©2006 Investment Company Institute. All rights reserved. Information may be abridged and therefore incomplete.
Communications from the Institute do not constitute, and should not be considered a substitute for, legal advice.
[19981]
April 28, 2006
TO: PENSION COMMITTEE No. 12-06
PENSION OPERATIONS ADVISORY COMMITTEE No. 12-06
RESEARCH COMMITTEE No. 4-06
529 PLAN ADVISORY COMMITTEE No. 4-06
RE: INSTITUTE RELEASES AD HOC SURVEY OF COVERDELL ESAs AS OF DECEMBER
31, 2005
The Institute recently surveyed certain of its members in a continuing effort to track
developments in the education savings market. Although 93 percent of households saving for college do
so through taxable investments, 20 percent of households saving for college use education-targeted
savings programs.1,2 At year-end 2005, Coverdell Education Savings Accounts (ESAs) held $4 billion in
mutual fund assets and 529 savings plans held $68.7 billion in assets3 (of which, 96 percent was invested
in mutual funds).
The Institute’s most recent survey requested Coverdell ESA4 data on the number of
beneficiaries, average number of funds held per beneficiary, and value of their mutual fund assets as of
December 31, 2005. This ad hoc survey was conducted in response to ongoing interest in the education
savings market.
Survey respondents indicate that between June 30, 2005 and December 31, 2005, the number
of beneficiaries with Coverdell ESAs edged down slightly.5 Survey respondents indicated that Coverdell
ESA assets invested in mutual funds increased 11.6 percent over the second half of 2005, reflecting in
1 Education-targeted savings programs include state-sponsored 529 prepaid tuition plans, state-sponsored 529 savings plans, and
Coverdell ESAs.
2 See Figure 5 in “Profile of Households Saving for College,” which presents results from a 2003 ICI household survey on college saving
activity among U.S. households with children age 18 and younger (available at: http://www.ici.org/stats/res/rpt_03_college_saving.pdf).
3See, ICI Memorandum #19982, dated April 28, 2006.
4 In July 2001, Education IRAs were renamed Coverdell ESAs. In addition, as allowed by the Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA), the annual contribution limit to these accounts is $2,000 for tax-years 2002 through 2010 (up
from $500 prior to 2002).
5 Growth in the number of Coverdell ESA beneficiaries may have been higher than reflected in the reported statistics. A few reporters
indicated efforts to close very small or inactive accounts in their systems during the past two years. In addition, however, some reporters
noted migration to 529 plans.
2
part, positive equity market returns.6 Survey respondents managed assets for nearly 790,000 ESA
beneficiaries at the end of December 2005. As of the end of December 2005, the average ESA
beneficiary held a total of $2,800 in mutual fund assets in 1.5 funds.
Coverdell ESA Survey Results:
Number of Coverdell ESA Beneficiaries Reported by the Sample
673,300
753,000
776,800 786,400
791,200 791,200 794,000 792,000 789,900
December
2001
June 2002 December
2002
June 2003 December
2003
June 2004 December
2004
June 2005 December
2005
Source: Investment Company Institute, Coverdell ESA surveys of an ad hoc sample of member firms.
These ad hoc survey results are based on the responses of 20 firms, representing an estimated 54
percent of the $4 billion of Coverdell ESA assets invested in mutual funds at year-end 2005. Note that
the survey respondents are not randomly selected and therefore do not necessarily reflect the
characteristics of the typical Coverdell ESA invested in mutual funds.
If you have any questions or comments concerning the survey, please call me at (202)
326-5915.
Sarah A. Holden
Senior Economist
Research Department
6 The S&P 500 total return index was up 5.8 percent over the second half of 2005.