PRIOR PRINTER'S NO. 871 PRINTER'S NO. 1406
No. 8 Session of 1999
INTRODUCED BY JUBELIRER, SALVATORE, EARLL, WHITE, BRIGHTBILL,
HOLL, LEMMOND, MUSTO, COSTA, PUNT, DENT, MURPHY, CONTI,
STOUT, WAGNER, TARTAGLIONE, TILGHMAN, KUKOVICH, HELFRICK,
O'PAKE, THOMPSON, ROBBINS, GERLACH, SCHWARTZ, MELLOW, WENGER,
WAUGH, CORMAN, FUMO, BOSCOLA, RHOADES AND HUGHES,
APRIL 13, 1999
SENATOR LOEPER, RULES AND EXECUTIVE NOMINATIONS, RE-REPORTED AS
AMENDED, OCTOBER 18, 1999
AN ACT
1 Amending the act of April 3, 1992 (P.L.28, No.11), entitled "An
2 act providing for the advance purchase of tuition at certain
3 institutions of higher education; establishing the Tuition
4 Account Program Bureau within the Treasury Department and
5 providing duties for the Treasury Department; establishing
6 the tuition payment fund; providing for tuition account
7 payment contracts; providing for the issuance and sale of
8 certain bonds; and further providing for duties of the
9 Pennsylvania Higher Education Assistance Agency," EXPANDING <--
10 THE SCOPE OF THE ACT; further providing for the tuition <--
11 account program TUITION ACCOUNT PROGRAMS; and establishing <--
12 scholarship programs.
13 The General Assembly of the Commonwealth of Pennsylvania
14 hereby enacts as follows:
15 Section 1. Sections 301(5), 302, 303, 304(c), 305, 306(a) <--
16 and (b), 307(b), 308, 309, 310, 311, 312, 313 and 316 of the act
17 of April 3, 1992 (P.L.28, No.11), known as the Tuition Account
18 Program and College Savings Bond Act, are amended to read:
19 SECTION 1. THE TITLE AND SECTION 101 OF THE ACT OF APRIL 3, <--
20 1992 (P.L.28, NO.11), KNOWN AS THE TUITION ACCOUNT PROGRAM AND
1 COLLEGE SAVINGS BOND ACT, ARE AMENDED TO READ:
2 AN ACT
3 PROVIDING FOR THE [ADVANCE PURCHASE OF TUITION AT CERTAIN
4 INSTITUTIONS OF HIGHER EDUCATION;] ESTABLISHMENT OF TWO
5 PROGRAMS FOR POSTSECONDARY EDUCATIONAL SAVINGS ACCOUNTS, ONE
6 OF WHICH IS A GUARANTEED SAVINGS PROGRAM AND THE OTHER OF
7 WHICH IS AN INVESTMENT PROGRAM; ESTABLISHING THE TUITION
8 ACCOUNT PROGRAM BUREAU WITHIN THE TREASURY DEPARTMENT AND
9 PROVIDING DUTIES FOR THE TREASURY DEPARTMENT; ESTABLISHING
10 [THE TUITION PAYMENT FUND; PROVIDING FOR TUITION ACCOUNT
11 PAYMENT CONTRACTS; PROVIDING FOR THE ISSUANCE AND SALE OF
12 CERTAIN BONDS;] TUITION ACCOUNT FUNDS; PROVIDING FOR TUITION
13 ACCOUNT PROGRAM CONTRACTS; PROVIDING FOR THE ESTABLISHMENT OF
14 SCHOLARSHIP PROGRAMS; AND FURTHER PROVIDING FOR DUTIES OF THE
15 PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY.
16 SECTION 101. SHORT TITLE.
17 THIS ACT SHALL BE KNOWN AND MAY BE CITED AS THE TUITION
18 ACCOUNT [PROGRAM] PROGRAMS AND COLLEGE SAVINGS BOND ACT.
19 SECTION 2. THE HEADING OF CHAPTER 3 OF THE ACT IS AMENDED TO
20 READ:
21 CHAPTER 3
22 TUITION ACCOUNT [PROGRAM] PROGRAMS
23 SECTION 3. SECTIONS 301(5), 302, 303, 304(A), (C) AND (D),
24 305, 306, 307, 308 AND 309 OF THE ACT ARE AMENDED TO READ:
25 Section 301. Declaration of policy.
26 The General Assembly finds and declares as follows:
27 * * *
28 (5) The purposes of this chapter are to:
29 (i) Provide wide and affordable access to
30 institutions of higher education, both public and
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1 private, for the residents of this Commonwealth.
2 (ii) Encourage attendance at institutions of higher
3 education, both public and private, and help individuals
4 plan for educational expenses.
5 (iii) Provide [a program for the advance purchase of <--
6 tuition] PROGRAMS FOR POSTSECONDARY EDUCATIONAL SAVINGS <--
7 as both a means and an incentive for the citizens of this
8 Commonwealth to provide for future higher education
9 expenses.
10 (iv) Provide to the citizens of this Commonwealth a
11 means of prepurchasing tuition to be used SAVING for <--
12 postsecondary education that provides them with the
13 advantages of a prepaid tuition program through a <--
14 "qualified State tuition program PROGRAMS" as defined by <--
15 section 529 of the Internal Revenue Code of 1986 (Public
16 Law 99-514, 26 U.S.C. § 529).
17 Section 302. Definitions.
18 The following words and phrases when used in this chapter
19 shall have the meanings given to them in this section unless the
20 context clearly indicates otherwise:
21 "Academic period." A semester, trimester or comparable
22 institutional period into which an eligible educational
23 institution divides its academic year.
24 "Academic year." A 12-month period commencing on or after
25 August 1 of the calendar year.
26 "ACCOUNT OWNER." A PERSON, INCLUDING A NATURAL PERSON, <--
27 CORPORATION, ASSOCIATION, PARTNERSHIP OR OTHER LEGAL ENTITY, WHO
28 ENTERS INTO A TUITION ACCOUNT PROGRAM CONTRACT.
29 "Beneficiary." A person who meets the eligibility criteria
30 established by this chapter and by the department and on whose
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1 behalf [a purchaser enters into a tuition account payment <--
2 contract.] AN ACCOUNT OWNER ENTERS INTO A TUITION ACCOUNT <--
3 PROGRAM CONTRACT.
4 "Board." The Tuition Account [Program] PROGRAMS Advisory <--
5 Board.
6 "Department." The Treasury Department of the Commonwealth.
7 "Eligible educational institution." A college, university,
8 vocational or other postsecondary educational institution as
9 defined by section 529 of the Internal Revenue Code of 1986
10 (Public Law 99-514, 26 U.S.C. § 529).
11 "Fund." The Tuition [Payment] Account Program Fund. <--
12 ["FUND." THE TUITION PAYMENT FUND.] <--
13 "FUNDS." THE TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM FUND
14 AND THE TUITION ACCOUNT INVESTMENT PROGRAM FUND.
15 "Lawful investment." Any of those investments described in
16 either 24 Pa.C.S. § 8521 (relating to management of fund and
17 accounts) or 71 Pa.C.S. § 5931 (relating to management of fund
18 and accounts).
19 "Net earnings rate of the [fund] TUITION ACCOUNT GUARANTEED <--
20 SAVINGS PROGRAM FUND." The percentage return of the investment
21 of [fund] TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM FUND assets <--
22 after adjusting for any taxes and operating expenses.
23 "Other educational expense credits." Tuition credits that
24 are converted for payment of qualified higher education expenses
25 other than tuition, as provided in section 309(h).
26 ["Participating institution." Any accredited, degree-
27 granting college or university which is required to participate
28 in the tuition account program under section 308.]
29 "Private institution." Any private or out-of-State public
30 institution that is an eligible educational institution.
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1 "Public institution." Any public eligible educational
2 institution which is required to participate in the tuition <--
3 account program TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM under <--
4 section 308.
5 ["Purchaser." A person, including a natural person, <--
6 corporation, association, partnership or other legal entity, who
7 enters into a tuition account payment contract.] <--
8 "Qualified higher education expenses." Expenses, as defined
9 by section 529 of the Internal Revenue Code of 1986 (Public Law
10 99-514, 26 U.S.C. § 529).
11 "Tuition." The [total of all fees and charges] charge for an
12 academic credit or the credits required for attendance at an
13 [institution of higher education] eligible educational
14 institution for a full-time, undergraduate academic [year,
15 excluding charges for room and board] period.
16 ["Tuition account payment contract." A contract entered into <--
17 by a purchaser and the department on behalf of the Commonwealth
18 to provide for the advance purchase of tuition credits for a
19 beneficiary attending [a participating] an eligible educational <--
20 institution.] <--
21 "TUITION ACCOUNT PROGRAM CONTRACT." A TUITION ACCOUNT <--
22 GUARANTEED SAVINGS PROGRAM CONTRACT OR A TUITION ACCOUNT
23 INVESTMENT PROGRAM CONTRACT ENTERED INTO BY AN ACCOUNT OWNER AND
24 THE DEPARTMENT ON BEHALF OF THE COMMONWEALTH TO PROVIDE FOR
25 SAVINGS TO MEET THE FUTURE QUALIFIED HIGHER EDUCATION EXPENSES
26 OF A BENEFICIARY ATTENDING AN ELIGIBLE EDUCATIONAL INSTITUTION.
27 "Tuition credits." Credits as determined in section 309(c).
28 "Tuition credit purchase prices." The price set by the <--
29 Treasury Department annually for each tuition level for the <--
30 purchase of one tuition credit.
19990S0008B1406 - 5 -
1 "Tuition level." The purchaser's ACCOUNT OWNER'S designation <--
2 of the public or private institution or an average established
3 pursuant to section 309(b), to which payment DEPOSITS made <--
4 pursuant to the tuition account payment contract will be applied <--
5 to purchase tuition credits. A TUITION ACCOUNT GUARANTEED <--
6 SAVINGS PROGRAM CONTRACT WILL BE APPLIED TO DETERMINE THE
7 TUITION CREDIT EQUIVALENT OF THE DEPOSIT.
8 "Tuition shortfall." The [positive] difference between the
9 [tuition for the number of tuition credits used at a
10 participating institution accepting a beneficiary for enrollment
11 and the tuition payment as determined in section 309(g).] amount
12 of the payment authorized by the purchaser ACCOUNT OWNER <--
13 pursuant to section 309(d)(2) or (e)(2) and the available
14 portion of the value of the account.
