2008 Legislation
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HOUSE BILL NO. 548<br /> – College Savings Program, revised


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H0548......................................................by STATE AFFAIRS
COLLEGE SAVINGS PROGRAM - Amends and adds to existing law to revise powers
and duties of the State College Savings Program Board; to revise college
savings program requirements; to revise limitations of the college savings
program chapter; to allow policies instead of rules; and to provide
procedures for unclaimed amounts.

02/21    House intro - 1st rdg - to printing
02/22    Rpt prt - to Educ
03/04    Rpt out - rec d/p - to 2nd rdg
03/05    2nd rdg - to 3rd rdg
03/06    3rd rdg - PASSED - 65-0-5
      AYES -- Anderson, Andrus, Barrett, Bayer, Bedke, Bell, Bilbao, Black,
      Block, Bock, Boe, Bolz, Bowers, Brackett, Bradford, Chadderdon,
      Chavez, Chew, Clark, Collins, Crane, Eskridge, Hart, Harwood,
      Henbest, Jaquet, Killen, King, Kren, Labrador, Lake, LeFavour,
      Loertscher, Luker, Marriott, Mathews, McGeachin, Mortimer, Moyle,
      Nielsen, Nonini, Pasley-Stuart, Patrick, Pence, Raybould, Ringo,
      Roberts, Ruchti, Rusche, Sayler, Schaefer, Shepherd(02),
      Shepherd(08), Shirley, Shively, Smith(30), Smith(24), Stevenson,
      Thayn, Thomas, Trail, Vander Woude, Wills, Wood(27), Mr. Speaker
      NAYS -- None
      Absent and excused -- Durst, Hagedorn, Henderson, Snodgrass, Wood(35)
    Floor Sponsor - Boe
    Title apvd - to Senate
03/07    Senate intro - 1st rdg - to Educ
03/13    Rpt out - rec d/p - to 2nd rdg
03/14    2nd rdg - to 3rd rdg
03/18    3rd rdg - PASSED - 34-0-1
      AYES -- Andreason, Bair, Bastian, Bilyeu, Broadsword, Burkett,
      Cameron, Coiner, Corder, Darrington, Davis, Fulcher, Gannon, Geddes,
      Goedde, Hammond, Heinrich, Hill, Jorgenson, Kelly, Keough, Langhorst,
      Little, Lodge, Malepeai(Sagness), McGee, McKague, McKenzie,
      Richardson, Schroeder, Siddoway, Stegner, Stennett, Werk
      NAYS -- None
      Absent and excused -- Pearce
    Floor Sponsor - Jorgenson
    Title apvd - to House
03/18    To enrol - Rpt enrol - Sp signed
03/19    Pres signed
03/20    To Governor
03/25    Governor signed
         Session Law Chapter 275
         Effective: 07/01/08

Bill Text

  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-ninth Legislature                   Second Regular Session - 2008


                              IN THE HOUSE OF REPRESENTATIVES

                                     HOUSE BILL NO. 548

                                 BY STATE AFFAIRS COMMITTEE

  1                                        AN ACT

 11    Be It Enacted by the Legislature of the State of Idaho:

 12        SECTION  1.  That  Section 33-5401, Idaho Code, be, and the same is hereby
 13    amended to read as follows:

 14        33-5401.  DEFINITIONS. As used in this chapter, the following  terms  have
 15    the following meanings unless the context clearly denotes otherwise:
 16        (1)  "Account" means an individual trust account or savings account estab-
 17    lished as prescribed in this chapter.
 18        (2)  "Account owner" means the person or state or local government organi-
 19    zation  designated  in the agreement governing the account as having the right
 20    to withdraw moneys from the account before the account is disbursed to or  for
 21    the benefit of the designated beneficiary.
 22        (3)  "Board" means the state college savings program board created in sec-
 23    tion 33-5402, Idaho Code.
 24        (4)  "Designated  beneficiary,"  except  as  provided  in section 33-5404,
 25    Idaho Code, means, with respect to an account, the  person  individual  desig-
 26    nated  at the time the account is opened as the person individual whose higher
 27    education expenses are expected to be paid from the account or, if this desig-
 28    nated beneficiary is replaced in accordance with section 33-5404, Idaho  Code,
 29    the replacement beneficiary.
 30        (5)  "Eligible educational institution" shall have the meaning provided in
 31    26 U.S.C. section 529.
 32        (6)  "Financial institution" means any state bank,  national bank, savings
 33    bank, savings and loan association, credit union, insurance company, brokerage
 34    firm or other similar entity that is authorized to do business in this state.
 35        (6)  "Higher education institution" means any of the following:
 36        (a)  An  institution  described  in the higher education act of 1965 (P.L.
 37        89-329; 79 Stat. 1219; 20 U.S.C. sections 1001 et seq.);
 38        (b)  An area vocational educational school as defined in 20 U.S.C. section
 39        2471(4);
 40        (c)  An institution regulated by the state board of education.
 41        (7)  "Member of the family" shall have  the  meaning  as  provided  in  26
 42    U.S.C. section 529.
 43        (8)  "Nonqualified withdrawal" means an account withdrawal that is not one


