LRB-4017/4
MJL:cmh:kjf
1999 - 2000 LEGISLATURE
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 1An Act to repeal 14.63 (3) (a) 1. and 3.; to amend 14.63 (4), 14.63 (5) (a), 14.63
2(5) (b) (intro.) and 2., 14.63 (8), 14.63 (11) (b) and 16.75 (2m) (a); and to create
314.57, 14.63 (3) (c), 14.64, 15.07 (1) (b) 2., 16.25, 20.585 (1) (gm) and 815.18 (3)
4(p) of the statutes; relating to: the college tuition prepayment program,
5creating a college savings program board and college savings program,
6granting 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federal law; federal tax is deferred until funds are withdrawn, after which the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 1Section 1. 14.57 of the statutes is created to read:
AB654,2,4 214.57 Same; attached boards. There is created a college savings program
3board that is attached to the office of the state treasurer under s. 15.03 and that
4consists of all of the following members:
AB654,2,5 5(1) The state treasurer or his or her designee.
AB654,2,7 6(2) The president of the board of regents of the University of Wisconsin System
7or his or her designee.
AB654,2,9 8(3) A representative of private colleges in this state, appointed for a 4-year
9term.
AB654,3,1
1(4) The chairperson of the investment board or his or her designee.
AB654,3,2 2(5) The president of the technical college system board or his or her designee.
AB654,3,3 3(6) Six other members, appointed for 4-year terms.
AB654, s. 2 4Section 2. 14.63 (3) (a) 1. and 3. of the statutes, as affected by 1999 Wisconsin
5Act 9
, are repealed.
AB654, s. 3 6Section 3. 14.63 (3) (c) of the statutes is created to read:
AB654,3,77 14.63 (3) (c) The state treasurer may charge a purchaser an enrollment fee.
AB654, s. 4 8Section 4. 14.63 (4) of the statutes, as affected by 1999 Wisconsin Act 9, is
9amended to read:
AB654,3,1710 14.63 (4) Number of tuition units purchased. A person who enters into a
11contract under sub. (3) may purchase tuition units at any time and in any number,
12except that the total number of tuition units purchased on behalf of a single
13beneficiary may not exceed the number necessary to pay for 4 years of full-time
14attendance, including mandatory student tuition, fees and the costs described in sub.
15(5) (a)
, as a resident undergraduate at the institution within the University of
16Wisconsin System that has the highest resident undergraduate tuition, as
17determined by the state treasurer, in the anticipated academic years of their use.
AB654, s. 5 18Section 5. 14.63 (5) (a) of the statutes, as affected by 1999 Wisconsin Act 9, is
19amended to read:
AB654,4,320 14.63 (5) (a) Except as provided in sub. (7m), if an individual named as
21beneficiary in a contract under sub. (3) attends an institution of higher education in
22the United States, each tuition unit purchased on his or her behalf entitles that
23beneficiary to apply toward the payment of tuition and mandatory student, fees and
24the costs of room and board, books, supplies and equipment required for enrollment
25or attendance
at the institution an amount equal to 1% of the anticipated weighted

1average tuition of bachelor's degree-granting institutions within the University of
2Wisconsin System for the year of attendance, as estimated under sub. (2) in the year
3in which the tuition unit was purchased.
AB654, s. 6 4Section 6. 14.63 (5) (b) (intro.) and 2. of the statutes, as affected by 1999
5Wisconsin Act 9
, are amended to read:
AB654,4,86 14.63 (5) (b) (intro.) Upon request by the beneficiary, the state treasurer shall
7pay to the institution or beneficiary, whichever is appropriate, in each semester of
8attendance the lesser of the following:
AB654,4,109 2. An amount equal to the sum of the institution's tuition and mandatory
10student
, fees and the costs described in par. (a) for that semester.
AB654, s. 7 11Section 7. 14.63 (8) of the statutes, as affected by 1999 Wisconsin Act 9, is
12amended to read:
AB654,4,1613 14.63 (8) Exemption from garnishment, attachment and execution. Moneys
14deposited in the tuition trust fund and a beneficiary's right to the payment of tuition
15and mandatory student, fees and the costs described in sub. (5) (a) under this section
16are not subject to garnishment, attachment, execution or any other process of law.
AB654, s. 8 17Section 8. 14.63 (11) (b) of the statutes, as affected by 1999 Wisconsin Act 9,
18is amended to read:
AB654,4,2219 14.63 (11) (b) The requirements to pay tuition and mandatory student, fees and
20the costs of room and board, books, supplies and equipment
under sub. (5) and to
21make refunds under sub. (7) are subject to the availability of sufficient assets in the
22tuition trust fund.
AB654, s. 9 23Section 9. 14.64 of the statutes is created to read:
AB654,4,24 2414.64 College savings program. (1) Definitions. In this section:
AB654,5,2
1(a) "Account owner" means an individual who establishes a college savings
2account under this section.
AB654,5,33 (b) "Board" means the college savings program board.
AB654,5,4 4(2) Duties of the board. The board shall do all of the following:
AB654,5,105 (a) Except as provided in s. 16.25, establish and administer a college savings
6program that allows an individual, trust, legal guardian or entity described under
726 USC 529 (e) (1) (C) to establish a college savings account to cover tuition, fees and
8the costs of room and board, books, supplies and equipment required for the
9enrollment or attendance of a beneficiary at an eligible educational institution, as
10defined under 26 USC 529.
