Morningstar Medalist Rating Methodology for 529 Plans

This document is a technical report detailing the methodology used by Morningstar to evaluate 529 plans through the Morningstar Medalist Rating. The report outlines the qualitative, analyst-driven research conducted since 2004, which aims to assist individuals saving for education expenses in making informed investment decisions. It describes the criteria for identifying 529 plans that adhere to best practices and those that do not, emphasizing the importance of investment options expected to outperform peer groups on a risk-adjusted basis over the long term. The report also explains the five-tier rating scale from Gold to Negative, which reflects the analysts' confidence in a plan's ability to deliver superior performance. Furthermore, it discusses the key pillars of evaluation, including the quality of investment managers, the investment process, and pricing strategies, while clarifying that state tax benefits are not factored into the performance predictions. The document concludes with a description of the scoring system used to derive ratings based on these evaluations.