  1    (1) of the following:
  2        (a)  A qualified withdrawal;
  3        (b)  A  withdrawal  made  as  the result of the death or disability of the
  4        designated beneficiary of an account;
  5        (c)  A withdrawal that is made on account of a scholarship as  defined  in
  6        26  U.S.C. section 117 or an educational allowance as defined in 26 U.S.C.
  7        section 25A(g)(2);
  8        (d)  A rollover or change of the designated beneficiary.
  9        (9)  "Person" means an individual, a trust, an estate, a  partnership,  an
 10    association, a foundation, a guardianship, a corporation, or a custodian under
 11    the Idaho uniform transfers to minors act.
 12        (10) "Program"  means  the  college savings program established under this
 13    chapter.
 14        (101) "Qualified higher education expenses" shall have  the  meaning  pro-
 15    vided in 26 U.S.C. section 529(e)(3).
 16        (112) "Qualified withdrawal" means a withdrawal from an account to pay the
 17    qualified  higher  education  expenses  of  the  designated beneficiary of the
 18    account, but only if the withdrawal is made in accordance with this chapter.

 19        SECTION 2.  That Section 33-5402, Idaho Code, be, and the same  is  hereby
 20    amended to read as follows:

 22    -- POWERS AND DUTIES. There is hereby created the state college  savings  pro-
 23    gram board. The board shall consist of the state treasurer or his designee who
 24    shall serve as chair, the governor or designee, the state controller or desig-
 25    nee,  the  attorney general or designee, the superintendent of public instruc-
 26    tion or designee, and the secretary of state or designee. A  quorum  shall  be
 27    necessary  to  transact business. Members of the board shall be compensated by
 28    their appointing entity. The state college savings program board shall:
 29        (1)  Develop and implement the program in a manner  consistent  with  this
 30    chapter through the adoption of rules, guidelines and procedures;
 31        (2)  Retain  professional  services,  if necessary, including accountants,
 32    auditors, consultants and other experts;
 33        (3)  Seek rulings and other guidance from the United States department  of
 34    the treasury, the internal revenue service and the state tax commission relat-
 35    ing to the program;
 36        (4)  Make changes to the program required for the participants in the pro-
 37    gram  to  obtain the federal income tax benefits or treatment provided by sec-
 38    tion 529 of the Internal Revenue Code of 1986, as amended.;
 39        (5)  Interpret, in rules, policies, guidelines and procedures, the  provi-
 40    sions of this chapter broadly in light of its purpose and objectives;
 41        (6)  Charge, impose and collect administrative fees and service charges in
 42    connection  with  any  agreement, contract or transaction relating to the pro-
 43    gram;
 44        (7)  Select the financial institution or institutions to act as the depos-
 45    itory and manager of the program in accordance with this chapter;
 46        (8)  Enter into contracts, within the limit of funds  available  therefor,
 47    acquire  services  and personal property, and do and perform any acts that may
 48    be necessary in the administration of the program;
 49        (9)  Establish, in its discretion, a trust or other method of  segregating
 50    the  funds of participants in the program from the general funds of the state,
 51    the funds of the board and the funds of the members of the board;
 52        (10) Administer the program and any trust  established  by  the  board  as
 53    instrumentalities  of the state under section 529 of the Internal Revenue Code


  1    of 1986, as amended, and the federal securities law, including the  securities
  2    act  of 1933, as amended, the trust indenture act of 1939, as amended, and the
  3    investment company act of 1940, as amended.

