PRIOR PRINTER'S NOS. 871, 1406 PRINTER'S NO. 1450
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
AS AMENDED ON SECOND CONSIDERATION, OCTOBER 26, 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 tuition account
11 programs; and establishing scholarship programs.
12 The General Assembly of the Commonwealth of Pennsylvania
13 hereby enacts as follows:
14 Section 1. The title and section 101 of the act of April 3,
15 1992 (P.L.28, No.11), known as the Tuition Account Program and
16 College Savings Bond Act, are amended to read:
17 AN ACT
18 Providing for the [advance purchase of tuition at certain
19 institutions of higher education;] establishment of two
20 programs for postsecondary educational savings accounts, <--
1 SAVINGS, one of which is a guaranteed savings program and the <--
2 other of which is an investment program; establishing the
3 Tuition Account [Program] PROGRAMS Bureau within the Treasury <--
4 Department and providing duties for the Treasury Department;
5 establishing [the Tuition Payment Fund; providing for tuition
6 account payment contracts; providing for the issuance and
7 sale of certain bonds;] tuition account funds; providing for
8 Tuition Account Program Contracts; providing for the
9 establishment of scholarship programs; and further providing
10 for duties of the Pennsylvania Higher Education Assistance
11 Agency.
12 Section 101. Short title.
13 This act shall be known and may be cited as the Tuition
14 Account [Program] Programs and College Savings Bond Act.
15 Section 2. The heading of Chapter 3 of the act is amended to
16 read:
17 CHAPTER 3
18 TUITION ACCOUNT [PROGRAM] PROGRAMS
19 Section 3. Sections 301(5), 302, 303, 304(a), (c) and (d),
20 305, 306, 307, 308 and 309 of the act are amended to read:
21 Section 301. Declaration of policy.
22 The General Assembly finds and declares as follows:
23 * * *
24 (5) The purposes of this chapter are to:
25 (i) Provide wide and affordable access to
26 institutions of higher education, both public and
27 private, for the residents of this Commonwealth.
28 (ii) Encourage attendance at institutions of higher
29 education, both public and private, and help individuals
30 plan for educational expenses.
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1 (iii) Provide [a program for the advance purchase of
2 tuition] programs for postsecondary educational savings
3 as both a means and an incentive for the citizens of this
4 Commonwealth to provide for future higher education
5 expenses.
6 (iv) Provide to the citizens of this Commonwealth a <--
7 means of saving for postsecondary education that provides
8 them with the advantages of "qualified State tuition
9 programs" as defined by section 529 of the Internal
10 Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
11 529).
12 Section 302. Definitions.
13 The following words and phrases when used in this chapter
14 shall have the meanings given to them in this section unless the
15 context clearly indicates otherwise:
16 "Academic period." A semester, trimester or comparable
17 institutional period into which an eligible educational <--
18 institution divides its academic year.
19 "Academic year." A 12-month period commencing on or after
20 August 1 of the calendar year.
21 "Account owner." A person, including a natural person,
22 corporation, association, partnership or other legal entity, who
23 enters into a Tuition Account Program Contract.
24 "Beneficiary." A person who meets the eligibility criteria
25 established by this chapter and by the department and on whose
26 behalf [a purchaser enters into a tuition account payment
27 contract.] an account owner enters into a Tuition Account
28 Program Contract.
29 "Board." The Tuition Account [Program] Programs Advisory
30 Board.
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1 "Department." The Treasury Department of the Commonwealth.
2 "Eligible educational institution." A college, university,
3 vocational or other postsecondary educational institution as
4 defined by section 529 of the Internal Revenue Code of 1986
5 (Public Law 99-514, 26 U.S.C. § 529).
6 ["Fund." The Tuition Payment Fund.]
7 "Funds." The Tuition Account Guaranteed Savings Program Fund
8 and the Tuition Account Investment Program Fund.
9 "Lawful investment." Any of those investments described in
10 either 24 Pa.C.S. § 8521 (relating to management of fund and
11 accounts) or 71 Pa.C.S. § 5931 (relating to management of fund
12 and accounts).
13 "Net earnings rate of the [fund] Tuition Account Guaranteed
14 Savings Program Fund." The percentage return of the investment
15 of [fund] Tuition Account Guaranteed Savings Program Fund assets
16 after adjusting for any taxes and operating expenses.
17 "Other educational expense credits." Tuition credits that
18 are converted for payment of qualified higher education expenses
19 other than tuition, as provided in section 309(h).
20 ["Participating institution." Any accredited, degree-
21 granting college or university which is required to participate
22 in the tuition account program under section 308.]
23 "Private institution." Any private or out-of-State public
24 institution that is an eligible educational institution.
25 "Public institution." Any public eligible educational
26 institution which is required to participate in the Tuition
27 Account Guaranteed Savings Program under section 308.
28 ["Purchaser." A person, including a natural person,
29 corporation, association, partnership or other legal entity, who
30 enters into a tuition account payment contract.]
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1 "Qualified higher education expenses." Expenses, as defined
2 by section 529 of the Internal Revenue Code of 1986 (Public Law
3 99-514, 26 U.S.C. § 529).
4 "Tuition." The [total of all fees and charges] charge for an
5 academic credit or the credits required for attendance at an
6 [institution of higher education] eligible educational
7 institution for a full-time, undergraduate academic [year,
8 excluding charges for room and board] period.
9 ["Tuition account payment contract." A contract entered into
10 by a purchaser and the department on behalf of the Commonwealth
11 to provide for the advance purchase of tuition credits for a
12 beneficiary attending a participating institution.]
13 "Tuition Account Program Contract." A Tuition Account
14 Guaranteed Savings Program Contract or a Tuition Account
15 Investment Program Contract entered into by an account owner and
16 the department on behalf of the Commonwealth to provide for
17 savings to meet the future qualified higher education expenses
18 of a beneficiary attending an eligible educational institution.
19 "Tuition credits." Credits as determined in section 309(c).
20 "Tuition credit prices." The price set by the Treasury
21 Department annually for each tuition level.
22 "Tuition level." The account owner's designation of the
23 public or private institution or an average established pursuant
24 to section 309(b), to which deposits made pursuant to a Tuition
25 Account Guaranteed Savings Program Contract will be applied to
26 determine the tuition credit equivalent of the deposit.
27 "Tuition shortfall." The [positive] difference between the
28 [tuition for the number of tuition credits used at a
29 participating institution accepting a beneficiary for enrollment
30 and the tuition payment as determined in section 309(g).] amount
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1 of the payment authorized by the account owner pursuant to
2 section 309(d)(2) or (e)(2) and the available portion of the
3 value of the account.
4 "Value of the account." For deposits made pursuant to a
5 Tuition Account Guaranteed Savings Program Contract, an amount
6 calculated by compounding annually each separate deposit from
7 the time of deposit to the date of calculation at the actual
8 annual net earnings rate of the Tuition Account Guaranteed
9 Savings Program Fund. For deposits made pursuant to a Tuition
10 Account Investment Program Contract, an amount determined by
11 subtracting expenses, fees and taxes, if any, from the value of
12 the Tuition Account Investment Program Fund and then prorating
13 the remaining net value by shares.
