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Upromise to manage state college fund

December 3, 2007

The state plans to hand management of its college-savings plan to a new company after the existing manager attracted attention for charging hefty fees.

The Indiana Education Savings Authority announced yesterday that it has chosen to begin intensive negotiations with Upromise Inc. to take over the Indiana version of the 529 offering. Upromise, based in Newton, Mass., is an affiliate of Upromise Investments.

Eliminated from the competitive process are the prior manager, JP Morgan Chase & Co., as well as TIAA-CREF, Oppenheimer & Co. Inc. and Union Bank & Trust Co. of Lincoln, Neb.

Earlier this year, Savings Authority Executive Director Jodi Golden said the administrator that takes over would need to charge fees "significantly" less than JPMorgan. A transition date has not been set, but Golden hopes the process is complete by the middle of next year.

Currently, annual fees for a program that could be purchased without a financial adviser range from 0.91 percent to 1.17 percent. A custom choice, which requires a financial adviser and offers more portfolio choices, has fees from 0.60 percent to 2.69 percent.

Upromise's proposal calls for charging as little as 0.53 percent-about half the prior costs. However, Golden emphasized that the negotiations might produce a different figure.

Upromise also offered a simplified format and lower minimum investments, Golden said.

Only Alaska, Illinois, Montana, Nebraska and West Virginia have plans with higher fees than Indiana. JPMorgan has said the figures are misleading.

The Indiana plan offers a 20-percent tax credit equaling $1,000 on contributions up to $5,000. The plan has $690 million in assets, Golden said.

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