AB654: Bill Text

LRB-4017/4

MJL:cmh:kjf

1999 - 2000 LEGISLATURE

1999 Assembly BILL 654

January 11, 2000 - Introduced by Representatives Kreibich, Plale, Underheim, Jensen, Musser, Kestell, Duff, M. Lehman, Rhoades, Hutchison, Sykora, Albers, Freese, Gunderson, Brandemuehl, Ladwig, Jeskewitz, Spillner, Suder, Ott, Plouff, Ryba, Meyerhofer, Stone, Olsen, Handrick, Klusman, Vrakas, Montgomery, Walker, Townsend, Ward, Pettis, Young, Ainsworth, Wieckert and Wasserman, cosponsored by Senators Grobschmidt, Welch, Darling, Burke, Erpenbach, Roessler, Decker, Farrow and Lazich. Referred to Committee on Colleges and Universities.

AB654,1,6 An Act to repeal 14.63 (3) (a) 1. and 3.; to amend 14.63 (4), 14.63 (5) (a), 14.63 (5) (b) (intro.) and 2., 14.63 (8), 14.63 (11) (b) and 16.75 (2m) (a); and to create 14.57, 14.63 (3) (c), 14.64, 15.07 (1) (b) 2., 16.25, 20.585 (1) (gm) and 815.18 (3) (p) of the statutes; relating to: the college tuition prepayment program, creating a college savings program board and college savings program, granting rule-making authority and making an appropriation.

Analysis by the Legislative Reference Bureau

Under current law, the state treasurer administers a college tuition prepayment program that allows a Wisconsin resident, trust or legal guardian to purchase tuition units from the state treasurer that may be redeemed in the future to pay tuition and mandatory student fees at any accredited institution of higher education in the United States on behalf of a beneficiary who is a Wisconsin resident. The college tuition prepayment program is a qualified state tuition plan under federal law; federal tax is deferred until funds are withdrawn, after which the distributions are taxable as ordinary income at the beneficiary's federal tax rate. Distributions are exempt from state tax. A person who wishes to purchase tuition units must pay a $50 nonrefundable enrollment fee.

This bill repeals the residency requirements for purchasers and beneficiaries of tuition units; permits, but does not require, the state treasurer to charge an enrollment fee; and permits tuition units to be redeemed to cover tuition, fees and the costs of room and board, books, supplies and equipment required for college enrollment.

The bill also creates a college savings program, which is administered primarily by an eleven-member college savings program board (board) that is attached to the office of the state treasurer. The college savings program allows an individual, trust or legal guardian to establish and contribute money to a college savings account to cover tuition, fees and the costs of room and board, books, supplies and equipment required for enrollment or attendance of a beneficiary at any accredited institution of higher education in the United States. (A tax-exempt nonprofit corporation and a state or local governmental unit may also open a college savings account as part of a scholarship program.) The board must ensure that the college savings program meets federal requirements for a qualified state tuition plan and must invest the contributions to college savings accounts and pay distributions to beneficiaries and institutions of higher education. Under the bill, the department of administration (DOA) selects a private entity to serve as program manager, based upon factors specified in the bill and other factors determined by DOA. The contract between DOA and the manager must, among other things, require the manager to reimburse the state for all administrative costs that the state incurs for the college savings program. The bill also prohibits a state agency, a University of Wisconsin System institution or a technical college from including the balance of a college savings account in the calculation of a beneficiary's eligibility for state financial aid for higher education.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB654, s. 1 Section 1. 14.57 of the statutes is created to read:

AB654,2,4 14.57 Same; attached boards. There is created a college savings program board that is attached to the office of the state treasurer under s. 15.03 and that consists of all of the following members:

AB654,2,5 (1) The state treasurer or his or her designee.

AB654,2,7 (2) The president of the board of regents of the University of Wisconsin System or his or her designee.

AB654,2,9 (3) A representative of private colleges in this state, appointed for a 4-year term.

AB654,3,1 (4) The chairperson of the investment board or his or her designee.

AB654,3,2 (5) The president of the technical college system board or his or her designee.

AB654,3,3 (6) Six other members, appointed for 4-year terms.

AB654, s. 2 Section 2. 14.63 (3) (a) 1. and 3. of the statutes, as affected by 1999 Wisconsin Act 9, are repealed.

