Saving for your child’s college education is one of the most important financial decisions you’ll make. A popular way to do that is through a 529 college savings plan. Bank of America offers access to the NextGen 529 Plan, which is administered by the Finance Authority of Maine (FAME) and managed by Merrill (a subsidiary of Bank of America). But before you jump in, it’s important to understand the fees associated with this plan. After all, even small charges can add up over time and impact your long-term savings.
What Is a 529 Plan?
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. Earnings in the plan grow tax-free, and withdrawals for qualified education expenses (like tuition, books, and housing) are also tax-free. Bank of America, through its Merrill arm, provides access to the NextGen Direct and NextGen Select options—each with its own fee structure.
Types of Fees You May Encounter
529 plan fees generally fall into a few categories. Here’s a breakdown of the common charges associated with the Bank of America 529 options:
1. Program Management Fee
The NextGen 529 Plan includes a program management fee that typically ranges from 0.05% to 0.20% of assets annually. This fee compensates the program manager for maintaining the plan infrastructure and services.
2. Underlying Fund Fees (Expense Ratios)
When you invest in a 529 plan, your money is allocated into mutual funds or ETFs. These investments have internal fees known as expense ratios. For Bank of America’s Merrill-linked 529 plan, these can range from 0.05% to 0.70%, depending on the investment option you choose.
- An age-based portfolio using low-cost index funds may charge closer to 0.15%
- Actively managed funds or specialty portfolios could go up to 0.70% or more
Always review the specific portfolio details to understand what you’re paying.
3. Sales Charges (Applies to NextGen Select)
If you open the NextGen Select version through a Merrill Financial Advisor, you may be subject to:
- Front-end sales loads (as much as 5.25%, though often waived or reduced)
- Ongoing advisor fees, depending on your advisory relationship
These fees compensate the advisor for helping you choose investments and manage the plan. While some people value the hands-on advice, it’s important to factor in the cost.
4. Annual Account Maintenance Fee
Some 529 plans charge a flat annual account fee (e.g., $10–$25), but the NextGen 529 Direct Plan typically waives this fee if you opt for electronic delivery of documents or maintain a certain balance. Be sure to check your statements or the plan website to confirm.
Investment Fund Fees (Expense Ratios)
Each investment option within the plan has its own expense ratio, which covers the costs of managing the mutual fund or ETF.
- Low-cost portfolios (index funds): ~0.10% – 0.25%
- Actively managed funds: ~0.40% – 0.70%+
These fees are baked into the investment’s return, so you won’t see them deducted directly—they just reduce the overall growth.
ales Charges (NextGen Select Only)
If you choose to work with a financial advisor via Merrill (Bank of America’s investment arm), you may incur the following:
a. Front-End Load (Class A shares)
- As high as 5.25%
- This is taken upfront when you make a contribution.
✅ Many investors qualify for waivers or reduced fees based on contribution amount or employer plans.
b. Contingent Deferred Sales Charge (CDSC)
- Applies to Class B or C shares if you withdraw within a certain time frame (usually 6 years for B shares).
- Declines over time and is eventually eliminated.
c. Ongoing Advisory Fees
- Annual advisory fee of 0.25% to 1.00%, depending on your relationship and service level with the advisor.
- Higher-tier clients with Merrill Edge or Merrill Guided Investing may get discounted or fee-waived options.
Final Thoughts
Bank of America, through Merrill, offers a solid 529 college savings plan with flexible options and tax advantages. However, like any investment, understanding the fees is critical to maximizing your savings. By choosing the right portfolio, avoiding unnecessary advisor charges (if you don’t need them), and keeping an eye on fund expenses, you can ensure more of your money goes toward your child’s future — not fees.
If you’re ready to start saving, take time to compare the NextGen Direct and NextGen Select options and make a fee-conscious decision that suits your financial goals.