PRIOR PRINTER'S NOS. 871, 1406, 1450 PRINTER'S NO. 1484
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 THIRD CONSIDERATION, NOVEMBER 9, 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, one of which <--
1 is a guaranteed savings program and the other of which is an <--
2 investment program; establishing the Tuition Account
3 [Program] Programs Bureau within the Treasury Department and
4 providing duties for the Treasury Department; establishing
5 [the Tuition Payment Fund; providing for tuition account
6 payment contracts; providing for the issuance and sale of
7 certain bonds;] tuition account funds; providing for Tuition
8 Account Program Contracts; providing for the establishment of
9 scholarship programs; and further providing for duties of the
10 Pennsylvania Higher Education Assistance Agency.
11 Section 101. Short title.
12 This act shall be known and may be cited as the Tuition
13 Account [Program] Programs and College Savings Bond Act.
14 Section 2. The heading of Chapter 3 of the act is amended to
15 read:
16 CHAPTER 3
17 TUITION ACCOUNT [PROGRAM] PROGRAMS
18 Section 3. Sections 301(5), 302, 303, 304(a), (c) and (d),
19 305, 306, 307, 308 and 309 of the act are amended to read:
20 Section 301. Declaration of policy.
21 The General Assembly finds and declares as follows:
22 * * *
23 (5) The purposes of this chapter are to:
24 (i) Provide wide and affordable access to
25 institutions of higher education, both public and
26 private, for the residents of this Commonwealth.
27 (ii) Encourage attendance at institutions of higher
28 education, both public and private, and help individuals
29 plan for educational expenses.
30 (iii) Provide [a program for the advance purchase of
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1 tuition] programs for postsecondary educational savings
2 as both a means and an incentive for the citizens of this
3 Commonwealth to provide for future higher education
4 expenses.
5 (iv) Provide to the citizens of this Commonwealth
6 means of saving for postsecondary education that provides
7 them with the advantages of "qualified State tuition
8 programs" as defined by section 529 of the Internal
9 Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
10 529).
11 Section 302. Definitions.
12 The following words and phrases when used in this chapter
13 shall have the meanings given to them in this section unless the
14 context clearly indicates otherwise:
15 "Academic period." A semester, trimester or comparable
16 period into which an eligible educational institution divides
17 its academic year.
18 "Academic year." A 12-month period commencing on or after
19 August 1 of the calendar year.
20 "Account owner." A person, including a natural person,
21 corporation, association, partnership or other legal entity, who
22 enters into a Tuition Account Program Contract.
23 "Beneficiary." A person who meets the eligibility criteria
24 established by this chapter and by the department and on whose
25 behalf [a purchaser enters into a tuition account payment
26 contract.] an account owner enters into a Tuition Account
27 Program Contract.
28 "Board." The Tuition Account [Program] Programs Advisory
29 Board.
30 "Department." The Treasury Department of the Commonwealth.
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1 "Eligible educational institution." A college, university,
2 vocational or other postsecondary educational institution as
3 defined by section 529 of the Internal Revenue Code of 1986
4 (Public Law 99-514, 26 U.S.C. § 529).
5 ["Fund." The Tuition Payment Fund.]
6 "Funds." The Tuition Account Guaranteed Savings Program Fund
7 and the Tuition Account Investment Program Fund.
8 "Lawful investment." Any of those investments described in
9 either 24 Pa.C.S. § 8521 (relating to management of fund and
10 accounts) or 71 Pa.C.S. § 5931 (relating to management of fund
11 and accounts).
12 "Net earnings rate of the [fund] Tuition Account Guaranteed
13 Savings Program Fund." The percentage return of the investment
14 of [fund] Tuition Account Guaranteed Savings Program Fund assets
15 after adjusting for any taxes and operating expenses.
16 "Other educational expense credits." Tuition credits that
17 are converted for payment of qualified higher education expenses
18 other than tuition, as provided in section 309(h).
19 ["Participating institution." Any accredited, degree-
20 granting college or university which is required to participate
21 in the tuition account program under section 308.]
22 "Private institution." Any private or out-of-State public
23 institution that is an eligible educational institution.
24 "Public institution." Any public eligible educational
25 institution which is required to participate in the Tuition
26 Account Guaranteed Savings Program under section 308.
27 ["Purchaser." A person, including a natural person,
28 corporation, association, partnership or other legal entity, who
29 enters into a tuition account payment contract.]
30 "Qualified higher education expenses." Expenses, as defined
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1 by section 529 of the Internal Revenue Code of 1986 (Public Law
2 99-514, 26 U.S.C. § 529).
3 "Tuition." The [total of all fees and charges] charge for an
4 academic credit or the credits required for attendance at an
5 [institution of higher education] eligible educational
6 institution for a full-time, undergraduate academic [year,
7 excluding charges for room and board] period.
8 ["Tuition account payment contract." A contract entered into
9 by a purchaser and the department on behalf of the Commonwealth
10 to provide for the advance purchase of tuition credits for a
11 beneficiary attending a participating institution.]
12 "Tuition Account Program Contract." A Tuition Account
13 Guaranteed Savings Program Contract or a Tuition Account
14 Investment Program Contract entered into by an account owner and
15 the department on behalf of the Commonwealth to provide for
16 savings to meet the future qualified higher education expenses
17 of a beneficiary attending an eligible educational institution.
18 "Tuition credits." Credits as determined in section 309(c).
19 "Tuition credit prices." The price set by the Treasury
20 Department annually for each tuition level.
21 "Tuition level." The account owner's designation of the
22 public or private institution or an average established pursuant
23 to section 309(b), to which deposits A CONTRIBUTION made <--
24 pursuant to a Tuition Account Guaranteed Savings Program
25 Contract will be applied to determine the tuition credit
26 equivalent of the deposit CONTRIBUTION. <--
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 <--
7 CONTRIBUTION from the time of deposit CONTRIBUTION to the date <--
8 of calculation at the actual annual net earnings rate of the
9 Tuition Account Guaranteed Savings Program Fund. For deposits <--
10 made pursuant to a Tuition Account Investment Program Contract,
11 an amount determined by subtracting expenses, fees and taxes, if
12 any, from the value of the Tuition Account Investment Program
13 Fund and then prorating 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 CONTRIBUTED <--
25 pursuant to a Tuition Account Guaranteed Savings Program
26 Contract for the future payment of qualified higher educational
27 expenses for attendance at eligible educational institutions as
28 described in section 309. Money deposited CONTRIBUTED pursuant <--
29 to a Tuition Account Guaranteed Savings Program Contract shall
30 increase in value by, at a minimum, the increase in the tuition
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1 at the tuition level designated in the contract. The investment
2 program shall provide that money may be deposited CONTRIBUTED <--
3 pursuant to a Tuition Account Program Investment Contract for
4 the future payment of qualified higher educational expenses for
5 attendance at eligible educational institutions as described in
6 section 309.1. The 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 CONTRIBUTIONS 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 programs; funds.
