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Families unable to access funds from college savings program following audit ‘issue’

Silver Spring resident Brian Savoie began setting aside money for his son’s college tuition nearly 20 years ago, when his first-born, Caleb, entered kindergarten. Now, facing a fall semester tuition payment, the Savoie family cannot access all of the money in their account due to a glitch in one of Maryland’s tuition savings programs.

Administrators of the Maryland Prepaid College Trust acknowledge the problem. They say that during a switch-over to a new vendor, an audit raised concerns as to whether interest earnings were being calculated accurately. That led to the interest portion of accounts like the Savoies’ to be frozen.

Parents across Maryland have grown frustrated that it has taken many months to address the issue, which remains unresolved, while many are facing an immediate need to pay for the fall semester.

They also accuse the trust and its governing board (which includes numerous high-profile officials) of stonewalling and a lack of candor — and of conducting a closed-door meeting in violation of the state’s open meetings laws.

“They are not disclosing. They are not providing information,” Savoie said. “There are a lot of questions that I and other parents have that the plan just can’t — or won’t — answer.”

Maryland runs two 529 college savings programs (so named because of the section of IRS code that makes them possible).

The Prepaid College Trust allows parents to lock in their child’s future tuition costs when they are young.

The College Investment Plan is administered by an outside money manager and functions more like a 401(k). That investment plan is unaffected by the software glitch, officials stress.

That is cold comfort to families who now cannot access funds they thought they could count on. Savoie needs to ship $9,000 to Purdue University, his son’s school. But he can only tap $6,000 because of what the Maryland 529 program refers to as the “MPCT Interest Calculation Issue.”

Last month, Savoie launched a Facebook group, “Free Our Interest NOW, Maryland529!,” to give parents a place to sound off and compare notes.

“Complete cluster,” wrote user Mon Hansel. “I just called prepaid customer service line today and was told don’t expect any updates until October 31. It’s still with the third-party auditor trying to fix the interest rate debacle. Which leads me to believe that this is a bigger problem than a simple miscalculation of interest rates.”

Savoie also raised the issue with state lawmakers from Montgomery County.

Del. Jheanelle Wilkins (D) called the freezing of funds “a violation of the trust that residents put into our government.”

“This issue must be resolved and impacted residents made whole immediately,” she said.

The program’s new executive director, Anthony Savia, was traveling on Thursday and unavailable for an interview, a spokesperson said in an email. She said a series of questions that Maryland Matters submitted would be answered on Friday.

At an online meeting last week, Savia apologized to parents “for what’s happening” and pledged to have more information at a follow-up session next week. He acknowledged that online accounts have displayed incorrect information and he requested that parents be patient while the program and its vendor work to make things right.

“The funds in the Prepaid College Trust are secure,” Savia said. “This is not a situation where funds are missing; instead, the problem that developed during conversion relates solely to calculations of what the plan calls the minimum benefit.”

Savia stressed that the issue does not affect the investment program, which is administered by T. Rowe Price.

State Treasurer Dereck Davis (D), who sits on the 529 program board, said in an interview that he shares parents’ frustration. He said the audit that uncovered the interest calculation concern was conducted a year ago, before he became treasurer. A fix, he said, is long overdue.

“Errors should be fixed within a year,” he said. “I don’t want to disparage anybody, but this is just inexcusable. It’s unacceptable.”

Through a spokesperson, Comptroller Peter Franchot (D), who also sits on the 529 board, said he “is closely monitoring this serious issue and shares the concern and frustration of impacted families who have invested in this system.”

At a Sept. 9 meeting, the 529 board approved up to $1 million to hire outside counsel.

“This counsel is going to help us… provide project oversight on the audit side as well as communication out to the constituents and such,” Savia said. “The staff internal is just not capable of handling the magnitude of what we’re working on right now.”

The panel then voted to go into closed session citing a need to discuss an “administrative” matter, a move that Davis and, from what could be heard during the virtual meeting, a second member, also opposed.

“At this point, we need to be as transparent as possible,” Davis told Maryland Matters. “And if we’re not legally required to handle something in executive session, I don’t think we should go looking for reasons.”

“We owe it to the parents,” he added. “They need to see and hear everything that we’re doing. We need to be up-front with it.”

Shortly after the meeting, Savoie, the Montgomery County parent, filed a formal complaint with the Open Meetings Compliance Board.

“I don’t feel like it was a legitimate reason for closing a meeting,” he said. “I think it was because whatever they were discussing was an embarrassing topic.”

Board president Peter Tsirigotis did not immediately respond to an email request for comment on Thursday.


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Families unable to access funds from college savings program following audit ‘issue’