AB683: Bill Text

LRB-3672/2

GMM:jld:rs

2003 - 2004 LEGISLATURE

2003 Assembly BILL 683

November 20, 2003 - Introduced by Representatives Montgomery, Stone, Ainsworth, Ladwig, Olsen, Schooff, Musser, Bies, Jensen, Hines, F. Lasee, Vrakas, Gottlieb, Weber, Petrowski, Ott, Seratti, Lothian, Suder, Krawczyk, Loeffelholz, Zepnick and Taylor, cosponsored by Senators Reynolds, Robson, Stepp and Schultz. Referred to Committee on Colleges and Universities.

AB683,1,6 An Act to renumber and amend 16.255 (1) and 16.255 (2); to amend 14.64 (2) (e), 14.64 (2) (g), 16.255 (title), 16.255 (3) (intro.) and 25.85; and to create 16.255 (1d), 16.255 (1g), 16.255 (1m) (g), 16.255 (1m) (h), 16.255 (1m) (i), 16.255 (1m) (j), 16.255 (2) (a), 16.255 (2) (b), 16.255 (2) (c) and 16.255 (3) (e) of the statutes; relating to: the selection of one or more financial institutions to serve as vendors of the college savings program and granting rule-making authority.

Analysis by the Legislative Reference Bureau

Under current law, the College Savings Program Board (board) administers a college savings program, commonly referred to as "EdVest," under which a person may 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 the enrollment or attendance of a beneficiary at an accredited institution of higher education anywhere in the United States. Under current law, the Department of Administration (DOA) is required to select a nongovernmental person to serve as the vendor of EdVest based on factors determined by DOA, including certain factors specified under current law.

This bill permits DOA to select more than one vendor of EdVest. The bill also defines "vendor" as a bank, savings bank, savings and loan association, credit union, insurance company, trust company, investment company, investment adviser, or any other similar entity that is authorized to do business in this state and that provides or proposes to provide administrative, investment management, and sales, marketing, and distribution services for EdVest. In addition, the bill permits the board to approve more than one kind of investment instrument to be offered through EdVest. Under the bill, any decision on the use of multiple vendors of EdVest or multiple investment instruments to be offered under EdVest shall take into account the requirements for qualifying as a qualified tuition program under the Internal Revenue Code, differing needs of account owners regarding the risk and potential return of different investment instruments, and the administrative costs and burdens that may result from the decision.

The bill also requires DOA to select as vendors of EdVest the vendor or vendors that demonstrate the most advantageous combination, to account owners, beneficiaries, and this state, of the factors determined by DOA, including certain additional factors specified in the bill. Those additional factors are as follows:

1. The financial stability and integrity of the vendor.

2. The safety of the investment instruments being offered by the vendor, taking into account any insurance provided with respect to those investment instruments.

3. The ability of the investment instruments being offered by the vendor to track future higher education costs as estimated by the board.

4. Any other benefits to account owners, beneficiaries, and this state offered by the vendor.

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:

AB683, s. 1 Section 1. 14.64 (2) (e) of the statutes is amended to read:

AB683,2,8 14.64 (2) (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 rules that impose more than a de minimis penalty, as defined under 26 USC 529, for nonqualified withdrawals, and rules to prevent contributions on behalf of a beneficiary that are in excess of those necessary to pay the qualified higher education expenses, as defined in 26 USC 529 (e) (3), of the beneficiary.

AB683, s. 2 Section 2. 14.64 (2) (g) of the statutes is amended to read:

AB683,3,6 14.64 (2) (g) Ensure that, if the department of administration changes vendors terminates the authority of a vendor, as defined in s. 16.255 (1d) (d), the balances of the college savings accounts held by that vendor are promptly transferred to another vendor that has been selected by the department of administration under s. 16.255 (2) and are transferred into investment instruments that are as similar to the original investment instruments as possible.