14 Section 303. Tuition Account [Program] PROGRAMS Bureau. <--
15 The State Treasurer is directed to establish a bureau within
16 the Treasury Department, which shall be known as the Tuition
17 Account [Program] PROGRAMS Bureau, for the purpose of <--
18 establishing and administering [the tuition account program. The
19 program shall provide for the advance purchase of tuition
20 credits for a beneficiary attending a participating
21 institution.] two programs for postsecondary educational
22 savings, one of which is a guaranteed savings program and the
23 other of which is an investment program. The guaranteed savings
24 program shall provide that money may be deposited pursuant to a
25 Tuition Account Guaranteed Savings Program Contract for the
26 future payment of qualified higher educational expenses for
27 attendance at eligible educational institutions as described in
28 section 309. Money deposited pursuant to a Tuition Account
29 Guaranteed Savings Program Contract shall increase in value by,
30 at a minimum, the increase in the tuition credit price at the <--
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1 tuition level designated in the contract. The investment program
2 shall provide that money may be deposited pursuant to a Tuition
3 Account Program Investment Contract for the future payment of
4 qualified higher educational expenses for attendance at eligible
5 educational institutions as described in section 309.1. The
6 investment program shall have no guarantee.
7 Section 304. Tuition Account [Program] PROGRAMS Advisory Board. <--
8 (a) Creation.--There is created a Tuition Account [Program]
9 Programs Advisory Board. The board shall be composed of the
10 State Treasurer, the Chairman of the Board of Directors of the
11 Pennsylvania Higher Education Assistance Agency, the
12 Commissioner of Higher Education within the Department of
13 Education, the Chairman of the Council of Higher Education and
14 the Chancellor of the State System of Higher Education, all of
15 whom shall be ex officio members. There also shall be 12 other
16 members of the board. Of these 12 other members, three shall be
17 appointed by the President pro tempore of the Senate, three
18 shall be appointed by the Speaker of the House of
19 Representatives and six shall be appointed by the Governor. Of
20 the three members appointed by the President pro tempore of the
21 Senate, one must be a member of the Senate and one must be
22 recommended by the Minority Leader of the Senate. Of the three
23 members appointed by the Speaker of the House of
24 Representatives, one must be a member of the House of
25 Representatives and one must be recommended by the Minority
26 Leader of the House of Representatives. The remaining members of
27 the board appointed by the President pro tempore of the Senate
28 and the Speaker of the House of Representatives must have
29 knowledge, skill and expertise in financial affairs. Of the six
30 members appointed by the Governor, one must be the president of
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1 a State-related institution; one must be the president of one of
2 the institutions operating under Article XIX-A of the act of
3 March 10, 1949 (P.L.30, No.14), known as the Public School Code
4 of 1949; one must be the president of a university in the State
5 System of Higher Education; and one must be a president of a
6 private or independent four-year, degree-granting college or
7 university located within this Commonwealth.
8 * * *
9 (c) Organizational meeting.--The Commissioner of Higher
10 Education shall call the organizational meeting of the board, at
11 which time a [chairman] chairperson shall be selected from among
12 the members. If a vacancy in the office of chairperson occurs,
13 such vacancy shall be filled by a selection from among the
14 members. Meetings of the board shall be held at least quarterly
15 or at the call of the [chairman] chairperson.
16 (d) Duties.--The board shall consider, study and review the
17 work of the Tuition Account [Program] Programs Bureau, shall
18 advise the department on request and shall make recommendations
19 on its own initiative for the improvement of the tuition account
20 [program] programs. The board shall report annually to the
21 Governor and to the General Assembly, and may make such interim
22 reports as are deemed advisable.
23 * * *
24 Section 305. Powers of department.
25 In addition to the powers granted by other provisions of this
26 chapter, the department shall have the powers necessary or
27 convenient to carry out this chapter, including, but not limited
28 to, the power to:
29 (1) Administer the tuition account [program and the
30 fund.] programs and the funds.
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1 (2) Enter into [tuition account payment contracts with
2 purchasers.] Tuition Account Program Contracts with account
3 owners.
4 (3) Contract and make any agreements or arrangements
5 necessary with eligible educational institutions [of higher
6 education].
7 (4) Pay directly to an eligible educational institution,
8 an account owner, a beneficiary or a third party authorized
9 by the account owner, upon the receipt of appropriate
10 documentation, the funds which the department is obligated to
11 [transfer to the institution upon a beneficiary's use of
12 tuition credits.] pay pursuant to a Tuition Account Program
13 Contract.
14 (5) Contract for goods and services, and engage and
15 employ personnel, including, but not limited to, the services
16 of private consultants, actuaries, managers, legal counsel
17 and auditors for rendering professional, managerial and
18 technical assistance and advice.
19 (6) Solicit and accept gifts, grants, loans and other
20 aid from any person, corporation or other entity or from
21 Federal, State or local government and participate in any
22 Federal, State or local government program, if necessary for
23 prudent management or the establishment and administration of
24 a scholarship program.
25 (7) Charge and collect administrative fees and charges
26 in connection with any transaction, including continued
27 participation in [the] tuition account [program] programs.
28 (8) Terminate tuition accounts and make refunds.
29 (9) Contract for insurance, letters of credit and
30 collateral agreements.
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1 (10) Restrict the number of participants in the
2 [program] programs.
3 (11) Adjust the terms of [subsequent tuition account
4 payment contracts.] Tuition Account Program Contracts.
5 (12) Solicit answers from the appropriate Federal
6 agencies regarding the application of security or other
7 Federal laws to the program.
8 (13) Limit the times and dates during which [tuition
9 account payment contracts may be sold.] Tuition Payment
10 Program Contracts may be entered into.
11 (14) Consider means whereby [a purchaser may have
12 installment payments] an account owner may have deposits
13 deducted from salary.
14 (15) Promulgate regulations.
15 (16) Notwithstanding any other provision of this act,
16 administer the tuition account programs in such manner as to
17 ensure and maintain their status as "qualified State tuition
18 programs" as defined in section 529 of the Internal Revenue
19 Code of 1986 (Public Law, 26 U.S.C. § 529).
20 Section 306. Tuition [Payment Fund.] account program PROGRAMS; <--
21 funds.
22 (a) Establishment.--There [is] are established in the State
23 Treasury [a special fund] two special funds to be known as the
24 Tuition [Payment Fund. This fund shall be invested in accordance
25 with this chapter. All money in the fund is hereby appropriated]
26 Account Guaranteed Savings Program Fund and the Tuition Account
27 Investment Program Fund. The money in these funds shall be
28 invested in accordance with this chapter. All money in each of
29 the funds is hereby appropriated to the department on a
30 continuing basis to carry out the provisions of this chapter.
19990S0008B1450 - 10 -
1 (b) Administration.--
2 (1) The assets of [the fund] each of the funds shall be
3 preserved, invested and expended solely pursuant to and for
4 the purposes set forth in this chapter.