15 "Value of the account." An amount calculated for an <--
16 individual tuition account payment contract by compounding
17 annually each separate payment for purchase of tuition credits
18 from the time of payment to the date of calculation at the
19 actual annual net earnings rate of the Tuition Account Program
20 Fund.
21 "VALUE OF THE ACCOUNT." FOR DEPOSITS MADE PURSUANT TO A <--
22 TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM CONTRACT, AN AMOUNT
23 CALCULATED BY COMPOUNDING ANNUALLY EACH SEPARATE DEPOSIT FROM
24 THE TIME OF DEPOSIT TO THE DATE OF CALCULATION AT THE ACTUAL
25 ANNUAL NET EARNINGS RATE OF THE TUITION ACCOUNT GUARANTEED
26 SAVINGS PROGRAM FUND. FOR DEPOSITS MADE PURSUANT TO A TUITION
27 ACCOUNT INVESTMENT PROGRAM CONTRACT, AN AMOUNT DETERMINED BY
28 SUBTRACTING EXPENSES, FEES AND TAXES, IF ANY, FROM THE VALUE OF
29 THE TUITION ACCOUNT INVESTMENT PROGRAM FUND AND THEN PRORATING
30 THE REMAINING NET VALUE BY SHARES.
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1 Section 303. Tuition Account Program Bureau.
2 The State Treasurer is directed to establish a bureau within
3 the Treasury Department, which shall be known as the Tuition
4 Account Program Bureau, for the purpose of establishing and
5 administering [the tuition account program. The program shall <--
6 provide for the advance purchase of tuition credits for a
7 beneficiary attending [a participating] an eligible educational <--
8 institution.] TWO PROGRAMS FOR POSTSECONDARY EDUCATIONAL <--
9 SAVINGS, ONE OF WHICH IS A GUARANTEED SAVINGS PROGRAM AND THE
10 OTHER OF WHICH IS AN INVESTMENT PROGRAM. THE GUARANTEED SAVINGS
11 PROGRAM SHALL PROVIDE THAT MONEY MAY BE DEPOSITED PURSUANT TO A
12 TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM CONTRACT FOR THE
13 FUTURE PAYMENT OF QUALIFIED HIGHER EDUCATIONAL EXPENSES FOR
14 ATTENDANCE AT ELIGIBLE EDUCATIONAL INSTITUTIONS AS DESCRIBED IN
15 SECTION 309. MONEY DEPOSITED PURSUANT TO A TUITION ACCOUNT
16 GUARANTEED SAVINGS PROGRAM CONTRACT SHALL INCREASE IN VALUE BY,
17 AT A MINIMUM, THE INCREASE IN THE TUITION CREDIT PRICE AT THE
18 TUITION LEVEL DESIGNATED IN THE CONTRACT. THE INVESTMENT PROGRAM
19 SHALL PROVIDE THAT MONEY MAY BE DEPOSITED PURSUANT TO A TUITION
20 ACCOUNT PROGRAM INVESTMENT CONTRACT FOR THE FUTURE PAYMENT OF
21 QUALIFIED HIGHER EDUCATIONAL EXPENSES FOR ATTENDANCE AT ELIGIBLE
22 EDUCATIONAL INSTITUTIONS AS DESCRIBED IN SECTION 309.1. THE
23 INVESTMENT PROGRAM SHALL HAVE NO GUARANTEE.
24 Section 304. Tuition Account Program Advisory Board.
25 (A) CREATION.--THERE IS CREATED A TUITION ACCOUNT [PROGRAM] <--
26 PROGRAMS ADVISORY BOARD. THE BOARD SHALL BE COMPOSED OF THE
27 STATE TREASURER, THE CHAIRMAN OF THE BOARD OF DIRECTORS OF THE
28 PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY, THE
29 COMMISSIONER OF HIGHER EDUCATION WITHIN THE DEPARTMENT OF
30 EDUCATION, THE CHAIRMAN OF THE COUNCIL OF HIGHER EDUCATION AND
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1 THE CHANCELLOR OF THE STATE SYSTEM OF HIGHER EDUCATION, ALL OF
2 WHOM SHALL BE EX OFFICIO MEMBERS. THERE ALSO SHALL BE 12 OTHER
3 MEMBERS OF THE BOARD. OF THESE 12 OTHER MEMBERS, THREE SHALL BE
4 APPOINTED BY THE PRESIDENT PRO TEMPORE OF THE SENATE, THREE
5 SHALL BE APPOINTED BY THE SPEAKER OF THE HOUSE OF
6 REPRESENTATIVES AND SIX SHALL BE APPOINTED BY THE GOVERNOR. OF
7 THE THREE MEMBERS APPOINTED BY THE PRESIDENT PRO TEMPORE OF THE
8 SENATE, ONE MUST BE A MEMBER OF THE SENATE AND ONE MUST BE
9 RECOMMENDED BY THE MINORITY LEADER OF THE SENATE. OF THE THREE
10 MEMBERS APPOINTED BY THE SPEAKER OF THE HOUSE OF
11 REPRESENTATIVES, ONE MUST BE A MEMBER OF THE HOUSE OF
12 REPRESENTATIVES AND ONE MUST BE RECOMMENDED BY THE MINORITY
13 LEADER OF THE HOUSE OF REPRESENTATIVES. THE REMAINING MEMBERS OF
14 THE BOARD APPOINTED BY THE PRESIDENT PRO TEMPORE OF THE SENATE
15 AND THE SPEAKER OF THE HOUSE OF REPRESENTATIVES MUST HAVE
16 KNOWLEDGE, SKILL AND EXPERTISE IN FINANCIAL AFFAIRS. OF THE SIX
17 MEMBERS APPOINTED BY THE GOVERNOR, ONE MUST BE THE PRESIDENT OF
18 A STATE-RELATED INSTITUTION; ONE MUST BE THE PRESIDENT OF ONE OF
19 THE INSTITUTIONS OPERATING UNDER ARTICLE XIX-A OF THE ACT OF
20 MARCH 10, 1949 (P.L.30, NO.14), KNOWN AS THE PUBLIC SCHOOL CODE
21 OF 1949; ONE MUST BE THE PRESIDENT OF A UNIVERSITY IN THE STATE
22 SYSTEM OF HIGHER EDUCATION; AND ONE MUST BE A PRESIDENT OF A
23 PRIVATE OR INDEPENDENT FOUR-YEAR, DEGREE-GRANTING COLLEGE OR
24 UNIVERSITY LOCATED WITHIN THIS COMMONWEALTH.
25 * * *
26 (c) Organizational meeting.--The Commissioner of Higher
27 Education shall call the organizational meeting of the board, at
28 which time a [chairman] chairperson shall be selected from among
29 the members. If a vacancy in the office of chairperson occurs,
30 such vacancy shall be filled by a selection from among the
19990S0008B1406 - 8 -
1 members. Meetings of the board shall be held at least quarterly
2 or at the call of the [chairman] chairperson.
3 (D) DUTIES.--THE BOARD SHALL CONSIDER, STUDY AND REVIEW THE <--
4 WORK OF THE TUITION ACCOUNT [PROGRAM] PROGRAMS BUREAU, SHALL
5 ADVISE THE DEPARTMENT ON REQUEST AND SHALL MAKE RECOMMENDATIONS
6 ON ITS OWN INITIATIVE FOR THE IMPROVEMENT OF THE TUITION ACCOUNT
7 [PROGRAM] PROGRAMS. THE BOARD SHALL REPORT ANNUALLY TO THE
8 GOVERNOR AND TO THE GENERAL ASSEMBLY, AND MAY MAKE SUCH INTERIM
9 REPORTS AS ARE DEEMED ADVISABLE.
10 * * *
11 Section 305. Powers of department.
12 In addition to the powers granted by other provisions of this
13 chapter, the department shall have the powers necessary or
14 convenient to carry out this chapter, including, but not limited
15 to, the power to:
16 (1) Administer the tuition account [program and the <--
17 fund.] PROGRAMS AND THE FUNDS. <--
18 (2) Enter into [tuition account payment contracts with <--
19 purchasers.] TUITION ACCOUNT PROGRAM CONTRACTS WITH ACCOUNT <--
20 OWNERS.
21 (3) Contract and make any agreements or arrangements
22 necessary with eligible educational institutions [of higher
23 education].
24 (4) Pay directly to an eligible educational institution,
25 a purchaser AN ACCOUNT OWNER, a beneficiary or a third party <--
26 authorized by the purchaser ACCOUNT OWNER, upon the receipt <--
27 of appropriate documentation, the funds which the department
28 is obligated to [transfer to the institution] pay upon a <--
29 beneficiary's use of tuition credits.] PAY PURSUANT TO A <--
30 TUITION ACCOUNT PROGRAM CONTRACT.
19990S0008B1406 - 9 -
1 (5) Contract for goods and services, and engage and
2 employ personnel, including, but not limited to, the services
3 of private consultants, actuaries, managers, legal counsel
4 and auditors for rendering professional, managerial and
5 technical assistance and advice.
6 (6) Solicit and accept gifts, grants, loans and other
7 aid from any person, corporation or other entity or from
8 Federal, State or local government and participate in any
9 Federal, State or local government program, if necessary for
10 prudent management or the establishment and administration of
11 a scholarship program.
12 (7) Charge and collect administrative fees and charges
13 in connection with any transaction, including continued
14 participation in [the] tuition account [program] PROGRAMS. <--
15 (8) Terminate tuition accounts and make refunds.
16 (9) Contract for insurance, letters of credit and
17 collateral agreements.
18 (10) Restrict the number of participants in the
19 [program] PROGRAMS. <--
20 (11) Adjust the terms of [subsequent] tuition account <--
21 payment contracts.] TUITION ACCOUNT PROGRAM CONTRACTS. <--
22 (12) Solicit answers from the appropriate Federal
23 agencies regarding the application of security or other
24 Federal laws to the program.
25 (13) Limit the times and dates during which [tuition <--
26 account payment contracts may be sold.] TUITION PAYMENT <--
27 PROGRAM CONTRACTS MAY BE ENTERED INTO.
28 (14) Consider means whereby [a purchaser may have <--
29 installment payments] AN ACCOUNT OWNER MAY HAVE DEPOSITS <--
30 deducted from salary.
19990S0008B1406 - 10 -
1 (15) Promulgate regulations.
2 (16) Notwithstanding any other provision of this act,
3 administer the tuition account program PROGRAMS in such <--
4 manner as to ensure and maintain its THEIR status as a <--
5 "qualified State tuition program PROGRAMS" as defined in <--
6 section 529 of the Internal Revenue Code of 1986 (Public Law,
7 26 U.S.C. § 529).
