1. A participant may cancel a participation agreement at will. Upon cancellation of a participation agreement, a participant shall be entitled to the return of the participant's account balance, less endowment fund investment earnings, and less a refund penalty levied by the trust against the participant's account balance earnings, if any. The penalty shall be deposited into the administrative fund.
2. a. Upon the occurrence of any of the following circumstances, no refund penalty shall be levied by the trust in the event of cancellation of a participation agreement:
b. In the event of cancellation of a participation agreement for any of the causes listed in paragraph "a", the participant shall be entitled to receive the participant's account balance, less endowment fund investment income.
(1) Death of the beneficiary.
(2) Permanent disability or mental incapacity of the beneficiary.
(3) The beneficiary is awarded a scholarship, as defined in section 529 of the Internal Revenue Code, but only to the extent the refund of earnings does not exceed the scholarship amount.
(4) Attendance of the designated beneficiary at the United States military academy, the United States naval academy, the United States air force academy, the United States coast guard academy, or the United States merchant marine academy, to the extent that the amount of the payment or distribution does not exceed the costs of advanced education, as defined by 10 U.S.C. § 2005(e)(3), as in effect on the date of the enactment of this subparagraph, attributable to such attendance.
98 Acts, ch 1172, §5; 99 Acts, ch 96, § 1; 99 Acts, ch 122, §6, 7, 10; 2003 Acts, ch 142, §1, 11
1999 amendments to subsection 1 and subsection 2, paragraph b, apply retroactively to July 1, 1998; 99 Acts, ch 122, § 10
2003 amendment adding new subparagraph (4) to paragraph a of subsection 2 takes effect May 21, 2003, and applies retroactively to tax years beginning on or after January 1, 2003; 2003 Acts, ch 142, § 11
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