For Massachusetts residents, the MEFA’s U. Fund, a direct-sold 529 college savings program managed by Fidelity Investments, is Massachusetts’ lone option. This state plan, which is not limited to in-state residents, is rated among the best 529 plans due to its low management fees and robust investment performance.
MEFA’s U. Fund is a highly-rated 529 plan that offers low fees, strong investment performance, and various investment portfolios designed to help a beneficiary save higher education costs. Massachusetts residents who invest in MEFA’s U. Fund can take advantage of Fidelity’s 529 plan gifting platform and earn credit card rewards that can be put toward college savings.
Massachusetts residents can invest in almost any state’s 529 college savings plan, but they can only qualify for state tax deductions and matching grants if they opt for MEFA’s U. Fund.
How to enroll in MEFA’s U. Fund
You can apply online to enroll in the MEFA U. Fund. To start the enrollment process, the 529 plan account owner must provide their Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), date of birth, mailing address, telephone number, and email address, along with the beneficiary’s name, date of birth and SSN or ITIN.
Massachusetts state tax benefits
Massachusetts offers in-state residents specific state tax benefits for contributions to the state’s 529 college savings account. Single filers can deduct up to $1,000, while joint filers can deduct up to $2,000 from their taxable income.
Qualified distributions from a Massachusetts 529 or out-of-state plan are not subject to Massachusetts state income tax.
MEFA’s U. Fund offers competitive fees, with total asset-based expense ratios ranging from 0.11% to 0.95%, based on selected investment options. According to Savingforcollege.com’s 529 fee study, the total fees on a $10,000 investment over ten years would be between $141 and $1,166, depending on which investment options are selected.
Professionally managed investment portfolios
The MEFA U. Fund 529 plan is managed by Fidelity Investments, one of the world’s largest and most well-known asset managers. Fidelity offers a variety of investment options within this plan, and there is no minimum contribution. This plan allows family members to invest toward their college savings goals and needs through its 15 investment portfolios, which include the following:
- Age-Based Portfolios: These automatically reduce risk as the beneficiary approaches college. Families may choose an age-based portfolio invested in Fidelity Series actively managed funds, Fidelity Series index funds, or a Fidelity Blend option that includes active and index funds.
- Static Portfolios: These do not automatically adjust. Options include aggressive, moderate, and conservative portfolios with actively managed and index fund versions and five individual portfolios. Investors can mix and match these portfolios to create their own asset allocation.
- An FDIC-Insured Bank Deposit Portfolio: This aims to protect the principal investment.
Strong long-term performance
This tax-advantaged plan received a rating of 4.5 out of 5 caps for residents in Savingforcollege.com’s 5-Cap Ratings as of November 16, 2023. The 5-Cap Ratings are an indicator of a plan’s overall attractiveness, evaluating a plan based on performance, costs, features, reliability, and resident benefits.
Remember that this data represents historical performance, which doesn’t necessarily indicate future results.
529 plan grant for Massachusetts residents
Beginning January 1, 2020, all babies born in Massachusetts or adopted by Massachusetts residents are eligible for a $50 seed contribution to a MEFA U.Fund account. Families must enroll in Massachusetts’s BabySteps Saving Plan before the beneficiary’s first birthday or within one year of adoption to qualify.
529 plan gifting options
Massachusetts families who invest in the MEFA U.Fund college investing plan can take advantage of Fidelity’s unique 529 gifting platform. 529 plan account owners are able to set up a personalized College Gifting page to share with friends and family. The dashboard tracks gifts made to the account and lists each gift giver’s name and the amount they contributed.
Credit card rewards
The Fidelity Investments 529 College Rewards Visa Signature Card allows families to earn cash-back rewards for college. Cardholders receive 2% cash back on all purchases that can be automatically contributed to a Fidelity 529 Plan, including the MEFA U. Fund. The contribution will grow tax-deferred and can be withdrawn completely tax-free to pay for college or k-12 tuition. The credit card has no annual fee, and rewards do not expire.