21 (a) Establishment.--There [is] are established in the State
22 Treasury [a special fund] two special funds to be known as the
23 Tuition [Payment Fund. This fund shall be invested in accordance
24 with this chapter. All money in the fund is hereby appropriated]
25 Account Guaranteed Savings Program Fund and the Tuition Account
26 Investment Program Fund. The money in these funds shall be
27 invested in accordance with this chapter. All money in each of
28 the funds is hereby appropriated to the department on a
29 continuing basis to carry out the provisions of this chapter.
30 (b) Administration.--
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1 (1) The assets of [the fund] each of the funds shall be
2 preserved, invested and expended solely pursuant to and for
3 the purposes set forth in this chapter.
4 (2) The department shall obtain appropriate actuarial
5 assistance to establish, maintain and certify that the [fund]
6 Tuition Account Guaranteed Savings Program Fund is sufficient
7 to defray [the tuition account program's] its obligations and
8 shall annually evaluate, or cause to be evaluated, [the] its
9 actuarial soundness [of the fund]. If the department finds a
10 need for additional assets in order to preserve actuarial
11 soundness [or if the department finds that actuarial
12 soundness can be maintained with fewer assets], it may adjust
13 the [purchase prices of the] tuition [credits calculated
14 under section 309(c)(3)] credit prices to ensure such
15 soundness. If the department finds that actuarial soundness
16 can be maintained with fewer assets, it may adjust the
17 tuition credit prices or distribute surplus assets in excess
18 of those needed to maintain the actuarial soundness of the
19 Tuition Account Guaranteed Savings Program Fund as specified
20 in paragraph (2.1).
21 (2.1) (i) Annually, after the department's fiscal year
22 has ended, the department shall determine whether the
23 Tuition Account Guaranteed Savings Program Fund has been
24 actuarially certified as being sufficient to defray its
25 obligations and whether the actuarial soundness of the
26 Tuition Account Guaranteed Savings Program Fund, as
27 actuarially evaluated, can be maintained with fewer
28 assets and, if so, the dollar value of any excess surplus
29 assets. In making the determination, the department shall
30 consider the projected costs and expenses of the Tuition
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1 Account Guaranteed Savings Program, including the Tuition
2 Account Guaranteed Savings Program Fund, as well as any
3 material subsequent events occurring between the end of
4 the fiscal year and the date on which the determination
5 is made.
6 (ii) If the department determines that there are
7 assets in excess of those needed to maintain actuarial
8 soundness of the Tuition Account Guaranteed Savings
9 Program Fund and the assets actuarially certified as
10 sufficient to defray the costs of the Tuition Account
11 Guaranteed Savings Program, the department may, but shall
12 not be obligated to, distribute the dollar value of any
13 excess surplus assets by making additional deposits <--
14 CONTRIBUTIONS, which will be converted to the equivalent <--
15 of tuition credits pursuant to section 309(c), into
16 accounts established pursuant to Tuition Account
17 Guaranteed Savings Program Contracts that have not been
18 terminated as of the date of determination.
19 (iii) Any distribution of any excess surplus assets
20 of the fund shall be made on an equitable basis as
21 determined by the department.
22 (3) The department, in conjunction with the board, shall
23 make an annual report to the Governor and the General
24 Assembly showing the [fund's] condition of each of the funds.
25 This report shall contain the findings and recommendations of
26 the department and the board and the recommendations of any
27 private consultant under contract or volunteering services to
28 the department or board. The report shall detail actions
29 taken or needed to modify the [tuition account program]
30 Tuition Account Guaranteed Savings Program to insure the
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1 fiscal sufficiency of the [fund] Tuition Account Guaranteed
2 Savings Program Fund to meet its obligations under this
3 chapter. [The] With regard to the Tuition Account Guaranteed
4 Savings Program Fund, the report shall address the
5 relationship between existing and projected net investment
6 returns and existing and projected tuition levels and address
7 the advisability or necessity of modifying the authorized
8 investment of fund assets, the [purchase price of tuition
9 credits,] tuition credit price, the amount of administrative
10 fee or charges or the amount of refunds offered upon
11 termination of a [tuition account.] Tuition Account
12 Guaranteed Savings Program Contract. Further, consistent with
13 the goal of providing for the maintenance of the fiscal
14 sufficiency of the fund, [this report] the report regarding
15 each of the funds shall detail those actions taken or needed
16 to modify the [tuition account program] programs so that the
17 [fund, purchasers] funds, account owners and beneficiaries
18 will receive favorable treatment for purposes of Federal
19 taxation.
20 (c) Composition.--[The fund] Each of the funds shall consist
21 of:
22 (1) All [payments made by purchasers pursuant to tuition
23 account payment contracts] deposits CONTRIBUTIONS made by <--
24 account owners pursuant to Tuition Account Program Contracts
25 and all interest, earnings and additions thereto.
26 (2) Any other money, public or private, appropriated or
27 made available to the department for the fund from any source
28 and all interest, earnings and additions thereto.
29 (d) Operating and administrative costs.--The department
30 shall, through the Governor, annually submit to the General
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1 Assembly a budget covering the operating and administrative
2 expenses of the Tuition Account [Program] Programs Bureau and
3 the board. Upon approval by the General Assembly in an
4 appropriation bill, expenses as incurred by the Tuition Account
5 [Program] Programs Bureau and the board[, commencing one year
6 after tuition credits have been offered for sale to the public,]
7 shall be paid from the fees, charges and investment earnings of
8 the [fund] funds, proportionately taken from each fund on an
9 equitable basis as determined by the department, or from any
10 other available funds.