8 Section 306. Tuition [Payment] Account Program Fund. FUND.] <--
9 ACCOUNT PROGRAM FUNDS.
10 (a) Establishment.--There [is] ARE established in the State <--
11 Treasury [a special fund] TWO SPECIAL FUNDS to be known as the <--
12 Tuition [Payment] Account Program Fund. This fund shall be <--
13 invested in accordance with this chapter. All money in the fund
14 is hereby appropriated] ACCOUNT GUARANTEED SAVINGS PROGRAM FUND <--
15 AND THE TUITION ACCOUNT INVESTMENT PROGRAM FUND. THE MONEY IN
16 THESE FUNDS SHALL BE INVESTED IN ACCORDANCE WITH THIS CHAPTER.
17 ALL MONEY IN EACH OF THE FUNDS IS HEREBY APPROPRIATED to the
18 department on a continuing basis to carry out the provisions of
19 this chapter.
20 (b) Administration.--
21 (1) The assets of [the fund] EACH OF THE FUNDS shall be <--
22 preserved, invested and expended solely pursuant to and for
23 the purposes set forth in this chapter.
24 (2) The department shall obtain appropriate actuarial
25 assistance to establish, maintain and certify that the [fund] <--
26 TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM FUND is sufficient <--
27 to defray [the tuition account program's] ITS obligations and <--
28 shall annually evaluate, or cause to be evaluated, [the] ITS <--
29 actuarial soundness [of the fund]. If the department finds a <--
30 need for additional assets in order to preserve actuarial
19990S0008B1406 - 11 -
1 soundness [or if the department finds that actuarial
2 soundness can be maintained with fewer assets], it may adjust
3 the [purchase prices of the] tuition [credits calculated
4 under section 309(c)(3)] credit purchase prices to ensure <--
5 such soundness. If the department finds that actuarial
6 soundness can be maintained with fewer assets, it may adjust
7 the tuition credit purchase prices or distribute surplus <--
8 assets in excess of those needed to maintain the actuarial
9 soundness of the fund TUITION ACCOUNT GUARANTEED SAVINGS <--
10 PROGRAM FUND as specified in paragraph (2.1)
11 (2.1) (i) Annually, after the department's fiscal year
12 has ended, the department shall determine whether the
13 fund TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM FUND has <--
14 been actuarially certified as being sufficient to defray
15 the tuition account program's ITS obligations and whether <--
16 the actuarial soundness of the fund TUITION ACCOUNT <--
17 GUARANTEED SAVINGS PROGRAM FUND, as actuarially
18 evaluated, can be maintained with fewer assets and, if
19 so, the dollar value of any excess surplus assets. In
20 making the determination, the department shall consider
21 the projected costs and expenses of the program TUITION <--
22 ACCOUNT GUARANTEED SAVINGS PROGRAM, including the fund <--
23 TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM FUND, as well <--
24 as any material subsequent events occurring between the
25 end of the fiscal year and the date on which the
26 determination is made.
27 (ii) If the department determines that there are
28 assets in excess of those needed to maintain actuarial
29 soundness of the fund TUITION ACCOUNT GUARANTEED SAVINGS <--
30 PROGRAM FUND and the assets actuarially certified as
19990S0008B1406 - 12 -
1 sufficient to defray the costs of the tuition account <--
2 program TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM, the <--
3 department may, but shall not be obligated to, distribute
4 the dollar value of any excess surplus assets by
5 increasing the number of tuition credits in accounts <--
6 established pursuant to tuition account payment contracts
7 that have not been terminated MAKING ADDITIONAL DEPOSITS, <--
8 WHICH WILL BE CONVERTED TO THE EQUIVALENT OF TUITION
9 CREDITS PURSUANT TO SECTION 309(C), INTO ACCOUNTS
10 ESTABLISHED PURSUANT TO TUITION ACCOUNT GUARANTEED
11 SAVINGS PROGRAM CONTRACTS THAT HAVE NOT BEEN TERMINATED
12 as of the date of determination.
13 (iii) Any distribution of any excess surplus assets
14 of the fund shall be made on an equitable basis as
15 determined by the department.
16 (3) The department, in conjunction with the board, shall
17 make an annual report to the Governor and the General
18 Assembly showing the [fund's] condition OF EACH OF THE FUNDS. <--
19 This report shall contain the findings and recommendations of
20 the department and the board and the recommendations of any
21 private consultant under contract or volunteering services to
22 the department or board. The report shall detail actions
23 taken or needed to modify the [tuition account program] <--
24 TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM to insure the <--
25 fiscal sufficiency of the [fund] TUITION ACCOUNT GUARANTEED <--
26 SAVINGS PROGRAM FUND to meet its obligations under this
27 chapter. [The] WITH REGARD TO THE TUITION ACCOUNT GUARANTEED <--
28 SAVINGS PROGRAM FUND, THE report shall address the
29 relationship between existing and projected net investment
30 returns and existing and projected tuition levels and address
19990S0008B1406 - 13 -
1 the advisability or necessity of modifying the authorized
2 investment of fund assets, the [purchase price of tuition <--
3 credits,] TUITION CREDIT PRICE, the amount of administrative <--
4 fee or charges or the amount of refunds offered upon
5 termination of a [tuition account.] TUITION ACCOUNT <--
6 GUARANTEED SAVINGS PROGRAM CONTRACT. Further, consistent with
7 the goal of providing for the maintenance of the fiscal
8 sufficiency of the fund, [this report] THE REPORT REGARDING <--
9 EACH OF THE FUNDS shall detail those actions taken or needed
10 to modify the [tuition account program] PROGRAMS so that the <--
11 [fund, purchasers] FUNDS, ACCOUNT OWNERS and beneficiaries <--
12 will receive favorable treatment for purposes of Federal
13 taxation.
14 * * * <--
15 Section 307. Investment policies and guidelines.
16 * * *
17 (C) COMPOSITION.--[THE FUND] EACH OF THE FUNDS SHALL CONSIST <--
18 OF:
19 (1) ALL [PAYMENTS MADE BY PURCHASERS PURSUANT TO TUITION
20 ACCOUNT PAYMENT CONTRACTS] DEPOSITS MADE BY ACCOUNT OWNERS
21 PURSUANT TO TUITION ACCOUNT PROGRAM CONTRACTS AND ALL
22 INTEREST, EARNINGS AND ADDITIONS THERETO.
23 (2) ANY OTHER MONEY, PUBLIC OR PRIVATE, APPROPRIATED OR
24 MADE AVAILABLE TO THE DEPARTMENT FOR THE FUND FROM ANY SOURCE
25 AND ALL INTEREST, EARNINGS AND ADDITIONS THERETO.
26 (D) OPERATING AND ADMINISTRATIVE COSTS.--THE DEPARTMENT
27 SHALL, THROUGH THE GOVERNOR, ANNUALLY SUBMIT TO THE GENERAL
28 ASSEMBLY A BUDGET COVERING THE OPERATING AND ADMINISTRATIVE
29 EXPENSES OF THE TUITION ACCOUNT [PROGRAM] PROGRAMS BUREAU AND
30 THE BOARD. UPON APPROVAL BY THE GENERAL ASSEMBLY IN AN
19990S0008B1406 - 14 -
1 APPROPRIATION BILL, EXPENSES AS INCURRED BY THE TUITION ACCOUNT
2 [PROGRAM] PROGRAMS BUREAU AND THE BOARD[, COMMENCING ONE YEAR
3 AFTER TUITION CREDITS HAVE BEEN OFFERED FOR SALE TO THE PUBLIC,]
4 SHALL BE PAID FROM THE FEES, CHARGES AND INVESTMENT EARNINGS OF
5 THE [FUND] FUNDS, PROPORTIONATELY TAKEN FROM EACH FUND ON AN
6 EQUITABLE BASIS AS DETERMINED BY THE DEPARTMENT, OR FROM ANY
7 OTHER AVAILABLE FUNDS.
8 (E) REPAYMENT OF INITIAL APPROPRIATION.--THE DEPARTMENT
9 SHALL REPAY FROM THE FEES, CHARGES AND INVESTMENT EARNINGS OF
10 THE [FUND] TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM FUND TO
11 THE GENERAL FUND ANY MONEY APPROPRIATED FOR THE INITIAL
12 PLANNING, ORGANIZATION AND ADMINISTRATION OF THE TUITION ACCOUNT
13 PROGRAM ESTABLISHED AT THE TIME OF THE ORIGINAL ENACTMENT OF
14 THIS ACT. THE REPAYMENT SHALL TAKE PLACE WITHIN A TEN-YEAR
15 PERIOD[, WHICH PERIOD COMMENCES TWO YEARS AFTER TUITION CREDITS
16 HAVE BEEN OFFERED FOR SALE TO THE PUBLIC.] COMMENCING SEPTEMBER
17 1, 1995.
18 SECTION 307. INVESTMENT POLICIES AND GUIDELINES.
19 (A) GENERAL RULE.--THE POLICIES GOVERNING THE INVESTMENT OF
20 THE [FUND SHALL BE DIRECTED TO OBTAINING SUFFICIENT INCOME TO
21 MEET THE COMMONWEALTH'S OBLIGATIONS UNDER THIS CHAPTER,
22 MAINTAINING NECESSARY RESERVES AND COVERING OPERATING EXPENSES.
23 THE DEPARTMENT, ITS INVESTMENT MANAGER AND TRUSTEE SHALL NOT
24 ENGAGE IN ANY INVESTMENT PRACTICE OR ACTIVITY WHICH ENTAILS
25 GREATER RISK THAN NECESSARY TO MEET THESE OBJECTIVES BUT SHALL
26 HAVE THE AUTHORITY TO INVEST AND REINVEST THE FUND IN ALL LAWFUL
27 INVESTMENTS.] TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM FUND
28 SHALL BE DIRECTED TO OBTAINING SUFFICIENT INCOME TO MEET THE
29 COMMONWEALTH'S OBLIGATIONS UNDER THIS CHAPTER, MAINTAINING
30 NECESSARY RESERVES AND COVERING OPERATING EXPENSES. THE POLICIES
19990S0008B1406 - 15 -
1 GOVERNING THE INVESTMENT OF THE TUITION ACCOUNT INVESTMENT
2 PROGRAM FUND SHALL BE DIRECTED TO PROVIDING FOR AN APPROPRIATE
3 BALANCE OF RISK, LIQUIDITY AND RETURN COMMENSURATE WITH THE
4 MANAGEMENT OF A PRUDENT INVESTOR. WITH REGARD TO EACH OF THE
5 FUNDS, THE DEPARTMENT, ITS INVESTMENT MANAGERS, PROGRAM MANAGERS
6 AND TRUSTEES SHALL HAVE THE AUTHORITY TO INVEST AND REINVEST THE
7 FUNDS IN ALL LAWFUL INVESTMENTS.
8 (b) Investment manager and trustee.--The department may
9 contract with one or more persons or other legal entities to
10 serve as investment managers, PROGRAM MANAGERS and trustees to <--
11 the department on behalf of [the tuition account program] EITHER <--
12 OR BOTH OF THE TUITION ACCOUNT PROGRAMS. If the department
13 contracts with investment managers [and], PROGRAM MANAGERS OR <--
14 trustees in order to fulfill the objectives of the tuition
15 account program, the investment managers, PROGRAM MANAGERS and <--
16 trustees shall work with the department to create an investment
17 program OR PROGRAMS, to develop investment portfolios and to <--
18 supervise investments and the investment [program] PROGRAMS <--
19 selected. If the department contracts with investment managers, <--
20 PROGRAM MANAGERS and trustees, the department may require that
21 the investment managers, PROGRAM MANAGERS and trustees agree, <--
22 based on actuarial projections of program costs and expenses
23 supplied by the department, to meet any obligations of the
24 department if, as a result of the imprudent selection or
25 supervision of investments or the investment program by the
26 investment managers, PROGRAM MANAGERS or trustees, the tuition <--
27 [payment] account program fund is not TRUSTEES, THE [TUITION <--
28 PAYMENT FUND] TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM FUND IS
29 NOT fiscally sufficient to enable the department to fulfill its
30 obligations under this chapter.
