RD776 - Virginia College Savings Plan Annual Report – Audited for the Period Ended June 30, 2021
*This report was replaced in its entirety by the Virginia College Savings Plan Board on December 29, 2021.
The Virginia College Savings Plan’s (VA529’s) annual report for the year ended June 30, 2021, which contains the required financial statements, notes thereto and required supplementary information, is prepared in accordance with generally accepted accounting principles. The annual report also includes a letter of transmittal and Management's Discussion and Analysis and the report should be read in its entirety.
VA529 has multiple statutory mandates and missions, all centered on financial wellness and preparation for the future. The longest standing mandate centers on educational attainment, which VA529 has done since its inception in 1996 by offering education savings programs to help make higher education more affordable and accessible. These mature programs include the Defined Benefit 529 Program (legacy Prepaid529SM and the Invest529SM Tuition Track Portfolio), Invest529SM, and CollegeAmerica®. In addition to these programs, VA529 also meets it mission to help make college more affordable and accessible to ALL Virginians through its access and affordability initiative. This initiative started eleven years ago with SOAR Virginia® and has expanded in recent years to enhance access to higher education by funding a variety of mentoring, coaching, workforce development, and scholarship programs throughout the Commonwealth.
More recently, in 2015, VA529’s mission expanded to include administration of programs which provide tax-advantaged savings options to individuals with disabilities, allowing them to save for qualified disability expenses without losing important federal and state means-tested benefits. VA529 opened the ABLEnow® program in 2016 and ABLEAmerica® in 2019. Finally, in 2021 the VA529 mission was expanded once more to include developing a retirement savings program for working Virginians without access to retirement savings options through their employers. VA529 is in the early stages of developing its retirement program, which will take the form of an automatic-enrollment individual retirement account (IRA), for anticipated launch in fiscal year 2023.
Though now closed to new enrollment, while open Prepaid529 sold contracts at actuarially-determined prices which cover future payouts of undergraduate tuition for the normal full-time course load for students enrolled in a general course of study at any Virginia public higher education institution and all mandatory fees required as a condition of enrollment of all students. Under Prepaid529, payouts differ at private or out-of-state institutions. Unit pricing for VA529’s other Defined Benefit 529 Program, the Invest529 Tuition Track Portfolio, is based on enrollment-weighted average tuition prices (also referred to as average tuition) of all Virginia state universities at the time of purchase. At matriculation, the units are paid out at average tuition at the time of withdrawal, regardless of the institution attended. As of June 30, 2021, the Defined Benefit 529 Program (DB529) was 193.5 percent funded on an actuarial basis.
Invest529 is a direct-sold defined contribution savings program, which allows participants to make contributions into their selected investment portfolio(s). CollegeAmerica, a broker-sold savings option managed by the Capital Group®, is also a defined contribution savings program that offers 46 different American Funds® mutual fund products as investment options. Both Invest529 and CollegeAmerica participants bear all market risk for their investment, including the potential loss of principal. ABLEnow and ABLEAmerica are direct-sold and broker-sold defined contribution savings plans, respectively, and serve as Virginia’s tax-advantaged ABLE savings programs for individuals with disabilities.
VA529 holds, invests and distributes monies on behalf of program participants. VA529 invests its funds pursuant to statute and its Investment Policies and Guidelines under the direction of its Board and Investment Advisory Committee in a mix of equity, fixed income and alternative investments. VA529 remains optimistic that its asset allocation and investment strategies will result in DB529 meeting or exceeding performance expectations over the long-term. VA529 has assumed a long-term investment return rate of 5.5 percent for DB529. As of June 30, 2021, the total return since inception was about 6.66 percent net of fees and reflects DB529’s 23.63 percent overall performance during fiscal 2021.
VA529 experienced overall positive account growth in fiscal 2021. Invest529 experienced 12.2 percent gross account growth and added 64,132 new accounts during fiscal year 2021. CollegeAmerica experienced 3.1 percent net account growth during fiscal 2021. ABLEnow and ABLEAmerica experienced 40.5 percent and 71.5 percent net account growth, respectively. ABLEnow and ABLEAmerica ended fiscal 2021 with 12,404 and 1,278 open accounts, respectively.
In assessing DB529’s financial condition, VA529 has projected that tuition and fee increases at Virginia’s public higher education institutions will increase annually by approximately 4.0 percent for the next two academic years beginning Fall 2022 and 6.0 percent beginning Fall 2024 and thereafter. VA529 projects that Virginia’s public community colleges and two-year institutions will increase tuition and fees annually by approximately 2.0 percent for the next two academic years beginning Fall 2022 and 4.0 percent beginning Fall 2024 and thereafter. These long-term tuition and fee increase projections were established for the June 30, 2021 DB529 actuarial valuation. Changes in public education funding that result in tuition increases above VA529’s projections would have an immediate, detrimental impact on VA529’s outstanding long-term DB529 obligations. With the statutory requirement that institutions provide updated, long-term tuition projections, VA529 remains in a position to be informed of future tuition and fee increases.