State Treasurer details Maryland 529 transition, honors 6% rate and presses IT modernization

Micah Richards, an analyst with the Department of Legislative Services, opened the session with an overview of the State Treasurer's Office FY2025 allowance, noting the budget rises by $15.4 million to $105.5 million and that insurance premiums account for roughly 61 percent of the proposed spending.

State Treasurer Derek Davis told the subcommittee he and his staff prioritized getting account-holders paid and decided to honor the previously announced 6% earnings commitment. "We were able to determine that the 6% was affordable," Davis said, and the office began distributing funds in late August and early September for straightforward accounts while continuing to work through more complex claims.

Davis described the claims process as complicated and resource-intensive. An initial RFP to hire a vendor to manage claims drew no bidders, he said, forcing the office to stand up more work internally. He also said the office worked with Congressman Jamie Raskin's staff and the Internal Revenue Service to waive potential federal tax penalties for certain transfers and rollovers, provided they occur by Dec. 30 of this year.

DLS asked for updates on a four-phase programmatic policy change the treasurer is using to resolve the Prepaid College Trust issues, and on how the office has spent $6.65 million added to the agency in the FY2024 budget. Davis told the committee the office has spent about $1.8 million of those funds to date and expects to return some unneeded dollars.

Davis also told lawmakers the office's financial-systems modernization—a multiyear project to migrate treasury and insurance management systems to a cloud-based platform—has been deprioritized at times because the 529 transition required immediate staffing and attention. "We've had to, in some ways, put that on the back burner a little bit," he said, while adding that the project remains an objective and the FY2025 allowance includes funding for it.

Treasury staff and DLS flagged several audit findings and requested follow-up about internal controls, proprietary calculations for injured workers' insurance payments, and compliance with Maryland Insurance Administration audits. The Treasurer's Office agreed to provide status updates on the 4-phase implementation and on planned uses of the FY2024 appropriation.

The committee offered thanks for the office's work; Senator Bailey singled out staff efforts, saying from his constituent conversations the Treasurer's response had markedly improved parents' confidence.

The hearing record shows no formal vote or committee action on the Treasurer's budget at this session; DLS recommended concurrence with the governor's allowance and requested additional reporting on the 529 implementation and systems modernization.