19990S0008B1406 - 16 -
1 Section 308. [Participating institutions] Participation IN <--
2 TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM by
3 eligible educational institutions.
4 (a) Public institutions.--The following public institutions
5 of higher education shall participate in the [tuition account <--
6 program] TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM: <--
7 (1) Community colleges operating under Article XIX-A of
8 the act of March 10, 1949 (P.L.30, No.14), known as the
9 Public School Code of 1949.
10 (2) Universities comprising the State System of Higher
11 Education.
12 (3) The following State-related institutions:
13 (i) The Pennsylvania State University.
14 (ii) The University of Pittsburgh.
15 (iii) Temple University.
16 (iv) Lincoln University.
17 (4) Any institution which is hereafter designated as
18 "State-related" by the Commonwealth.
19 (5) ANY OTHER ELIGIBLE EDUCATIONAL INSTITUTION OWNED BY <--
20 THE COMMONWEALTH.
21 (b) Private institutions.--A private institution may enter
22 into an agreement with the department through which the
23 institution, under terms mutually agreeable to the institution
24 and the department, agrees to be a private institution that
25 purchasers ACCOUNT OWNERS may choose when designating their <--
26 tuition level PURSUANT TO A TUITION ACCOUNT GUARANTEED SAVINGS <--
27 PROGRAM CONTRACT. The terms of the agreement shall include, but
28 not be limited to, the determination of tuition credit purchase <--
29 prices, terms of redemption of tuition credits at the
30 institution, conversion of tuition credits purchased DEPOSITED <--
19990S0008B1406 - 17 -
1 at other tuition levels to OTHER tuition at the institution and <--
2 appropriate conversion of tuition credits to educational expense
3 credits.
4 Section 309. Tuition [account program] ACCOUNT GUARANTEED <--
5 SAVINGS PROGRAM.
6 (a) General description.--Each [payment] DEPOSIT made <--
7 pursuant to a [tuition account payment contract will purchase <--
8 tuition credits at [one of three standard tuition levels or, at <--
9 the purchaser's designation, at a specific participating
10 institution.] the tuition level designated by the purchaser in <--
11 the tuition account payment contract. All tuition credits
12 purchased] TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM CONTRACT <--
13 WILL BE CONSIDERED THE EQUIVALENT OF A PURCHASE OF TUITION
14 CREDITS AT THE TUITION LEVEL DESIGNATED BY THE ACCOUNT OWNER IN
15 THE TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM CONTRACT. ALL
16 DEPOSITS will be held in a beneficiary's account and will be
17 converted to the tuition level of the institution to be attended
18 by the beneficiary. At the time of redemption, the tuition to be
19 paid will be calculated based on the tuition level designated
20 and the institution being attended as described in this section.
21 A [participating] public institution attended by a beneficiary
22 shall accept that beneficiary's tuition credits when presented.
23 [The department shall pay from the fund to the participating
24 institution the lesser of the actual tuition for the number of
25 tuition credits used or the tuition payment as specified in
26 subsection (g).] Payments on account of tuition shortfalls shall
27 be made [to participating institutions] as provided for in
28 section 310.
29 (b) [Standard tuition] Tuition levels.--
30 (1) The department shall annually establish three
19990S0008B1406 - 18 -
1 [standard] average tuition levels for public institutions
2 corresponding approximately to the average tuition charges
3 for that year at the Commonwealth's community colleges, at
4 universities in the State System of Higher Education and at
5 State-related universities. The department may annually
6 establish an average tuition level or levels for private
7 institutions corresponding to average tuition charges at
8 private institutions, as the department deems appropriate.
9 (2) Any purchaser may buy tuition credits at [any <--
10 designated standard tuition level or at the tuition rate of a
11 specific participating institution.] the tuition level
12 designated in the tuition account payment contract. With the
13 approval of the department, a purchaser may change the
14 designated tuition level.
15 (c) Tuition credits.--Tuition credits are [whole or partial
16 units related to] purchased for an academic [year] period and
17 are obtained as follows:
18 (1) [The payment for each tuition purchase] A payment
19 made pursuant to a tuition account payment contract shall be
20 divided by [either] the tuition credit purchase price at [a
21 standard] the tuition level [or the tuition at a specific
22 participating institution, as] designated by the purchaser.
23 (2) For tuition purchases during the period from
24 [August] September 1 to [July] August 31, tuition [rates]
25 credit purchase prices for the corresponding academic year
26 shall be used.
27 [(3) If the department, in its discretion, determines
28 [ANY PURCHASER MAY BUY TUITION CREDITS AT ANY DESIGNATED <--
29 STANDARD TUITION LEVEL OR AT THE TUITION RATE OF A SPECIFIC
30 PARTICIPATING INSTITUTION.
19990S0008B1406 - 19 -
1 (C) TUITION CREDITS.--TUITION CREDITS ARE WHOLE OR PARTIAL
2 UNITS RELATED TO AN ACADEMIC YEAR AND ARE OBTAINED AS FOLLOWS:
3 (1) THE PAYMENT FOR EACH TUITION PURCHASE SHALL BE
4 DIVIDED BY EITHER THE TUITION AT A STANDARD TUITION LEVEL OR
5 THE TUITION AT A SPECIFIC PARTICIPATING INSTITUTION, AS
6 DESIGNATED BY THE PURCHASER.
7 (2) FOR TUITION PURCHASERS DURING THE PERIOD FROM AUGUST
8 1 TO JULY 31, TUITION RATES FOR THE CORRESPONDING ACADEMIC
9 YEAR SHALL BE USED.
10 (3) IF THE DEPARTMENT, IN ITS DISCRETION, DETERMINES
11 that the purchase payment for tuition credits representing a
12 unit of tuition for one academic year at a standard tuition
13 level or at a specific participating institution is to be
14 greater or less than actual tuition for the corresponding
15 year at a standard or at a specific participating
16 institution, the method of calculating tuition credits in
17 accordance with paragraphs (1) and (2) shall be adjusted
18 accordingly.] <--
19 (2) A DEPOSIT MAY BE MADE AT THE TUITION LEVEL <--
20 DESIGNATED IN THE TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM
21 CONTRACT. WITH THE APPROVAL OF THE DEPARTMENT, AN ACCOUNT
22 OWNER MAY CHANGE THE DESIGNATED TUITION LEVEL.
23 (C) TUITION CREDITS.--DEPOSITS MADE PURSUANT TO A TUITION
24 ACCOUNT GUARANTEED SAVINGS PROGRAM CONTRACT WILL BE CONVERTED TO
25 THE EQUIVALENT AMOUNT OF TUITION CREDITS AS FOLLOWS:
26 (1) A DEPOSIT MADE PURSUANT TO A TUITION ACCOUNT
27 GUARANTEED SAVINGS PROGRAM CONTRACT SHALL BE DIVIDED BY THE
28 TUITION CREDIT PRICE IN THE YEAR OF DEPOSIT AT THE TUITION
29 LEVEL DESIGNATED BY THE ACCOUNT OWNER.
30 (2) FOR DEPOSITS MADE DURING THE PERIOD FROM SEPTEMBER 1
19990S0008B1406 - 20 -
1 TO AUGUST 31, TUITION CREDIT PRICES FOR THE CORRESPONDING
2 ACADEMIC YEAR SHALL BE USED.
3 [(4)] (3) The number of tuition credits calculated at <--
4 the time of [purchase] DEPOSIT in accordance with paragraphs <--
5 (1)[, (2) and (3)] and (2) [shall] may be reduced in a manner
6 determined by the department reasonably to reflect potential
7 investment loss resulting from the time of year when the
8 [purchase] DEPOSIT is made. <--
9 (d) Process for public institutions.--The process for
10 certifying tuition, converting tuition credits, issuing and
11 redeeming tuition credits and making tuition payments for public
12 institutions shall be as follows:
13 [(d) Certifying tuition.--](1) On or before July 31, a
14 [participating] public institution shall certify to the
15 department the tuition to be charged by that institution for
16 the academic year beginning on or after August 1 [of that
17 year and ending on or before July 31 of the following year,]
18 and, at such times as the department shall determine, each
19 [participating] public institution shall certify to the
20 department the tuition charged by that institution for the
21 current or any previous academic year.
22 [(e) Conversion of tuition credits.--Upon request of any
23 purchaser or beneficiary, the department shall convert tuition
24 credits purchased at standard tuition levels to actual tuition
25 at a specific participating institution by multiplying the
26 number of tuition credits purchased each year by the ratio of
27 that academic year's standard tuition level divided by the
28 tuition for the same academic year at the designated
29 participating institution. Upon request of the purchaser or
30 beneficiary, the department, following the same procedure, shall
19990S0008B1406 - 21 -
1 convert tuition credits purchased at the tuition rate of a
2 participating institution to the tuition at another
3 participating institution designated in the request. The sum of
4 such conversions shall be the total tuition credits applicable
5 to a specific participating institution.
