Upromise benefits both parents and state

Upromise, the college savings program that got a splashy rollout in Nevada last month, allows parents to save a few cents toward college expenses every time they purchase a product from a participating company.

Parents aren't the only ones hoping that a few cents here and there accumulate into a substantial stake.

So does the state government, which sponsors the plan operated by Upromise Inc., a private outfit.

The office of State Treasurer Brian Krolicki gets a tiny cut from every dollar invested through Upromise program and other college-savings programs overseen by Nevada.

By aligning itself with the popular Upromise effort, the state hopes the flow of pennies, nickels and dollars will grow.

Parents who sign up with Upromise get rebates whenever they buy products ranging from diapers to automobiles.

In the latest wrinkle, parents can link their Upromise savings to the Upromise College Fund 529 Plan.

A 529 plan, a sweet deal for parents, allows investments for college expenses to grow tax-free.

With the Upromise College Fund 529 Plan, parents can elect to have their rebates swept automatically into a mutual fund each month.

Although the Upromise program is sponsored by the Nevada state government, it's open to anyone in the United States.

And that's where things could get attractive for the state treasurer's office.

Upromise pays the state a fee equal to 0.0667 percent of the assets in funds it sells directly and 0.1 percent on funds sold by outside investment advisors.

When parents sign up with the Upromise 529 program, they select investments either from the Vanguard or Strong families of funds.

More dimes and nickels flow to the treasurer's office.

Strong, for instance, pays $10 per account to the state treasurer along with a fee of 0.0667 percent of the assets it has under management.

Little percentages, perhaps, but Krolicki said he wouldn't be surprised if assets under management in Nevadasponsored 529 programs amount to billions of dollars within a few years.

Along with the funds offered by Upromise, Vanguard and Strong, Nevada is a home base for 529 plans sold by USAA, Columbia Management and American Skandia.

The pennies, nickels and dollars generated by the state's tiny slice of the 529 investment pool pay for its administration of the program as no taxpayer dollars are allocated to running it.

It's possible, Krolicki said, that the 529 programs could generate enough for his office to cover the costs of administering other college-savings plans as well.

His office, for instance, also oversees a prepaid tuition plan that locks in the cost of an education at a state school.

Unlike some other states which have locked themselves into exclusive relationships with providers of 529 investments Maine, for instance, handles all of the Merrill Lynch business and nothing else Nevada chose to align itself with several mutual fund distributors.

The lack of exclusive arrangements cuts both ways.

Strong, for instance, is aligned with Wisconsin and Oregon in addition to Nevada.

That doesn't make much difference to most investors, however, because they can park the kids' college money in any 529 plan in the nation, no matter where they may live.

But the state sponsorship makes a difference to investment companies.

James Fadule, president of Upromise Investments Inc., said the company based in Needham, Mass., chose Nevada because of a good working relationship it established with Krolicki and the state treasurer's understanding of the Upromise business plan.