  4        SECTION 3.  That Section 33-5404, Idaho Code, be, and the same  is  hereby
  5    amended to read as follows:

  6        33-5404.  PROGRAM  REQUIREMENTS. (1) The program shall be operated through
  7    the use of accounts. An account may be opened by any  person  who  desires  to
  8    save  to  pay  the qualified higher education expenses of a person. Minors may
  9    open an account which cannot be disaffirmed pursuant to section 32-103,  Idaho
 10    Code.  A  person  may  open  an  account  by  satisfying each of the following
 11    requirements:
 12        (a)  Completing an application in the form prescribed by  the  board.  The
 13        application shall include the following information:
 14             (i)   The  name, address and social security number or employer iden-
 15             tification number of the contributor;
 16             (ii)  The name, address and social security  number  of  the  account
 17             owner if the account owner is not the contributor;
 18             (iii) The  name, address and social security number of the designated
 19             beneficiary;
 20             (iv)  The certification relating to no excess contributions  required
 21             by subsection (13) of this section;
 22             (v)   Any other information that the board  may require;
 23        (b)  Paying the one-time application fee established by the board;
 24        (c)  Making  the  minimum contribution required by the board or by opening
 25        an account;
 26        (d)  Designating the type of account to be opened if  more  than  one  (1)
 27        type of account is offered.
 28        (2)  Any  person may make contributions to an account after the account is
 29    opened.
 30        (3)  Contributions to accounts may be made only in cash.
 31        (4)  Account owners may withdraw all  or  part  of  the  balance  from  an
 32    account  on  sixty (60) days' notice, or a shorter period as may be authorized
 33    by the board, under rules prescribed by the board. These rules  shall  include
 34    provisions  that  will generally enable the board or program manager to deter-
 35    mine if a withdrawal is a nonqualified withdrawal or a  qualified  withdrawal.
 36    The rules may, but need not, require one (1) or more of the following:
 37        (a)  Account  owners seeking to make a qualified withdrawal or other with-
 38        drawal that is not a nonqualified withdrawal shall provide certifications,
 39        copies of bills for qualified higher education expenses or other  support-
 40        ing material;
 41        (b)  Qualified  withdrawals  from an account shall be made only by a check
 42        payable as designated by the account owner.
 43        (5)  An account owner may change the designated beneficiary of an  account
 44    to  an individual who is a member of the family of the former designated bene-
 45    ficiary in accordance with procedures established by the board.
 46        (6)  On the direction of an account owner, all or a portion of an  account
 47    may be transferred to another account of which the designated beneficiary is a
 48    member of the family of the designated beneficiary of the transferee account.
 49        (7)  Changes  in designated beneficiaries and rollovers under this section
 50    are not permitted if the changes or rollovers would violate either of the fol-
 51    lowing provisions  of this section relating  to  excess  contributions  or  to
 52    investment choice.
 53        (8)  Each  account  shall be maintained separately from each other account


  1    under the program.
  2        (9)  Separate records and accounting shall be maintained for each  account
  3    for each designated beneficiary.
  4        (10) No  contributor to, account owner of or designated beneficiary of any
  5    account may direct the investment of any contributions to an  account  or  the
  6    earnings from the account.
  7        (11) If  the  board terminates the authority of a financial institution to
  8    hold accounts and accounts must be moved from that  financial  institution  to
  9    another  financial  institution, the board shall select the financial institu-
 10    tion and type of investment to which the  balance  of  the  account  is  moved
 11    unless  the  internal  revenue service provides guidance stating that allowing
 12    the account owner to select among several financial institutions that are cur-
 13    rent contractors would not cause a plan to cease to  be  a  qualified  tuition
 14    program.
 15        (12) Neither  an  account  owner  nor  a designated beneficiary may use an
 16    interest in an account as security for a loan. Any pledge of an interest in an
 17    account is of no force and effect.
 18        (13) The board shall adopt rules to prevent contributions on behalf  of  a
 19    designated  beneficiary  in  excess  of  those  necessary to pay the qualified
 20    higher education expenses of the designated  beneficiaries.  The  rules  shall
 21    address the following:
 22        (a)  Procedures  for  aggregating  the total balances of multiple accounts
 23        established for a designated beneficiary;
 24        (b)  The establishment of a maximum total balance  that  may  be  held  in
 25        accounts for a designated beneficiary;
 26        (c)  The  board  shall review the quarterly reports received from partici-
 27        pating financial institutions and certify that the balance in  all  quali-
 28        fied  tuition  programs, as defined in section 529 of the Internal Revenue
 29        Code, of which that person is the designated beneficiary does  not  exceed
 30        the lesser of:
 31             (i)  A  maximum  college savings amount established by the board from
 32             time to time;
 33             (ii) The cost  in  current  dollars  of  qualified  higher  education
 34             expenses  that  the contributor reasonably anticipates the designated
 35             beneficiary will incur;
 36        (d)  Requirements that any excess balances with respect  to  a  designated
 37        beneficiary  be  promptly withdrawn in a nonqualified withdrawal or rolled
 38        over to another account in accordance with this section.
 39        (14) If there is any distribution from an account to any person or for the
 40    benefit of any person during  a  calendar  year,  the  distribution  shall  be
 41    reported  to  the internal revenue service and the account owner or the desig-
 42    nated beneficiary to the extent required by federal law.
 43        (15) The financial institution shall provide statements  to  each  account
 44    owner  at  least  once  each year within thirty-one (31) days after the twelve
 45    (12) month period to which they relate. The statement shall identify the  con-
 46    tributions made during a preceding twelve (12) month period, the total contri-
 47    butions made through the end of the period, the value of the account as of the
 48    end  of  this period, distributions made during this period and any other mat-
 49    ters that the board requires be reported to the account owner.
 50        (16) Statements and information returns relating to accounts shall be pre-
 51    pared and filed to the extent required by federal or state tax law.
 52        (17) A state or local government  or  organization  described  in  section
 53    501(c)(3)  of  the Internal Revenue Code may open and become the account owner
 54    of an account to  fund scholarships for persons whose identity will be  deter-
 55    mined after an account is opened.