5 (2) The department shall obtain appropriate actuarial
6 assistance to establish, maintain and certify that the [fund]
7 Tuition Account Guaranteed Savings Program Fund is sufficient
8 to defray [the tuition account program's] its obligations and
9 shall annually evaluate, or cause to be evaluated, [the] its
10 actuarial soundness [of the fund]. If the department finds a
11 need for additional assets in order to preserve actuarial
12 soundness [or if the department finds that actuarial
13 soundness can be maintained with fewer assets], it may adjust
14 the [purchase prices of the] tuition [credits calculated
15 under section 309(c)(3)] credit prices to ensure such
16 soundness. If the department finds that actuarial soundness
17 can be maintained with fewer assets, it may adjust the
18 tuition credit prices or distribute surplus assets in excess
19 of those needed to maintain the actuarial soundness of the
20 Tuition Account Guaranteed Savings Program Fund as specified
21 in paragraph (2.1).
22 (2.1) (i) Annually, after the department's fiscal year
23 has ended, the department shall determine whether the
24 Tuition Account Guaranteed Savings Program Fund has been
25 actuarially certified as being sufficient to defray its
26 obligations and whether the actuarial soundness of the
27 Tuition Account Guaranteed Savings Program Fund, as
28 actuarially evaluated, can be maintained with fewer
29 assets and, if so, the dollar value of any excess surplus
30 assets. In making the determination, the department shall
19990S0008B1450 - 11 -
1 consider the projected costs and expenses of the Tuition
2 Account Guaranteed Savings Program, including the Tuition
3 Account Guaranteed Savings Program Fund, as well as any
4 material subsequent events occurring between the end of
5 the fiscal year and the date on which the determination
6 is made.
7 (ii) If the department determines that there are
8 assets in excess of those needed to maintain actuarial
9 soundness of the Tuition Account Guaranteed Savings
10 Program Fund and the assets actuarially certified as
11 sufficient to defray the costs of the Tuition Account
12 Guaranteed Savings Program, the department may, but shall
13 not be obligated to, distribute the dollar value of any
14 excess surplus assets by making additional deposits,
15 which will be converted to the equivalent of tuition
16 credits pursuant to section 309(c), into accounts
17 established pursuant to Tuition Account Guaranteed
18 Savings Program Contracts that have not been terminated
19 as of the date of determination.
20 (iii) Any distribution of any excess surplus assets
21 of the fund shall be made on an equitable basis as
22 determined by the department.
23 (3) The department, in conjunction with the board, shall
24 make an annual report to the Governor and the General
25 Assembly showing the [fund's] condition of each of the funds.
26 This report shall contain the findings and recommendations of
27 the department and the board and the recommendations of any
28 private consultant under contract or volunteering services to
29 the department or board. The report shall detail actions
30 taken or needed to modify the [tuition account program]
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1 Tuition Account Guaranteed Savings Program to insure the
2 fiscal sufficiency of the [fund] Tuition Account Guaranteed
3 Savings Program Fund to meet its obligations under this
4 chapter. [The] With regard to the Tuition Account Guaranteed
5 Savings Program Fund, the report shall address the
6 relationship between existing and projected net investment
7 returns and existing and projected tuition levels and address
8 the advisability or necessity of modifying the authorized
9 investment of fund assets, the [purchase price of tuition
10 credits,] tuition credit price, the amount of administrative
11 fee or charges or the amount of refunds offered upon
12 termination of a [tuition account.] Tuition Account
13 Guaranteed Savings Program Contract. Further, consistent with
14 the goal of providing for the maintenance of the fiscal
15 sufficiency of the fund, [this report] the report regarding
16 each of the funds shall detail those actions taken or needed
17 to modify the [tuition account program] programs so that the
18 [fund, purchasers] funds, account owners and beneficiaries
19 will receive favorable treatment for purposes of Federal
20 taxation.
21 (c) Composition.--[The fund] Each of the funds shall consist
22 of:
23 (1) All [payments made by purchasers pursuant to tuition
24 account payment contracts] deposits made by account owners
25 pursuant to Tuition Account Program Contracts and all
26 interest, earnings and additions thereto.
27 (2) Any other money, public or private, appropriated or
28 made available to the department for the fund from any source
29 and all interest, earnings and additions thereto.
30 (d) Operating and administrative costs.--The department
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1 shall, through the Governor, annually submit to the General
2 Assembly a budget covering the operating and administrative
3 expenses of the Tuition Account [Program] Programs Bureau and
4 the board. Upon approval by the General Assembly in an
5 appropriation bill, expenses as incurred by the Tuition Account
6 [Program] Programs Bureau and the board[, commencing one year
7 after tuition credits have been offered for sale to the public,]
8 shall be paid from the fees, charges and investment earnings of
9 the [fund] funds, proportionately taken from each fund on an
10 equitable basis as determined by the department, or from any
11 other available funds.
12 (e) Repayment of initial appropriation.--The department
13 shall repay from the fees, charges and investment earnings of
14 the [fund] Tuition Account Guaranteed Savings Program Fund to
15 the General Fund any money appropriated for the initial
16 planning, organization and administration of the tuition account
17 program established at the time of the original enactment of
18 this act. The repayment shall take place within a ten-year
19 period[, which period commences two years after tuition credits
20 have been offered for sale to the public.] commencing September
21 1, 1995.
22 Section 307. Investment policies and guidelines.
23 (a) General rule.--The policies governing the investment of
24 the [fund shall be directed to obtaining sufficient income to
25 meet the Commonwealth's obligations under this chapter,
26 maintaining necessary reserves and covering operating expenses.
27 The department, its investment manager and trustee shall not
28 engage in any investment practice or activity which entails
29 greater risk than necessary to meet these objectives but shall
30 have the authority to invest and reinvest the fund in all lawful
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1 investments.] Tuition Account Guaranteed Savings Program Fund
2 shall be directed to obtaining sufficient income to meet the
3 Commonwealth's FUND'S obligations under this chapter, <--
4 maintaining necessary reserves and covering operating expenses.
5 The policies governing the investment of the Tuition Account
6 Investment Program Fund shall be directed to providing for an
7 appropriate balance of risk, liquidity and return commensurate
8 with the management of a prudent investor. With regard to each
9 of the funds, the department, its investment managers, program
10 managers and trustees shall have the authority to invest and
11 reinvest the funds in all lawful investments.
12 (b) Investment manager and trustee.--The department may
13 contract with one or more persons or other legal entities to
14 serve as investment managers, program managers and trustees to
15 the department on behalf of [the tuition account program] either
16 or both of the Tuition Account Programs. If the department
17 contracts with investment managers [and], program managers or
18 trustees in order to fulfill the objectives of the tuition
19 account [program] PROGRAMS, the investment managers, program <--
20 managers and trustees shall work with the department to create
21 an investment program or programs, to develop investment
22 portfolios and to supervise investments and the investment
23 [program] programs selected. If the department contracts with
24 investment managers, program managers and trustees, the
25 department may require that the investment managers, program
26 managers and trustees agree, based on actuarial projections of
27 program costs and expenses supplied by the department, to meet
28 any obligations of the department if, as a result of the
29 imprudent selection or supervision of investments or the
30 investment program by the investment managers, program managers
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1 or trustees, the [tuition payment fund] Tuition Account
2 Guaranteed Savings Program Fund is not fiscally sufficient to
3 enable the department to fulfill its obligations under this
4 chapter.
