Text: HF02428 Text: HF02430 Text: HF02400 - HF02499 Text: HF Index Bills and Amendments: General Index Bill History: General Index
PAG LIN 1 1 Section 1. Section 12D.1, Code 2003, is amended to read as 1 2 follows: 1 3 12D.1 PURPOSE AND DEFINITIONS. 1 4 The general assembly finds that the general welfare and 1 5 well-being of the state are directly related to educational 1 6 levels and skills of the citizens of the state, and that a 1 7 vital and valid public purpose is served by the creation and 1 8 implementation of programs which encourage and make possible 1 9 the attainment of higher education by the greatest number of 1 10 citizens of the state. The state has limited resources to 1 11 provide additional programs for higher education funding and 1 12 the continued operation and maintenance of the state's public 1 13 institutions of higher education and the general welfare of 1 14 the citizens of the state will be enhanced by establishing a 1 15 program which allows citizens of the state to invest money in 1 16 a public trust for future application to the payment of higher 1 17 education costs. The creation of the means of encouragement 1 18 for citizens to invest in such a program represents the 1 19 carrying out of a vital and valid public purpose. In order to 1 20 make available to the citizens of the state an opportunity to 1 21 fund future higher education needs, it is necessary that a 1 22 public trust be established in which moneys may be invested 1 23 for future educational use.It is also necessary to establish1 24an endowment fund which may be funded with public funds, among1 25other sources, the income from which will be made available to1 26participants in the trust to enhance their savings invested1 27for the payment of future higher education costs.1 28 As used in this chapter, unless the context otherwise 1 29 requires: 1 30 1. "Account balance limit" means the maximum allowable 1 31 aggregate balance of accounts established for the same 1 32 beneficiary. Account earnings, if any, are included in the 1 33 account balance limit. 1 34 2. "Administrative fund" means the administrative fund 1 35 established under section 12D.4. 2 1 3. "Beneficiary" means the individual designated by a 2 2 participation agreement to benefit from advance payments of 2 3 higher education costs on behalf of the beneficiary. 2 4 4. "Benefits" means the payment of higher education costs 2 5 on behalf of a beneficiary by the trust during the 2 6 beneficiary's attendance at an institution of higher 2 7 education. 2 85. "Endowment fund" means the endowment fund established2 9under section 12D.4.2 106.5. "Higher education costs" means the certified costs 2 11 of tuition, fees, books, supplies, and equipment required for 2 12 enrollment or attendance at an institution of higher 2 13 education. Reasonable room and board expenses, based on the 2 14 minimum amount applicable for the institution of higher 2 15 education during the period of enrollment, shall be included 2 16 as a higher education cost for those students enrolled on at 2 17 least a half-time basis. In the case of a special needs 2 18 beneficiary, expenses for special needs services incurred in 2 19 connection with enrollment or attendance at an institution of 2 20 higher education shall be included as a higher education cost. 2 217.6. "Institution of higher education" means an 2 22 institution described in section 481 of the federal Higher 2 23 Education Act of 1965, 20 U.S.C. } 1088, which is eligible to 2 24 participate in the United States department of education's 2 25 student aid programs. 2 268.7. "Internal Revenue Code" means the same as defined in 2 27 section 422.3. 2 289.8. "Iowa educational savings plan trust" or "trust" 2 29 means the trust created under section 12D.2. 2 3010.9. "Participant" means an individual,or an2 31 individual's legal representative,whotrust, or estate that 2 32 has entered into a participation agreement under this chapter 2 33 for the advance payment of higher education costs on behalf of 2 34 a beneficiary. 2 3511.10. "Participation agreement" means an agreement 3 1 between a participant and the trust entered into under this 3 2 chapter. 3 312.11. "Program fund" means the program fund established 3 4 under section 12D.4. 3 513. "Refund penalty" means the amount assessed by the3 6treasurer of state for cancellation of a participation3 7agreement which is not considered a de minimus penalty3 8pursuant to section 529 of the Internal Revenue Code.3 914.12. "Tuition and fees" means the quarter or semester 3 10 charges imposed to attend an institution of higher education 3 11 and required as a condition of enrollment. 