101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB5388

 

Introduced , by Rep. Norine K. Hammond - Grant Wehrli - Patrick Windhorst - Amy Grant

 

SYNOPSIS AS INTRODUCED:
 
15 ILCS 505/16.5
110 ILCS 979/45.5 new

    Amends the State Treasurer Act and Illinois Prepaid Tuition Act. Provides that, beginning on July 1, 2020, for a designated beneficiary or qualified beneficiary who is a State resident, no contributions toward the College Savings Pool or the purchase of an Illinois prepaid tuition contract may be considered in evaluating the financial situation of the beneficiary or be deemed a financial resource or form of financial aid or assistance to the beneficiary for purposes of determining the eligibility of the beneficiary for any scholarship, grant, or monetary assistance awarded by the Illinois Student Assistance Commission. Provides that contributions toward the College Savings Pool or the purchase of an Illinois prepaid tuition contract may not reduce the amount of any scholarship, grant, or monetary assistance that the beneficiary is eligible to be awarded by the Commission. Effective June 1, 2020.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB5388LRB101 16658 CMG 66045 b

1    AN ACT concerning education.
 
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    "Member of the family" has the same meaning ascribed to
3that term under Section 529 of the Internal Revenue Code.
4    "Nonqualified withdrawal" means a distribution from an
5account other than a distribution that (i) is used for the
6qualified expenses of the designated beneficiary; (ii) results
7from the beneficiary's death or disability; (iii) is a rollover
8to another account in the College Savings Pool; or (iv) is a
9rollover to an ABLE account, as defined in Section 16.6 of this
10Act, or any distribution that, within 60 days after such
11distribution, is transferred to an ABLE account of the
12designated beneficiary or a member of the family of the
13designated beneficiary to the extent that the distribution,
14when added to all other contributions made to the ABLE account
15for the taxable year, does not exceed the limitation under
16Section 529A(b) of the Internal Revenue Code.
17    "Program manager" means any financial institution or
18entity lawfully doing business in the State of Illinois
19selected by the State Treasurer to oversee the recordkeeping,
20custody, customer service, investment management, and
21marketing for one or more of the programs in the College
22Savings Pool.
23    "Qualified expenses" means: (i) tuition, fees, and the
24costs of books, supplies, and equipment required for enrollment
25or attendance at an eligible educational institution; (ii)
26expenses for special needs services, in the case of a special

 

 

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1needs beneficiary, which are incurred in connection with such
2enrollment or attendance; (iii) certain expenses for the
3purchase of computer or peripheral equipment, as defined in
4Section 168 of the federal Internal Revenue Code (26 U.S.C.
5168), computer software, as defined in Section 197 of the
6federal Internal Revenue Code (26 U.S.C. 197), or Internet
7access and related services, if such equipment, software, or
8services are to be used primarily by the beneficiary during any
9of the years the beneficiary is enrolled at an eligible
10educational institution, except that, such expenses shall not
11include expenses for computer software designed for sports,
12games, or hobbies, unless the software is predominantly
13educational in nature; and (iv) room and board expenses
14incurred while attending an eligible educational institution
15at least half-time. "Eligible educational institutions", as
16used in this Section, means public and private colleges, junior
17colleges, graduate schools, and certain vocational
18institutions that are described in Section 1001 of the Higher
19Education Resource and Student Assistance Chapter of Title 20
20of the United States Code (20 U.S.C. 1001) and that are
21eligible to participate in Department of Education student aid
22programs. A student shall be considered to be enrolled at least
23half-time if the student is enrolled for at least half the
24full-time academic workload for the course of study the student
25is pursuing as determined under the standards of the
26institution at which the student is enrolled.

