We ran into the same problem (living in CA) but selected the California 529 anyway because it was run by TIAA-CREF, whom I have accounts with and like (and the fees were low). This past year Fidelity took over the plan and actually lowered the fees. I have yet to recompare, but I found the comment that the fees were too high interesting, since they were among the lowest when I last did a thorough check (~18 months ago). It seems it might be time to do another round of invest-igation.

One thing to consider. If you have relatives in another state that will be contributing (like Grandma), you can setup a plan in that state and let them get a tax break–assuming the plan is otherwise comparable. I hold out hope (but not my breath) that California will get on board and let us write off the 529.

-one muggle

Forget the tax break hope, the state is so broke.

http://www.savingforcollege.com has some info, but it is not laid out clearly.  Most people are under the impression that you can only invest in their state plan, and have you to 
dig in to faqs to realize that isn't true.  How confusing. This is from the "best" place for info!?!  
   It appears that Fidelity CA plan has 0.5% expense rate, while the Utah plan has 0.30 to 0.40% rate.  Anyone care to verify that?

The California plan expense ratio varies – the standard index portfolio is .50%. They have actively managed portfolios that range from .72% to 1.09% and a social choice portfolio at .80%.

I am not sure exactly why – but the Fidelity portion of the expenxe is only .40% – the extra .10% is a “State Fee”. That same fee is included in every one of the portfolios.

Added: Here is Fidelity’s comment on the “State Fee” –

“The State Fee is the percentage of net assets paid to California’s ScholarShare Investment Board for administrative costs.”

When I looked at the CA plan versus an out of state plan, my understanding was that

1) if you participated in the CA 529 plan, qualified withdrawals from the 529 plan would both be Federal and State tax exempt.

2) If you participated in an out of state plan, qualified withdrawals would only be federal tax exempt (not state tax exempt).

Someone correct me if I’m wrong.

After looking at Vanguard’s Nevada 529 and looking at Fidelity CA 529, I opted to participate in the Nevada plan because i didn’t like Fidelity’s fund selection. But to get around the state tax issue, I was just planning to open a CA 529 plan and transfer from the nevada plan when the time came.

I considered participating in other state plans, namely because i was interested in certain state laws. For example, some states consider 529 plans like a “retirement” plan and offer asset protection. Generally, those states exclude “retirement” plans from creditors. Unfortunately, it seemed like those state laws only applies to state residences. And CA doesn’t have such laws that would protect your 529 plans from creditors. So it was a moot point.

CA suck. You can just about sue anyone for anything.

1. The $20/fee for vanguard accounts is waived for accounts >=$3000.

2. I know CA gives no pretax deductions. But, i was referring to earnings from the 529. My initial understanding was that earnings from 529 are federal exempt for qualified withdrawals for all 529 plans (irrespective of which where you live), but as a CA resident, your 529 earnings are only exempt if you’re participating in the CA scholarshare plan. But I think the latest info I have is that that this isn’t the case. Earnings from all 529 plans are CA state tax exempt.

Program manager Upromise Investments, Inc.
Fidelity Investments
Distribution manager Vanguard Marketing Corporation
Upromise Investment Advisors, LLC

Fidelity Brokerage Services, LLC
Program type Tuition Savings
Tuition Savings
Operational date December 10, 2002
October 4, 1999
Residency required No
No

State benefits
Maximum annual state tax deduction No state income tax.
0
Other benefits No state income tax.
No state tax deduction for contributions. Qualified withdrawals from this plan and other states’ plans are exempt from California state income tax.
Creditor protection Yes. Creditor protection available. If the debtor lives in Nevada, State statute SB 434 provides that up to $500,000 of assets held in a 529 Plan account may be protected from creditors, depending on when such assets were contributed to the account and whether they are eventually used to pay qualifying higher educational expenses of the designated beneficiary.
No
Beneficiary age restrictions None
None
Transferrable to other family members Initial – anyone. Change – family of original beneficiary
Initial – anyone. Change – family of original beneficiary

Contributions
Minimum opening amount $3,000
$50
Minimum monthly electronic transfer $50
$15
Minimum monthly payroll deduction $50
$15
Maximum funding amount $310,000
$300,000

Fees
Enrollment None
None
Maintenance $20 (for accounts under $3,000)
None
Fund expense Included in Asset Management Fees
Included in Asset Management Fees
Asset management 0.50%-0.70%
0.50%-1.10%

Investment options
Age-based portfolios 3
2
Individual portfolios 19
12
Stock 10
2
Balanced 2
2
Bonds 3
1
Short-term reserves 1
1
Guaranteed 0
0