5 Section 308. [Participating institutions] Participation in
6 Tuition Account Guaranteed Savings Program by
7 eligible educational institutions.
8 (a) Public institutions.--The following public institutions
9 of higher education shall participate in the [tuition account
10 program] Tuition Account Guaranteed Savings program:
11 (1) Community colleges operating under Article XIX-A of
12 the act of March 10, 1949 (P.L.30, No.14), known as the
13 Public School Code of 1949.
14 (2) Universities comprising the State System of Higher
15 Education.
16 (3) The following State-related institutions:
17 (i) The Pennsylvania State University.
18 (ii) The University of Pittsburgh.
19 (iii) Temple University.
20 (iv) Lincoln University.
21 (4) Any institution which is hereafter designated as
22 "State-related" by the Commonwealth.
23 (5) Any other eligible educational institution owned by
24 the Commonwealth.
25 (b) Private institutions.--A private institution may enter
26 into an agreement with the department through which the
27 institution, under terms mutually agreeable to the institution
28 and the department, agrees to be a private institution that
29 account owners may choose when designating their tuition level
30 pursuant to a Tuition Account Guaranteed Savings Program
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1 Contract. The terms of the agreement shall include, but not be
2 limited to, the determination of tuition credit prices, terms of
3 redemption of tuition credits at the institution, conversion of
4 tuition credits deposited at other tuition levels to other <--
5 tuition at the institution and appropriate conversion of tuition
6 credits to OTHER educational expense credits. <--
7 Section 309. Tuition [account program] Account Guaranteed
8 Savings Program.
9 (a) General description.--Each [payment] deposit made
10 pursuant to a [tuition account payment contract will purchase
11 tuition credits at one of three standard tuition levels or, at
12 the purchaser's designation, at a specific participating
13 institution. All tuition credits purchased] Tuition Account
14 Guaranteed Savings Program Contract will be considered the
15 equivalent of a purchase of tuition credits at the tuition level
16 designated by the account owner in the Tuition Account
17 Guaranteed Savings Program Contract. All deposits will be held
18 in a beneficiary's account and will be converted to the tuition
19 level of the institution to be attended by the beneficiary. At
20 the time of redemption, the tuition to be paid will be
21 calculated based on the tuition level designated and the
22 institution being attended as described in this section. A
23 [participating] public institution attended by a beneficiary
24 shall accept that beneficiary's tuition credits when presented.
25 [The department shall pay from the fund to the participating
26 institution the lesser of the actual tuition for the number of
27 tuition credits used or the tuition payment as specified in
28 subsection (g).] Payments on account of tuition shortfalls shall
29 be made [to participating institutions] as provided for in
30 section 310.
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1 (b) [Standard tuition] Tuition levels.--
2 (1) The department shall annually establish three
3 [standard] average tuition levels for public institutions
4 corresponding approximately to the average tuition charges
5 for that year at the Commonwealth's community colleges, at
6 universities in the State System of Higher Education and at
7 State-related universities. The department may annually
8 establish an average tuition level or levels for private
9 institutions corresponding to average tuition charges at
10 private institutions, as the department deems appropriate.
11 [Any purchaser may buy tuition credits at any designated
12 standard tuition level or at the tuition rate of a specific
13 participating institution.
14 (c) Tuition credits.--Tuition credits are whole or partial
15 units related to an academic year and are obtained as follows:
16 (1) The payment for each tuition purchase shall be
17 divided by either the tuition at a standard tuition level or
18 the tuition at a specific participating institution, as
19 designated by the purchaser.
20 (2) For tuition purchasers during the period from August
21 1 to July 31, tuition rates for the corresponding academic
22 year shall be used.
23 (3) If the department, in its discretion, determines
24 that the purchase payment for tuition credits representing a
25 unit of tuition for one academic year at a standard tuition
26 level or at a specific participating institution is to be
27 greater or less than actual tuition for the corresponding
28 year at a standard or at a specific participating
29 institution, the method of calculating tuition credits in
30 accordance with paragraphs (1) and (2) shall be adjusted
19990S0008B1450 - 18 -
1 accordingly.]
2 (2) A deposit may be made at the tuition level
3 designated in the Tuition Account Guaranteed Savings Program
4 Contract. With the approval of the department, an account
5 owner may change the designated tuition level.
6 (c) Tuition credits.--Deposits made pursuant to a Tuition
7 Account Guaranteed Savings Program Contract will be converted to
8 the equivalent amount of tuition credits as follows:
9 (1) A deposit made pursuant to a Tuition Account
10 Guaranteed Savings Program Contract shall be divided by the
11 tuition credit price in the year of deposit at the tuition
12 level designated by the account owner.
13 (2) For deposits made during the period from September 1
14 to August 31, tuition credit prices for the corresponding
15 academic year shall be used.
16 [(4)] (3) The number of tuition credits calculated at
17 the time of [purchase] deposit in accordance with paragraphs
18 (1)[, (2) and (3)] and (2) [shall] may be reduced in a manner
19 determined by the department reasonably to reflect potential
20 investment loss resulting from the time of year when the
21 [purchase] deposit is made.
22 (d) Process for public institutions.--The process for
23 certifying tuition, converting tuition credits, issuing and
24 redeeming tuition credits and making tuition payments for public
25 institutions shall be as follows:
26 [(d) Certifying tuition.--](1) On or before July 31, a
27 [participating] public institution shall certify to the
28 department the tuition to be charged by that institution for
29 the academic year beginning on or after August 1 [of that
30 year and ending on or before July 31 of the following year,]
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1 and, at such times as the department shall determine, each
2 [participating] public institution shall certify to the
3 department the tuition charged by that institution for the
4 current or any previous academic year.
5 [(e) Conversion of tuition credits.--Upon request of any
6 purchaser or beneficiary, the department shall convert tuition
7 credits purchased at standard tuition levels to actual tuition
8 at a specific participating institution by multiplying the
9 number of tuition credits purchased each year by the ratio of
10 that academic year's standard tuition level divided by the
11 tuition for the same academic year at the designated
12 participating institution. Upon request of the purchaser or
13 beneficiary, the department, following the same procedure, shall
14 convert tuition credits purchased at the tuition rate of a
15 participating institution to the tuition at another
16 participating institution designated in the request. The sum of
17 such conversions shall be the total tuition credits applicable
18 to a specific participating institution.