 

 

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1    (b) Establishment of the Pool. The State Treasurer may
2establish and administer the College Savings Pool as a
3qualified tuition program under Section 529 of the Internal
4Revenue Code. The Pool may consist of one or more college
5savings programs. The State Treasurer, in administering the
6College Savings Pool, may receive, hold, and invest moneys paid
7into the Pool and perform such other actions as are necessary
8to ensure that the Pool operates as a qualified tuition program
9in accordance with Section 529 of the Internal Revenue Code.
10    (c) Administration of the College Savings Pool. The State
11Treasurer may engage one or more financial institutions to
12handle the overall administration, investment management,
13recordkeeping, and marketing of the programs in the College
14Savings Pool. The contributions deposited in the Pool, and any
15earnings thereon, shall not constitute property of the State or
16be commingled with State funds and the State shall have no
17claim to or against, or interest in, such funds; provided that
18the State Treasurer may collect fees in accordance with this
19Act.
20    (c-5) The State Treasurer shall provide a separate
21accounting for each designated beneficiary. The separate
22accounting shall be provided to the account owner of the
23account for the designated beneficiary at least annually and
24shall show the account balance, the investment in the account,
25the investment earnings, and the distributions from the
26account.

 

 

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

 

 

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1the 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.
5    (g) Investment policy. The Treasurer shall develop,
6publish, and implement an investment policy covering the
7investment of the moneys in each of the programs in the College
8Savings Pool. The policy shall be published each year as part
9of the audit of the College Savings Pool by the Auditor
10General, which shall be distributed to all account owners in
11such program. The Treasurer shall notify all account owners in
12such program in writing, and the Treasurer shall publish in a
13newspaper of general circulation in both Chicago and
14Springfield, any changes to the previously published
15investment policy at least 30 calendar days before implementing
16the policy. Any investment policy adopted by the Treasurer
17shall be reviewed and updated if necessary within 90 days
18following the date that the State Treasurer takes office.
19    (h) Investment restrictions. An account owner may,
20directly or indirectly, direct the investment of any
21contributions to the College Savings Pool (or any earnings
22thereon) only as provided in Section 529(b)(4) of the Internal
23Revenue Code. Donors and designated beneficiaries, in those
24capacities, may not, directly or indirectly, direct the
25investment of any contributions to the Pool (or any earnings
26thereon).

 

 

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1    (i) Distributions. Distributions from an account in the
2College Savings Pool may be used for the designated
3beneficiary's qualified expenses. Funds contained in a College
4Savings Pool account may be rolled over into an eligible ABLE
5account, as defined in Section 16.6 of this Act, to the extent
6permitted by Section 529 of the Internal Revenue Code.
7    Distributions made from the College Savings Pool may be
8made directly to the eligible educational institution,
9directly to a vendor, in the form of a check payable to both
10the designated beneficiary and the institution or vendor,
11directly to the designated beneficiary or account owner, or in
12any other manner that is permissible under Section 529 of the
13Internal Revenue Code.
14    (j) Contributions. Contributions to the College Savings
15Pool shall be as follows:
16        (1) Contributions to an account in the College Savings
17    Pool may be made only in cash.
18        (2) The Treasurer shall limit the contributions that
19    may be made to the College Savings Pool on behalf of a
20    designated beneficiary, as required under Section 529 of
21    the Internal Revenue Code, to prevent contributions for the
22    benefit of a designated beneficiary in excess of those
23    necessary to provide for the qualified expenses of the
24    designated beneficiary. The Pool shall not permit any
25    additional contributions to an account as soon as the
26    aggregate accounts for the designated beneficiary in the

 

 

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1    Pool reach a specified account balance limit applicable to
2    all designated beneficiaries.
3        (3) The contributions made on behalf of a designated
4    beneficiary who is also a beneficiary under the Illinois
5    Prepaid Tuition Program shall be further restricted to
6    ensure that the contributions in both programs combined do
7    not exceed the limit established for the College Savings
8    Pool.
9        (4) Beginning on July 1, 2020, for a designated
10    beneficiary who is a State resident, no contributions to
11    the College Savings Pool authorized under this Section may
12    be considered in evaluating the financial situation of the
13    designated beneficiary or be deemed a financial resource or
14    a form of financial aid or assistance to the designated
15    beneficiary for purposes of determining eligibility for
16    any scholarship, grant, or monetary assistance awarded by
17    the Illinois Student Assistance Commission. Contributions
18    to the College Savings Pool may not reduce the amount of
19    any scholarship, grant, or monetary assistance that the
20    designated beneficiary is eligible to be awarded by the
21    Illinois Student Assistance Commission.
22    (k) Illinois Student Assistance Commission. The Treasurer
23shall provide the Illinois Student Assistance Commission each
24year at a time designated by the Commission, an electronic
25report of all account owner accounts in the Treasurer's College
26Savings Pool, listing total contributions and disbursements