AB683, s. 3 Section 3. 16.255 (title) of the statutes is amended to read:

AB683,3,8 16.255 (title) College savings program vendor vendors.

AB683, s. 4 Section 4. 16.255 (1) of the statutes is renumbered 16.255 (1m) and amended to read:

AB683,3,13 16.255 (1m) The department shall determine the factors to be considered in selecting a vendor of the program under s. 14.64 vendors under sub. (2), which shall include:

AB683,3,15 (a) The person's ability of the vendor to satisfy record-keeping and reporting requirements.

AB683,3,16 (b) The fees, if any, that the person vendor proposes to charge account owners.

AB683,3,19 (c) The person's plan of the vendor for promoting the college savings program and the investment that the person vendor is willing to make to promote the college savings program.

AB683,3,21 (d) The minimum initial contribution or minimum contributions that the person vendor will require.

AB683,3,24 (e) The ability and willingness of the person vendor to accept electronic contributions electronically, through payroll deduction plans, and through other deposit plans.

AB683,4,2 (f) The ability of the person vendor to augment the college savings program with additional, beneficial services related to the college savings program.

AB683, s. 5 Section 5. 16.255 (1d) of the statutes is created to read:

AB683,4,4 16.255 (1d) In this section:

AB683,4,5 (a) "Board" means the college savings program board.

AB683,4,7 (b) "College savings program" means the college savings program under s. 14.64.

AB683,4,11 (c) "Financial institution" means a bank, savings bank, savings and loan association, credit union, insurance company, trust company, investment company, investment adviser, or any other similar entity that is authorized to do business in this state.

AB683,4,14 (d) "Vendor" means a financial institution that provides or proposes to provide administrative, investment management, and sales, marketing, and distribution services for the college savings program.

AB683, s. 6 Section 6. 16.255 (1g) of the statutes is created to read:

AB683,4,21 16.255 (1g) The board shall implement the college savings program through the use of one or more vendors selected by the department under sub. (2). Under the college savings program, an individual, trust, legal guardian, or entity described under 26 USC 529 (e) (1) (C) may establish a college savings account through any vendor selected by the department and may invest that account in one or more investment instruments approved by the board.

AB683, s. 7 Section 7. 16.255 (1m) (g) of the statutes is created to read:

AB683,4,23 16.255 (1m) (g) The financial stability and integrity of the vendor.

AB683, s. 8 Section 8. 16.255 (1m) (h) of the statutes is created to read:

AB683,5,3 16.255 (1m) (h) The safety of the investment instruments being offered by the vendor, taking into account any insurance provided with respect to those investment instruments.

AB683, s. 9 Section 9. 16.255 (1m) (i) of the statutes is created to read:

AB683,5,6 16.255 (1m) (i) The ability of the investment instruments being offered by the vendor to track future higher education costs as estimated by the board.

AB683, s. 10 Section 10. 16.255 (1m) (j) of the statutes is created to read:

AB683,5,9 16.255 (1m) (j) Any other benefits to account owners, beneficiaries, and this state offered by the vendor.

AB683, s. 11 Section 11. 16.255 (2) of the statutes is renumbered 16.255 (2) (intro.) and amended to read:

AB683,5,21 16.255 (2) (intro.) The department shall solicit competitive sealed proposals under s. 16.75 (2m) from nongovernmental persons to serve as vendor of the college savings program. The department vendors and, from those proposals, shall select the vendor based upon as vendors the vendor or vendors that demonstrate the most advantageous combination, to account owners, beneficiaries, and this state, of the factors determined by the department under sub. (1). (1m). The department may select more than one vendor, and the board may approve more than one kind of investment instrument to be offered through the college savings program. Any decision on the use of multiple vendors or multiple investment instruments shall take into account all of the following:

AB683, s. 12 Section 12. 16.255 (2) (a) of the statutes is created to read:

AB683,5,24 16.255 (2) (a) The requirements for qualifying as a qualified tuition program under 26 USC 529.