19 (f)] (2) [Issuance and redemption of certified tuition
20 credits.--]Upon application, the department shall issue to [a
21 purchaser or beneficiary a certified] an account owner a
22 statement of accumulated tuition credits available for the
23 payment of [all or a portion of a student's] tuition for a
24 specific academic [year at a] period at the specific public
25 institution or the public institution average tuition level
26 designated [participating institution. Any participating
27 institution which presents to the department a certified
28 statement of tuition credits for a student accepted for
29 enrollment for a specific academic year shall be paid by the
30 department the lesser of actual tuition for the number of
19990S0008B1450 - 20 -
1 tuition credits used as established by the institution for
2 that academic year or the tuition payment for the academic
3 year calculated as specified in subsection (g).] by the
4 account owner. In the event the account owner decides to
5 redeem the available tuition credits, the account owner shall
6 notify the department of the institution at which the
7 beneficiary intends to enroll. In the event the institution
8 is:
9 (i) The public institution last designated by the
10 account owner in the Tuition Account Guaranteed Savings
11 Program Contract as the tuition level, the account owner
12 shall submit to the department adequate documentation of
13 enrollment, the qualified higher education expenses and
14 the number of credits or dollar value of the credits that
15 the account owner has decided to redeem. The account
16 owner shall authorize payment of that amount to the
17 institution, a specified third party, the account owner
18 and/or beneficiary. Payment shall be made as specified in
19 subsection (d)(3).
20 (ii) A different public institution than that last
21 designated by the account owner in the Tuition Account
22 Guaranteed Savings Program Contract as the tuition level,
23 a conversion shall be made pursuant to subsection (g) and
24 the department shall issue a revised statement of
25 accumulated tuition credits and their dollar value
26 available for payment of qualified higher education
27 expenses at the newly designated public institution. The
28 account owner shall submit to the department adequate
29 documentation of enrollment, the qualified higher
30 education expenses and the number of credits or dollar
19990S0008B1450 - 21 -
1 value of the credits that the account owner has decided
2 to redeem. The account owner shall authorize payment of
3 that amount to the institution, a specified third party,
4 the account owner and/or beneficiary. Payment shall be
5 made as specified in subsection (d)(3).
6 (iii) A private institution that has not entered
7 into an agreement with the department pursuant to section
8 308(b), the available tuition credits shall be redeemable
9 for the payment of qualified higher education expenses at
10 the value they would have had if they had been redeemed
11 at the tuition level last designated by the account owner
12 in the Tuition Account Guaranteed Savings Program
13 Contract. The account owner shall submit to the
14 department adequate documentation of enrollment, the
15 qualified higher education expenses and the number of
16 credits or dollar value of the credits that the account
17 owner has decided to redeem. The account owner shall
18 authorize payment of that amount to the institution, a
19 specified third party, the account owner and/or
20 beneficiary. Payment shall be made as specified in
21 subsection (d)(3).
22 (iv) A private institution that has entered into an
23 agreement with the department pursuant to section 308(b),
24 payment shall be governed by the terms of the agreement,
25 provided, however, that in no event shall the payment be
26 less than what would have been paid if the beneficiary
27 were attending a private institution that has not entered
28 into an agreement with the department. Payment shall be
29 made as specified in the agreement.
30 [(g) Tuition payment.--Upon presentation of a certified
19990S0008B1450 - 22 -
1 statement of tuition credits by a participating institution
2 or in anticipation thereof, the department shall calculate
3 the tuition payment for the academic year specified. The
4 tuition payment under this section shall consist of the
5 purchase price of each total annual purchase of tuition
6 credits compounded each year from the year of purchase to the
7 year during which such credits are to be utilized, by the
8 average annual net earnings rate of the fund. The compounded
9 values of annual purchases of tuition credits shall be summed
10 in order of date of purchase until sufficient credits for one
11 academic year are obtained.]
12 (3) Upon submission of such documentation, the
13 department shall make the payment as authorized by the
14 account owner. Before making the payment authorized by the
15 account owner, the department shall determine whether the
16 available portion of the value of the account equals or
17 exceeds the authorized payment. If it does not, two separate
18 payments shall be made. The first payment shall be in the
19 amount of the available portion of the value of the account.
20 The second payment shall be in the amount of the difference
21 between the amount of the payment authorized by the account
22 owner and the available portion of the value of the account,
23 and it shall be paid pursuant to the tuition shortfall
24 provision of section 310.
25 (e) Process for private institution average tuition
26 levels.--The process of establishing private institution average
27 tuition credit prices, redeeming those tuition credits and
28 making tuition payments when an account owner has designated a
29 private institution average tuition level shall be as follows:
30 (1) On or before August 31, the department shall
19990S0008B1450 - 23 -
1 determine the average tuition credit price or prices for
2 average tuition level or levels for private institutions
3 established pursuant to subsection (b) for the academic year
4 beginning on or after August 1 of that year.
5 (2) Upon application, the department shall issue to an
6 account owner a statement of accumulated tuition credits
7 available for the payment of qualified higher education
8 expenses for a specific academic period at the private
9 institution average tuition level designated by the account
10 owner. In the event the account owner decides to redeem the
11 available tuition credits, the account owner shall notify the
12 department of the public or private institution at which the
13 beneficiary intends to enroll. In the event the institution
14 is:
15 (i) A public institution, the process for conversion
16 and payment shall be as set forth in subsections (d)(3)
17 and (g).
18 (ii) A private institution that has not entered into
19 an agreement with the department pursuant to section
20 308(b), the available tuition credits shall be redeemable
21 at the average tuition credit price DETERMINED BY THE <--
22 DEPARTMENT BEFORE ADJUSTMENTS, IF ANY, MADE PURSUANT TO
23 SECTION 306(B)(2), of the designated tuition level
24 established by the department for the year in which they
25 are redeemed. The account owner shall submit to the
26 department adequate documentation of enrollment, the
27 qualified higher education expenses and the number of
28 credits or dollar value of the credits that the account
29 owner has decided to redeem. The account owner shall
30 authorize payment of that amount to the institution, a
19990S0008B1450 - 24 -
1 specified third party, the account owner and/or
2 beneficiary. The department shall make the payment in
3 substantially the same manner as specified in subsection
4 (d)(3). Payment under this subsection for any one
5 academic period shall not exceed the amount of the
6 beneficiary's tuition and other qualified higher
7 education expenses for that academic period. If the
8 average tuition level in the year of redemption is
9 insufficient to pay the actual tuition, the department
10 shall have no obligation or authority to pay the
11 insufficiency.
12 (iii) A private institution that has entered into an
13 agreement with the department pursuant to section 308(b),
14 payment shall be governed by the terms of the agreement,
15 provided, however, that in no event shall the payment be
16 less than what would have been paid if the beneficiary
17 were attending a private institution that has not entered
18 into an agreement with the department.
