A, B, and C Shares
Some broker- and advisor-sold 529 plans and some LGIPs can be sold in different types of share classes. These different classes are based on how the fund recovers sales charges and other expenses. A, B, and C shares are the most common classes and are described below.
A shares are sold at a public offering price of NAV plus front-end sales charge. The load comes off the top of the amount invested, reducing the amount of money available to put into the plan. Thus, if an investor has $10,000 to invest into the 529 and there is a 5% front-end load, $500 will go to the advisor selling the fund and only $9,500 will be left to invest in the plan. Sales charges can be reduced through breakpoints, described below. A shares may include an annual maintenance fee; this fee is usually lower for A shares than for B shares or C shares. A shares are most appropriate for accounts with a large enough investment to benefit from a breakpoint.
B shares are sold at the NAV with no up-front sales charge. Thus, the full amount of the investor’s money is available to invest in the 529. B shares are subject to a back-end charge when the money is withdrawn if not held for the number of years specified in the official statement. This is often called a deferred sales load or contingent deferred sales charge (CDSC). The CDSC usually gets smaller every year and disappears altogether if you hold the shares long enough. The time period is specified in the official statement, but it is usually around six years. Annual maintenance fees are higher for B shares than for A shares. B shares are more appropriate for accounts not large enough to reach breakpoints and for investors who intend to hold the shares for a long period of time.
C shares have no front-end or back-end sales charges, except for a back-end charge if the investor sells within one year.