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Monday, April 22, 2002

By Teresa F. Lindeman, Post-Gazette Staff Writer

If you're already making regular visits to the grocery store, you might as well start saving for the kids' college education while you're there.

A program called Upromise is offering grocery shoppers rebates that can be deposited directly into 529 college savings accounts. (John Beale, Post-Gazette)

That sort of logic may make more sense in the next few weeks as labels appear on grocery shelves for Upromise, a marketing program rewarding shoppers with rebates that can be deposited directly into 529 college savings accounts.

The program is the brainchild of a Massachusetts company that reasons people will get around to saving if it's easy enough. Throwing in a little free money is supposed to make this an offer you'd be crazy to refuse. Once you're hooked, you might take the time to research your options and invest the money wisely.

Here's how it works: merchants agree to rebate a percentage of the sale when registered Upromise shoppers buy from them or use their services. Buying a General Motors car triggers a $150 contribution, for example. McDonald's offers a 3 percent rebate on a $5 book of gift certificates.

The money goes into an account that the consumer can easily direct to a 529 college account, which lets parents build tax-free investment kitties that can be used to offset educational expenses for their children. The Upromise Web site offers lots of educational information and links to investment firms.

"We're removing speed bumps that keep people from opening these accounts," said spokesman Jim Doyle. About one million members have registered so far at www.upromise.com.

Reaching the real masses has eluded the company so far. That may change with an April 28 national rollout bringing grocery stores into the program. Food shopping is just a bigger part of people's everyday lives.

"We are inches from critical mass," said Doyle.

It's such a natural fit that Giant Eagle decided to get out ahead of the crowd. Pittsburgh's dominant grocer is offering to contribute a dollar to anyone registering an Advantage Card with Upromise by the end of May. The O'Hara grocer has also promised to match 1 percent of participants' total April grocery bill.

After the initial lures expire, participating grocers will basically track customer purchases of qualifying items -- say Kellogg cereals or Coca-Cola six-packs. Those manufacturers have promised to contribute a portion of the sales. Their goal is to use a portion of their marketing budgets to build goodwill and customer loyalty.

In addition to Giant Eagle, Bi-Lo grocery stores have signed on. Many Shop'n Save and Foodland stores also are considering it.

There are other reward programs in a similar vein but Upromise has been able to leverage exposure through savvy recruiting of people such as former U.S. Sen. Bill Bradley and David Rockefeller Jr. to be on the advisory board. There's also a related foundation dedicated to helping low-income students pay for college.

The main operation nudges middle-income families toward the 529s. By one estimate, about $2.5 billion had been deposited nationally in such accounts at the beginning of 2001. By early this year, that had grown to $10 billion.

"I think there are such great tax advantages to them right now," said Donna J. DeFilippi, a partner at Sisterson & Co., Downtown. She hadn't heard of Upromise, but thought the idea was interesting.

Sisterson has been educating clients about 529s. Among the advantages, they're flexible. If one child decides not to go to college, money can be shifted to another one. The account holder -- usually a parent or grandparent -- retains control. Money can even be withdrawn for non-college use, although there would likely be tax penalties.

On the other hand, the laws that created the plans will sunset in 2010. If lawmakers don't extend them, that could cause problems. And the choices of where to establish a 529 account can be confusing.

The Upromise plan will funnel rebate money into a non-interest bearing escrow account. It can stay there indefinitely, although that's not the goal.

If a customer sets up a 529 investment account linked to Upromise, money will be moved over automatically. Quarterly sweeps shift amounts of $50 or higher. If there's only $49 in the account, it stays until next quarter. If there is $93, it all moves over.

The private company has not released numbers on how much the average member accumulated so far. Contributions could vary wildly depending on the kind of purchases made. A car would likely bring a lot more than a few toys or books.

For now, the program only has investment partnerships with Salomon Smith Barney and Fidelity Investments. Within a few months, several more companies are expected to establish links, Doyle said.

Consumers also have the option of just taking money out, another choice the Upromise officials won't be encouraging. They'd rather see people who don't need tax shelters for college dedicate their rewards to nieces, nephews, grandchildren or even friends.

Upromise will send out quarterly email statements or people can check their account information online. Those who want it will get educational information on investing.

Joe Hurley has registered. He's an accountant who has written a book on 529s and has a Web site, www.savingforcollege.com. "I think it's a good idea," he said, as long as it doesn't raise the cost of his purchases.

While Hurley's glad to see anything get people investing for education, he said Upromise rewards aren't likely to pay all the bills.

And consumers who want to participate should be aware they may have to share personal information, depending on how much they want to benefit. For example, Toys R Us purchases would only be recorded if a registered credit or debit card was used in the sale. A cash purchase wouldn't be noticed.

None of the information given to Upromise is shared, Doyle said, even with participating partners.