11 (e) Repayment of initial appropriation.--The department
12 shall repay from the fees, charges and investment earnings of
13 the [fund] Tuition Account Guaranteed Savings Program Fund to
14 the General Fund any money appropriated for the initial
15 planning, organization and administration of the tuition account
16 program established at the time of the original enactment of
17 this act. The repayment shall take place within a ten-year
18 period[, which period commences two years after tuition credits
19 have been offered for sale to the public.] commencing September
20 1, 1995.
21 Section 307. Investment policies and guidelines.
22 (a) General rule.--The policies governing the investment of
23 the [fund shall be directed to obtaining sufficient income to
24 meet the Commonwealth's obligations under this chapter,
25 maintaining necessary reserves and covering operating expenses.
26 The department, its investment manager and trustee shall not
27 engage in any investment practice or activity which entails
28 greater risk than necessary to meet these objectives but shall
29 have the authority to invest and reinvest the fund in all lawful
30 investments.] Tuition Account Guaranteed Savings Program Fund
19990S0008B1484 - 14 -
1 shall be directed to obtaining sufficient income to meet the
2 fund's obligations under this chapter, maintaining necessary
3 reserves and covering operating expenses. The policies governing
4 the investment of the Tuition Account Investment Program Fund
5 shall be directed to providing for an appropriate balance of
6 risk, liquidity and return commensurate with the management of a
7 prudent investor. With regard to each of the funds, the
8 department, its investment managers, program managers and
9 trustees shall have the authority to invest and reinvest the
10 funds in all lawful investments.
11 (b) Investment manager and trustee.--The department may
12 contract with one or more persons or other legal entities to
13 serve as investment managers, program managers and trustees to
14 the department on behalf of [the tuition account program] either
15 or both of the Tuition Account Programs. If the department
16 contracts with investment managers [and], program managers or
17 trustees in order to fulfill the objectives of the tuition
18 account [program] programs, the investment managers, program
19 managers and trustees shall work with the department to create
20 an investment program or programs, to develop investment
21 portfolios and to supervise investments and the investment
22 [program] programs selected. If the department contracts with
23 investment managers, program managers and trustees, the
24 department may require that the investment managers, program
25 managers and trustees agree, based on actuarial projections of
26 program costs and expenses supplied by the department, to meet
27 any obligations of the department if, as a result of the
28 imprudent selection or supervision of investments or the
29 investment program by the investment managers, program managers
30 or trustees, the [tuition payment fund] Tuition Account
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1 Guaranteed Savings Program Fund is not fiscally sufficient to
2 enable the department to fulfill its obligations under this
3 chapter.
4 Section 308. [Participating institutions] Participation in
5 Tuition Account Guaranteed Savings Program by
6 eligible educational institutions.
7 (a) Public institutions.--The following public institutions
8 of higher education shall participate in the [tuition account
9 program] Tuition Account Guaranteed Savings program:
10 (1) Community colleges operating under Article XIX-A of
11 the act of March 10, 1949 (P.L.30, No.14), known as the
12 Public School Code of 1949.
13 (2) Universities comprising the State System of Higher
14 Education.
15 (3) The following State-related institutions:
16 (i) The Pennsylvania State University.
17 (ii) The University of Pittsburgh.
18 (iii) Temple University.
19 (iv) Lincoln University.
20 (4) Any institution which is hereafter designated as
21 "State-related" by the Commonwealth.
22 (5) Any other eligible educational institution owned by
23 the Commonwealth.
24 (b) Private institutions.--A private institution may enter
25 into an agreement with the department through which the
26 institution, under terms mutually agreeable to the institution
27 and the department, agrees to be a private institution that
28 account owners may choose when designating their tuition level
29 pursuant to a Tuition Account Guaranteed Savings Program
30 Contract. The terms of the agreement shall include, but not be
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1 limited to, the determination of tuition credit prices, terms of
2 redemption of tuition credits at the institution, conversion of
3 tuition credits deposited CONTRIBUTED at other tuition levels to <--
4 tuition at the institution and appropriate conversion of tuition
5 credits to other educational expense credits.
6 Section 309. Tuition [account program] Account Guaranteed
7 Savings Program.
8 (a) General description.--Each [payment] deposit <--
9 CONTRIBUTION made pursuant to a [tuition account payment <--
10 contract will purchase tuition credits at one of three standard
11 tuition levels or, at the purchaser's designation, at a specific
12 participating institution. All tuition credits purchased]
13 Tuition Account Guaranteed Savings Program Contract will be
14 considered the equivalent of a purchase of tuition credits at
15 the tuition level designated by the account owner in the Tuition
16 Account Guaranteed Savings Program Contract. All deposits <--
17 CONTRIBUTIONS will be held in a beneficiary's account and will <--
18 be converted to the tuition level of the institution to be
19 attended by the beneficiary. At the time of redemption, the
20 tuition to be paid will be calculated based on the tuition level
21 designated and the institution being attended as described in
22 this section. A [participating] public institution attended by a
23 beneficiary shall accept that beneficiary's tuition credits when
24 presented. [The department shall pay from the fund to the
25 participating institution the lesser of the actual tuition for
26 the number of tuition credits used or the tuition payment as
27 specified in subsection (g).] Payments on account of tuition
28 shortfalls shall be made [to participating institutions] as
29 provided for in section 310.
30 (b) [Standard tuition] Tuition levels.--
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1 (1) The department shall annually establish three
2 [standard] average tuition levels for public institutions
3 corresponding approximately to the average tuition charges
4 for that year at the Commonwealth's community colleges, at
5 universities in the State System of Higher Education and at
6 State-related universities. The department may annually
7 establish an average tuition level or levels for private
8 institutions corresponding to average tuition charges at
9 private institutions, as the department deems appropriate.
10 [Any purchaser may buy tuition credits at any designated
11 standard tuition level or at the tuition rate of a specific
12 participating institution.
13 (c) Tuition credits.--Tuition credits are whole or partial
14 units related to an academic year and are obtained as follows:
15 (1) The payment for each tuition purchase shall be
16 divided by either the tuition at a standard tuition level or
17 the tuition at a specific participating institution, as
18 designated by the purchaser.
19 (2) For tuition purchasers during the period from August
20 1 to July 31, tuition rates for the corresponding academic
21 year shall be used.
22 (3) If the department, in its discretion, determines
23 that the purchase payment for tuition credits representing a
24 unit of tuition for one academic year at a standard tuition
25 level or at a specific participating institution is to be
26 greater or less than actual tuition for the corresponding
27 year at a standard or at a specific participating
28 institution, the method of calculating tuition credits in
29 accordance with paragraphs (1) and (2) shall be adjusted
30 accordingly.]
