12DIOWA EDUCATIONAL SAVINGS PLAN TRUST12D.1Purpose and definitions.1The general assembly finds that the general welfare and well-being of the state are directly related to educational levels and skills of the citizens of the state, and that a vital and valid public purpose is served by the creation and implementation of programs which encourage and make possible the attainment of formal education by the greatest number of citizens of the state. The general welfare of the citizens of the state will be enhanced by establishing a program which allows citizens of the state to invest money in a public trust for future application to the payment of qualified education expenses. The creation of the means of encouragement for citizens to invest in such a program represents the carrying out of a vital and valid public purpose. In order to make available to the citizens of the state an opportunity to fund future formal education needs, it is necessary that a public trust be established in which moneys may be invested for future educational use.2As used in this chapter, unless the context otherwise requires:a“Account balance limit” means the maximum allowable aggregate balance of accounts established for the same beneficiary. Account earnings, if any, are included in the account balance limit.b“Administrative fund” means the administrative fund established under section 12D.4.c“Beneficiary” means the individual designated by a participation agreement to benefit from advance payments of qualified education expenses on behalf of the beneficiary.d“Benefits” means the payment of qualified education expenses on behalf of a beneficiary by the trust during the beneficiary’s attendance at a qualified educational institution.e“Institution of higher education” means an institution described in section 481 of the federal Higher Education Act of 1965, 20 U.S.C. §1088, which is eligible to participate in the United States department of education’s student aid programs.f“Internal Revenue Code” means the same as defined in section 12I.1.g“Iowa educational savings plan trust” or “trust” means the trust created under section 12D.2.h“Participant” means an individual, individual’s legal representative, trust, estate, or an organization described in section 501(c)(3) of the Internal Revenue Code and exempt from taxation under section 501(a) of the Internal Revenue Code, that has entered into a participation agreement under this chapter for the advance payment of qualified education expenses on behalf of a beneficiary.i“Participation agreement” means an agreement between a participant and the trust entered into under this chapter.j“Program fund” means the program fund established under section 12D.4.k“Qualified education expenses” means the same as “qualified higher education expenses” as defined in section 529(e)(3) of the Internal Revenue Code, as amended by Pub. L. No. 115-97, and shall include elementary and secondary school expenses for tuition described in section 529(c)(7) of the Internal Revenue Code, subject to the limitations imposed by section 529(e)(3)(A) of the Internal Revenue Code. “Qualified education expenses” includes expenses for the participation in an apprenticeship program registered and certified with the United States secretary of labor under section 1 of the National Apprenticeship Act, 29 U.S.C. §50, and amounts paid as principal or interest on any qualified education loan on behalf of a beneficiary or a sibling of the beneficiary, subject to the limitations imposed by section 529(c)(9)(B) and (C) of the Internal Revenue Code.l“Qualified education loan” means the same as “qualified education loan” as defined in section 221(d) of the Internal Revenue Code.m“Qualified educational institution” means an institution of higher education, or any elementary or secondary public, private, or religious school described in section 529(c)(7) of the Internal Revenue Code.n“Sibling” means a brother, sister, stepbrother, or stepsister of the beneficiary.o“Tuition” means the quarter, semester, or annual charges imposed to attend a qualified educational institution and required as a condition of enrollment or attendance.98 Acts, ch 1172, §1; 2000 Acts, ch 1163, §1, 6; 2004 Acts, ch 1079, §1, 17; 2008 Acts, ch 1032, §201; 2016 Acts, ch 1107, §1, 2, 5; 2018 Acts, ch 1161, §135, 147, 148; 2020 Acts, ch 1118, §127, 128, 131, 13212D.2Creation of Iowa educational savings plan trust.An Iowa educational savings plan trust is created. The treasurer of state is the trustee of the trust, and has all powers necessary to carry out and effectuate the purposes, objectives, and provisions of this chapter pertaining to the trust, including the power to do all of the following:1Make and enter into contracts necessary for the administration of the trust created under this chapter.2Enter into agreements with any qualified educational institution, the state, or any federal or other state agency, or other entity as required to implement this chapter.3Carry out the duties and obligations of the trust pursuant to this chapter.4Accept any grants, gifts, legislative appropriations, and other moneys from the state, any unit of federal, state, or local government, or any other person, firm, partnership, or corporation which the treasurer of state shall deposit into the administrative fund or the program fund.5Carry out studies and projections so the treasurer of state may advise participants regarding present and estimated future qualified education expenses and levels of financial participation in the trust required in order to enable participants to achieve their educational funding objectives.6Participate in any federal, state, or local governmental program for the benefit of the trust.7Procure insurance against any loss in connection with the property, assets, or activities of the trust.8Enter into participation agreements with participants.9Make payments to qualified educational institutions, participants, or beneficiaries, pursuant to participation agreements on behalf of beneficiaries.10Make refunds to participants upon the termination of participation agreements, and