There are 21 different funds within the state's Bright Start college savings plan.
The problem -- and this settlement has to do with one of them -- Oppenheimer's Core Plus fund, which lost over a third of its value in part because of mismanaged investments. The fund managers responsible have since left the firm.
The settlement means that Oppenheimer will pay just over $77 million to cover a portion of the losses suffered by college tuition saving parents.
Roughly 4,400 Illinois families had invested all their Bright Start College savings money into what was then called Oppenheimer's Core Plus bond fund. The fund's prospectus spoke of "investment grade bonds and U.S. government securities" when in reality the fund's managers made far riskier investments.
The fund was losing even before the market collapsed last fall, and by late last year, it had lost 38 percent of its value.
Six states went after Oppenheimer, and Illinois now becomes the first to settle on recouping some of the losses. The agreement means Core Plus investors will get back 57 cents on the dollar.
"Our goal in working with the attorney general's office was to get as much money as we could for as many families as possible," said Alexi Giannoulias, Illinois state treasurer.
State treasurer and U.S. Senate candidate Alexi Giannoulias says the settlement now is a better option than waging a long court fight with no guarantee of successes.
"And for them to market this program as a pure savings program for parents was to mislead parents," said David Hoffman, (D) U.S. Senate candidate.
David Hoffman, one of Giannoulias' primary opponents, says the treasurer is culpable in the Oppenheimer fund mess and that his handling of it was professionally immature.
"From the beginning, the treasurer's office -- if he didn't know, he should have known that part of their investments were going into risky securities," Hoffman said.
"I'm not surprised. That's politics. When you have someone who's in third place in single digits, they'll do anything to drum up attention," said Giannoulias.
Giannoulias says his office acted promptly when it saw red flags in the Core Plus fund's performance, that it was the first state to go after Oppenheimer, and is the first to get money back from a failed 529 fund.
"So the fact that this is the only 529 fund in the country to actually give money back to families in Illinois, I think is a step in the right direction," Giannoulias said.
Giannoulias says the Oppenheimer settlement is not about politics or the race for U.S. Senate, but his opponents surely see it otherwise. A spokesman for senate candidate Cheryle Jackson said the state treasurer should have had a handle on the troubled fund and didn't. The fund lost about $150 million, about 70 million more than first revealed.
Those parents who had money in the Core Plus fund will begin seeing that settlement money in April.