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Rating:Brouhaha Over Keystone 529 Not Rated 3.0 Email Routing List Email & Route  Print Print
Tuesday, January 08, 2002

Brouhaha Over Keystone 529

Reported by Tony Pennino

Incumbency did not guarantee victory in Pennsylvania. The state has selected Delaware Investments over Mellon Financial as the vendor to its new 529 college savings program that will supplement its existing TAP program.

The TAP program offers guaranteed investments while the new plan will offer investment-based funds and be qualified as a 529 program. The new program is slated to launch this Spring.

Pennsylvania State Treasurer Barbara Hafer pointed to Delaware Investment's local ties, strong national presence and investment capabilities as reasons for the selection. The selection also follows the trend of states selecting firms that use intermediary distribution rather than direct sales.

Hafer noted that Delaware's ties to the broker-dealer community through its parent, Lincoln Financial Group, were "an important factor in Delaware's favor."

The decision to favor Delaware over Mellon was initiated by Mellon's sale of its mid-Atlantic consumer operations to Citizens Bank. Mellon responded to the decision by releasing a statement claiming that "Mellon continues to believe it would have been an excellent choice."

Yet, Hafer has no regrets with the process stating that the RFP was "clearly was the right thing to do. We saw even stronger interest among financial institutions, and as a result, we'll be able to offer a program that's even better."

Mellon continues to act as custodian of its $85 billion in retirement funds for the state of Pennsylvania.

It also revealed that its Dreyfus subsidiary is engaged in discussions with other states about developing 529 programs for them; with existing sponsors regarding distribution joint ventures; and with other sponsors regarding the sale of Dreyfus Funds in their programs. 

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