Moody's Investor Service Gives Bob Casey a High Rating - PittsburghLIVE.com

Plan gets thumbs-up - PittsburghLIVE.com: "College savings plan gets thumbs-up

By Bill Zlatos
TRIBUNE-REVIEW
Wednesday, November 16, 2005

Moody's Investor Service has given the state's guaranteed college savings plan a thumbs-up -- an A-3 rating.
"It gives the assurance that Pennsylvania is doing everything to make the Tuition Account Program the best in the country," state Treasurer Robert P. Casey Jr. announced Tuesday at a news conference.

TAP allows its 50,000 investors to buy future college credits for themselves or relatives at current prices. Casey hired Moody's, a Wall Street rating firm, after the TAP Guaranteed Savings Plan posted a $44 million deficit as of June 30.

"The credit rating we assigned to the program is about in the middle of the investment grade category," said Martin Duffy, a vice president and senior credit officer with Moody's.

He said the evaluation balanced the volatility of tuition increases and the program's own investments with its strong backing from state lawmakers and the governor's office.

"I view it as certainly an indication that the odds are really good that the program will live up to its promises," said Joseph Hurley, founder and CEO of Savingforcollege.com, a Web site that evaluates Section 529 plans.

The plans, named after the part of the Internal Revenue Service Code that authorizes them, are a popular way for parents to save for their children's college education.

Duffy and Hurley said they would have rated the program even higher if it was guaranteed by law with a "full faith and credit" pledge. Programs in several states -- including Ohio, Mississippi and Florida -- have such backing.

Hurley said Moody's rating supports his own evaluation. He rates all Section 529 plans on a one- to five-cap scale, with five caps going to the best programs. He gives TAP's Guaranteed Savings Plan four caps.

He was somewhat concerned, however, by the program's projected deficit.

"It's a red flag indicating on an actuarial basis the program does not have enough funds to meet its projected payout," he said.


Bill Zlatos can be reached at bzlatos@tribweb.com or (412) 320-7828. "