3 12 Sec. 2. Section 12D.2, subsection 4, Code 2003, is amended 3 13 to read as follows: 3 14 4. Accept any grants, gifts, legislative appropriations, 3 15 and other moneys from the state, any unit of federal, state, 3 16 or local government, or any other person, firm, partnership, 3 17 or corporation which the treasurer of state shall deposit into 3 18 the administrative fund, the endowment fund,or the program 3 19 fund. 3 20 Sec. 3. Section 12D.2, subsection 8, Code 2003, is amended 3 21 by striking the subsection. 3 22 Sec. 4. Section 12D.2, subsection 10, Code 2003, is 3 23 amended to read as follows: 3 24 10. Make payments to institutions of higher education, 3 25 participants, or beneficiaries, pursuant to participation 3 26 agreements on behalf of beneficiaries. 3 27 Sec. 5. Section 12D.2, subsection 11, Code 2003, is 3 28 amended to read as follows: 3 29 11. Make refunds to participants upon the termination of 3 30 participation agreements, and partial nonqualified 3 31 distributions to participants, pursuant to the provisions, 3 32 limitations, and restrictions set forth in this chapter. 3 33 Sec. 6. Section 12D.2, subsection 12, Code 2003, is 3 34 amended to read as follows: 3 35 12. Invest moneys fromthe endowment fund andthe program 4 1 fund in any investments which are determined by the treasurer 4 2 of state to be appropriate. 4 3 Sec. 7. Section 12D.3, subsection 1, paragraph a, Code 4 4 2003, is amended to read as follows: 4 5 a. Each participation agreement may require a participant 4 6 to agree to invest a specific amount of money in the trust for 4 7 a specific period of time for the benefit of a specific 4 8 beneficiary. A participant shall not be required to make an 4 9 annual contribution on behalf of a beneficiary.The minimum4 10contribution per beneficiary per year, in a year in which a4 11participant is making a contribution, shall be fifty dollars.4 12 The maximum contribution that may be deducted for Iowa income 4 13 tax purposes shall not exceed two thousand dollars per 4 14 beneficiary per year adjusted annually to reflect increases in 4 15 the consumer price index. The treasurer of state shall set an 4 16 account balance limit to maintain compliance with section 529 4 17 of the Internal Revenue Code. A contribution shall not be 4 18 permitted to the extent it causes the aggregate balance of all 4 19 accounts established for the same beneficiary to exceed the 4 20 applicable account balance limit. 4 21 Sec. 8. Section 12D.3, subsections 2 and 3, Code 2003, are 4 22 amended by striking the subsections. 4 23 Sec. 9. Section 12D.4, Code 2003, is amended by striking 4 24 the section and inserting in lieu thereof the following: 4 25 12D.4 PROGRAM AND ADMINISTRATIVE FUNDS – INVESTMENT AND 4 26 PAYMENTS. 4 27 1. a. The treasurer of state shall segregate moneys 4 28 received by the trust into two funds: the program fund and 4 29 the administrative fund. 4 30 b. All moneys paid by participants in connection with 4 31 participation agreements shall be deposited as received into 4 32 separate accounts within the program fund. 4 33 c. Contributions to the trust made by participants may 4 34 only be made in the form of cash. 4 35 d. A participant or beneficiary shall not provide 5 1 investment direction regarding program contributions or 5 2 earnings held by the trust. 5 3 2. Moneys accrued by participants in the program fund of 5 4 the trust may be used for payments to any institution of 5 5 higher education. Payments can be made to the institution, 5 6 the participant, or the beneficiary. 5 7 Sec. 10. Section 12D.5, Code Supplement 2003, is amended 5 8 by striking the section and inserting in lieu thereof the 5 9 following: 5 10 12D.5 CANCELLATION OF AGREEMENTS. 5 11 A participant may cancel a participation agreement at will. 5 12 Upon cancellation of a participation agreement, a participant 5 13 shall be entitled to the return of the participant's account 5 14 balance. 5 15 Sec. 11. Section 12D.6, subsection 2, Code 2003, is 5 16 amended to read as follows: 5 17 2. In the event the program is terminated prior to payment 5 18 of higher education costs for the beneficiary, the participant 5 19 is entitled to a refund of the participant's account balance. 5 20No right to receive investment income shall exist in cases5 21of voluntary participant cancellation except as provided in5 22section 12D.5.5 23 Sec. 12. Section 12D.6, subsection 3, Code 2003, is 5 24 amended by striking the subsection. 