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1 (2) A deposit CONTRIBUTION may be made at the tuition <--
2 level designated in the Tuition Account Guaranteed Savings
3 Program Contract. With the approval of the department, an
4 account owner may change the designated tuition level.
5 (c) Tuition credits.--Deposits CONTRIBUTIONS made pursuant <--
6 to a Tuition Account Guaranteed Savings Program Contract will be
7 converted to the equivalent amount of tuition credits as
8 follows:
9 (1) A deposit CONTRIBUTION made pursuant to a Tuition <--
10 Account Guaranteed Savings Program Contract shall be divided
11 by the tuition credit price in the year of deposit <--
12 CONTRIBUTION at the tuition level designated by the account <--
13 owner.
14 (2) For deposits CONTRIBUTIONS made during the period <--
15 from September 1 to August 31, tuition credit prices for the
16 corresponding academic year shall be used.
17 [(4)] (3) The number of tuition credits calculated at
18 the time of [purchase] deposit CONTRIBUTION in accordance <--
19 with paragraphs (1)[, (2) and (3)] and (2) [shall] may be
20 reduced in a manner determined by the department reasonably
21 to reflect potential investment loss resulting from the time
22 of year when the [purchase] deposit CONTRIBUTION is made. <--
23 (d) Process for public institutions.--The process for
24 certifying tuition, converting tuition credits, issuing and
25 redeeming tuition credits and making tuition payments for public
26 institutions shall be as follows:
27 [(d) Certifying tuition.--](1) On or before July 31, a
28 [participating] public institution shall certify to the
29 department the tuition to be charged by that institution for
30 the academic year beginning on or after August 1 [of that
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1 year and ending on or before July 31 of the following year,]
2 and, at such times as the department shall determine, each
3 [participating] public institution shall certify to the
4 department the tuition charged by that institution for the
5 current or any previous academic year.
6 [(e) Conversion of tuition credits.--Upon request of any
7 purchaser or beneficiary, the department shall convert tuition
8 credits purchased at standard tuition levels to actual tuition
9 at a specific participating institution by multiplying the
10 number of tuition credits purchased each year by the ratio of
11 that academic year's standard tuition level divided by the
12 tuition for the same academic year at the designated
13 participating institution. Upon request of the purchaser or
14 beneficiary, the department, following the same procedure, shall
15 convert tuition credits purchased at the tuition rate of a
16 participating institution to the tuition at another
17 participating institution designated in the request. The sum of
18 such conversions shall be the total tuition credits applicable
19 to a specific participating institution.
20 (f)] (2) [Issuance and redemption of certified tuition
21 credits.--]Upon application, the department shall issue to [a
22 purchaser or beneficiary a certified] an account owner a
23 statement of accumulated tuition credits available for the
24 payment of [all or a portion of a student's] tuition TUITION] <--
25 QUALIFIED HIGHER EDUCATION EXPENSES for a specific academic
26 [year at a] period at the specific public institution or the
27 public institution average tuition level designated
28 [participating institution. Any participating institution
29 which presents to the department a certified statement of
30 tuition credits for a student accepted for enrollment for a
19990S0008B1484 - 20 -
1 specific academic year shall be paid by the department the
2 lesser of actual tuition for the number of tuition credits
3 used as established by the institution for that academic year
4 or the tuition payment for the academic year calculated as
5 specified in subsection (g).] by the account owner. In the
6 event the account owner decides to redeem the available
7 tuition credits, the account owner shall notify the
8 department of the institution at which the beneficiary
9 intends to enroll. In the event the institution is:
10 (i) The public institution last designated by the
11 account owner in the Tuition Account Guaranteed Savings
12 Program Contract as the tuition level, the account owner
13 shall submit to the department adequate documentation of
14 enrollment, the qualified higher education expenses and
15 the number of credits or dollar value of the credits that
16 the account owner has decided to redeem. The account
17 owner shall authorize payment of that amount to the
18 institution, a specified third party, the account owner
19 and/or beneficiary. Payment shall be made as specified in
20 subsection (d)(3).
21 (ii) A different public institution OTHER than that <--
22 last designated by the account owner in the Tuition
23 Account Guaranteed Savings Program Contract as the
24 tuition level, a conversion shall be made pursuant to
25 subsection (g) and the department shall issue a revised
26 statement of accumulated tuition credits and their dollar
27 value available for payment of qualified higher education
28 expenses at the newly designated public institution. The
29 account owner shall submit to the department adequate
30 documentation of enrollment, the qualified higher
19990S0008B1484 - 21 -
1 education expenses and the number of credits or dollar
2 value of the credits that the account owner has decided
3 to redeem. The account owner shall authorize payment of
4 that amount to the institution, a specified third party,
5 the account owner and/or beneficiary. Payment shall be
6 made as specified in subsection (d)(3).
7 (iii) A private institution that has not entered
8 into an agreement with the department pursuant to section
9 308(b), the available tuition credits shall be redeemable
10 for the payment of qualified higher education expenses at
11 the value they would have had if they had been redeemed
12 at the tuition level last designated by the account owner
13 in the Tuition Account Guaranteed Savings Program
14 Contract. The account owner shall submit to the
15 department adequate documentation of enrollment, the
16 qualified higher education expenses and the number of
17 credits or dollar value of the credits that the account
18 owner has decided to redeem. The account owner shall
19 authorize payment of that amount to the institution, a
20 specified third party, the account owner and/or
21 beneficiary. Payment shall be made as specified in
22 subsection (d)(3).
23 (iv) A private institution that has entered into an
24 agreement with the department pursuant to section 308(b),
25 payment shall be governed by the terms of the agreement,
26 provided, however, that in no event shall the payment be
27 less than what would have been paid if the beneficiary
28 were attending a private institution that has not entered
29 into an agreement with the department. Payment shall be
30 made as specified in the agreement.
19990S0008B1484 - 22 -
1 [(g) Tuition payment.--Upon presentation of a certified
2 statement of tuition credits by a participating institution
3 or in anticipation thereof, the department shall calculate
4 the tuition payment for the academic year specified. The
5 tuition payment under this section shall consist of the
6 purchase price of each total annual purchase of tuition
7 credits compounded each year from the year of purchase to the
8 year during which such credits are to be utilized, by the
9 average annual net earnings rate of the fund. The compounded
10 values of annual purchases of tuition credits shall be summed
11 in order of date of purchase until sufficient credits for one
12 academic year are obtained.]