 

 

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1from each individual account during the previous calendar year.
2As soon thereafter as is possible following receipt of the
3Treasurer's report, the Illinois Student Assistance Commission
4shall, in turn, provide the Treasurer with an electronic report
5listing those College Savings Pool account owners who also
6participate in the Illinois Prepaid Tuition Program,
7administered by the Commission.
8    The Treasurer shall work with the Illinois Student
9Assistance Commission to coordinate the marketing of the
10College Savings Pool and the Illinois Prepaid Tuition Program
11when considered beneficial by the Treasurer and the Director of
12the Illinois Student Assistance Commission.
13    (l) Prohibition; exemption. No interest in the program, or
14any portion thereof, may be used as security for a loan. Moneys
15held in an account invested in the College Savings Pool shall
16be exempt from all claims of the creditors of the account
17owner, donor, or designated beneficiary of that account, except
18for the non-exempt College Savings Pool transfers to or from
19the account as defined under subsection (j) of Section 12-1001
20of the Code of Civil Procedure.
21    (m) Taxation. The assets of the College Savings Pool and
22its income and operation shall be exempt from all taxation by
23the State of Illinois and any of its subdivisions. The accrued
24earnings on investments in the Pool once disbursed on behalf of
25a designated beneficiary shall be similarly exempt from all
26taxation by the State of Illinois and its subdivisions, so long

 

 

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1as they are used for qualified expenses. Contributions to a
2College Savings Pool account during the taxable year may be
3deducted from adjusted gross income as provided in Section 203
4of the Illinois Income Tax Act. The provisions of this
5paragraph are exempt from Section 250 of the Illinois Income
6Tax Act.
7    (n) Rules. The Treasurer shall adopt rules he or she
8considers necessary for the efficient administration of the
9College Savings Pool. The rules shall provide whatever
10additional parameters and restrictions are necessary to ensure
11that the College Savings Pool meets all the requirements for a
12qualified tuition program under Section 529 of the Internal
13Revenue Code.
14    The rules shall require the maintenance of records that
15enable the Treasurer's office to produce a report for each
16account in the Pool at least annually that documents the
17account balance and investment earnings.
18    Notice of any proposed amendments to the rules and
19regulations shall be provided to all account owners prior to
20adoption.
21    (o) Bond. The State Treasurer shall give bond with at least
22one surety, payable to and for the benefit of the account
23owners in the College Savings Pool, in the penal sum of
24$10,000,000, conditioned upon the faithful discharge of his or
25her duties in relation to the College Savings Pool.
26    (p) The changes made to subsections (c) and (e) of this

 

 

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1Section by this amendatory Act of the 101st General Assembly
2are intended to be a restatement and clarification of existing
3law.
4(Source: P.A. 100-161, eff. 8-18-17; 100-863, eff. 8-14-18;
5100-905, eff. 8-17-18; 101-26, eff. 6-21-19; 101-81, eff.
67-12-19.)
 
7    Section 10. The Illinois Prepaid Tuition Act is amended by
8adding Section 45.5 as follows:
 
9    (110 ILCS 979/45.5 new)
10    Sec. 45.5. Scholarships, grants, or monetary assistance.
11Beginning on July 1, 2020, for a qualified beneficiary who is a
12State resident, no contributions toward the purchase of an
13Illinois prepaid tuition contract authorized under this Act may
14be considered in evaluating the financial situation of the
15qualified beneficiary or be deemed a financial resource or form
16of financial aid or assistance to the qualified beneficiary for
17purposes of determining the eligibility of the qualified
18beneficiary for any scholarship, grant, or monetary assistance
19awarded by the Commission. Contributions toward the purchase of
20an Illinois prepaid tuition contract may not reduce the amount
21of any scholarship, grant, or monetary assistance that the
22qualified beneficiary is eligible to be awarded by the
23Commission.
 
24    Section 99. Effective date. This Act takes effect June 1,

 

 

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12020.