6 (f)] (2) [Issuance and redemption of certified tuition
7 credits.--]Upon application, the department shall issue to a <--
8 purchaser [or beneficiary a certified] a statement of [A <--
9 PURCHASER OR BENEFICIARY A CERTIFIED] AN ACCOUNT OWNER A
10 STATEMENT OF accumulated tuition credits available for the
11 payment of [all or a portion of a student's] tuition for a
12 specific academic [year at a] period at the specific public
13 institution or the public institution average tuition level
14 designated [participating institution. Any participating
15 institution which presents to the department a certified
16 statement of tuition credits for a student accepted for
17 enrollment for a specific academic year shall be paid by the
18 department the lesser of actual tuition for the number of
19 tuition credits used as established by the institution for
20 that academic year or the tuition payment for the academic
21 year calculated as specified in subsection (g).] by the
22 purchaser ACCOUNT OWNER. In the event the purchaser ACCOUNT <--
23 OWNER decides to redeem the available tuition credits, the
24 purchaser ACCOUNT OWNER shall notify the department of the <--
25 institution at which the beneficiary intends to enroll. In
26 the event the institution is:
27 (i) The public institution last designated by the
28 purchaser in the tuition account payment contract as the <--
29 tuition level, the purchaser ACCOUNT OWNER IN THE TUITION <--
30 ACCOUNT GUARANTEED SAVINGS PROGRAM CONTRACT AS THE
19990S0008B1406 - 22 -
1 TUITION LEVEL, THE ACCOUNT OWNER shall submit to the
2 department adequate documentation of enrollment, the
3 qualified higher education expenses and the number of
4 credits or dollar value of the credits that the purchaser <--
5 ACCOUNT OWNER has decided to redeem. The purchaser <--
6 ACCOUNT OWNER shall authorize payment of that amount to <--
7 the institution, a specified third party, the purchaser <--
8 ACCOUNT OWNER and/or beneficiary. Payment shall be made <--
9 as specified in subsection (d)(3).
10 (ii) A different public institution than that last
11 designated by the purchaser in the tuition account <--
12 payment contract ACCOUNT OWNER IN THE TUITION ACCOUNT <--
13 GUARANTEED SAVINGS PROGRAM CONTRACT as the tuition level,
14 a conversion shall be made pursuant to subsection (g) and
15 the department shall issue a revised statement of
16 accumulated tuition credits and their dollar value
17 available for payment of qualified higher education
18 expenses at the newly designated public institution. The
19 purchaser ACCOUNT OWNER shall submit to the department <--
20 adequate documentation of enrollment, the qualified
21 higher education expenses and the number of credits or
22 dollar value of the credits that the purchaser ACCOUNT <--
23 OWNER has decided to redeem. The purchaser ACCOUNT OWNER <--
24 shall authorize payment of that amount to the
25 institution, a specified third party, the purchaser <--
26 ACCOUNT OWNER and/or beneficiary. Payment shall be made <--
27 as specified in subsection (d)(3).
28 (iii) A private institution that has not entered
29 into an agreement with the department pursuant to section
30 308(b), the available tuition credits shall be redeemable
19990S0008B1406 - 23 -
1 for the payment of qualified higher education expenses at
2 the value they would have had if they had been redeemed
3 at the tuition level last designated by the purchaser in <--
4 the tuition account payment contract. The purchaser shall
5 ACCOUNT OWNER IN THE TUITION ACCOUNT GUARANTEED SAVINGS <--
6 PROGRAM CONTRACT. THE ACCOUNT OWNER SHALL submit to the
7 department adequate documentation of enrollment, the
8 qualified higher education expenses and the number of
9 credits or dollar value of the credits that the purchaser <--
10 ACCOUNT OWNER has decided to redeem. The purchaser <--
11 ACCOUNT OWNER shall authorize payment of that amount to <--
12 the institution, a specified third party, the purchaser <--
13 ACCOUNT OWNER and/or beneficiary. Payment shall be made <--
14 as specified in subsection (d)(3).
15 (iv) A private institution that has entered into an
16 agreement with the department pursuant to section 308(b),
17 payment shall be governed by the terms of the agreement,
18 provided, however, that in no event shall the payment be
19 less than what would have been paid if the beneficiary
20 were attending a private institution that has not entered
21 into an agreement with the department. Payment shall be
22 made as specified in the agreement.
23 [(g) Tuition payment.--Upon presentation of a certified
24 statement of tuition credits by a participating institution
25 or in anticipation thereof, the department shall calculate
26 the tuition payment for the academic year specified. The
27 tuition payment under this section shall consist of the
28 purchase price of each total annual purchase of tuition
29 credits compounded each year from the year of purchase to the
30 year during which such credits are to be utilized, by the
19990S0008B1406 - 24 -
1 average annual net earnings rate of the fund. The compounded
2 values of annual purchases of tuition credits shall be summed
3 in order of date of purchase until sufficient credits for one
4 academic year are obtained.]
5 (3) Upon submission of such documentation, the
6 department shall make the payment as authorized by the
7 purchaser ACCOUNT OWNER. Before making the payment authorized <--
8 by the purchaser ACCOUNT OWNER, the department shall <--
9 determine whether the available portion of the value of the
10 account equals or exceeds the authorized payment. If it does
11 not, two separate payments shall be made. The first payment
12 shall be in the amount of the available portion of the value
13 of the account. The second payment shall be in the amount of
14 the difference between the amount of the payment authorized
15 by the purchaser ACCOUNT OWNER and the available portion of <--
16 the value of the account, and it shall be paid pursuant to
17 the tuition shortfall provision of section 310.
18 (e) Process for private institution average tuition
19 levels.--The process of establishing private institution average
20 tuition credit purchase prices, redeeming those tuition credits <--
21 and making tuition payments when a purchaser AN ACCOUNT OWNER <--
22 has designated a private institution average tuition level shall
23 be as follows:
24 (1) On or before August 31, the department shall
25 determine the average tuition credit purchase price or prices <--
26 for average tuition level or levels for private institutions
27 established pursuant to subsection (b) for the academic year
28 beginning on or after August 1 of that year.
29 (2) Upon application, the department shall issue to a <--
30 purchaser AN ACCOUNT OWNER a statement of accumulated tuition <--
19990S0008B1406 - 25 -
1 credits available for the payment of qualified higher
2 education expenses for a specific academic period at the
3 private institution average tuition level designated by the
4 purchaser ACCOUNT OWNER. In the event the purchaser ACCOUNT <--
5 OWNER decides to redeem the available tuition credits, the
6 purchaser ACCOUNT OWNER shall notify the department of the <--
7 public or private institution at which the beneficiary
8 intends to enroll. In the event the institution is:
9 (i) A public institution, the process for conversion
10 and payment shall be as set forth in subsections (d)(3)
11 and (g).
12 (ii) A private institution that has not entered into
13 an agreement with the department pursuant to section
14 308(b), the available tuition credits shall be redeemable
15 at the average tuition credit purchase price of the <--
16 designated tuition level established by the department
17 for the year in which they are redeemed. The purchaser <--
18 ACCOUNT OWNER shall submit to the department adequate <--
19 documentation of enrollment, the qualified higher
20 education expenses and the number of credits or dollar
21 value of the credits that the purchaser ACCOUNT OWNER has <--
22 decided to redeem. The purchaser ACCOUNT OWNER shall <--
23 authorize payment of that amount to the institution, a
24 specified third party, the purchaser ACCOUNT OWNER and/or <--
25 the beneficiary. The department shall make the payment in
26 substantially the same manner as specified in subsection
27 (d)(3). Payment under this subsection for any one
28 academic period shall not exceed the amount of the
29 beneficiary's tuition and other qualified higher
30 education expenses for that academic period. If the
19990S0008B1406 - 26 -
1 average tuition level in the year of redemption is
2 insufficient to pay the actual tuition, the department
3 shall have no obligation or authority to pay the
4 insufficiency.
5 (iii) A private institution that has entered into an
6 agreement with the department pursuant to section 308(b),
7 payment shall be governed by the terms of the agreement,
8 provided, however, that in no event shall the payment be
9 less than what would have been paid if the beneficiary
10 were attending a private institution that has not entered
11 into an agreement with the department.
12 (f) Process for specific private institutions with which the
13 department has an agreement.--The purchase and redemption of <--
14 tuition credits MAKING AND REDEEMING OF DEPOSITS for use at <--
15 private institutions that have entered into agreements with the
16 department pursuant to section 308(b) shall be governed by the
17 terms of those respective agreements. Upon request of a <--
18 purchaser who has purchased AN ACCOUNT OWNER WHO HAS MADE <--
19 DEPOSITS at a tuition level of a specific private institution, a
20 conversion to an average tuition level, a specific public
21 institution or a different private institution that has entered
22 into an agreement with the department, if permitted by the terms
23 of that particular agreement between the department and that
24 particular private institution, shall be made using
25 substantially the same procedure as specified in subsection (g).
26 Upon a decision by the beneficiary for whom tuition credits have <--
27 been purchased for DEPOSITS HAVE BEEN MADE AT A TUITION LEVEL OF <--
28 a private institution that has entered an agreement with the
29 department pursuant to section 308(b) to attend a different
30 private institution that has entered into an agreement with the
19990S0008B1406 - 27 -
1 department but for which the terms of that particular agreement
2 do not provide for a conversion, or to attend a different
3 private institution that has not entered into an agreement with
4 the department pursuant to section 308(b), at the direction of
5 the purchaser ACCOUNT OWNER, payment shall be made in <--
6 substantially the same manner as is specified in subsection
7 (e)(2) except that in no event shall the department pay more
8 than it would have paid had the beneficiary attended the
9 previously designated private institution.
10 (g) Conversion of tuition credits.--At any time during the
11 existence of the tuition account payment contract, upon the
12 request of a purchaser AN ACCOUNT OWNER, the department may <--
13 convert tuition credits purchased FOR DEPOSITS MADE at any <--
14 tuition level to any other tuition level. The method by which
15 the conversion is made shall be determined by the department.
16 Following conversion, the department shall issue to the
17 purchaser ACCOUNT OWNER a statement of the number of tuition <--
18 credits converted.
19 (h) Other uses of tuition credits.--The department shall
20 permit the use of tuition credits for master's degree and other
21 postbaccalaureate programs at [participating] eligible
22 educational institutions, after an appropriate conversion. The
23 department [and participating institutions] also may [agree
24 that] permit tuition credits [remaining in a tuition account
25 after tuition is paid may] to be converted into other
26 educational expense credits to be applied [against room, board
27 and other educational expenses. Other educational expense
28 credits shall be determined by an appropriate conversion.] for
29 the payment of qualified higher education expenses other than
30 tuition.
19990S0008B1406 - 28 -
1 (i) Course load or credit hours.--A beneficiary attending [a
2 participating] an eligible educational institution may apply
3 tuition credits to a specific academic year at the maximum
4 course load or maximum number of credit hours generally
5 permitted to full-time undergraduates at that institution.