13 (3) Upon submission of such documentation, the
14 department shall make the payment as authorized by the
15 account owner. Before making the payment authorized by the
16 account owner, the department shall determine whether the
17 available portion of the value of the account equals or
18 exceeds the authorized payment. If it does not, two separate
19 payments shall be made. The first payment shall be in the
20 amount of the available portion of the value of the account.
21 The second payment shall be in the amount of the difference
22 between the amount of the payment authorized by the account
23 owner and the available portion of the value of the account,
24 and it shall be paid pursuant to the tuition shortfall
25 provision of section 310.
26 (e) Process for private institution average tuition
27 levels.--The process of establishing private institution average
28 tuition credit prices, redeeming those tuition credits and
29 making tuition payments when an account owner has designated a
30 private institution average tuition level shall be as follows:
19990S0008B1484 - 23 -
1 (1) On or before August 31, the department shall
2 determine the average tuition credit price or prices for
3 average tuition level or levels for private institutions
4 established pursuant to subsection (b) for the academic year
5 beginning on or after August 1 of that year.
6 (2) Upon application, the department shall issue to an
7 account owner a statement of accumulated tuition credits
8 available for the payment of qualified higher education
9 expenses for a specific academic period at the private
10 institution average tuition level designated by the account
11 owner. In the event the account owner decides to redeem the
12 available tuition credits, the account owner shall notify the
13 department of the public or private institution at which the
14 beneficiary intends to enroll. In the event the institution
15 is:
16 (i) A public institution, the process for conversion
17 and payment shall be as set forth in subsections (d)(3)
18 and (g).
19 (ii) A private institution that has not entered into
20 an agreement with the department pursuant to section
21 308(b), the available tuition credits shall be redeemable
22 at the average tuition credit price determined by the
23 department before adjustments, if any, made pursuant to
24 section 306(b)(2), of the designated tuition level
25 established by the department for the year in which they
26 are redeemed. The account owner shall submit to the
27 department adequate documentation of enrollment, the
28 qualified higher education expenses and the number of
29 credits or dollar value of the credits that the account
30 owner has decided to redeem. The account owner shall
19990S0008B1484 - 24 -
1 authorize payment of that amount to the institution, a
2 specified third party, the account owner and/or
3 beneficiary. The department shall make the payment in
4 substantially the same manner as specified in subsection
5 (d)(3). Payment under this subsection for any one
6 academic period shall not exceed the amount of the
7 beneficiary's tuition and other qualified higher
8 education expenses for that academic period. If the
9 average tuition level in the year of redemption is
10 insufficient to pay the actual tuition, the department
11 shall have no obligation or authority to pay the
12 insufficiency.
13 (iii) A private institution that has entered into an
14 agreement with the department pursuant to section 308(b),
15 payment shall be governed by the terms of the agreement,
16 provided, however, that in no event shall the payment be
17 less than what would have been paid if the beneficiary
18 were attending a private institution that has not entered
19 into an agreement with the department.
20 (f) Process for specific private institutions with which the
21 department has an agreement.--The making and redeeming of
22 deposits CONTRIBUTIONS for use at private institutions that have <--
23 entered into agreements with the department pursuant to section
24 308(b) shall be governed by the terms of those respective
25 agreements. Upon request of an account owner who has made
26 deposits CONTRIBUTIONS at a tuition level of a specific private <--
27 institution, a conversion to an average tuition level, a
28 specific public institution or a different private institution
29 that has entered into an agreement with the department, if
30 permitted by the terms of that particular agreement between the
19990S0008B1484 - 25 -
1 department and that particular private institution, shall be
2 made using substantially the same procedure as specified in
3 subsection (g). Upon a decision by the beneficiary for whom
4 deposits CONTRIBUTIONS have been made at a tuition level of a <--
5 private institution that has entered an agreement with the
6 department pursuant to section 308(b) to attend a different
7 private institution that has entered into an agreement with the
8 department but for which the terms of that particular agreement
9 do not provide for a conversion, or to attend a different
10 private institution that has not entered into an agreement with
11 the department pursuant to section 308(b), at the direction of
12 the account owner, payment shall be made in substantially the
13 same manner as is specified in subsection (e)(2) except that in
14 no event shall the department pay more than it would have paid
15 had the beneficiary attended the previously designated private
16 institution.
17 (g) Conversion of tuition credits.--At any time during the
18 existence of the tuition account payment contract, upon the
19 request of an account owner, the department may convert tuition
20 credits for deposits CONTRIBUTIONS made at any tuition level to <--
21 any other tuition level. The method by which the conversion is
22 made shall be determined by the department. Following
23 conversion, the department shall issue to the account owner a
24 statement of the number of tuition credits converted.
25 (h) Other uses of tuition credits.--The department shall
26 permit the use of tuition credits for master's degree and other
27 postbaccalaureate programs at [participating] eligible
28 educational institutions, after an appropriate conversion. The
29 department [and participating institutions] also may [agree
30 that] permit tuition credits [remaining in a tuition account
19990S0008B1484 - 26 -
1 after tuition is paid may] to be converted into other
2 educational expense credits to be applied [against room, board
3 and other educational expenses. Other educational expense
4 credits shall be determined by an appropriate conversion.] for
5 the payment of qualified higher education expenses other than
6 tuition.
7 (i) Course load or credit hours.--A beneficiary attending [a
8 participating] an eligible educational institution may apply
9 tuition credits to a specific academic year at the maximum
10 course load or maximum number of credit hours generally
11 permitted to full-time undergraduates at that institution.
12 [(j) Levy and execution.--A tuition account shall not be
13 subject to attachment, levy or execution by any creditor of a
14 purchaser or beneficiary.
15 (k) Period of participation.--Notwithstanding any of the
16 provisions of this chapter, the following shall apply:
17 (1) Except as provided in paragraph (2), a minimum
18 period of four years must elapse between the time the first
19 tuition account contract is entered into on behalf of the
20 beneficiary and the time that tuition credits may be issued
21 and redeemed pursuant to subsection (f).
22 (2) The board may prescribe an alternative minimum
23 period of time which must elapse between the time the first
24 tuition account contract is entered into on behalf of the
25 beneficiary and the time that tuition credits may be issued
26 and redeemed pursuant to subsection (f).