19 (f) Process for specific private institutions with which the
20 department has an agreement.--The making and redeeming of
21 deposits for use at private institutions that have entered into
22 agreements with the department pursuant to section 308(b) shall
23 be governed by the terms of those respective agreements. Upon
24 request of an account owner who has made deposits at a tuition
25 level of a specific private institution, a conversion to an
26 average tuition level, a specific public institution or a
27 different private institution that has entered into an agreement
28 with the department, if permitted by the terms of that
29 particular agreement between the department and that particular
30 private institution, shall be made using substantially the same
19990S0008B1450 - 25 -
1 procedure as specified in subsection (g). Upon a decision by the
2 beneficiary for whom deposits have been made at a tuition level
3 of a private institution that has entered an agreement with the
4 department pursuant to section 308(b) to attend a different
5 private institution that has entered into an agreement with the
6 department but for which the terms of that particular agreement
7 do not provide for a conversion, or to attend a different
8 private institution that has not entered into an agreement with
9 the department pursuant to section 308(b), at the direction of
10 the account owner, payment shall be made in substantially the
11 same manner as is specified in subsection (e)(2) except that in
12 no event shall the department pay more than it would have paid
13 had the beneficiary attended the previously designated private
14 institution.
15 (g) Conversion of tuition credits.--At any time during the
16 existence of the tuition account payment contract, upon the
17 request of an account owner, the department may convert tuition
18 credits for deposits made at any tuition level to any other
19 tuition level. The method by which the conversion is made shall
20 be determined by the department. Following conversion, the
21 department shall issue to the account owner a statement of the
22 number of tuition credits converted.
23 (h) Other uses of tuition credits.--The department shall
24 permit the use of tuition credits for master's degree and other
25 postbaccalaureate programs at [participating] eligible
26 educational institutions, after an appropriate conversion. The
27 department [and participating institutions] also may [agree
28 that] permit tuition credits [remaining in a tuition account
29 after tuition is paid may] to be converted into other
30 educational expense credits to be applied [against room, board
19990S0008B1450 - 26 -
1 and other educational expenses. Other educational expense
2 credits shall be determined by an appropriate conversion.] for
3 the payment of qualified higher education expenses other than
4 tuition.
5 (i) Course load or credit hours.--A beneficiary attending [a
6 participating] an eligible educational institution may apply
7 tuition credits to a specific academic year at the maximum
8 course load or maximum number of credit hours generally
9 permitted to full-time undergraduates at that institution.
10 [(j) Levy and execution.--A tuition account shall not be
11 subject to attachment, levy or execution by any creditor of a
12 purchaser or beneficiary.
13 (k) Period of participation.--Notwithstanding any of the
14 provisions of this chapter, the following shall apply:
15 (1) Except as provided in paragraph (2), a minimum
16 period of four years must elapse between the time the first
17 tuition account contract is entered into on behalf of the
18 beneficiary and the time that tuition credits may be issued
19 and redeemed pursuant to subsection (f).
20 (2) The board may prescribe an alternative minimum
21 period of time which must elapse between the time the first
22 tuition account contract is entered into on behalf of the
23 beneficiary and the time that tuition credits may be issued
24 and redeemed pursuant to subsection (f).
25 (l) Student aid.--The value of tuition credits shall not be
26 used in calculating personal asset contribution for determining
27 eligibility and need for student loan programs, student grant
28 programs or other student aid programs administered by any
29 agency of the Commonwealth, except as otherwise may be provided
30 by Federal law.
19990S0008B1450 - 27 -
1 (m) Residency.--The purchase payment for tuition credits
2 shall be determined with reference to the residency of the
3 beneficiary at the time of purchase. If the residency of the
4 beneficiary changes, there shall be an appropriate conversion of
5 tuition credits to reflect the differential in tuition caused by
6 the change of residency, if any.]
7 (j) Residency.--The tuition credit price shall be determined
8 with reference to the residency of the beneficiary at the time a
9 deposit is made pursuant to a Tuition Account Guaranteed Savings
10 Program Contract, except that for a resident beneficiary, an
11 account owner may elect to save at a nonresident rate. If the
12 residency of the beneficiary at the time the credits are
13 redeemed is different from the residency designated in the
14 Tuition Account Guaranteed Savings Program Contract, or as
15 thereafter changed with the consent of the department, there
16 shall be an appropriate conversion of tuition credits to reflect
17 the differential in tuition caused by the change of designated
18 residency, if any.
19 Section 4. The act is amended by adding sections to read:
20 Section 309.1. Tuition Account Investment Program.
21 The department shall establish an investment plan that
22 defines the Tuition Account Investment Program structure and
23 sets forth investment policies and guidelines to be utilized in
24 administering the program and may, in its discretion, obtain the
25 services of investment managers, program managers and trustees
26 as described in section 307(b) to assist in establishing and
27 administering the plan. The department, through regulation or <--
28 pursuant to a Tuition Account Investment Program Contract, shall
29 specify the minimum and maximum amounts of deposits, the terms
30 and conditions for transferring the Tuition Account Investment
19990S0008B1450 - 28 -
1 Program Contract to another account owner or substituting a
2 beneficiary for the originally named beneficiary, the terms and
3 conditions for withdrawing deposits or terminating the Tuition
4 Account Investment Program Contract, the method and procedures
5 for making payments pursuant to the Tuition Account Investment
6 Program Contracts for the payment of beneficiaries' qualified
7 higher education expenses and all other rights and obligations
8 of the account owner and the department.
9 Section 309.2. General provisions governing both tuition
10 account programs.
11 (a) Levy, execution and security for loans.--A tuition
12 account or any legal interest therein shall not be subject to
13 attachment, levy or execution by any creditor of an account
14 owner or beneficiary and shall not be used as security for a
15 loan.
16 (b) Period of participation.--Notwithstanding any of the
17 provisions of this chapter, the following shall apply:
18 (1) Except as provided in paragraph (2), a minimum
19 period of one year must elapse between the time a deposit is
20 made pursuant to a Tuition Account Program Contract and the
21 time that deposit and any increase in its value may be used
22 for payment of qualified higher education expenses pursuant
23 to section 309 or 309.1.
24 (2) The board may prescribe an alternative minimum
25 period of time which must elapse between a deposit and its
26 use for payment of qualified higher education expenses.
27 (c) Student aid.--Any amounts deposited pursuant to a
28 Tuition Account Program Contract and any increase in the value
29 thereof shall not be used in calculating personal asset
30 contributions for determining eligibility and need for student
19990S0008B1450 - 29 -
1 loan programs, student grant programs or other student aid
2 programs administered by any agency of the Commonwealth, except
3 as otherwise may be provided by Federal law.
4 (d) Excess contributions.--The department shall institute
5 adequate safeguards to prevent contributions to an account or
6 multiple accounts that are in excess of those necessary to
7 provide for the qualified higher education expenses of the
8 beneficiary of that account or accounts, as specified in section
9 529 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
10 U.S.C. § 529).
11 (e) Cash contributions.--A deposit made pursuant to a
12 Tuition Account Program Contract may only be made in cash, which
13 may at the department's discretion include checks, money orders,
14 credit cards or other similar methods.
15 (f) Transfers between programs.--The department, through <--
16 regulation or pursuant to a Tuition Account Program Contract,
17 may specify the terms and conditions under which transfers of
18 deposits and any increased value thereof may be made from one
19 account to another by an account owner who has entered into a
20 Tuition Account Guaranteed Savings Program Contract and a
21 Tuition Account Investment Program Contract. Nothing in this
22 subsection shall be construed to require the department to allow
23 such transfers.