  1        (18) In  the case of any account described in subsection (17) of this sec-
  2    tion, the requirement that a designated  beneficiary  be  designated  when  an
  3    account  is  opened does not apply and each person who receives an interest in
  4    the account as a scholarship shall be treated as a designated beneficiary with
  5    respect to the interest.
  6        (19) Any social security numbers, addresses or telephone numbers of  indi-
  7    vidual account holders and designated beneficiaries that come into the posses-
  8    sion  of  the  board are confidential, are not public records and shall not be
  9    released by the board.

 10        SECTION 4.  That Section 33-5407, Idaho Code, be, and the same  is  hereby
 11    amended to read as follows:

 12        33-5407.  LIMITATIONS  OF  CHAPTER.  (1)  Nothing in this chapter shall be
 13    construed to:
 14        (a)  Give any designated beneficiary any rights  or  legal  interest  with
 15        respect  to  an  account  unless the designated beneficiary is the account
 16        owner;
 17        (b)  Guarantee that a designated beneficiary will be admitted to an higher
 18        eligible education institution or be allowed to continue enrollment at  or
 19        graduate  from  an  higher  eligible education institution located in this
 20        state after admission;
 21        (c)  Establish state residency for a person merely because the person is a
 22        designated beneficiary;
 23        (d)  Guarantee that amounts saved pursuant to the program will  be  suffi-
 24        cient  to  cover  the  qualified higher education expenses of a designated
 25        beneficiary.
 26        (2)  Nothing in this chapter establishes any obligation of this  state  or
 27    any  agency  or  instrumentality of this state to guarantee for the benefit of
 28    any account owner, contributor to an account or designated beneficiary any  of
 29    the following:
 30        (a)  The return of any amounts contributed to an account;
 31        (b)  The rate of interest or other return on any account;
 32        (c)  The payment of interest or other return on any account;
 33        (d)  Tuition rates or the cost of related higher education expenditures.
 34        (3)  Under  rules  policies adopted by the board, every contract, applica-
 35    tion, deposit slip or other similar document that may be  used  in  connection
 36    with  a  contribution to an account shall clearly indicate that the account is
 37    not insured by this state and neither the principal deposited nor the  invest-
 38    ment return is guaranteed by this state.

 39        SECTION  5.  That  Chapter  54,  Title 33, Idaho Code, be, and the same is
 40    hereby amended by the addition thereto of a NEW SECTION, to be known and  des-
 41    ignated as Section 33-5410, Idaho Code, and to read as follows:

 42        33-5410.  UNCLAIMED  ACCOUNTS.  Unclaimed accounts shall be subject to the
 43    provisions of section 14-506, Idaho Code. The  date  upon  which  the  account
 44    owner is deemed to have last communicated that the owner is currently aware of
 45    his  interest  in the account shall not occur prior to the eighteenth birthday
 46    of the designated beneficiary.

Statement of Purpose / Fiscal Impact

                       STATEMENT OF PURPOSE

                             RS 17932

The College Savings Program Board recently completed a successful
transition to a new program manager. During the transition, the
Board and the incoming program manager determined that minor
adjustments and clarifications to the statutory provisions
governing the program will aid in the administration of the
program. The requested changes to definitions clarify who can own
an account and be identified as a beneficiary and align the
definitions used in the statute with the Internal Revenue Code. The
revisions also clarify the role of the Board in administering the
program and eliminate the requirement that the Board establish
rules duplicating requirements in the Internal Revenue Code. New
language will allow the Board to authorize minors to open accounts.
This will encourage young people to save for their own education.
Lastly, a new section clarifies when dormant accounts will be
subject to the unclaimed property laws.

                           FISCAL NOTE


Name: Liza Carberry, 
Investment Manager, State Treasurer's Office 
Phone: (208) 332-2997

STATEMENT OF PURPOSE/FISCAL NOTE                         H 548