Fidelity was the third-largest administrator of 529s as of the first quarter after American Funds, a unit of Los Angeles- based Capital Group Cos., and Upromise Investments Inc. in Newton, Massachusetts, according to the Financial Research Corporation in Boston. TIAA-CREF ranked fifth with $7.8 billion in plan assets, FRC data shows.

The "race to the bottom" on 529 fees in recent years may explain why the state received only two bids, said Dresslar. Some firms may have thought they couldn't be competitive on costs, he said. California also received a bid for its direct- sold plan from Union Bank & Trust Co. in Lincoln, Nebraska.

The average annual fee for plans sold directly to investors was about 0.65 percent as of October, down from 0.72 percent in February 2009, according to the College Savings Plans Network.

Fidelity's Assets

Fidelity managed more than $17 billion in 529 assets in five states as of March and has managed California's direct-sold and adviser-sold plans since November 2006, Ginsburg said.

"Fidelity made a strategic business decision not to bid for the ScholarShare and ScholarShare Advisor College Savings Plans and we will focus efforts in California on our growing IRA, brokerage, retirement, workplace, financial adviser and institutional businesses," Vincent Loporchio, a Fidelity spokesman said in an e-mail.

Fidelity reduced charges on its 529 plans nationwide in December 2009. Fees range from 0.25 percent to 0.35 percent for index funds and 0.59 percent to 1.06 percent of plan assets for actively managed portfolios, data from Fidelity shows.

Fees for California's direct-sold plan will be reduced under TIAA-CREF's management to an average of 0.23 percent for index age-based portfolios and 0.58 percent for those actively managed, according to a report by the ScholarShare board. Investors also will have more investment choices including funds from TIAA-CREF, T. Rowe Price Group Inc. and Pacific Investment Management Co., while Fidelity only offered funds it manages.

New York's Plans

New York also put its plan out for bids and expects to choose an administrator by August, said Vanessa Lockel, a spokeswoman for the state comptroller's office. The current contract is with Vanguard Group Inc. as the investment manager and Upromise Investments, which administers the accounts. New York has the largest direct-sold plan in the U.S. with $9.9 billion in assets at the end of the first quarter of 2011.