5 25 Sec. 13. Section 12D.9, subsection 1, paragraphs d and e, 5 26 Code Supplement 2003, are amended to read as follows: 5 27 d. Pursuant to section 12D.4, subsection 1, paragraph"f"5 28 "c", contributions may only be made in the form of cash. 5 29 e. Pursuant to section 12D.4, subsection 1, paragraph"g"5 30 "d", a participant or beneficiary shall not provide investment 5 31 direction regarding program contributions or earnings held by 5 32 the trust. 5 33 Sec. 14. Section 12D.9, subsection 1, paragraph f, Code 5 34 Supplement 2003, is amended by striking the paragraph. 5 35 Sec. 15. Section 12D.10, subsection 1, Code 2003, is 6 1 amended to read as follows: 6 2 1. The assets of the trust, including the program fund and6 3the endowment fund,shall at all times be preserved, invested, 6 4 and expended solely and only for the purposes of the trust and 6 5 shall be held in trust for the participants and beneficiaries. 6 6 Sec. 16. LEGISLATIVE INTENT. It is the intent of the 6 7 general assembly that the treasurer of state shall establish 6 8 an additional educational savings plan option, to be marketed 6 9 through licensed securities agents, by December 31, 2005. 6 10 Licensed securities agents marketing the optional program may 6 11 be compensated from the product distributor, fund company, 6 12 insurance company, or other distribution agent for their 6 13 activities in marketing and advising investors regarding the 6 14 program. 6 15 EXPLANATION 6 16 This bill makes several technical and substantive changes 6 17 regarding the operation of the Iowa educational savings plan 6 18 trust pursuant to Code chapter 12D. 6 19 The bill eliminates the endowment fund which is currently 6 20 established pursuant to Code section 12D.4, and deletes 6 21 references to that fund throughout Code chapter 12D. The bill 6 22 additionally eliminates provisions establishing a penalty 6 23 assessed by the treasurer of state for cancellation of a 6 24 participation agreement. The inclusion of penalty provisions 6 25 had previously been required in order for plan qualification 6 26 pursuant to section 529 of the Internal Revenue Code, but is 6 27 no longer necessary due to the incorporation of such 6 28 provisions in federal tax legislation. The bill further 6 29 eliminates age restrictions which currently limit plan 6 30 participation to individuals establishing an account for a 6 31 child prior to the child's attainment of age 18. Such 6 32 restrictions are not required for plan qualification pursuant 6 33 to section 529 of the Internal Revenue Code. Consistent with 6 34 the elimination of beneficiary age restrictions, the bill 6 35 additionally eliminates a provision providing for a refund of 7 1 a participant's account balance remaining in the account after 7 2 the 30-day period following the beneficiary's thirtieth 7 3 birthday. 7 4 The bill also adjusts current plan provisions to promote 7 5 clarity or increase flexibility. The bill adds a provision to 7 6 the definition of "higher education costs" providing that such 7 7 costs include, in the case of a special needs beneficiary, 7 8 expenses for special needs services incurred in connection 7 9 with enrollment or attendance at an institution of higher 7 10 education. The bill allows payments to be made by the 7 11 treasurer of state not only to institutions of higher 7 12 learning, as currently provided for in Code chapter 12D, but 7 13 also to the participant and the beneficiary of the plan. The 7 14 bill eliminates the current minimum contribution limit of $50 7 15 per year, and deletes provisions which currently limit 7 16 participation to individuals, thereby authorizing 7 17 participation by entities such as trusts or estates. 7 18 Additionally, the bill provides that refunds to participants 7 19 made upon the termination of participation agreements can 7 20 include or extend to a partial nonqualified distribution. 7 21 The bill also provides intent language regarding the 7 22 establishment by the treasurer of state of an additional 7 23 educational savings plan option. The bill provides that the 7 24 additional option shall be marketed through licensed 7 25 securities agents, who may be compensated from the product 7 26 distributor, fund company, insurance company, or other 7 27 distribution agent for their activities in marketing and 7 28 advising investors regarding the program. The bill provides 7 29 that the additional option shall be established by December 7 30 31, 2005. 7 31 LSB 6103HH 80 7 32 rn/sh/8.1
Text: HF02428 Text: HF02430 Text: HF02400 - HF02499 Text: HF Index Bills and Amendments: General Index Bill History: General Index
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