27 (l) Student aid.--The value of tuition credits shall not be
28 used in calculating personal asset contribution for determining
29 eligibility and need for student loan programs, student grant
30 programs or other student aid programs administered by any
19990S0008B1484 - 27 -
1 agency of the Commonwealth, except as otherwise may be provided
2 by Federal law.
3 (m) Residency.--The purchase payment for tuition credits
4 shall be determined with reference to the residency of the
5 beneficiary at the time of purchase. If the residency of the
6 beneficiary changes, there shall be an appropriate conversion of
7 tuition credits to reflect the differential in tuition caused by
8 the change of residency, if any.]
9 (j) Residency.--The tuition credit price shall be determined
10 with reference to the residency of the beneficiary at the time a
11 deposit CONTRIBUTION is made pursuant to a Tuition Account <--
12 Guaranteed Savings Program Contract, except that for a resident
13 beneficiary, an account owner may elect to save at a nonresident
14 rate. If the residency of the beneficiary at the time the
15 credits are redeemed is different from the residency designated
16 in the Tuition Account Guaranteed Savings Program Contract, or
17 as thereafter changed with the consent of the department, there
18 shall be an appropriate conversion of tuition credits to reflect
19 the differential in tuition caused by the change of designated
20 residency, if any.
21 Section 4. The act is amended by adding sections to read:
22 Section 309.1. Tuition Account Investment Program.
23 The department shall establish an investment plan that
24 defines the Tuition Account Investment Program structure and
25 sets forth investment policies and guidelines to be utilized in
26 administering the program and may, in its discretion, obtain the
27 services of investment managers, program managers and trustees
28 as described in section 307(b) to assist in establishing and
29 administering the plan. The department, pursuant to a Tuition
30 Account Investment Program Contract, shall specify the minimum
19990S0008B1484 - 28 -
1 and maximum amounts of deposits CONTRIBUTIONS, the terms and <--
2 conditions for transferring the Tuition Account Investment
3 Program Contract to another account owner or substituting a
4 beneficiary for the originally named beneficiary, the terms and
5 conditions for withdrawing deposits CONTRIBUTIONS or terminating <--
6 the Tuition Account Investment Program Contract, the method and
7 procedures for making payments pursuant to the Tuition Account
8 Investment Program Contracts for the payment of beneficiaries'
9 qualified higher education expenses and all other rights and
10 obligations of the account owner and the department.
11 Section 309.2. General provisions governing both tuition
12 account programs.
13 (a) Levy, execution and security for loans.--A tuition
14 account or any legal interest therein shall not be subject to
15 attachment, levy or execution by any creditor of an account
16 owner or beneficiary and shall not be used as security for a
17 loan.
18 (b) Period of participation.--Notwithstanding any of the
19 provisions of this chapter, the following shall apply:
20 (1) Except as provided in paragraph (2), a minimum
21 period of one year must elapse between the time a deposit <--
22 CONTRIBUTION is made pursuant to a Tuition Account Program <--
23 Contract and the time that deposit CONTRIBUTION and any <--
24 increase in its value may be used for payment of qualified
25 higher education expenses pursuant to section 309 or 309.1.
26 (2) The board may prescribe an alternative minimum
27 period of time which must elapse between a deposit <--
28 CONTRIBUTION and its use for payment of qualified higher <--
29 education expenses.
30 (c) Student aid.--Any amounts deposited CONTRIBUTED pursuant <--
19990S0008B1484 - 29 -
1 to a Tuition Account Program Contract and any increase in the
2 value thereof shall not be used in calculating personal asset
3 contributions for determining eligibility and need for student
4 loan programs, student grant programs or other student aid
5 programs administered by any agency of the Commonwealth, except
6 as otherwise may be provided by Federal law.
7 (d) Excess contributions.--The department shall institute
8 adequate safeguards to prevent contributions to an account or
9 multiple accounts that are in excess of those necessary to
10 provide for the qualified higher education expenses of the
11 beneficiary of that account or accounts, as specified in section
12 529 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
13 U.S.C. § 529).
14 (e) Cash contributions.--A deposit CONTRIBUTION made <--
15 pursuant to a Tuition Account Program Contract may only be made
16 in cash, which may at the department's discretion include
17 checks, money orders, credit cards or other similar methods.
18 (f) Transfers between programs.--The department, pursuant to
19 a Tuition Account Program Contract, may specify the terms and
20 conditions under which transfers of deposits CONTRIBUTIONS and <--
21 any increased value thereof may be made from one account to
22 another by an account owner who has entered into a Tuition
23 Account Guaranteed Savings Program Contract and a Tuition
24 Account Investment Program Contract. Nothing in this subsection
25 shall be construed to require the department to allow such
26 transfers.
27 Section 5. Sections 310, 311, 312, 313, 314, 315, 316 and
28 317 of the act are amended to read:
29 Section 310. Payments on account of tuition shortfalls.
30 If there are tuition shortfalls on account of beneficiaries
19990S0008B1484 - 30 -
1 of Tuition Account Guaranteed Savings Program Contracts
2 attending a [participating institution remain after payments are
3 made pursuant to section 309(g)] public institution or redeeming
4 tuition credits at a private institution average tuition level
5 and if such tuition shortfalls are not paid on behalf of the
6 department pursuant to section 307(b), the total shortfall with
7 respect to that institution shall be paid from the fund as a
8 separate payment pursuant to section 309(d)(3) or (e)(2)(ii).
9 The amount of shortfall payments shall be considered in
10 determining the actuarial soundness of the fund as provided for
11 in section 306(b)(2).
12 Section 311. Tuition [account payment contracts] Account
13 Program Contracts.
14 [Purchasers buying tuition credits] Account owners making
15 deposits CONTRIBUTIONS for the use of beneficiaries shall enter <--
16 into [tuition account payment contracts] Tuition Account Program
17 Contracts with the department. These contracts shall be in such
18 form as is determined by the department, but with regard to
19 Tuition Account Guaranteed Savings Program Contracts shall
20 reflect that the [purchase price of] tuition [credits] credit
21 prices can be adjusted annually [in accordance with sections
22 306(b)(2) and 309(c)(3)].
