RD377 - Annual Report of the Virginia College Savings Plan


Executive Summary:
The Virginia College Savings Plan’s Management Discussion and Analysis is required supplemental information under the Governmental Accounting Standards Board (GASB) reporting model. It is designed to assist the reader in focusing on significant financial issues and provides an overview of financial activity. This discussion includes an analysis of the Plan’s financial condition and results of operations for the fiscal year ended June 30, 2006. Since this presentation includes summarized data, it should be read in conjunction with the accompanying financial statements and notes.

The Virginia College Savings Plan (the Plan) operates the Commonwealth’s Internal Revenue Code (IRC) Section 529 qualified tuition program, which offers three options, the Virginia Prepaid Education Program (VPEP), the Virginia Education Savings Trust (VEST), and CollegeAmerica. VPEP is considered a defined benefit plan which offers contracts, for actuarially determined amounts, guaranteeing full future tuition and mandatory fee payments at the Commonwealth’s higher education institutions and differing payouts at private or out-of-state institutions. Annually, the Plan’s actuary determines the actuarial soundness of VPEP. Key factors used in the soundness analysis include potential tuition increases (both short and long-term) as well as anticipated investment performance.

VEST is a defined contribution program which allows participants to make contributions into their selected investment portfolio(s). VEST accounts are subject to market investment risk, including the possible loss of principal. CollegeAmerica is also a defined contribution plan which offers 21 different American Funds mutual fund products as investment options. CollegeAmerica participants also bear all market risk for their investment, including the potential loss of principal. The American Funds acts as program manager for this program and provides all back office and operational activities for the program.

Financial Highlights

• Total VPEP cash, cash equivalents, and investments increased by $216.4 million, or 20.2 percent, due to both new participation in the program and continued favorable market conditions.
• VPEP’s actuarially determined tuition benefits payable liability increased by $187.1 million, or 13.1%, which was primarily due to the additional obligation for over 5,700 new contracts opened during the 2005 – 2006 enrollment period.
• VPEP’s total net assets increased by $33.5 million to an actuarially determined deficit of $26.5 million as compared to a deficit $60.0 million in the prior year.
• VEST net assets held in trust for program participants increased by $172.8 million or about 31 percent, which was due to strong investor participation and continued favorable market conditions.
• CollegeAmerica net assets held in trust for program participants increased more than 43.6 percent over the previous year to $15.8 billion, due to the continued popularity of the program as well as favorable market conditions. CollegeAmerica remained the largest IRC Section 529 program in the nation at June 30, 2006.