 2023 529 Savings Plan Landscape report that Ms. Kim spearheaded in May affirms Morningstar's continued focus on fees and glidepath structure.
- Summer months are critical. With a September 15, 2023 due date, we encourage States to begin preparing RFI and presentation materials as soon as possible. It also is not too late to commit to implementing enhancements for Morningstar's consideration this rating season. Be proactive in communicating with your designated Morningstar analyst!
ABLE: Direct Deposit Guidance from SSA and New Legislation
- New guidance from the Social Security Administration ("SSA") may complicate direct deposits. As of Q2 2023, over 20 ABLE Programs offer the ability to accept direct deposits of Social Security benefits. This is important as a significant percentage of ABLE Beneficiaries receive SSA benefits. Recently, however, SSA released guidance that may pose issues for direct deposits. The guidance provides that if SSA has appointed a "Representative Payee" for the ABLE Beneficiary, then that Payee also must control the ABLE Account before SSA benefits can be direct deposited. Although this appears to be a pre-existing SSA rule, it may nevertheless be news to many ABLE Programs and Administrators. We encourage Programs to be mindful of the rule but not allow it to hamper further development of direct deposit functionality. SSA direct deposits would enhance the ABLE user experience; industry adoption of the technology would be welcome.
- New legislation offers federal funding for ABLE Accounts and outreach. On July 26, 2023, Senator Bob Casey (D-PA) introduced the ABLE MATCH Act, which would provide a federal dollar-for-dollar match of up to $2,000 for new and existing ABLE accounts owned by low-income individuals. In addition, the bill would allow the Treasury to award grants to States for the promotion of ABLE Programs.
State-run Retirement Programs: Interstate Partnerships are Here
- Advent of interstate partnerships. State-run Retirement Programs ("SRRPs") continue to flourish with the arrival of interstate partnerships. The ability to partner with another State allows a State to take advantage of economies of scale and bring their own program to market sooner.
- Maine and Colorado have executed the inaugural SRRP partnership - with Maine benefiting from the already-launched Colorado Secure Savings Program.[1] We expect this collaboration will forge a path for other States considering Auto-IRA Programs. In fact, Delaware is now evaluating partnership opportunities, showcasing the growing interest and potential for expansion in this sector.
- For interested industry professionals and stakeholders, our upcoming 2023 SRRP Market Report will shed more light on partnerships and other industry developments.
AKF keeps a close watch on key developments across 529, ABLE and State-run Retirement Programs. With a keen eye, State Administrators and stakeholders can create opportunities to foster better financial security, inclusivity, and prosperity for all.
[1] Pilot launched on October 17, 2022; full Program launched on January 18, 2023