D.C. residents are getting a raw deal when it comes to the government's college savings plan, according to multiple D.C. Council members following a News4 I-Team investigation of the District’s 529 fees.
“I have a 529 plan for my daughter,” said D.C. Councilmember Charles Allen (D-Ward 6). “I’ve had financial advisors say to me that they’re now advising their clients, ‘Do not invest in the District’s 529. Don’t do it.’”
Multiple residents have told him he should, “Invest in Virginia, invest in Maryland, invest somewhere else,” Allen said.
Allen explained, as a councilmember, “You know, personally, I'm going to want to invest in D.C. But I also want to make sure it's a good deal."
Allen is one of three freshman councilmembers who said they're frustrated by what the I-Team exposed when creating a special 529 calculator, which found D.C.’s fees are so high, many D.C. residents may be able to save thousands of dollars by investing in another state's plan.
"This story that you guys have done is really highlighting the issue,” Councilmember Brianne Nadeau (D-Ward 1) said.
Both she and at-large member Elissa Silverman said they’ve also received calls from angry parents.
"The fees are outrageous, and it doesn't make sense," Silverman said.
After reviewing city records, the I-Team found parents have been complaining about the 529 fund for years, including Eric Wolf, who testified before the Council in March about his frustration.
“I live in Petworth and I have 8-month twins,” he told the Council before explaining how D.C. not only charges him some of the highest fees in the nation, but unlike Maryland and Virginia, hits parents with a sales charge on everything he contributes.
"Taking almost 5 percent off the top, $100 in, that's $95,” he explained. “That's terrible."
At that same March meeting, Allen and Silverman grilled the District Treasurer Jeffrey Barnette about the program.
Barnette explained that unlike Virginia, which the I-Team found has the largest 529 fund in the nation, D.C.'s fees are so high because its population is so small.
Barnette testified he had just $400 million to work with.
"So, it is very difficult to get the same level of response you may get from another institution as the state of Virginia or the state of California, who says we can bid it out," Barnette said. "We have $5 billion. It's just not the same."
There are only two states with a smaller population than D.C. The I-Team found Vermont charges just a quarter of the fees compared to some of D.C.'s plans, while Wyoming abandoned it’s 529 program about 10 years ago when it joined up with its larger neighbor Colorado.
In that March hearing, Silverman asked Barnette, "Do we need to have a 529? Is this something about which makes us a state? Like having a NBA team, this makes us a big league city?"
The treasurer responded they hadn't considered that option but were in the process of rebidding the 529 contract and hoped to get a better deal.
"The contract bidding process is actually open at this moment,” Barnette testified. “So, we are actually about three-quarters of the way through the process. We've received responses from bidders."
Allen and Silverman said that promise was made months ago and now think the Treasurer has taken too long to make a decision.
"Six months later, we're in the exact same position and I really haven't seen much change,” Allen told the I-Team.
In response, the treasurer's office sent the I-Team a statement, explaining, "The procurement process has taken longer than anticipated due to the negotiating process with the potential vendor. We anticipate that the contract will be executed by the vendor and the District government in the next few weeks."
Councilmember Allen was blunt about how he feels about the process so far.
"I don't like the answers I've gotten," he said.
He explained he wants the treasurer to follow through with this new promiseso he and parents throughout the city can actually start saving more, instead of shelling out so much cash.