An FDIC-insured account is one option among 10 different static or fixed-income investment options that my529 offers as a way to help individuals put aside and invest dollars for a beneficiary's education. The plan also offers 12 enrollment date options, which take into consideration the target year the account beneficiary will begin taking withdrawals, and two customizable options, according to its website.
"At this point in time, we still feel comfortable with both the banks and maintaining our deposits there," said Richard Ellis, Salt Lake City-based executive director at my529.
Sallie Mae Bank holds 90% of the money in my529's FDIC-insured accounts, Mr. Ellis said, while U.S. Bank has 10%.
"We have reached out to both banks and had conversations with them (in light of recent events)," he added.
In March, Silicon Valley Bank and Signature Bank collapsed after a large number of depositors withdrew their money due to concerns over liquidity and interest rate risk. As a result, the FDIC, Federal Reserve and Treasury Department on March 12 seized Signature Bank and announced they would break protocol to protect all depositors at both banks, including those holding more than the FDIC insurance cap of $250,000, as the bank failures posed "systemic risk."
My529 has nearly 317,000 FDIC-insured accounts totaling $1.8 billion in investments, according to Mr. Ellis.
Of those accounts, 244 have balances of more than $250,000, he said, which is the limit for FDIC deposit insurance.
The average cost of tuition at a public four-year university in the U.S. is $10,940 for the 2022-2023 school year, according to data from College Board, meaning a four-year degree currently costs an average of $43,760.
But tuition and fees at several private universities total $250,000 or more over the course of four years.
Columbia University costs $65,524 in undergraduate tuition and fees during the 2022-2023 school year; University of Southern California costs $63,468; and Brown University costs $62,680, according to their respective websites.
Mr. Ellis said 529 plans moved to start offering FDIC-insured investment options because "people know what FDIC insurance is," Mr. Ellis said. "And so when they just see that and they read it, it gives them comfort" that their money is safe.
My529 has not received questions from participants thus far regarding the FDIC-insured investment option, Mr. Ellis said.
Sallie Mae Bank and U.S. Bank were selected through a request for proposal, or RFP, Mr. Ellis said, and an outside consultant prepares quarterly reports on the banks, which includes information such as capital ratios and loan loss reserves.
Mr. Ellis said the last report was as of Dec. 31, and the next report should be coming toward the end of April, "which could be more enlightening."