24 Section 5. Sections 310, 311, 312, 313, 314, 315, 316 and
25 317 of the act are amended to read:
26 Section 310. Payments on account of tuition shortfalls.
27 If there are tuition shortfalls on account of beneficiaries
28 of Tuition Account Guaranteed Savings Program Contracts
29 attending a [participating institution remain after payments are
30 made pursuant to section 309(g)] public institution or redeeming
19990S0008B1450 - 30 -
1 tuition credits at a private institution average tuition level
2 and if such tuition shortfalls are not paid on behalf of the
3 department pursuant to section 307(b), the total shortfall with
4 respect to that institution shall be paid from the fund as a
5 separate payment pursuant to section 309(d)(3) or (e)(2)(ii).
6 The amount of shortfall payments shall be considered in
7 determining the actuarial soundness of the fund as provided for
8 in section 306(b)(2).
9 Section 311. Tuition [account payment contracts] Account
10 Program Contracts.
11 [Purchasers buying tuition credits] Account owners making
12 deposits for the use of beneficiaries shall enter into [tuition
13 account payment contracts] Tuition Account Program Contracts
14 with the department. These contracts shall be in such form as is
15 determined by the department, but with regard to Tuition Account
16 Guaranteed Savings Program Contracts shall reflect that the
17 [purchase price of] tuition [credits] credit purchase prices can <--
18 be adjusted annually [in accordance with sections 306(b)(2) and
19 309(c)(3)].
20 Section 312. Eligible beneficiaries.
21 Notwithstanding any other eligibility criteria established by
22 the board, the following shall apply:
23 (1) In order to be eligible as a beneficiary, a person
24 must be one of the following:
25 (i) A resident of this Commonwealth at the time the
26 [tuition account payment contract] Tuition Account
27 Program Contract is entered into on the person's behalf.
28 (ii) A nonresident if the [tuition account payment
29 contract] Tuition Account Program Contract entered into
30 on the person's behalf is [purchased] entered into by a
19990S0008B1450 - 31 -
1 resident of this Commonwealth, including any legal entity
2 with its principal place of business located within this
3 Commonwealth.
4 (2) The [purchaser] account owner must designate a
5 beneficiary at the time the [purchaser] account owner enters
6 into a [tuition account payment contract] Tuition Account
7 Program Contract unless the contract is made pursuant to a
8 scholarship program.
9 (3) [The] Unless the Tuition Account Program Contract is
10 established as a scholarship pursuant to section 318, the
11 [purchaser] account owner may substitute for the CURRENT <--
12 beneficiary only a member of the family of the [purchaser or] <--
13 initial [THE PURCHASER OR INITIAL] THAT beneficiary upon <--
14 approval by the department. "Member of the family" is defined
15 by section 529 of the Internal Revenue Code of 1986 (Public
16 Law 99-514, 26 U.S.C. § 529), as hereafter amended. <--
17 Section 313. Termination and refund.
18 (a) [Inability to attend a participating or nonparticipating
19 institution] Death or disability.--Upon termination of a
20 [tuition account, the purchaser or the purchaser's] Tuition
21 Account Program Contract, the account owner or the account
22 owner's designee shall receive the value of the account [under
23 subsection (f)] if the account is terminated upon the happening
24 of any of the following:
25 (1) The death of the beneficiary.
26 (2) The disability of the beneficiary which, in the
27 opinion of the department, would make attendance by the
28 beneficiary at [a participating] an eligible educational
29 institution impossible or unreasonably burdensome.
30 [(3) Failure of the beneficiary who, in the opinion of
19990S0008B1450 - 32 -
1 the department, has made a good faith attempt to gain
2 admission to a participating or nonparticipating institution
3 within the time limits imposed by the department.
4 (b) Decision to attend a nonparticipating institution.--Upon
5 termination of a tuition account as a result of a decision by
6 the beneficiary to attend a nonparticipating institution, the
7 department, at the direction of the purchaser or beneficiary and
8 upon presentation of proof of the beneficiary's acceptance by
9 the nonparticipating institution, shall pay to the institution
10 the tuition for the number of tuition credits purchased
11 calculated at the standard tuition level or at the tuition for a
12 specific participating institution, as designated in the tuition
13 account payment contract, or an amount equal to the value of the
14 account under subsection (f), whichever is less. Payment under
15 this subsection for any one academic year shall not exceed the
16 amount of the beneficiary's tuition or other approved
17 educational expenses for that year.
18 (c) Decision not to attend a participating or
19 nonparticipating institution.--Upon termination of a tuition
20 account as a result of a decision by the beneficiary not to
21 attend a participating or nonparticipating institution, within
22 time limits determined by the department, the purchaser or the
23 purchaser's designee shall receive 90% of the tuition for the
24 number of tuition credits purchased calculated at the standard
25 tuition level or at the tuition for a specific participating
26 institution, as designated in the tuition account payment
27 contract, or an amount equal to 90% of the value of the account
28 under subsection (f), whichever is less.
29 (d) Refunds for other reasons.--In circumstances other than
30 those set forth in this section, the department shall, by
19990S0008B1450 - 33 -
1 regulation, provide for refunds up to but not exceeding the
2 amount authorized under subsection (c).]
3 (b) Refunds for other reasons.--
4 (1) Except as provided in paragraph (3), refunds for
5 Tuition Account Guaranteed Savings Program Contracts for
6 reasons other than those set forth in subsection (a) shall be
7 the sum of the deposits made pursuant to the Tuition Account
8 Guaranteed Savings Program Contract plus 90% of the
9 difference between the tuition credit prices in the years of
10 deposit and the increased value of the tuition credits had
11 they been redeemed in the academic year of termination.
12 (2) Except as provided in paragraph (3), refunds for
13 Tuition Account Investment Program Contracts for reasons
14 other than those set forth in subsection (a) shall be:
15 (i) in the event the value of the account is less
16 than or equal to the sum of the deposits made pursuant to
17 the Tuition Account Investment Program Contract, the
18 value of the account; and
19 (ii) in the event the value of the account is more
20 than the sum of the deposits made pursuant to the Tuition
21 Account Investment Program Contract, the sum of the
22 deposits plus 90% of the difference between the sum of
23 the deposits and the value of the account.
24 (3) The board may alter the refund provisions set forth
25 in paragraphs (1) and (2) so long as such alterations are
26 consistent with the requirements for "qualified State tuition
27 programs" provided in section 529 of the Internal Revenue
28 Code of 1986 (Public Law 99-514, 26 U.S.C. § 529), as <--
29 hereafter amended.
30 (4) If a refund is requested under this subsection
19990S0008B1450 - 34 -
1 within the 12 months preceding FOLLOWING the account owner's <--
2 changing the tuition level designated in a Tuition Account
3 Guaranteed Savings Program Contract, the refund shall be
4 calculated using the value of the tuition credits of the
5 previous or current tuition level, whichever is less.