partial nonqualified distributions to participants, pursuant to the provisions, limitations, and restrictions set forth in this chapter.11Invest moneys from the program fund in any investments which are determined by the treasurer of state to be appropriate.12Engage investment advisors, if necessary, to assist in the investment of trust assets.13Contract for goods and services and engage personnel as necessary, including consultants, actuaries, managers, legal counsel, and auditors for the purpose of rendering professional, managerial, and technical assistance and advice to the treasurer of state regarding trust administration and operation.14Establish, impose, and collect administrative fees and charges in connection with transactions of the trust, and provide for reasonable service charges.15Administer the funds of the trust.16Adopt rules pursuant to chapter 17A for the administration of the trust.98 Acts, ch 1172, §2; 99 Acts, ch 114, §1; 99 Acts, ch 122, §1, 10; 2004 Acts, ch 1079, §2 – 6, 17; 2018 Acts, ch 1161, §136, 147, 14812D.3Participation agreements for trust.The trust may enter into participation agreements with participants on behalf of beneficiaries pursuant to the following terms and agreements:1Each participation agreement may require a participant to agree to invest a specific amount of money in the trust for a specific period of time for the benefit of a specific beneficiary. A participant shall not be required to make an annual contribution on behalf of a beneficiary. The maximum contribution that may be deducted for Iowa income tax purposes shall not exceed five thousand five hundred dollars per beneficiary per year adjusted annually to reflect increases in the consumer price index. The treasurer of state shall set an account balance limit to maintain compliance with section 529 of the Internal Revenue Code. A contribution shall not be permitted to the extent it causes the aggregate balance of all accounts established for the same beneficiary under the trust to exceed the applicable account balance limit.2The execution of a participation agreement by the trust shall not guarantee in any way that qualified education expenses will be equal to projections and estimates provided by the trust or that the beneficiary named in any participation agreement will attain any of the following:aBe admitted to a qualified educational institution.bIf admitted, be determined a resident for tuition purposes by the qualified educational institution.cBe allowed to continue attendance at the qualified educational institution following admission.dGraduate from the qualified educational institution.3aA beneficiary under a participation agreement may be changed as permitted under rules adopted by the treasurer of state upon written request of the participant as long as the substitute beneficiary is eligible for participation.bParticipation agreements may otherwise be freely amended throughout their terms in order to enable participants to increase or decrease the level of participation, change the designation of beneficiaries, and carry out similar matters as authorized by rule.4Each participation agreement shall provide that the participation agreement may be canceled upon the terms and conditions, and upon payment of applicable fees and costs set forth and contained in the rules adopted by the treasurer of state.5A participant may designate a successor in accordance with rules adopted by the treasurer of state. The designated successor shall succeed to the ownership of the account in the event of the death of the participant. In the event a participant dies and has not designated a successor to the account, the following criteria shall apply:aThe beneficiary of the account, if eighteen years of age or older, shall become the owner of the account as well as remain the beneficiary upon filing the appropriate forms in accordance with rules adopted by the treasurer of state.bIf the beneficiary of the account is under the age of eighteen, account ownership shall be transferred to the first surviving parent or other legal guardian of the beneficiary to file the appropriate forms in accordance with rules adopted by the treasurer of state.98 Acts, ch 1172, §3; 99 Acts, ch 122, §2 – 4, 10; 2000 Acts, ch 1163, §2 – 4, 6; 2004 Acts, ch 1079, §7, 8, 17; 2018 Acts, ch 1161, §137, 138, 147, 148; 2024 Acts, ch 1147, §1, 32024 amendment to subsection 1 applies retroactively to January 1, 2024, for tax years beginning on or after that date; 2024 Acts, ch 1147, §312D.4Program and administrative funds investment and payments.1aThe treasurer of state shall segregate moneys received by the trust into two funds:the program fund and the administrative fund.bAll moneys paid by participants in connection with participation agreements shall be deposited as received into separate accounts within the program fund.cContributions to the trust made by participants may only be made in the form of cash.dA participant or beneficiary may, directly or indirectly, direct the investment of any contributions to the trust or any earnings thereon no more than two times in a calendar year.eThe amount of cash distributions from the trust and all other qualified state tuition programs under section 529 of the Internal Revenue Code to a beneficiary during any taxable year shall, in the aggregate, include no more than ten thousand dollars in expenses for tuition in connection with enrollment at an elementary or secondary public, private, or religious school incurred during the taxable year.2Moneys accrued by participants in the program fund of the trust may be used for payments to any qualified educational institution. Payments can be made to the qualified educational institution, the participant, or the beneficiary.98 Acts, ch 1172, §4; 2004 Acts, ch 1079, §9, 17; 2018 Acts, ch 1161, §139, 147, 14812D.4AAdministrative fund — appropriation.Repealed by 2000 Acts, ch 1231, §39; 2001 Acts, ch 24, §72, 74. 12D.5Cancellation of agreements.