23 Section 312. Eligible beneficiaries.
24 Notwithstanding any other eligibility criteria established by
25 the board, the following shall apply:
26 (1) In order to be eligible as a beneficiary, a person
27 must be one of the following:
28 (i) A resident of this Commonwealth at the time the
29 [tuition account payment contract] Tuition Account
30 Program Contract is entered into on the person's behalf.
19990S0008B1484 - 31 -
1 (ii) A nonresident if the [tuition account payment
2 contract] Tuition Account Program Contract entered into
3 on the person's behalf is [purchased] entered into by a
4 resident of this Commonwealth, including any legal entity
5 with its principal place of business located within this
6 Commonwealth.
7 (2) The [purchaser] account owner must designate a
8 beneficiary at the time the [purchaser] account owner enters
9 into a [tuition account payment contract] Tuition Account
10 Program Contract unless the contract is made pursuant to a
11 scholarship program.
12 (3) [The] Unless the Tuition Account Program Contract is
13 established as a scholarship pursuant to section 318, the
14 [purchaser] account owner may substitute for the current
15 beneficiary only a member of the family of [the purchaser or
16 initial] that beneficiary upon approval by the department.
17 "Member of the family" is defined by section 529 of the
18 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
19 529).
20 Section 313. Termination and refund.
21 (a) [Inability to attend a participating or nonparticipating
22 institution] Death or disability.--Upon termination of a
23 [tuition account, the purchaser or the purchaser's] Tuition
24 Account Program Contract, the account owner or the account
25 owner's designee shall receive the value of the account [under
26 subsection (f)] if the account is terminated upon the happening
27 of any of the following:
28 (1) The death of the beneficiary.
29 (2) The disability of the beneficiary which, in the
30 opinion of the department, would make attendance by the
19990S0008B1484 - 32 -
1 beneficiary at [a participating] an eligible educational
2 institution impossible or unreasonably burdensome.
3 [(3) Failure of the beneficiary who, in the opinion of
4 the department, has made a good faith attempt to gain
5 admission to a participating or nonparticipating institution
6 within the time limits imposed by the department.
7 (b) Decision to attend a nonparticipating institution.--Upon
8 termination of a tuition account as a result of a decision by
9 the beneficiary to attend a nonparticipating institution, the
10 department, at the direction of the purchaser or beneficiary and
11 upon presentation of proof of the beneficiary's acceptance by
12 the nonparticipating institution, shall pay to the institution
13 the tuition for the number of tuition credits purchased
14 calculated at the standard tuition level or at the tuition for a
15 specific participating institution, as designated in the tuition
16 account payment contract, or an amount equal to the value of the
17 account under subsection (f), whichever is less. Payment under
18 this subsection for any one academic year shall not exceed the
19 amount of the beneficiary's tuition or other approved
20 educational expenses for that year.
21 (c) Decision not to attend a participating or
22 nonparticipating institution.--Upon termination of a tuition
23 account as a result of a decision by the beneficiary not to
24 attend a participating or nonparticipating institution, within
25 time limits determined by the department, the purchaser or the
26 purchaser's designee shall receive 90% of the tuition for the
27 number of tuition credits purchased calculated at the standard
28 tuition level or at the tuition for a specific participating
29 institution, as designated in the tuition account payment
30 contract, or an amount equal to 90% of the value of the account
19990S0008B1484 - 33 -
1 under subsection (f), whichever is less.
2 (d) Refunds for other reasons.--In circumstances other than
3 those set forth in this section, the department shall, by
4 regulation, provide for refunds up to but not exceeding the
5 amount authorized under subsection (c).]
6 (b) Refunds for other reasons.--
7 (1) Except as provided in paragraph (3), refunds for
8 Tuition Account Guaranteed Savings Program Contracts for
9 reasons other than those set forth in subsection (a) shall be
10 the sum of the deposits CONTRIBUTIONS made pursuant to the <--
11 Tuition Account Guaranteed Savings Program Contract plus 90%
12 of the difference between the tuition credit prices in the
13 years of deposit CONTRIBUTION and the increased value of the <--
14 tuition credits had they been redeemed in the academic year
15 of termination.
16 (2) Except as provided in paragraph (3), refunds for
17 Tuition Account Investment Program Contracts for reasons
18 other than those set forth in subsection (a) shall be:
19 (i) in the event the value of the account is less
20 than or equal to the sum of the deposits CONTRIBUTIONS <--
21 made pursuant to the Tuition Account Investment Program
22 Contract, the value of the account; and
23 (ii) in the event the value of the account is more
24 than the sum of the deposits CONTRIBUTIONS made pursuant <--
25 to the Tuition Account Investment Program Contract, the
26 sum of the deposits CONTRIBUTIONS plus 90% of the <--
27 difference between the sum of the deposits CONTRIBUTIONS <--
28 and the value of the account.
29 (3) The board may alter the refund provisions set forth
30 in paragraphs (1) and (2) so long as such alterations are
19990S0008B1484 - 34 -
1 consistent with the requirements for "qualified State tuition
2 programs" provided in section 529 of the Internal Revenue
3 Code of 1986 (Public Law 99-514, 26 U.S.C. § 529).
4 (4) If a refund is requested under this subsection
5 within the 12 months following the account owner's changing
6 the tuition level designated in a Tuition Account Guaranteed
7 Savings Program Contract, the refund shall be calculated
8 using the value of the tuition credits of the previous or
9 current tuition level, whichever is less.
10 [(e)](c) Fees.--The department may impose a fee upon
11 termination of the account for administrative costs and deduct
12 the fee from the amount otherwise payable.
13 [(f) Value of account.--The value of the account shall be
14 calculated by compounding annually each separate payment from
15 the time of payment to the time the account is terminated at the
16 actual annual net earnings rate of the fund.
17 (g)](d) Taxation of refunds.--In the event of a refund upon
18 the termination of a [tuition account] Tuition Account Program
19 Contract, to the extent the [amount of the] refund amount an
20 account owner receives exceeds the sum of the [payments]
21 deposits CONTRIBUTIONS, it shall be subject to taxation as <--
22 income under the laws of this Commonwealth[, except when the
23 refund is made pursuant to subsection (b)].
24 [(h)](e) Change of beneficiary for type of tuition account
25 program.--The substitution of the beneficiary of an account
26 pursuant to section 312(3) or the transfer of deposits <--
27 CONTRIBUTIONS, and any increased value thereof, from one type of <--
28 tuition account program to the other shall not be deemed a
29 termination of the account for purposes of this section.