6 [(e)](c) Fees.--The department may impose a fee upon
7 termination of the account for administrative costs and deduct
8 the fee from the amount otherwise payable.
9 [(f) Value of account.--The value of the account shall be
10 calculated by compounding annually each separate payment from
11 the time of payment to the time the account is terminated at the
12 actual annual net earnings rate of the fund.
13 (g)](d) Taxation of refunds.--In the event of a refund upon
14 the termination of a [tuition account] Tuition Account Program
15 Contract, to the extent the [amount of the] refund amount an
16 account owner receives exceeds the sum of the [payments]
17 deposits, it shall be subject to taxation as income under the
18 laws of this Commonwealth[, except when the refund is made
19 pursuant to subsection (b)].
20 [(h)](e) Change of beneficiary for type of tuition account
21 program.--The substitution of the beneficiary of an account
22 pursuant to section 312(3) or the transfer of deposits, and any
23 increased value thereof, from one type of tuition account
24 program to the other shall not be deemed a termination of the
25 account for purposes of this section.
26 [(i)](f) Scholarship.--If a beneficiary is awarded a
27 scholarship, the terms of which cover the benefits included in
28 [tuition account payment contracts purchased] Tuition Account
29 Program Contracts entered into on behalf of the beneficiary, the
30 [purchaser shall] account owner may receive a refund
19990S0008B1450 - 35 -
1 [consisting]. For Tuition Account Guaranteed Savings Program
2 Contracts, the refund shall consist of the [tuition for the
3 number of] value, in the academic award year the scholarship is
4 paid, of the available tuition credits [purchased calculated at
5 the standard tuition level or at the tuition for a specific
6 participating institution, as designated in the tuition account
7 payment contract, or an amount equal to the value of the account
8 under subsection (f), whichever is less]. For Tuition Account
9 Investment Program Contracts, the refund shall consist of the
10 available portion of the value of the account. The refund under
11 this subsection for any one academic award year shall not exceed
12 the scholarship for that year.
13 Section 314. Construction.
14 Nothing in this chapter or in a [tuition account payment
15 contract] Tuition Account Program Contract entered into pursuant
16 to this chapter shall be construed as a promise or guarantee by
17 the department that a person will be admitted to an institution
18 of higher education, will be allowed to continue to attend an
19 institution of higher education after having been admitted or
20 will be graduated from an institution of higher education.
21 Section 315. Exemption from security laws.
22 Tuition [account payment contracts] Account Program Contracts
23 are exempt from any statute regulating securities, including the
24 act of December 5, 1972 (P.L.1280, No.284), known as the
25 Pennsylvania Securities Act of 1972.
26 Section 316. State tax exemption.
27 (a) Property of [fund] funds.--The property of [the fund and
28 its] each of the funds and their income and operation shall be
29 exempt from all taxation by the Commonwealth and its political
30 subdivisions.
19990S0008B1450 - 36 -
1 (b) [Tuition credits.--The purchase and] Deposits.--Deposits
2 made pursuant to a Tuition Account Program Contract; any
3 increase in the value of those deposits, the retention, or
4 transfer during life or as a result of death of [tuition credits
5 and their use] any legal interest in a Tuition Account Program
6 Contract; and payment of qualified higher education expenses of
7 beneficiaries made pursuant to Tuition Account Program Contracts
8 shall [not be a transaction subject to income or property
9 taxation by the Commonwealth or any of its political
10 subdivisions.] be exempt from all taxation by the Commonwealth
11 and its political subdivisions.
12 Section 317. Federal taxation.
13 The department may take appropriate action in order to obtain
14 a determination from the Internal Revenue Service or the Federal
15 courts as to whether [the purchase and retention of tuition
16 credits and their use] deposits made pursuant to a Tuition
17 Account Program Contract, the increase in value of such
18 deposits, and payment of qualified higher education expenses
19 pursuant to a Tuition Account Program Contract shall be a
20 transaction which will subject [purchasers] account owners or
21 the income of [the fund] either or both of the funds to Federal
22 taxation and may respond to such determination in any manner
23 permitted under this chapter.
24 Section 6. The act is amended by adding a section to read:
25 Section 318. Scholarship programs.
26 (a) Establishment.--The Commonwealth, any political
27 subdivision of the Commonwealth, and any organization that is
28 exempt from Federal income taxation under section 501(a) and
29 described in section 501(c)(3) of the Internal Revenue Code of
30 1986 (Public Law 99-514, 26 U.S.C. § 501), including the
19990S0008B1450 - 37 -
1 department, if not prohibited by section 529 of the Internal
2 Revenue Code of 1986, may establish a scholarship program
3 through a Tuition Account Program Contract to award
4 scholarships. Any scholarship program created pursuant to this
5 section shall be registered with the department and shall comply
6 with such requirements as the department may establish.
7 Scholarship beneficiaries shall be selected by the entity
8 establishing the scholarship program, in accordance with
9 criteria established by the entity; and the entity may change
10 the beneficiary as permitted by section 529 of the Internal
11 Revenue Code of 1986.
12 (b) Deposits.--Any person or legal entity may make deposits
13 on behalf of a scholarship program that is or is to be
14 established in accordance with this section under the same terms
15 and conditions as those that apply to nonscholarship tuition
16 accounts. A beneficiary of a Tuition Account Program Contract
17 entered into as part of a scholarship program shall be entitled
18 to payment of qualified higher education expenses under the same
19 terms and conditions as those that apply to beneficiaries of
20 nonscholarship tuition accounts.
21 (c) No requirement.--Nothing in this act shall require the
22 creation of a scholarship account or authorize the use of State
23 funds for such accounts.
24 Section 7. (a) Within 60 days after the effective date of
25 this act, the department shall solicit proposals for assistance
26 in the management of all or part of the Tuition Account
27 Investment Program through a request for proposals. In its
28 discretion, the department may combine in this solicitation a
29 request for proposals for management of all or part of the
30 Tuition Account Guaranteed Savings Program. The department shall
19990S0008B1450 - 38 -
1 require that each proposal specify:
2 (1) whether it applies to the management of only the
3 Tuition Account Investment Program or both the Tuition
4 Account Investment Program and the Tuition Account Guaranteed
5 Savings Program;
6 (2) whether it applies to the administration, investment
7 and/or marketing of the program or programs;
8 (3) the manner in which the administration, investment
9 and/or marketing of the program or programs would be carried
10 out;
11 (4) how the administration, investment and/or marketing
12 of the Tuition Account Investment Program will be coordinated
13 with and complement that of the Tuition Account Guaranteed
14 Savings Program;
15 (5) the qualifications of the entity submitting the
16 proposal to provide the proposed services; and
17 (6) any other information desired by the department.
18 (b) The request for proposals shall provide that the
19 department may conduct discussions with responsible offerors.
20 The department may accept or reject any or all proposals or
21 portions of proposals deemed by the appropriate offeror and
22 department to be severable, if it determines that doing so is in
23 the best interests of the program or programs.
24 Section 8. This act shall take effect in 60 days.
C25L24JS/19990S0008B1450 - 39 -