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.98 Acts, ch 1172, §5; 99 Acts, ch 96, §1; 99 Acts, ch 122, §6, 7, 10; 2003 Acts, ch 142, §1, 11; 2004 Acts, ch 1079, §10, 1712D.6Repayment and ownership of payments and investment income — transfer of ownership rights.1aA participant retains ownership of all payments made under a participation agreement up to the date of utilization for payment of qualified education expenses for the beneficiary.bAll income derived from the investment of the payments made by the participant shall be considered to be held in trust for the benefit of the beneficiary.2In the event the program is terminated prior to payment of qualified education expenses for the beneficiary, the participant is entitled to a refund of the participant’s account balance.3The qualified educational institution shall obtain ownership of the payments made for the qualified education expenses paid to the institution at the time each payment is made to the institution.4Any amounts which may be paid to any person or persons pursuant to the Iowa educational savings plan trust but which are not listed in this section are owned by the trust.5A participant may transfer ownership rights to another participant, or may transfer funds to another plan under the trust or to an ABLE account as permitted under section 529(c)(3)(C) of the Internal Revenue Code. The transfer shall be made and the property distributed in accordance with rules adopted by the treasurer of state or with the terms of the participation agreement.6A participant shall not be entitled to utilize any interest in the trust as security for a loan.98 Acts, ch 1172, §6; 99 Acts, ch 96, §2; 99 Acts, ch 114, §2; 99 Acts, ch 122, §8, 10; 2004 Acts, ch 1079, §11, 12, 17; 2018 Acts, ch 1161, §140, 141, 147, 14812D.7Effect of payments on determination of need and eligibility for student financial aid.A student loan program, student grant program, or other program administered by any agency of the state, except as may be otherwise provided by federal law or the provisions of any specific grant applicable to that law, shall not take into account and shall not consider amounts available for the payment of qualified education expenses pursuant to the Iowa educational savings plan trust in determining need and eligibility for student aid.98 Acts, ch 1172, §7; 2018 Acts, ch 1161, §142, 147, 14812D.8Annual audited financial report to governor and general assembly.1aThe treasurer of state shall submit an annual audited financial report, prepared in accordance with generally accepted accounting principles, on the operations of the trust by November 1 to the governor and the general assembly.bThe annual audit shall be made either by the auditor of state or by an independent certified public accountant designated by the auditor of state and shall include direct and indirect costs attributable to the use of outside consultants, independent contractors, and any other persons who are not state employees.2The annual audit shall be supplemented by all of the following information prepared by the treasurer of state:aAny related studies or evaluations prepared in the preceding year.bA summary of the benefits provided by the trust including the number of participants and beneficiaries in the trust.cAny other information which is relevant in order to make a full, fair, and effective disclosure of the operations of the trust.98 Acts, ch 1172, §8; 2008 Acts, ch 1032, §20112D.9Tax considerations.1For federal income tax purposes, the Iowa educational savings plan trust shall be considered a qualified state tuition program exempt from taxation pursuant to section 529 of the Internal Revenue Code. The Iowa educational savings plan trust meets the requirements of section 529(b), of the Internal Revenue Code, as follows:aPursuant to section 12D.3, subsection 1, a participant may make contributions to an account which is established for the purpose of meeting the qualified education expenses of the designated beneficiary of the account.bPursuant to section 12D.3, subsection 1, a maximum contribution level is established.cPursuant to section 12D.4, subsection 1, paragraph “b”, a separate account is established for each beneficiary.dPursuant to section 12D.4, subsection 1, paragraph “c”, contributions may only be made in the form of cash.ePursuant to section 12D.4, subsection 1, paragraph “d”, a participant or beneficiary shall not provide investment direction regarding program contributions or earnings held by the trust.fPursuant to section 12D.6, subsection 6, a participant shall not pledge any interest in the trust as security for a loan.2State income tax treatment of the Iowa educational savings plan trust shall be as provided in section 422.7, subsections 11, 22, and 23.3For a death occurring before January 1, 2025, state inheritance tax treatment of interests in Iowa educational savings plans shall be as provided in section 450.4, subsection 8. This subsection shall apply to all Iowa educational savings plans existing on or after July 1, 1998.98 Acts, ch 1172, §9; 99 Acts, ch 122, §9, 10; 2003 Acts, ch 142, §2, 11; 2004 Acts, ch 1079, §13, 14, 17; 2005 Acts, ch 179, §107; 2008 Acts, ch 1164, §1; 2018 Acts, ch 1161, §99, 133, 134, 143, 147, 148; 2021 Acts, ch 177, §1; 2025 Acts, ch 148, §24, 53, 542018 amendment to subsection 2 is effective January 1, 2023, and applies to tax years beginning on or after that date; 2018 Acts, ch 1161, §133, 134; 2021 Acts, ch 177, §12025 amendment to subsection 3 applies retroactively to January 1, 2025, to the estates of decedents dying on or after January 1, 2025; 2025 Acts, ch 148, §54Subsection 3 amended12D.10Property rights to assets in trust.1The assets of the trust shall at all times be preserved, invested, and expended solely and only for the purposes of the trust and shall be held in trust for the participants and beneficiaries.2No property rights in the trust shall exist in favor of the state.3The assets of the trust shall not be transferred or used by the state for any purposes other than the purposes of the trust.98 Acts, ch 1172, §10; 2004 Acts, ch 1079, §15, 1712D.11Construction.This chapter shall be construed liberally in order to effectuate its purpose.98 Acts, ch 1172, §11