6 (j) Levy [and], execution and security for loans.--A tuition <--
7 account or any legal interest therein shall not be subject to
8 attachment, levy or execution by any creditor of a purchaser or
9 beneficiary and shall not be used as security for a loan.
10 (k) Period of participation.--Notwithstanding any of the
11 provisions of this chapter, the following shall apply:
12 (1) Except as provided in paragraph (2), a minimum
13 period of [four years] one year must elapse between the time
14 the first tuition account contract is entered into on behalf
15 of the beneficiary and the time that tuition credits may be
16 issued and redeemed pursuant to [subsection (f)] this
17 section.
18 (2) The board may prescribe an alternative minimum
19 period of time which must elapse between the time the first
20 tuition account contract is entered into on behalf of the
21 beneficiary and the time that tuition credits may be issued
22 and redeemed pursuant to [subsection (f)] this section.
23 (l) Student aid.--The value of tuition credits shall not be
24 used in calculating personal asset contribution for determining
25 eligibility and need for student loan programs, student grant
26 programs or other student aid programs administered by any
27 agency of the Commonwealth, except as otherwise may be provided
28 by Federal law.
29 (m) Residency.--[The purchase payment for tuition credits]
30 The tuition credit purchase price shall be determined with
19990S0008B1406 - 29 -
1 reference to the residency of the beneficiary at the time of
2 purchase, provided, however, that for a resident beneficiary a
3 purchaser may elect to save at a nonresident rate. If the
4 residency of the beneficiary [changes,] at the time the credits
5 are redeemed is different from the residency designated in the
6 tuition account payment contract, or as thereafter changed with
7 the consent of the department, there shall be an appropriate
8 conversion of tuition credits to reflect the differential in
9 tuition caused by the change of designated residency, if any.
10 (n) Excess contributions.--The department shall institute
11 adequate safeguards to prevent contributions to an account that
12 are in excess of those necessary to provide for the qualified
13 higher education expenses of the beneficiary, as specified in
14 section 529 of the Internal Revenue Code of 1986 (Public Law 99-
15 514, 26 U.S.C. § 1 et seq.), as hereafter amended.
16 (o) Cash contributions.--A purchase of tuition credits may
17 only be made in cash, which may, at the department's discretion,
18 include checks, money orders, credit cards or other similar
19 methods.
