He invested $400,000 and today it is worth $800,000. If I have to pay $4,000 it is easier knowing that there is a $400,000 tax free gain sitting behind it.
Well, depends how you look at it. Yes, it is retroactive in that it applies to past-purchases. However, I don't think it is retroactive because the fee only applies going forward. Retroactive in my mind would mean that they are going to assess the fee to you for past years as well (like pay the fee on your account value for 2008, 2007, and each year going back) - that would be really, really bad. However, if the account maintenance fee is all that will be charged at 0.49%, that really isn't so bad - as it is on par and lower than the fees charged by most other 529 plans.
I'm sure that I'm not the first to tell you this, but our federal government is socialist and most of what is happening these days has absolutely nothing to do with a free-market/capitalist economy. Get used to it - we're barely halfway through his first year in office - we still have 3.5 more years and it's not going to get any better for those who are and have been financially responsible.
Well, I have my own issues with the current cap ratings. However, I'd guess that Joe will have his hands full when the next revision of the ratings are done.
This is why it is important to completely understand the terms and conditions of the contract you make with the state by enrolling in this plan, or any other.
Because at the end of the day, even though it looks bad, it isn't the end of the world. No account values have gone down. There are many plans that are in more serious trouble (see info/link I provided for Alabama). And then you have regular 529 savings plans which have lost 25% and much more in investment losses.
So you pay 0.49% annual fees - they are not taking anything away from you. Again, if you invested in any mutual fund, you'd have at least that much taken in annual fees.
It's still not a bad deal, just not as good a deal.