Hawai'i's popular Tuition-EDGE college savings program is shopping for a new program manager after Delaware Investments informed the state it is pulling out of the business to concentrate on its other asset-management opportunities.

The state is negotiating with a firm to take over the program and has asked Delaware to stay on until a contract is executed. Scott Kami, state Financial Administration Division administrator, said the new manager may have lower fees while offering the same type of investment choices, and that a transition should be smooth for the 3,300 people with TuitionEDGE accounts.

The state has sponsored a so-called 529 Plan since 2002 when it selected Delaware Investments as administrator. Under the plan, earnings grow tax-deferred and qualified withdrawals used for college expenses aren't subject to state or federal taxes.

Delaware Investment, which manages more than $150 billion of assets for pension funds, mutual funds and others, yesterday said it was getting out of 529-plan management to focus on other asset management areas.

"Delaware decided to not participate in that segment of the industry anymore," said Delaware Investment spokeswoman Ayele Ajavon. She said the company also is exiting management of Pennsylvania's 529 plan. Hawai'i's plan has attracted about $39 million in investments.

"It sounded like the economies of scale didn't make sense," said Kami, who said the state is taking its time switching over to a new manager because it wants to make sure a smooth transition takes place. He said there is no timetable yet for a changeover.

First Hawaiian Bank, which works with Delaware to sell the investments, said people can still make deposits and open TuitionEDGE accounts through their branches or the plan's Web site. A spokesman said a report of someone on the Big Island saying they couldn't make a deposit must have resulted from a misunderstanding and that all branches have been briefed about the program continuing through the transition period.

Alan Matsuda, a Honolulu financial adviser, said local residents shouldn't think they're restricted to TuitionEDGE when selecting a 529 plan. He recommended people shop around, checking on track records and fees.

He said Alaska's plan managed by T. Rowe Price is attractive because it's a no-load fund with low fees. He said other companies that do a good job managing 529 plans include Vanguard Group and Fidelity Investments.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.