Editor’s Perspective on ABLE Accounts: “The Morning Pulse” Podcast with Jeffrey Snyder and George Grombacher

By | | July 19, 2018

What are the top trends and topics in the ABLE account industry?

Introduction: This week’s 529 Insider provides a podcast transcript between Paul Curley of Strategic Insight and Jeffrey Snyder and George Grombacher of “The Morning Pulse” Podcast released on July 15, 2018. The Morning Pulse was founded in 2012 as a digital technology, media company and consulting firm focused on the retirement and financial services industry, and the podcast audience has grown to over 100,000 industry professionals. The podcast typically covers issues and topics relating to retirement. Part 1 of this transcript covers questions and responses relating to 529 College savings plans, while part 2 covers questions and responses relating to ABLE accounts. The transcript provides an edited version to improve readability and understandability, and keeps the initial context and intent of the flow of conversation intact. To listen to a recording of the podcast, click on the link at the bottom of this article. In the meantime, thank you Jeffrey Snyder and George Grombacher for your time, insight and support in the podcast and for helping to raise awareness and understanding of 529 plans and ABLE accounts. Also, thank you readers as I hope the article provides you with an opportunity to learn more from your peers.

Question (Jeffrey Snyder & George Grombacher): Paul, I think within the last couple of years was the passage of the 529 ABLE for members who may have some disabilities. My understanding, and again I’m not an expert on 529 ABLE plans, but I kind of watch it from afar, is that there have been states that are trying to form consortiums where states work together in order to meet compliance requirements, accounting and the recordkeeping that goes with that. What’s the latest update on those types of plans and those provisions?

Answer (Paul Curley, CFA): In short, there are just over 20,000 accounts that are currently investing just over $100 million dollars. From the perspective of the accounts are actually live and that people are using them successfully, it is a great hit. In terms of money going into the account, money being invested, money is growing and so they are getting the tax deferred growth and that distributions are taking place as well – Overall that is a very positive sign. This is especially a positive outcome when taking into account the context of culture, were for a certain particular group of the population where they have not been allowed to save over $2,000, otherwise risk losing their Federal benefits. So from that perspective, ABLE has launched, they are growing, they are doing well. At the tail end of last year, there were a couple of bills that were put in place to make them a little bit easier such as incremental additional savings for working and the ability to rollover 529 assets to ABLE accounts. There are a couple other bills that that are currently in discussion as well. But frankly as you, there are roughly 32 states currently offering them and most of them are in consortium manner, as you said in kind of groups.

Question: I think it just makes sense from a scaling perspective in that all these states administering these types of plans do have a cost to them. If people can somehow leverage the scale, I think it works to everyone’s advantage. Real quick question, and I know George has quite a few of them as well, one of the things that happens in the retirement space is or has happened since the passage of the Pension Protection Act of 2006: We’ve seen more and more assets flow into target-date funds. Do you have a sense for the asset allocations of many of the plans? Obviously I know you don’t follow all 32 plans every day, but do you get the sense that people or these plans are utilizing target date or managed portfolios or either professionally managed or off-the-shelf type of portfolios?

Answer: We definitely do so. Our data collection is both at the plan level and the industry level. We also see the investment option level and report this detailed level out at the aggregate industry aggregate level. We know what investment options are being offered, and then usage from an assets, accounts, gross sales and net flows perspective and typically do report that out at the aggregate level. For ABLE accounts on that target-date versus asset allocation perspective, we find that most plans are offering more asset allocation instead of target dates because within ABLE accounts there really is not that specific date that they are working towards in their goals based investing as there is in 529 college savings plans. For 529 college savings plans, about 50% of assets and accounts are in target-date investments as there is that specific date families are working towards. In contrast, ABLE accounts primarily offer asset allocation investment options and 25% of the assets and accounts are currently in money market or FDIC-insured or short duration type of portfolios. But that was a pretty big discussion. Many people thought originally that they’d be more like health savings accounts (HSAs) – closer to 80% of the assets in money markets. In reality, it’s really closer to 25% in money market. But we really haven’t really seen too much target-date activity just because as we said, there is not that date that people are specifically working toward.

Question: Well great. Paul thank you so much for joining us today and we look forward to catching up with you down the road later in the year to see how ABLE is doing and what the latest news is on ABLE Accounts. Enjoy the rest of your summer. Thanks Paul.

Answer: Thank you.

Question: That was Paul Curley from Strategic Insight giving us a lot of great data and information on the state of 529 plans and ABLE accounts.

Editor’s Call to Action: Podcasts provide a great forum and channel for on-going education, and especially during the daily commute or exercise routine. Listen to the live Youtube version of the show at https://youtu.be/oMtgbFHmQmo. Alternatively, the recording of the show is also available on podbean at https://weeklypulse.podbean.com/, as well as Itunes, GooglePlay and Stitcher. Last but not least, please visit The Morning Pulse to learn more about the podcasts and their daily e-newsletter. Thank you Jeffrey and George for the opportunity and your time and insight, and thank you readers for learning about college financial planning from your peers. Hope you create a great day.