20 [(J) LEVY AND EXECUTION.--A TUITION ACCOUNT SHALL NOT BE <--
21 SUBJECT TO ATTACHMENT, LEVY OR EXECUTION BY ANY CREDITOR OF A
22 PURCHASER OR BENEFICIARY.
23 (K) PERIOD OF PARTICIPATION.--NOTWITHSTANDING ANY OF THE
24 PROVISIONS OF THIS CHAPTER, THE FOLLOWING SHALL APPLY:
25 (1) EXCEPT AS PROVIDED IN PARAGRAPH (2), A MINIMUM
26 PERIOD OF FOUR YEARS MUST ELAPSE BETWEEN THE TIME THE FIRST
27 TUITION ACCOUNT CONTRACT IS ENTERED INTO ON BEHALF OF THE
28 BENEFICIARY AND THE TIME THAT TUITION CREDITS MAY BE ISSUED
29 AND REDEEMED PURSUANT TO SUBSECTION (F).
30 (2) THE BOARD MAY PRESCRIBE AN ALTERNATIVE MINIMUM
19990S0008B1406 - 30 -
1 PERIOD OF TIME WHICH MUST ELAPSE BETWEEN THE TIME THE FIRST
2 TUITION ACCOUNT CONTRACT IS ENTERED INTO ON BEHALF OF THE
3 BENEFICIARY AND THE TIME THAT TUITION CREDITS MAY BE ISSUED
4 AND REDEEMED PURSUANT TO SUBSECTION (F).
5 (L) STUDENT AID.--THE VALUE OF TUITION CREDITS SHALL NOT BE
6 USED IN CALCULATING PERSONAL ASSET CONTRIBUTION FOR DETERMINING
7 ELIGIBILITY AND NEED FOR STUDENT LOAN PROGRAMS, STUDENT GRANT
8 PROGRAMS OR OTHER STUDENT AID PROGRAMS ADMINISTERED BY ANY
9 AGENCY OF THE COMMONWEALTH, EXCEPT AS OTHERWISE MAY BE PROVIDED
10 BY FEDERAL LAW.
11 (M) RESIDENCY.--THE PURCHASE PAYMENT FOR TUITION CREDITS
12 SHALL BE DETERMINED WITH REFERENCE TO THE RESIDENCY OF THE
13 BENEFICIARY AT THE TIME OF PURCHASE. IF THE RESIDENCY OF THE
14 BENEFICIARY CHANGES, THERE SHALL BE AN APPROPRIATE CONVERSION OF
15 TUITION CREDITS TO REFLECT THE DIFFERENTIAL IN TUITION CAUSED BY
16 THE CHANGE OF RESIDENCY, IF ANY.]
17 (J) RESIDENCY.--THE TUITION CREDIT PRICE SHALL BE DETERMINED
18 WITH REFERENCE TO THE RESIDENCY OF THE BENEFICIARY AT THE TIME A
19 DEPOSIT IS MADE PURSUANT TO A TUITION ACCOUNT GUARANTEED SAVINGS
20 PROGRAM CONTRACT, EXCEPT THAT FOR A RESIDENT BENEFICIARY, AN
21 ACCOUNT OWNER MAY ELECT TO SAVE AT A NONRESIDENT RATE. IF THE
22 RESIDENCY OF THE BENEFICIARY AT THE TIME THE CREDITS ARE
23 REDEEMED IS DIFFERENT FROM THE RESIDENCY DESIGNATED IN THE
24 TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM CONTRACT, OR AS
25 THEREAFTER CHANGED WITH THE CONSENT OF THE DEPARTMENT, THERE
26 SHALL BE AN APPROPRIATE CONVERSION OF TUITION CREDITS TO REFLECT
27 THE DIFFERENTIAL IN TUITION CAUSED BY THE CHANGE OF DESIGNATED
28 RESIDENCY, IF ANY.
29 SECTION 4. THE ACT IS AMENDED BY ADDING SECTIONS TO READ:
30 SECTION 309.1. TUITION ACCOUNT INVESTMENT PROGRAM.
19990S0008B1406 - 31 -
1 THE DEPARTMENT SHALL ESTABLISH AN INVESTMENT PLAN THAT
2 DEFINES THE TUITION ACCOUNT INVESTMENT PROGRAM STRUCTURE AND
3 SETS FORTH INVESTMENT POLICIES AND GUIDELINES TO BE UTILIZED IN
4 ADMINISTERING THE PROGRAM AND MAY, IN ITS DISCRETION, OBTAIN THE
5 SERVICES OF INVESTMENT MANAGERS, PROGRAM MANAGERS AND TRUSTEES
6 AS DESCRIBED IN SECTION 307(B) TO ASSIST IN ESTABLISHING AND
7 ADMINISTERING THE PLAN. THE DEPARTMENT, THROUGH REGULATION OR
8 PURSUANT TO A TUITION ACCOUNT INVESTMENT PROGRAM CONTRACT, SHALL
9 SPECIFY THE MINIMUM AND MAXIMUM AMOUNTS OF DEPOSITS, THE TERMS
10 AND CONDITIONS FOR TRANSFERRING THE TUITION ACCOUNT INVESTMENT
11 PROGRAM CONTRACT TO ANOTHER ACCOUNT OWNER OR SUBSTITUTING A
12 BENEFICIARY FOR THE ORIGINALLY NAMED BENEFICIARY, THE TERMS AND
13 CONDITIONS FOR WITHDRAWING DEPOSITS OR TERMINATING THE TUITION
14 ACCOUNT INVESTMENT PROGRAM CONTRACT, THE METHOD AND PROCEDURES
15 FOR MAKING PAYMENTS PURSUANT TO THE TUITION ACCOUNT INVESTMENT
16 PROGRAM CONTRACTS FOR THE PAYMENT OF BENEFICIARIES' QUALIFIED
17 HIGHER EDUCATION EXPENSES AND ALL OTHER RIGHTS AND OBLIGATIONS
18 OF THE ACCOUNT OWNER AND THE DEPARTMENT.
19 SECTION 309.2. GENERAL PROVISIONS GOVERNING BOTH TUITION
20 ACCOUNT PROGRAMS.
21 (A) LEVY, EXECUTION AND SECURITY FOR LOANS.--A TUITION
22 ACCOUNT OR ANY LEGAL INTEREST THEREIN SHALL NOT BE SUBJECT TO
23 ATTACHMENT, LEVY OR EXECUTION BY ANY CREDITOR OF AN ACCOUNT
24 OWNER OR BENEFICIARY AND SHALL NOT BE USED AS SECURITY FOR A
25 LOAN.
26 (B) PERIOD OF PARTICIPATION.--NOTWITHSTANDING ANY OF THE
27 PROVISIONS OF THIS CHAPTER, THE FOLLOWING SHALL APPLY:
28 (1) EXCEPT AS PROVIDED IN PARAGRAPH (2), A MINIMUM
29 PERIOD OF ONE YEAR MUST ELAPSE BETWEEN THE TIME A DEPOSIT IS
30 MADE PURSUANT TO A TUITION ACCOUNT PROGRAM CONTRACT AND THE
19990S0008B1406 - 32 -
1 TIME THAT DEPOSIT AND ANY INCREASE IN ITS VALUE MAY BE USED
2 FOR PAYMENT OF QUALIFIED HIGHER EDUCATION EXPENSES PURSUANT
3 TO SECTION 309 OR 309.1.
4 (2) THE BOARD MAY PRESCRIBE AN ALTERNATIVE MINIMUM
5 PERIOD OF TIME WHICH MUST ELAPSE BETWEEN A DEPOSIT AND ITS
6 USE FOR PAYMENT OF QUALIFIED HIGHER EDUCATION EXPENSES.
7 (C) STUDENT AID.--ANY AMOUNTS DEPOSITED PURSUANT TO A
8 TUITION ACCOUNT PROGRAM CONTRACT AND ANY INCREASE IN THE VALUE
9 THEREOF SHALL NOT BE USED IN CALCULATING PERSONAL ASSET
10 CONTRIBUTIONS FOR DETERMINING ELIGIBILITY AND NEED FOR STUDENT
11 LOAN PROGRAMS, STUDENT GRANT PROGRAMS OR OTHER STUDENT AID
12 PROGRAMS ADMINISTERED BY ANY AGENCY OF THE COMMONWEALTH, EXCEPT
13 AS OTHERWISE MAY BE PROVIDED BY FEDERAL LAW.
14 (D) EXCESS CONTRIBUTIONS.--THE DEPARTMENT SHALL INSTITUTE
15 ADEQUATE SAFEGUARDS TO PREVENT CONTRIBUTIONS TO AN ACCOUNT OR
16 MULTIPLE ACCOUNTS THAT ARE IN EXCESS OF THOSE NECESSARY TO
17 PROVIDE FOR THE QUALIFIED HIGHER EDUCATION EXPENSES OF THE
18 BENEFICIARY OF THAT ACCOUNT OR ACCOUNTS, AS SPECIFIED IN SECTION
19 529 OF THE INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26
20 U.S.C. § 529).
21 (E) CASH CONTRIBUTIONS.--A DEPOSIT MADE PURSUANT TO A
22 TUITION ACCOUNT PROGRAM CONTRACT MAY ONLY BE MADE IN CASH, WHICH
23 MAY AT THE DEPARTMENT'S DISCRETION INCLUDE CHECKS, MONEY ORDERS,
24 CREDIT CARDS OR OTHER SIMILAR METHODS.
25 (F) TRANSFERS BETWEEN PROGRAMS.--THE DEPARTMENT, THROUGH
26 REGULATION OR PURSUANT TO A TUITION ACCOUNT PROGRAM CONTRACT,
27 MAY SPECIFY THE TERMS AND CONDITIONS UNDER WHICH TRANSFERS OF
28 DEPOSITS AND ANY INCREASED VALUE THEREOF MAY BE MADE FROM ONE
29 ACCOUNT TO ANOTHER BY AN ACCOUNT OWNER WHO HAS ENTERED INTO A
30 TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM CONTRACT AND A
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1 TUITION ACCOUNT INVESTMENT PROGRAM CONTRACT. NOTHING IN THIS
2 SUBSECTION SHALL BE CONSTRUED TO REQUIRE THE DEPARTMENT TO ALLOW
3 SUCH TRANSFERS.
4 SECTION 5. SECTIONS 310, 311, 312, 313, 314, 315, 316 AND
5 317 OF THE ACT ARE AMENDED TO READ:
6 Section 310. Payments on account of tuition shortfalls.
7 If there are tuition shortfalls on account of beneficiaries
8 OF TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM CONTRACTS <--
9 attending a [participating institution remain after payments are
10 made pursuant to section 309(g)] public institution or redeeming
11 tuition credits at a private institution average tuition level
12 and if such tuition shortfalls are not paid on behalf of the
13 department pursuant to section 307(b), the total shortfall with
14 respect to that institution shall be paid from the fund as a
15 separate payment pursuant to section 309(d)(3) or (e)(2)(ii).
16 The amount of shortfall payments shall be considered in
17 determining the actuarial soundness of the fund as provided for
18 in section 306(b)(2).
19 Section 311. Tuition [account payment contracts] ACCOUNT <--
20 PROGRAM CONTRACTS.
21 [Purchasers buying tuition credits] ACCOUNT OWNERS MAKING <--
22 DEPOSITS for the use of beneficiaries shall enter into [tuition <--
23 account payment contracts] TUITION ACCOUNT PROGRAM CONTRACTS <--
24 with the department. These contracts shall be in such form as is
25 determined by the department, but WITH REGARD TO TUITION ACCOUNT <--
26 GUARANTEED SAVINGS PROGRAM CONTRACTS shall reflect that the
27 [purchase price of] tuition [credits] credit purchase prices can
28 be adjusted annually [in accordance with sections 306(b)(2) and
29 309(c)(3)].
30 Section 312. Eligible beneficiaries.
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1 Notwithstanding any other eligibility criteria established by
2 the board, the following shall apply:
3 (1) In order to be eligible as a beneficiary, a person
4 must be one of the following:
5 (i) A resident of this Commonwealth at the time the
6 [tuition account payment contract] TUITION ACCOUNT <--
7 PROGRAM CONTRACT is entered into on the person's behalf.
8 (ii) A nonresident if the [tuition account payment <--
9 contract] TUITION ACCOUNT PROGRAM CONTRACT entered into <--
10 on the person's behalf is [purchased] ENTERED INTO by a <--
11 resident of this Commonwealth, including any legal entity
12 with its principal place of business located within this
13 Commonwealth.
14 (2) The [purchaser] ACCOUNT OWNER must designate a <--
15 beneficiary at the time the [purchaser] ACCOUNT OWNER enters <--
16 into a [tuition account payment contract] TUITION ACCOUNT <--
17 PROGRAM CONTRACT unless the contract is made pursuant to a
18 scholarship program.
19 (3) [The] Unless the tuition account payment contract <--
20 TUITION ACCOUNT PROGRAM CONTRACT is established as a <--
21 scholarship pursuant to section 318, the [purchaser] ACCOUNT <--
22 OWNER may substitute for the beneficiary only a member of the
23 family of the [purchaser or] initial beneficiary upon
24 approval by the department. "Member of the family" is defined
25 by section 529 of the Internal Revenue Code of 1986 (Public
26 Law 99-514, 26 U.S.C. § 529), as hereafter amended.
27 Section 313. Termination and refund.
28 (a) [Inability to attend a participating or nonparticipating
29 institution] Death or disability.--Upon termination of a
30 [tuition account, the purchaser or the purchaser's] TUITION <--
19990S0008B1406 - 35 -
1 ACCOUNT PROGRAM CONTRACT, THE ACCOUNT OWNER OR THE ACCOUNT
2 OWNER'S designee shall receive the value of the account [under
3 subsection (f)] if the account is terminated upon the happening
4 of any of the following:
5 (1) The death of the beneficiary.
6 (2) The disability of the beneficiary which, in the
7 opinion of the department, would make attendance by the
8 beneficiary at [a participating] an eligible educational
9 institution impossible or unreasonably burdensome.
10 [(3) Failure of the beneficiary who, in the opinion of
11 the department, has made a good faith attempt to gain
12 admission to a participating or nonparticipating institution
13 within the time limits imposed by the department.
14 (b) Decision to attend a nonparticipating institution.--Upon
15 termination of a tuition account as a result of a decision by
16 the beneficiary to attend a nonparticipating institution, the
17 department, at the direction of the purchaser or beneficiary and
18 upon presentation of proof of the beneficiary's acceptance by
19 the nonparticipating institution, shall pay to the institution
20 the tuition for the number of tuition credits purchased
21 calculated at the standard tuition level or at the tuition for a
22 specific participating institution, as designated in the tuition
23 account payment contract, or an amount equal to the value of the
24 account under subsection (f), whichever is less. Payment under
25 this subsection for any one academic year shall not exceed the
26 amount of the beneficiary's tuition or other approved
27 educational expenses for that year.
28 (c) Decision not to attend a participating or
29 nonparticipating institution.--Upon termination of a tuition
30 account as a result of a decision by the beneficiary not to
19990S0008B1406 - 36 -
1 attend a participating or nonparticipating institution, within
2 time limits determined by the department, the purchaser or the
3 purchaser's designee shall receive 90% of the tuition for the
4 number of tuition credits purchased calculated at the standard
5 tuition level or at the tuition for a specific participating
6 institution, as designated in the tuition account payment
7 contract, or an amount equal to 90% of the value of the account
8 under subsection (f), whichever is less.
9 (d) Refunds for other reasons.--In circumstances other than
10 those set forth in this section, the department shall, by
11 regulation, provide for refunds up to but not exceeding the
12 amount authorized under subsection (c).]
13 (b) Refunds for other reasons.--
14 (1) Except as provided in paragraph (2) (3), refunds FOR <--
15 TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM CONTRACTS for
16 reasons other than those set forth in subsection (a) shall be
17 the sum of the payments DEPOSITS made pursuant to the tuition <--
18 account payment contract TUITION ACCOUNT GUARANTEED SAVINGS <--
19 PROGRAM CONTRACT plus 90% of the difference between the
20 tuition credit purchase prices in the years of purchase <--
21 DEPOSIT and the increased value of the tuition credits had <--
22 they been redeemed in the academic year of termination.
23 (2) EXCEPT AS PROVIDED IN PARAGRAPH (3), REFUNDS FOR <--
24 TUITION ACCOUNT INVESTMENT PROGRAM CONTRACTS FOR REASONS
25 OTHER THAN THOSE SET FORTH IN SUBSECTION (A) SHALL BE:
26 (I) IN THE EVENT THE VALUE OF THE ACCOUNT IS LESS
27 THAN OR EQUAL TO THE SUM OF THE DEPOSITS MADE PURSUANT TO
28 THE TUITION ACCOUNT INVESTMENT PROGRAM CONTRACT, THE
29 VALUE OF THE ACCOUNT; AND
30 (II) IN THE EVENT THE VALUE OF THE ACCOUNT IS MORE
19990S0008B1406 - 37 -
1 THAN THE SUM OF THE DEPOSITS MADE PURSUANT TO THE TUITION
2 ACCOUNT INVESTMENT PROGRAM CONTRACT, THE SUM OF THE
3 DEPOSITS PLUS 90% OF THE DIFFERENCE BETWEEN THE SUM OF
4 THE DEPOSITS AND THE VALUE OF THE ACCOUNT.
5 (2) (3) The board may alter the refund provisions set <--
6 forth in paragraph (1) PARAGRAPHS (1) AND (2) so long as such <--
7 alterations are consistent with the requirements for
8 "qualified State tuition programs" provided in section 529 of
9 the Internal Revenue Code of 1986 (Public Law 99-514, 26
10 U.S.C. § 529), as hereafter amended.
11 (3) (4) If a refund is requested under this subsection <--
12 within the 12 months preceding the purchaser's ACCOUNT <--
13 OWNER'S changing the tuition level DESIGNATED IN A TUITION <--
14 ACCOUNT GUARANTEED SAVINGS PROGRAM CONTRACT, the refund shall
15 be calculated using the value of the tuition credits of the
16 previous or current tuition level, whichever is less.
17 [(e)](c) Fees.--The department may impose a fee upon
18 termination of the account for administrative costs and deduct
19 the fee from the amount otherwise payable.
20 [(f) Value of account.--The value of the account shall be
21 calculated by compounding annually each separate payment from
22 the time of payment to the time the account is terminated at the
23 actual annual net earnings rate of the fund.
24 (g)](d) Taxation of refunds.--In the event of a refund upon
25 the termination of a [tuition account] TUITION ACCOUNT PROGRAM <--
26 CONTRACT, to the extent the [amount of the] refund amount a <--
27 purchaser AN ACCOUNT OWNER receives exceeds the sum of the <--
28 [payments] DEPOSITS, it shall be subject to taxation as income <--
29 under the laws of this Commonwealth[, except when the refund is
30 made pursuant to subsection (b)].