30 [(i)](f) Scholarship.--If a beneficiary is awarded a
19990S0008B1484 - 35 -
1 scholarship, the terms of which cover the benefits included in
2 [tuition account payment contracts purchased] Tuition Account
3 Program Contracts entered into on behalf of the beneficiary, the
4 [purchaser shall] account owner may receive a refund
5 [consisting]. For Tuition Account Guaranteed Savings Program
6 Contracts, the refund shall consist of the [tuition for the
7 number of] value, in the academic award year the scholarship is
8 paid, of the available tuition credits [purchased calculated at
9 the standard tuition level or at the tuition for a specific
10 participating institution, as designated in the tuition account
11 payment contract, or an amount equal to the value of the account
12 under subsection (f), whichever is less]. For Tuition Account
13 Investment Program Contracts, the refund shall consist of the
14 available portion of the value of the account. The refund under
15 this subsection for any one academic award year shall not exceed
16 the scholarship for that year.
17 Section 314. Construction.
18 Nothing in this chapter or in a [tuition account payment
19 contract] Tuition Account Program Contract entered into pursuant
20 to this chapter shall be construed as a promise or guarantee by
21 the department that a person will be admitted to an institution
22 of higher education, will be allowed to continue to attend an
23 institution of higher education after having been admitted or
24 will be graduated from an institution of higher education.
25 Section 315. Exemption from security laws.
26 Tuition [account payment contracts] Account Program Contracts
27 are exempt from any statute regulating securities, including the
28 act of December 5, 1972 (P.L.1280, No.284), known as the
29 Pennsylvania Securities Act of 1972.
30 Section 316. State tax exemption.
19990S0008B1484 - 36 -
1 (a) Property of [fund] funds.--The property of [the fund and
2 its] each of the funds and their income and operation shall be
3 exempt from all taxation by the Commonwealth and its political
4 subdivisions.
5 (b) [Tuition credits.--The purchase and] Deposits.--Deposits <--
6 CONTRIBUTIONS.--CONTRIBUTIONS made pursuant to a Tuition Account <--
7 Program Contract; any increase in the value of those deposits <--
8 CONTRIBUTIONS, the retention, or transfer during life or as a <--
9 result of death of [tuition credits and their use] any legal
10 interest in a Tuition Account Program Contract; and payment of
11 qualified higher education expenses of beneficiaries made
12 pursuant to Tuition Account Program Contracts shall [not be a
13 transaction subject to income or property taxation by the
14 Commonwealth or any of its political subdivisions.] be exempt
15 from all taxation by the Commonwealth and its political
16 subdivisions.
17 Section 317. Federal taxation.
18 The department may take appropriate action in order to obtain
19 a determination from the Internal Revenue Service or the Federal
20 courts as to whether [the purchase and retention of tuition
21 credits and their use] deposits CONTRIBUTIONS made pursuant to a <--
22 Tuition Account Program Contract, the increase in value of such
23 deposits CONTRIBUTIONS, and payment of qualified higher <--
24 education expenses pursuant to a Tuition Account Program
25 Contract shall be a transaction which will subject [purchasers]
26 account owners or the income of [the fund] either or both of the
27 funds to Federal taxation and may respond to such determination
28 in any manner permitted under this chapter.
29 Section 6. The act is amended by adding a section to read:
30 Section 318. Scholarship programs.
19990S0008B1484 - 37 -
1 (a) Establishment.--The Commonwealth, any political
2 subdivision of the Commonwealth, and any organization that is
3 exempt from Federal income taxation under section 501(a) and
4 described in section 501(c)(3) of the Internal Revenue Code of
5 1986 (Public Law 99-514, 26 U.S.C. § 501), including the
6 department, if not prohibited by section 529 of the Internal
7 Revenue Code of 1986, may establish a scholarship program
8 through a Tuition Account Program Contract to award
9 scholarships. Any scholarship program created pursuant to this
10 section shall be registered with the department and shall comply
11 with such requirements as the department may establish.
12 Scholarship beneficiaries shall be selected by the entity
13 establishing the scholarship program, in accordance with
14 criteria established by the entity; and the entity may change
15 the beneficiary as permitted by section 529 of the Internal
16 Revenue Code of 1986.
17 (b) Deposits CONTRIBUTIONS.--Any person or legal entity may <--
18 make deposits CONTRIBUTIONS on behalf of a scholarship program <--
19 that is or is to be established in accordance with this section
20 under the same terms and conditions as those that apply to
21 nonscholarship tuition accounts. A beneficiary of a Tuition
22 Account Program Contract entered into as part of a scholarship
23 program shall be entitled to payment of qualified higher
24 education expenses under the same terms and conditions as those
25 that apply to beneficiaries of nonscholarship tuition accounts.
26 (c) No requirement.--Nothing in this act shall require the
27 creation of a scholarship account or authorize the use of State
28 funds for such accounts.
29 Section 7. (a) Within 60 days after the effective date of
30 this act, the department shall solicit proposals for assistance
19990S0008B1484 - 38 -
1 in the management of all or part of the Tuition Account
2 Investment Program through a request for proposals. In its
3 discretion, the department may combine in this solicitation a
4 request for proposals for management of all or part of the
5 Tuition Account Guaranteed Savings Program. The department shall
6 require that each proposal specify:
7 (1) whether it applies to the management of only the
8 Tuition Account Investment Program or both the Tuition
9 Account Investment Program and the Tuition Account Guaranteed
10 Savings Program;
11 (2) whether it applies to the administration, investment
12 and/or marketing of the program or programs;
13 (3) the manner in which the administration, investment
14 and/or marketing of the program or programs would be carried
15 out;
16 (4) how the administration, investment and/or marketing
17 of the Tuition Account Investment Program will be coordinated
18 with and complement that of the Tuition Account Guaranteed
19 Savings Program;
20 (5) the qualifications of the entity submitting the
21 proposal to provide the proposed services; and
22 (6) any other information desired by the department.
23 (b) The request for proposals shall provide that the
24 department may conduct discussions with responsible offerors.
25 The department may accept or reject any or all proposals or
26 portions of proposals deemed by the appropriate offeror and
27 department to be severable, if it determines that doing so is in
28 the best interests of the program or programs.
29 Section 8. This act shall take effect in 60 days.
C25L24JS/19990S0008B1484 - 39 -