AB654, s. 3 Section 3. 14.63 (3) (c) of the statutes is created to read:

AB654,3,7 14.63 (3) (c) The state treasurer may charge a purchaser an enrollment fee.

AB654, s. 4 Section 4. 14.63 (4) of the statutes, as affected by 1999 Wisconsin Act 9, is amended to read:

AB654,3,17 14.63 (4) Number of tuition units purchased. A person who enters into a contract under sub. (3) may purchase tuition units at any time and in any number, except that the total number of tuition units purchased on behalf of a single beneficiary may not exceed the number necessary to pay for 4 years of full-time attendance, including mandatory student tuition, fees and the costs described in sub. (5) (a), as a resident undergraduate at the institution within the University of Wisconsin System that has the highest resident undergraduate tuition, as determined by the state treasurer, in the anticipated academic years of their use.

AB654, s. 5 Section 5. 14.63 (5) (a) of the statutes, as affected by 1999 Wisconsin Act 9, is amended to read:

AB654,4,3 14.63 (5) (a) Except as provided in sub. (7m), if an individual named as beneficiary in a contract under sub. (3) attends an institution of higher education in the United States, each tuition unit purchased on his or her behalf entitles that beneficiary to apply toward the payment of tuition and mandatory student, fees and the costs of room and board, books, supplies and equipment required for enrollment or attendance at the institution an amount equal to 1% of the anticipated weighted average tuition of bachelor's degree-granting institutions within the University of Wisconsin System for the year of attendance, as estimated under sub. (2) in the year in which the tuition unit was purchased.

AB654, s. 6 Section 6. 14.63 (5) (b) (intro.) and 2. of the statutes, as affected by 1999 Wisconsin Act 9, are amended to read:

AB654,4,8 14.63 (5) (b) (intro.) Upon request by the beneficiary, the state treasurer shall pay to the institution or beneficiary, whichever is appropriate, in each semester of attendance the lesser of the following:

AB654,4,10 2. An amount equal to the sum of the institution's tuition and mandatory student, fees and the costs described in par. (a) for that semester.

AB654, s. 7 Section 7. 14.63 (8) of the statutes, as affected by 1999 Wisconsin Act 9, is amended to read:

AB654,4,16 14.63 (8) Exemption from garnishment, attachment and execution. Moneys deposited in the tuition trust fund and a beneficiary's right to the payment of tuition and mandatory student, fees and the costs described in sub. (5) (a) under this section are not subject to garnishment, attachment, execution or any other process of law.

AB654, s. 8 Section 8. 14.63 (11) (b) of the statutes, as affected by 1999 Wisconsin Act 9, is amended to read:

AB654,4,22 14.63 (11) (b) The requirements to pay tuition and mandatory student, fees and the costs of room and board, books, supplies and equipment under sub. (5) and to make refunds under sub. (7) are subject to the availability of sufficient assets in the tuition trust fund.

AB654, s. 9 Section 9. 14.64 of the statutes is created to read:

AB654,4,24 14.64 College savings program. (1) Definitions. In this section:

AB654,5,2 (a) "Account owner" means an individual who establishes a college savings account under this section.

AB654,5,3 (b) "Board" means the college savings program board.

AB654,5,4 (2) Duties of the board. The board shall do all of the following:

AB654,5,10 (a) Except as provided in s. 16.25, establish and administer a college savings program that allows an individual, trust, legal guardian or entity described under 26 USC 529 (e) (1) (C) to establish a college savings account to cover tuition, fees and the costs of room and board, books, supplies and equipment required for the enrollment or attendance of a beneficiary at an eligible educational institution, as defined under 26 USC 529.

AB654,5,12 (b) Ensure that the college savings program meets the requirements of a qualified state tuition plan under 26 USC 529.

AB654,5,14 (c) Invest the contributions to college savings accounts and pay distributions to beneficiaries and eligible educational institutions.

AB654,5,19 (d) Provide to each account owner, and to persons who are interested in establishing a college savings account, information about current and estimated future higher education costs, levels of participation in the college savings program that will help achieve educational funding objectives and availability of and access to financial aid.

AB654,5,24 (e) Promulgate rules to implement and administer this section, including rules that determine whether a withdrawal from a college savings account is a qualified or nonqualified withdrawal, as defined under 26 USC 529, and that impose more than a de minimis penalty, as defined under 26 USC 529, for nonqualified withdrawals.