19990S0008B1406 - 38 -
1 [(h)](e) Change of beneficiary FOR TYPE OF TUITION ACCOUNT <--
2 PROGRAM.--The substitution of the beneficiary of an account
3 pursuant to section 312(3) OR THE TRANSFER OF DEPOSITS, AND ANY <--
4 INCREASED VALUE THEREOF, FROM ONE TYPE OF TUITION ACCOUNT
5 PROGRAM TO THE OTHER shall not be deemed a termination of the
6 account for purposes of this section.
7 [(i)](f) Scholarship.--If a beneficiary is awarded a
8 scholarship, the terms of which cover the benefits included in
9 [tuition account payment contracts purchased] TUITION ACCOUNT <--
10 PROGRAM CONTRACTS ENTERED INTO on behalf of the beneficiary, the
11 [purchaser [shall] ACCOUNT OWNER may receive a refund <--
12 [consisting]. FOR TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM <--
13 CONTRACTS, THE REFUND SHALL CONSIST of the [tuition for the
14 number of] value, in the academic award year the scholarship is
15 paid, of the available tuition credits [purchased [calculated at <--
16 the standard tuition level or at the tuition for a specific
17 participating institution, as designated in the tuition account
18 payment contract, or an amount equal to the value of the account
19 under subsection (f), whichever is less]. FOR TUITION ACCOUNT <--
20 INVESTMENT PROGRAM CONTRACTS, THE REFUND SHALL CONSIST OF THE
21 AVAILABLE PORTION OF THE VALUE OF THE ACCOUNT. The refund under
22 this subsection for any one academic award year shall not exceed
23 the scholarship for that year.
24 SECTION 314. CONSTRUCTION. <--
25 NOTHING IN THIS CHAPTER OR IN A [TUITION ACCOUNT PAYMENT
26 CONTRACT] TUITION ACCOUNT PROGRAM CONTRACT ENTERED INTO PURSUANT
27 TO THIS CHAPTER SHALL BE CONSTRUED AS A PROMISE OR GUARANTEE BY
28 THE DEPARTMENT THAT A PERSON WILL BE ADMITTED TO AN INSTITUTION
29 OF HIGHER EDUCATION, WILL BE ALLOWED TO CONTINUE TO ATTEND AN
30 INSTITUTION OF HIGHER EDUCATION AFTER HAVING BEEN ADMITTED OR
19990S0008B1406 - 39 -
1 WILL BE GRADUATED FROM AN INSTITUTION OF HIGHER EDUCATION.
2 SECTION 315. EXEMPTION FROM SECURITY LAWS.
3 TUITION [ACCOUNT PAYMENT CONTRACTS] ACCOUNT PROGRAM CONTRACTS
4 ARE EXEMPT FROM ANY STATUTE REGULATING SECURITIES, INCLUDING THE
5 ACT OF DECEMBER 5, 1972 (P.L.1280, NO.284), KNOWN AS THE
6 PENNSYLVANIA SECURITIES ACT OF 1972.
7 Section 316. State tax exemption.
8 (a) Property of [fund] FUNDS.--The property of [the fund and <--
9 its] EACH OF THE FUNDS AND THEIR income and operation shall be <--
10 exempt from all taxation by the Commonwealth and its political
11 subdivisions.
12 (b) [Tuition credits.--The purchase [and], AND] DEPOSITS.-- <--
13 DEPOSITS MADE PURSUANT TO A TUITION ACCOUNT PROGRAM CONTRACT;
14 ANY INCREASE IN THE VALUE OF THOSE DEPOSITS, THE retention, or
15 transfer during life or as a result of death of [tuition credits <--
16 and their use] ANY LEGAL INTEREST IN A TUITION ACCOUNT PROGRAM <--
17 CONTRACT; AND PAYMENT OF QUALIFIED HIGHER EDUCATION EXPENSES OF
18 BENEFICIARIES MADE PURSUANT TO TUITION ACCOUNT PROGRAM CONTRACTS
19 shall [not be a transaction subject to income or property
20 taxation by the Commonwealth or any of its political
21 subdivisions.] be exempt from all taxation by the Commonwealth
22 and its political subdivisions.
23 SECTION 317. FEDERAL TAXATION. <--
24 THE DEPARTMENT MAY TAKE APPROPRIATE ACTION IN ORDER TO OBTAIN
25 A DETERMINATION FROM THE INTERNAL REVENUE SERVICE OR THE FEDERAL
26 COURTS AS TO WHETHER [THE PURCHASE AND RETENTION OF TUITION
27 CREDITS AND THEIR USE] DEPOSITS MADE PURSUANT TO A TUITION
28 ACCOUNT PROGRAM CONTRACT, THE INCREASE IN VALUE OF SUCH
29 DEPOSITS, AND PAYMENT OF QUALIFIED HIGHER EDUCATION EXPENSES
30 PURSUANT TO A TUITION ACCOUNT PROGRAM CONTRACT SHALL BE A
19990S0008B1406 - 40 -
1 TRANSACTION WHICH WILL SUBJECT [PURCHASERS] ACCOUNT OWNERS OR
2 THE INCOME OF [THE FUND] EITHER OR BOTH OF THE FUNDS TO FEDERAL
3 TAXATION AND MAY RESPOND TO SUCH DETERMINATION IN ANY MANNER
4 PERMITTED UNDER THIS CHAPTER.
5 Section 2 6. The act is amended by adding a section to read: <--
6 Section 318. Scholarship programs.
7 (a) Establishment.--The Commonwealth, any political
8 subdivision of the Commonwealth, and any organization that is
9 exempt from Federal income taxation under section 501(a) and
10 described in section 501(c)(3) of the Internal Revenue Code of
11 1986 (Public Law 99-514, 26 U.S.C. § 501), including the
12 department, if not prohibited by section 529 of the Internal
13 Revenue Code of 1986, may establish a scholarship program
14 THROUGH A TUITION ACCOUNT PROGRAM CONTRACT to award scholarships <--
15 consisting of tuition credits to students. Any scholarship <--
16 program created pursuant to this section shall be registered
17 with the department and shall comply with such requirements as
18 the department may establish. Scholarship beneficiaries shall be
19 selected by the entity establishing the scholarship program, in
20 accordance with criteria established by the entity; and the
21 entity may change the beneficiary as permitted by section 529 of
22 the Internal Revenue Code of 1986.
23 (b) Purchase DEPOSITS.--Any person or legal entity may <--
24 purchase tuition credits MAKE DEPOSITS on behalf of a <--
25 scholarship program that is or is to be established in
26 accordance with this section at the same price as is established <--
27 for the purchase of credits for nonscholarship tuition accounts.
28 Tuition credits shall have the same value to the beneficiary of
29 a scholarship established pursuant to this section as they would
30 have to any other beneficiary of a tuition account payment
19990S0008B1406 - 41 -
1 contract. UNDER THE SAME TERMS AND CONDITIONS AS THOSE THAT <--
2 APPLY TO NONSCHOLARSHIP TUITION ACCOUNTS. A BENEFICIARY OF A
3 TUITION ACCOUNT PROGRAM CONTRACT ENTERED INTO AS PART OF A
4 SCHOLARSHIP PROGRAM SHALL BE ENTITLED TO PAYMENT OF QUALIFIED
5 HIGHER EDUCATION EXPENSES UNDER THE SAME TERMS AND CONDITIONS AS
6 THOSE THAT APPLY TO BENEFICIARIES OF NONSCHOLARSHIP TUITION
7 ACCOUNTS.
8 (c) No requirement.--Nothing in this act shall require the
9 creation of a scholarship account or authorize the use of State
10 funds for such accounts.
11 Section 3. This act shall take effect in 60 days. <--
12 SECTION 7. (A) WITHIN 60 DAYS AFTER THE EFFECTIVE DATE OF <--
13 THIS ACT, THE DEPARTMENT SHALL SOLICIT PROPOSALS FOR ASSISTANCE
14 IN THE MANAGEMENT OF ALL OR PART OF THE TUITION ACCOUNT
15 INVESTMENT PROGRAM THROUGH A REQUEST FOR PROPOSALS. IN ITS
16 DISCRETION, THE DEPARTMENT MAY COMBINE IN THIS SOLICITATION A
17 REQUEST FOR PROPOSALS FOR MANAGEMENT OF ALL OR PART OF THE
18 TUITION ACCOUNT GUARANTEED SAVINGS PROGRAM. THE DEPARTMENT SHALL
19 REQUIRE THAT EACH PROPOSAL SPECIFY:
20 (1) WHETHER IT APPLIES TO THE MANAGEMENT OF ONLY THE
21 TUITION ACCOUNT INVESTMENT PROGRAM OR BOTH THE TUITION
22 ACCOUNT INVESTMENT PROGRAM AND THE TUITION ACCOUNT GUARANTEED
23 SAVINGS PROGRAM;
24 (2) WHETHER IT APPLIES TO THE ADMINISTRATION, INVESTMENT
25 AND/OR MARKETING OF THE PROGRAM OR PROGRAMS;
26 (3) THE MANNER IN WHICH THE ADMINISTRATION, INVESTMENT
27 AND/OR MARKETING OF THE PROGRAM OR PROGRAMS WOULD BE CARRIED
28 OUT;
29 (4) HOW THE ADMINISTRATION, INVESTMENT AND/OR MARKETING
30 OF THE TUITION ACCOUNT INVESTMENT PROGRAM WILL BE COORDINATED
19990S0008B1406 - 42 -
1 WITH AND COMPLEMENT THAT OF THE TUITION ACCOUNT GUARANTEED
2 SAVINGS PROGRAM;
3 (5) THE QUALIFICATIONS OF THE ENTITY SUBMITTING THE
4 PROPOSAL TO PROVIDE THE PROPOSED SERVICES; AND
5 (6) ANY OTHER INFORMATION DESIRED BY THE DEPARTMENT.
6 (B) THE REQUEST FOR PROPOSALS SHALL PROVIDE THAT THE
7 DEPARTMENT MAY CONDUCT DISCUSSIONS WITH RESPONSIBLE OFFERORS.
8 THE DEPARTMENT MAY ACCEPT OR REJECT ANY OR ALL PROPOSALS OR
9 PORTIONS OF PROPOSALS DEEMED BY THE APPROPRIATE OFFEROR AND
10 DEPARTMENT TO BE SEVERABLE, IF IT DETERMINES THAT DOING SO IS IN
11 THE BEST INTERESTS OF THE PROGRAM OR PROGRAMS.
12 SECTION 8. THIS ACT SHALL TAKE EFFECT IN 60 DAYS.
C25L24JS/19990S0008B1406 - 43 -