RD472 - Virginia College Savings Plan Annual Report for the Period Ended June 30, 2009 and Actuarial Valuation of the Virginia Prepaid Education Program as of June 30, 2009
This report was replaced in its entirety on January 28, 2010 by Virginia College Savings Plan Board.
The Virginia College Savings Plan’s (Plan) annual report for the year ended June 30, 2009 contains the required financial statements and notes thereto prepared in accordance with generally accepted accounting principles, and management’s discussion and analysis, which is required supplemental information under the Governmental Accounting Standards Board reporting model. The financial statements and notes should be read in their entirety.
The Plan operates the Commonwealth’s Internal Revenue Code (IRC) Section 529 qualified tuition program, which offers four options, the Virginia Prepaid Education Program (VPEP), the Virginia Education Savings Trust (VEST), CollegeAmerica and CollegeWealth. VPEP is considered a defined benefit program which offers contracts, at actuarially determined prices, that provide full future tuition and mandatory fee payments at the Commonwealth’s public higher education institutions and differing payouts at private or out-of-state institutions. Annually, the Plan’s actuary determines the actuarial soundness of VPEP. As of June 30, 2009, VPEP was 85% funded according to the actuarial report. Key factors used in the soundness analysis include anticipated 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 program, which offers 24 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 CollegeAmerica and provides all back office and operational services for the program. CollegeWealth is also a defined contribution program under which participants invest in savings products offered through participating banks. These bank products may also carry FDIC insurance.
The Plan holds, invests and distributes monies held in trust for program participants. During fiscal year 2009, the Plan invested its funds pursuant to statute and Investment Guidelines under the direction of its Investment Advisory Committee in a mix of equity and fixed income investments. During fiscal year 2009, the economic recession continued and both the equity and fixed income markets experienced tremendous volatility. Equity markets ended the year down from the prior year despite a strong finish in the last quarter of the year.
• VPEP’s actual return on investments for the fiscal year ended June 30, 2009 was -16.3 percent on a time-weighted and -16.0 percent on a dollar weighted basis due to unfavorable market conditions through the third quarter of the fiscal year.
• VPEP’s total net assets decreased by $232.19 million to an actuarially determined deficit of $284.0 million from a deficit of $51.8 million in the prior year, which was primarily due to unrealized losses in the investment portfolio.
• VEST net assets held in trust for program participants decreased by $43.9 million or about 4 percent due to unfavorable market conditions despite 12 percent growth in the number of accounts.
• Both VPEP and VEST applicants continued to increase utilization of on-line applications with nearly 80% of applications being filed on-line.
• CollegeAmerica net assets held in trust for program participants decreased by approximately 17.6 percent from the previous year to $21.1 billion due to unfavorable market conditions despite a 6.3% rise in the number of accounts.
• CollegeWealth was created in fiscal year 2008 and continued to grow in fiscal year 2009. Net assets held in trust for program participants increased over four times to just under $5 million at year-end.