AB654,6,3 (f) Seek rulings and guidance from the U.S. department of the treasury, the internal revenue service and the securities and exchange commission to ensure the proper implementation and administration of the college savings program.

AB654,6,6 (g) Ensure that if the department of administration changes managers, the balances of college savings accounts are promptly transferred into investment instruments as similar to the original investment instruments as possible.

AB654,6,8 (h) Keep personal and financial information pertaining to an account owner or a beneficiary closed to the public.

AB654,6,10 (3) Account owners; beneficiaries; contributions; termination of savings accounts. (a) An account owner may do all of the following:

AB654,6,11 1. Contribute to a college savings account

AB654,6,12 2. Select a beneficiary of a college savings account.

AB654,6,14 3. Change the beneficiary of a college savings account to a family member, as defined under 26 USC 529, of the previous beneficiary.

AB654,6,16 4. Transfer all or a portion of a college savings account to another college savings account whose beneficiary is a member of the family.

AB654,6,18 5. Designate an individual other than the beneficiary as an individual to whom funds may be paid from a college savings account.

AB654,6,20 6. Receive distributions from a college savings account if no other individual is designated.

AB654,6,23 (b) An individual may be the beneficiary of more than one college savings account, and an account owner may be the beneficiary of a college savings account that the account owner has established.

AB654,7,4 (c) The board shall establish a minimum initial contribution to a college savings account that may be waived if the account owner agrees to contribute to a college savings account through a payroll deduction or automatic deposit plan. The board shall ensure that any such plan permits the adjustment of scheduled deposits because of a change in the account owner's economic circumstances or a beneficiary's educational plans.

AB654,7,6 (d) An account owner under this section may terminate his or her college savings account if any of the following occurs:

AB654,7,7 1. The beneficiary dies or is permanently disabled.

AB654,7,9 2. The beneficiary graduates from high school but is unable to gain admission to an institution of higher education after a good faith effort.

AB654,7,11 3. The beneficiary attended an institution of higher education but involuntarily failed to complete the program in which he or she was enrolled.

AB654,7,12 4. The beneficiary is at least 18 years old and one of the following applies:

AB654,7,13 a. The beneficiary has not graduated from high school.

AB654,7,14 b. The beneficiary has decided not to attend an institution of higher education.

AB654,7,16 c. The beneficiary attended an institution of higher education but voluntarily withdrew without completing the program in which he or she was enrolled.

AB654,7,17 5. Other circumstances determined by the board to be grounds for termination.

AB654,7,21 (e) The board shall terminate a college savings account if any portion of the college savings account balance remains unused 10 years after the anticipated academic year of the beneficiary's initial enrollment in an eligible educational institution.

AB654,7,24 (4) Contracts with professionals. The board may enter into a contract for the services of accountants, attorneys, consultants and other professionals to assist in the administration and evaluation of the college savings program.

AB654,8,4 (5) Report. Annually, the board shall submit a report to the governor, and to the appropriate standing committees of the legislature under s. 13.172 (3), on the performance of the college savings program, including any recommended changes to the program.

AB654,8,8 (6) Construction. Nothing in this section guarantees an individual's admission to, retention by or graduation from any institution of higher education; a rate of interest or return on a college savings account; or the payment of principal, interest or return on a college savings account.

AB654,8,11 (7) Exemption from garnishment, attachment and execution; security for loan. (a) A beneficiary's right to qualified withdrawals under this section is not subject to garnishment, attachment, execution or other process of law.

AB654,8,13 (b) No interest in a college savings account may be pledged as security for a loan.

AB654,8,17 (8) Financial aid calculations. No state agency, University of Wisconsin System institution or college campus or technical college may include the balance of a college savings account in the calculation of a beneficiary's eligibility for state financial aid for higher education.

AB654, s. 10 Section 10. 15.07 (1) (b) 2. of the statutes is created to read:

AB654,8,19 15.07 (1) (b) 2. College savings program board.

AB654, s. 11 Section 11. 16.25 of the statutes is created to read:

AB654,8,23 16.25 College savings program manager. (1) The department shall determine the factors to be considered in selecting a person to serve as manager of the program under s. 14.64, which shall include: