SB2921 EngrossedLRB100 17259 RJF 32418 b

1    AN ACT concerning State government.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The State Treasurer Act is amended by changing
5Section 16.5 as follows:
 
6    (15 ILCS 505/16.5)
7    Sec. 16.5. College Savings Pool.
8    (a) Definitions. As used in this Section:
9    "Account owner" means any person or entity who has opened
10an account or to whom ownership of an account has been
11transferred, as allowed by the Internal Revenue Code, and who
12has authority to withdraw funds, direct withdrawal of funds,
13change the designated beneficiary, or otherwise exercise
14control over an account in the College Savings Pool.
15    "Donor" means any person or entity who makes contributions
16to an account in the College Savings Pool.
17    "Designated beneficiary" means any individual designated
18as the beneficiary of an account in the College Savings Pool by
19an account owner. A designated beneficiary must have a valid
20social security number or taxpayer identification number. In
21the case of an account established as part of a scholarship
22program permitted under Section 529 of the Internal Revenue
23Code, the designated beneficiary is any individual receiving

 

 

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1benefits accumulated in the account as a scholarship.
2    "Nonqualified withdrawal" means a distribution from an
3account that is not used for the qualified expenses of the
4designated beneficiary.
5    "Program manager" means any financial institution or
6entity lawfully doing business in the State of Illinois
7selected by the State Treasurer to oversee the recordkeeping,
8custody, customer service, investment management, and
9marketing for one or more of the programs in the College
10Savings Pool.
11    "Qualified expenses" means: (i) tuition, fees, and the
12costs of books, supplies, and equipment required for enrollment
13or attendance at an eligible educational institution; (ii)
14expenses for special needs services, in the case of a special
15needs beneficiary, which are incurred in connection with such
16enrollment or attendance; (iii) certain expenses for the
17purchase of computer or peripheral equipment, as defined in
18Section 168 of the federal Internal Revenue Code (26 U.S.C.
19168), computer software, as defined in Section 197 of the
20federal Internal Revenue Code (26 U.S.C. 197), or Internet
21access and related services, if such equipment, software, or
22services are to be used primarily by the beneficiary during any
23of the years the beneficiary is enrolled at an eligible
24educational institution, except that, such expenses shall not
25include expenses for computer software designed for sports,
26games, or hobbies, unless the software is predominantly

 

 

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1educational in nature; and (iv) room and board expenses
2incurred while attending an eligible educational institution
3at least half-time. "Eligible educational institutions", as
4used in this Section, means public and private colleges, junior
5colleges, graduate schools, and certain vocational
6institutions that are described in Section 481 of the Higher
7Education Act of 1965 (20 U.S.C. 1088) and that are eligible to
8participate in Department of Education student aid programs. A
9student shall be considered to be enrolled at least half-time
10if the student is enrolled for at least half the full-time
11academic workload for the course of study the student is
12pursuing as determined under the standards of the institution
13at which the student is enrolled.
14    (b) Establishment of the Pool. The State Treasurer may
15establish and administer a College Savings Pool as a qualified
16tuition program under Section 529 of the Internal Revenue Code.
17The Pool may consist of one or more college savings programs to
18supplement and enhance the investment opportunities otherwise
19available to persons seeking to finance the costs of higher
20education. The State Treasurer, in administering the College
21Savings Pool, may receive, hold, and invest moneys paid into
22the Pool and perform such other actions as are necessary to
23ensure that the Pool operates as a qualified tuition program in
24accordance with Section 529 of the Internal Revenue Code pool
25by a participant and may serve as the fiscal agent of that
26participant for the purpose of holding and investing those

 

 

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1moneys.
2    (c) Administration of the College Savings Pool. The State
3Treasurer may engage one or more financial institutions to
4handle the overall administration, investment management,
5recordkeeping, and marketing of the programs in the College
6Savings Pool. The contributions deposited in the Pool, and any
7earnings thereon, shall not constitute property of the State or
8be commingled with State funds and the State shall have no
9claim to or against, or interest in, such funds.
10    "Participant", as used in this Section, means any person
11who has authority to withdraw funds, change the designated
12beneficiary, or otherwise exercise control over an account.
13"Donor", as used in this Section, means any person who makes
14investments in the pool. "Designated beneficiary", as used in
15this Section, means any person on whose behalf an account is
16established in the College Savings Pool by a participant. Both
17in-state and out-of-state persons may be participants, donors,
18and designated beneficiaries in the College Savings Pool. The
19College Savings Pool must be available to any individual with a
20valid social security number or taxpayer identification number
21for the benefit of any individual with a valid social security
22number or taxpayer identification number, unless a contract in
23effect on August 1, 2011 (the effective date of Public Act
2497-233) does not allow for taxpayer identification numbers, in
25which case taxpayer identification numbers must be allowed upon
26the expiration of the contract.

 

 

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1    New accounts in the College Savings Pool may be processed
2through participating financial institutions. "Participating
3financial institution", as used in this Section, means any
4financial institution insured by the Federal Deposit Insurance
5Corporation and lawfully doing business in the State of
6Illinois and any credit union approved by the State Treasurer
7and lawfully doing business in the State of Illinois that
8agrees to process new accounts in the College Savings Pool.
9Participating financial institutions may charge a processing
10fee to participants to open an account in the pool that shall
11not exceed $30 until the year 2001. Beginning in 2001 and every
12year thereafter, the maximum fee limit shall be adjusted by the
13Treasurer based on the Consumer Price Index for the North
14Central Region as published by the United States Department of
15Labor, Bureau of Labor Statistics for the immediately preceding
16calendar year. Every contribution received by a financial
17institution for investment in the College Savings Pool shall be
18transferred from the financial institution to a location
19selected by the State Treasurer within one business day
20following the day that the funds must be made available in
21accordance with federal law. All communications from the State
22Treasurer to participants and donors shall reference the
23participating financial institution at which the account was
24processed.
25    The Treasurer may invest the moneys in the College Savings
26Pool in the same manner and in the same types of investments

 

 

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1provided for the investment of moneys by the Illinois State
2Board of Investment.
3    (d) Availability of the College Savings Pool. The State
4Treasurer may permit persons, including trustees of trusts and
5custodians under a Uniform Transfers to Minors Act or Uniform
6Gifts to Minors Act account, and certain legal entities to be
7account owners, including as part of a scholarship program,
8provided that: (1) an individual, trustee or custodian must
9have a valid social security number or taxpayer identification
10number, be at least 18 years of age, and have a valid United
11States street address; and (2) a legal entity must have a valid
12taxpayer identification number and a valid United States street
13address. Both in-state and out-of-state persons may be account
14owners and donors, and both in-state and out-of-state
15individuals may be designated beneficiaries in the College
16Savings Pool.
17    (e) Fees. The State Treasurer shall establish fees to be
18imposed on accounts to recover the costs of administration,
19recordkeeping, and investment management. The Treasurer must
20use his or her best efforts to keep these fees as low as
21possible and consistent with administration of high quality
22competitive college savings programs.
23    (f) Investments in the State. To enhance the safety and
24liquidity of the College Savings Pool, to ensure the
25diversification of the investment portfolio of the College
26Savings Pool pool, and in an effort to keep investment dollars

 

 

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1in the State of Illinois, the State Treasurer may make a
2percentage of each account available for investment in
3participating financial institutions doing business in the
4State. The State Treasurer may deposit with the participating
5financial institution at which the account was processed the
6following percentage of each account at a prevailing rate
7offered by the institution, provided that the deposit is
8federally insured or fully collateralized and the institution
9accepts the deposit: 10% of the total amount of each account
10for which the current age of the beneficiary is less than 7
11years of age, 20% of the total amount of each account for which
12the beneficiary is at least 7 years of age and less than 12
13years of age, and 50% of the total amount of each account for
14which the current age of the beneficiary is at least 12 years
15of age.
16    (g) Investment policy. The Treasurer shall develop,
17publish, and implement an investment policy covering the
18investment of the moneys in each of the programs in the College
19Savings Pool. The policy shall be published each year as part
20of the audit of the College Savings Pool by the Auditor
21General, which shall be distributed to all account owners in
22such program participants. The Treasurer shall notify all
23account owners in such program participants in writing, and the
24Treasurer shall publish in a newspaper of general circulation
25in both Chicago and Springfield, any changes to the previously
26published investment policy at least 30 calendar days before

 

 

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1implementing the policy. Any investment policy adopted by the
2Treasurer shall be reviewed and updated if necessary within 90
3days following the date that the State Treasurer takes office.
4    (h) Investment restrictions. An account owner may,
5directly or indirectly, direct the investment of any
6contributions to the College Savings Pool (or any earnings
7thereon) only as provided in Section 529(b)(4) of the Internal
8Revenue Code. Donors and designated beneficiaries, in those
9capacities, may not, directly or indirectly, direct the
10investment of any contributions to the Pool (or any earnings
11thereon).
12    (i) Distributions. Distributions Participants shall be
13required to use moneys distributed from an account in the
14College Savings Pool may be used for the designated
15beneficiary's qualified expenses at eligible educational
16institutions. To the extent a nonqualified withdrawal is made
17from an account, the earnings portion of such distribution may
18be treated by the Internal Revenue Service as income subject to
19income tax and a 10% federal penalty tax. "Qualified expenses",
20as used in this Section, means the following: (i) tuition,
21fees, and the costs of books, supplies, and equipment required
22for enrollment or attendance at an eligible educational
23institution; (ii) expenses for special needs services, in the
24case of a special needs beneficiary, which are incurred in
25connection with such enrollment or attendance; (iii) certain
26expenses for the purchase of computer or peripheral equipment,

 

 

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1as defined in Section 168 of the federal Internal Revenue Code
2(26 U.S.C. 168), computer software, as defined in Section 197
3of the federal Internal Revenue Code (26 U.S.C. 197), or
4internet access and related services, if such equipment,
5software, or services are to be used primarily by the
6beneficiary during any of the years the beneficiary is enrolled
7at an eligible educational institution, except that, such
8expenses shall not include expenses for computer software
9designed for sports, games, or hobbies, unless the software is
10predominantly educational in nature; and (iv) certain room and
11board expenses incurred while attending an eligible
12educational institution at least half-time. "Eligible
13educational institutions", as used in this Section, means
14public and private colleges, junior colleges, graduate
15schools, and certain vocational institutions that are
16described in Section 481 of the Higher Education Act of 1965
17(20 U.S.C. 1088) and that are eligible to participate in
18Department of Education student aid programs. A student shall
19be considered to be enrolled at least half-time if the student
20is enrolled for at least half the full-time academic work load
21for the course of study the student is pursuing as determined
22under the standards of the institution at which the student is
23enrolled.
24    Distributions made from the College Savings Pool may pool
25for qualified expenses shall be made directly to the eligible
26educational institution, directly to a vendor, in the form of a

 

 

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1check payable to both the designated beneficiary and the
2institution or vendor, or directly to the designated
3beneficiary or account owner, or in any other a manner that is
4permissible under Section 529 of the Internal Revenue Code. Any
5moneys that are distributed in any other manner or that are
6used for expenses other than qualified expenses at an eligible
7educational institution shall be subject to a penalty of 10% of
8the earnings unless the beneficiary dies, becomes a person with
9a disability, or receives a scholarship that equals or exceeds
10the distribution. Penalties shall be withheld at the time the
11distribution is made.
12    (j) Contributions. Contributions to the College Savings
13Pool shall be as follows:
14        (1) Contributions to an account in the College Savings
15    Pool may be made only in cash.
16        (2) The Treasurer shall limit the contributions that
17    may be made to the College Savings Pool on behalf of a
18    designated beneficiary, as required under Section 529 of
19    the Internal Revenue Code, to prevent contributions for the
20    benefit of a designated beneficiary in excess of those
21    necessary to provide for the qualified expenses of the
22    designated beneficiary based on the limitations
23    established by the Internal Revenue Service. The Pool shall
24    not permit any additional contributions to an account as
25    soon as the aggregate accounts for the designated
26    beneficiary in the Pool reach a specified account balance

 

 

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1    limit applicable to all designated beneficiaries.
2        (3) The contributions made on behalf of a designated
3    beneficiary who is also a beneficiary under the Illinois
4    Prepaid Tuition Program shall be further restricted to
5    ensure that the contributions in both programs combined do
6    not exceed the limit established for the College Savings
7    Pool.
8    (k) Illinois Student Assistance Commission. The Treasurer
9shall provide the Illinois Student Assistance Commission each
10year at a time designated by the Commission, an electronic
11report of all account owner participant accounts in the
12Treasurer's College Savings Pool, listing total contributions
13and disbursements from each individual account during the
14previous calendar year. As soon thereafter as is possible
15following receipt of the Treasurer's report, the Illinois
16Student Assistance Commission shall, in turn, provide the
17Treasurer with an electronic report listing those College
18Savings Pool account owners participants who also participate
19in the State's prepaid tuition program, administered by the
20Commission. The Commission shall be responsible for filing any
21combined tax reports regarding State qualified savings
22programs required by the United States Internal Revenue
23Service.
24    The Treasurer shall work with the Illinois Student
25Assistance Commission to coordinate the marketing of the
26College Savings Pool and the Illinois Prepaid Tuition Program

 

 

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1when considered beneficial by the Treasurer and the Director of
2the Illinois Student Assistance Commission. The Treasurer's
3office shall not publicize or otherwise market the College
4Savings Pool or accept any moneys into the College Savings Pool
5prior to March 1, 2000. The Treasurer shall provide a separate
6accounting for each designated beneficiary to each account
7owner participant, the Illinois Student Assistance Commission,
8and the participating financial institution at which the
9account was processed.
10    (l) Prohibition; exemption. No interest in the program, or
11any portion thereof, may be used pledged as security for a
12loan. Moneys held in an account invested in the Illinois
13College Savings Pool shall be exempt from all claims of the
14creditors of the account owner participant, donor, or
15designated beneficiary of that account, except for the
16non-exempt College Savings Pool transfers to or from the
17account as defined under subsection (j) of Section 12-1001 of
18the Code of Civil Procedure (735 ILCS 5/12-1001(j)).
19    (m) Taxation. The assets of the College Savings Pool and
20its income and operation shall be exempt from all taxation by
21the State of Illinois and any of its subdivisions. The accrued
22earnings on investments in the Pool once disbursed on behalf of
23a designated beneficiary shall be similarly exempt from all
24taxation by the State of Illinois and its subdivisions, so long
25as they are used for qualified expenses. Contributions to a
26College Savings Pool account during the taxable year may be

 

 

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1deducted from adjusted gross income as provided in Section 203
2of the Illinois Income Tax Act. The provisions of this
3paragraph are exempt from Section 250 of the Illinois Income
4Tax Act.
5    (n) Rules. The Treasurer shall adopt rules he or she
6considers necessary for the efficient administration of the
7College Savings Pool. The rules shall provide whatever
8additional parameters and restrictions are necessary to ensure
9that the College Savings Pool meets all of the requirements for
10a qualified state tuition program under Section 529 of the
11Internal Revenue Code (26 U.S.C. 529).
12    The rules shall provide for the administration expenses of
13the Pool pool to be paid from its earnings and for the
14investment earnings in excess of the expenses and all moneys
15collected as penalties to be credited at least or paid monthly
16to the account owners several participants in the Pool pool in
17a manner which equitably reflects the differing amounts of
18their respective investments in the Pool pool and the differing
19periods of time for which those amounts were in the custody of
20the Pool pool.
21    The Also, the rules shall require the maintenance of
22records that enable the Treasurer's office to produce a report
23for each account in the Pool pool at least annually that
24documents the account balance and investment earnings.
25    Notice of any proposed amendments to the rules and
26regulations shall be provided to all account owners

 

 

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1participants prior to adoption. Amendments to rules and
2regulations shall apply only to contributions made after the
3adoption of the amendment.
4    (o) Bond. The Upon creating the College Savings Pool, the
5State Treasurer shall give bond with at least one surety 2 or
6more sufficient sureties, payable to and for the benefit of the
7account owners participants in the College Savings Pool, in the
8penal sum of $10,000,000 $1,000,000, conditioned upon the
9faithful discharge of his or her duties in relation to the
10College Savings Pool.
11(Source: P.A. 91-607, eff. 1-1-00; 91-829, eff. 1-1-01; 91-943,
12eff. 2-9-01; 92-16, eff. 6-28-01; 92-439, eff. 8-17-01; 92-626,
13eff 7-11-02; 93-812, eff. 1-1-05; 95-23, eff. 8-3-07; 95-306,
14eff. 1-1-08; 95-521, eff. 8-28-07; 95-876, eff. 8-21-08;
1597-233, eff. 8-1-11; 97-537, eff. 8-23-11; 97-813, eff.
167-13-12; 99-143, eff. 7-27-15; 100-161, eff. 8-18-17; revised
1710-2-17.)
 
18    Section 99. Effective date. This Act takes effect upon
19becoming law.