When is it worth switching to a better 529 college savings plan, and when isn't it?

These 529 savings plans work like state-sponsored educational piggy banks, using a variety of funds and asset classes to help cover educational expenses. Plans can be targeted for long or short-term savings, depending on how many years there are until college tuition bills start to arrive.

They typically have low mininum contribution amounts and offer significant tax advantages. Though investors feed the accounts with after-tax money, the investment income they earn in the account is tax free if it is used to pay for college. In addition, some states give investors tax deductions if they invest in the plan sponsored by their own states.

But some plans are better than others, and it may be worth investing in an out-of-state plan if its fees are significantly lower and its investment choices better.

College savings plans are becoming more popular among savers, with assets in 529 plans hitting an all-time high of $158.3 billion last March, according to Boston-based Financial Research Corp.

While there's a lot of diversity among the various plans - including performance, fees and management style - they have improved en masse, said Laura Pavlenko Lutton, director of funds research at Morningstar.

"The days of everything being expensive and the choices all being poor for 529 savings are over," Lutton said in an article on the company's website. "The likelihood that you are sitting in a plan that is a disaster right now is pretty low."

A study released by Morningstar Inc on Monday ranked the largest 529 college savings plans in the United States by their investment choices and likelihood of outperforming their peers. Overall, most 529 plans received solid ratings.

Four 529 college savings plans were recognized as top performers among a group that holds about 95% of the total 529 assets. To rate these 64 plans, analysts at Morningstar considered factors such as investment strategies and performance, management, parent firms and the value of the offerings.

The College Savings Plan for Alaska and Maryland College Investment Plan, both managed by T. Rowe Price, and the Vanguard 529 College Savings Plan for Nevada, managed by Upromise Investments, were ranked "gold" by Morningstar, along with Utah Educational Savings Plan, which is self-managed.

Four funds - iShares 529 Plan for Arkansas, the Michigan Education Savings Plan, the CollegeAdvantage 529 Savings Plan for Ohio and the College America plan for Virginia - were rated "silver" by Morningstar. Another 19 plans achieved "bronze" status.

Morningstar labeled four plans in three states - Kansas, Minnesota and Rhode Island - as "negative" for factors such as high fees or questionable fund choices.

Higher ratings were awarded to funds that are inexpensive and likely to outperform their peers, according to the study.

More than half of the plans were rated "neutral" by Morningstar, meaning they are unlikely to exceed market returns over a full market cycle. "College savers who choose a neutral-rated plan should expect market-like returns, which is a reasonable outcome. But for those in states with no local tax benefits, it may be worth upgrading to a top-rated plan," according to Lutton.

WHEN TO SWITCH

Does it make sense to switch out of an expensive or poor-performing plan? Keep in mind that some states such as New York and Illinois require you to pay back the money you deducted from state income taxes if you move money out of that state's 529 plan. And you could also pay a fee of about $50, on average, to make the switch, said Joe Hurley, founder of SavingForCollege.com, a website that offers advice on college savings, particularly 529 plans.

"Sometimes you can find another 529 plan that has essentially the same make-up of mutual funds in another state, with lower fees; then it becomes compelling to make the move. You can expect the same pre-fee investment, for a higher post-investment outcome," said Hurley.

There's no prohibition against having multiple plans, either, so you could always just stop contributing to an in-state plan you don't like and open a new plan in another state, without moving any money and incurring switch fees and taxes.

Before making a switch, it may be possible to improve savings by reallocating the funds that are invested in a 529 that is rated "neutral" or "negative," Lutton said.

Many plans with options to allocate savings in large equity or bond mutual funds can be reworked to place all or most of the savings in one of these funds. A federal law allows reallocations as well as rollovers to take place no more than once a year.

Lutton said that Morningstar analysts' concerns with some of the "negative" plans were due to the inclusion of a few weak funds. They also largely contained funds groups like Blackrock, however, which provided more stable investment options.

If you are making a small investment, chances are that you won't get much of a tax benefit with your state's deductions. It may be worth shopping for an out-of-state plan with better performance.