College-savings plan fees under scrutiny

WASHINGTON -- Lawmakers and federal regulators are examining the fees charged by popular college-savings plans, and an investigation of big brokerage firms' sales of the plans has widened.

An investor advocate told a House panel yesterday that states may have incentives to sponsor so-called 529 plans with high fees and that political factors can play a role in pushing up charges.

''Political considerations . . . may influence the selection of money managers and cause states to be less diligent when negotiating fees," Mercer Bullard, a University of Mississippi law professor who heads the advocacy group Fund Democracy, testified at a hearing examining the plans used by parents to save for their children's college tuition.

Bullard cited examples of states favoring investment firms based in the state or firms whose executives contributed to the election campaigns of state officials.

Securities regulators, meanwhile, have expanded their investigation of brokerage firms' sales of these 529 plans for possible violations that can deprive investors of the very tax benefits that make the plans attractive.