MONTANA

Montana Family Education Savings Program

Type: Savings

Phone: 800-888-2723

State tax deduction for residents: State tax deductions for contributions up to $3,000 per year ($6,000 for couples)

Open to nonresidents: Yes

Refund provisions: Penalty of 10% of earnings on non-qualified withdrawals, plus $100 for accounts less than 3 years old. Additional "early withdrawal" penalties for nonresidents

Minimum/maximum contributions: $250 / $262,000

Other: Contributions are invested in an FDIC-insured CD that grows at the same rate as a nationwide index of college costs

Montana's plan invests in the College Savings Bank's College Sure CD, which is pegged to a national index of private-college costs and guarantees a minimum return of 4%. Since increases on the index have not exceeded 6% since 1991-92, the CD is appropriate mainly for short-term savings. However, you must invest in the plan for at least three years to avoid a $100 penalty. Plus, you are subject to significant early-withdrawal penalties if you cash out before the maturity date you select when you open the account (in addition to the usual 10%-of-earnings penalty on noneducation withdrawals). Because it's run by a bank, the plan is backed by FDIC insurance up to $100,000. It can also be used for graduate school and there are no enrollment or annual fees.

Pacific Funds 529 College Savings Plan
In addition to the tax deduction described above, Montana residents who buy directly get a break on fees, but this plan is still expensive, with annual fund-management expenses running as high as 2.05% (and as high as 2.55% in broker-sold accounts). You can chose from 15 individual mutual funds, including health and technology sector funds. There are also five blended portfolios, ranging from 95% stocks to 20% stocks. There is no age-based portfolio.

State College Savings Plans