AB654,5,1211 (b) Ensure that the college savings program meets the requirements of a
12qualified state tuition plan under 26 USC 529.
AB654,5,1413 (c) Invest the contributions to college savings accounts and pay distributions
14to beneficiaries and eligible educational institutions.
AB654,5,1915 (d) Provide to each account owner, and to persons who are interested in
16establishing a college savings account, information about current and estimated
17future higher education costs, levels of participation in the college savings program
18that will help achieve educational funding objectives and availability of and access
19to financial aid.
AB654,5,2420 (e) Promulgate rules to implement and administer this section, including rules
21that determine whether a withdrawal from a college savings account is a qualified
22or nonqualified withdrawal, as defined under 26 USC 529, and that impose more
23than a de minimis penalty, as defined under 26 USC 529, for nonqualified
24withdrawals.
AB654,6,3
1(f) Seek rulings and guidance from the U.S. department of the treasury, the
2internal revenue service and the securities and exchange commission to ensure the
3proper implementation and administration of the college savings program.
AB654,6,64 (g) Ensure that if the department of administration changes managers, the
5balances of college savings accounts are promptly transferred into investment
6instruments as similar to the original investment instruments as possible.
AB654,6,87 (h) Keep personal and financial information pertaining to an account owner or
8a beneficiary closed to the public.
AB654,6,10 9(3) Account owners; beneficiaries; contributions; termination of savings
10accounts.
(a) An account owner may do all of the following:
AB654,6,1111 1. Contribute to a college savings account
AB654,6,1212 2. Select a beneficiary of a college savings account.
AB654,6,1413 3. Change the beneficiary of a college savings account to a family member, as
14defined under 26 USC 529, of the previous beneficiary.
AB654,6,1615 4. Transfer all or a portion of a college savings account to another college
16savings account whose beneficiary is a member of the family.
AB654,6,1817 5. Designate an individual other than the beneficiary as an individual to whom
18funds may be paid from a college savings account.
AB654,6,2019 6. Receive distributions from a college savings account if no other individual
20is designated.
AB654,6,2321 (b) An individual may be the beneficiary of more than one college savings
22account, and an account owner may be the beneficiary of a college savings account
23that the account owner has established.
AB654,7,424 (c) The board shall establish a minimum initial contribution to a college savings
25account that may be waived if the account owner agrees to contribute to a college

1savings account through a payroll deduction or automatic deposit plan. The board
2shall ensure that any such plan permits the adjustment of scheduled deposits
3because of a change in the account owner's economic circumstances or a beneficiary's
4educational plans.
AB654,7,65 (d) An account owner under this section may terminate his or her college
6savings account if any of the following occurs:
AB654,7,77 1. The beneficiary dies or is permanently disabled.
AB654,7,98 2. The beneficiary graduates from high school but is unable to gain admission
9to an institution of higher education after a good faith effort.
AB654,7,1110 3. The beneficiary attended an institution of higher education but involuntarily
11failed to complete the program in which he or she was enrolled.
AB654,7,1212 4. The beneficiary is at least 18 years old and one of the following applies:
AB654,7,1313 a. The beneficiary has not graduated from high school.
AB654,7,1414 b. The beneficiary has decided not to attend an institution of higher education.
AB654,7,1615 c. The beneficiary attended an institution of higher education but voluntarily
16withdrew without completing the program in which he or she was enrolled.
AB654,7,1717 5. Other circumstances determined by the board to be grounds for termination.
AB654,7,2118 (e) The board shall terminate a college savings account if any portion of the
19college savings account balance remains unused 10 years after the anticipated
20academic year of the beneficiary's initial enrollment in an eligible educational
21institution.
AB654,7,24 22(4) Contracts with professionals. The board may enter into a contract for the
23services of accountants, attorneys, consultants and other professionals to assist in
24the administration and evaluation of the college savings program.
AB654,8,4
1(5) Report. Annually, the board shall submit a report to the governor, and to
2the appropriate standing committees of the legislature under s. 13.172 (3), on the
3performance of the college savings program, including any recommended changes to
4the program.
AB654,8,8 5(6) Construction. Nothing in this section guarantees an individual's
6admission to, retention by or graduation from any institution of higher education; a
7rate of interest or return on a college savings account; or the payment of principal,
8interest or return on a college savings account.
AB654,8,11 9(7) Exemption from garnishment, attachment and execution; security for
10loan.
(a) A beneficiary's right to qualified withdrawals under this section is not
11subject to garnishment, attachment, execution or other process of law.
AB654,8,1312 (b) No interest in a college savings account may be pledged as security for a
13loan.
AB654,8,17 14(8) Financial aid calculations. No state agency, University of Wisconsin
15System institution or college campus or technical college may include the balance of
16a college savings account in the calculation of a beneficiary's eligibility for state
17financial aid for higher education.
AB654, s. 10 18Section 10. 15.07 (1) (b) 2. of the statutes is created to read:
AB654,8,1919 15.07 (1) (b) 2. College savings program board.
AB654, s. 11 20Section 11. 16.25 of the statutes is created to read:
AB654,8,23 2116.25 College savings program manager. (1) The department shall
22determine the factors to be considered in selecting a person to serve as manager of
23the program under s. 14.64, which shall include:
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