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Mississippi State Treasurer David McRae Mississippi State Treasurer David McRae


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College Savings Board Reviews College Savings Plans’ Performance for FY14

As MPACT reopens: Assumptions modified to reflect recent performance data and program changes

The Board of Directors for College Savings Mississippi was presented Tuesday with performance reports for the state’s 529 college savings plans, the Mississippi Prepaid Affordable College Tuition (MPACT) program and the Mississippi Affordable College Savings (MACS) program. The valuation reports, which assess the programs’ performance as of June 30, 2014, come as MPACT reopens to new enrollment today.

“These reports confirm how important it was to defer enrollment in MPACT in order to evaluate and adjust program assumptions so that new MPACT contracts will be cost-neutral for taxpayers,” said Treasurer Lynn Fitch. “Today’s valuation report confirms that MPACT’s funding shortfall is not just due to poor stock market performance during the Great Recession. The shortfall results from how students have actually utilized program benefits, and other risk assumptions that are now better reflected in pricing for new MPACT contracts.”

Both MPACT’s FY14 investment performance of 18.34% and tuition increases of 3.9% beat program assumptions, helping to shore up the prepaid tuition plan. However, based on the analysis by actuaries Gabriel, Roeder, Smith & Co. of program assumptions compared to the program history, the utilization assumptions underlying the program have been adjusted. Under the new assumptions, which are based on actual experience, the current funding shortfall for MPACT contracts sold before October 2012 is projected to be almost $130 million.

“The reality is that students are not finishing college in four years, and they often delay starting college,” Treasurer Fitch said. “Those facts add a financial burden to the program that previous pricing was not designed to address. Going forward, we are using the best data we have to accurately forecast MPACT’s sustainability.”

As of June 30, 2014, the MPACT Program is funded at 73.4% with a deficit of approximately $129.8 million, as reflected in the actuarial valuation report provided to board members. Tuition increases during the fiscal year were 3.9% for both four-year colleges and 2 year-colleges.

“We have had back to back years of strong investment returns for both MPACT and MACS and will hopefully continue to see those high rates of return,” added Treasurer Fitch. “With strong investment performance, new rules, risk assumptions, and more accurate pricing for new MPACT contracts, the goal is for both programs to remain fiscally sustainable in future years while remaining a valuable vehicle for families saving for college.”