101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB1823

 

Introduced 2/15/2019, by Sen. Chuck Weaver

 

SYNOPSIS AS INTRODUCED:
 
15 ILCS 505/16.5

    Amends the State Treasurer Act. In a Section concerning a college savings pool, provides that moneys may be used for qualified higher education expenses allowed pursuant to Section 529 of the Internal Revenue Code. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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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    "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)(2)(B)(i) 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; and (v) any qualified higher education
16expense, as that term is used in Section 529 of the federal
17Internal Revenue Code.
18    "Eligible educational institutions", as used in this
19Section, means public and private colleges, junior colleges,
20graduate schools, and certain vocational institutions that are
21described in Section 481 of the Higher Education Act of 1965
22(20 U.S.C. 1088) and that are eligible to participate in
23Department of Education student aid programs. A student shall
24be considered to be enrolled at least half-time if the student
25is enrolled for at least half the full-time academic workload
26for the course of study the student is pursuing as determined

 

 

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1under the standards of the institution at which the student is
2enrolled.
3    (b) Establishment of the Pool. The State Treasurer may
4establish and administer a College Savings Pool as a qualified
5tuition program under Section 529 of the Internal Revenue Code.
6The Pool may consist of one or more college savings programs.
7The State Treasurer, in administering the College Savings Pool,
8may receive, hold, and invest moneys paid into the Pool and
9perform such other actions as are necessary to ensure that the
10Pool operates as a qualified tuition program in accordance with
11Section 529 of the Internal Revenue Code.
12    (c) Administration of the College Savings Pool. The State
13Treasurer may engage one or more financial institutions to
14handle the overall administration, investment management,
15recordkeeping, and marketing of the programs in the College
16Savings Pool. The contributions deposited in the Pool, and any
17earnings thereon, shall not constitute property of the State or
18be commingled with State funds and the State shall have no
19claim to or against, or interest in, such funds.
20    (d) Availability of the College Savings Pool. The State
21Treasurer may permit persons, including trustees of trusts and
22custodians under a Uniform Transfers to Minors Act or Uniform
23Gifts to Minors Act account, and certain legal entities to be
24account owners, including as part of a scholarship program,
25provided that: (1) an individual, trustee or custodian must
26have a valid social security number or taxpayer identification

 

 

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1number, be at least 18 years of age, and have a valid United
2States street address; and (2) a legal entity must have a valid
3taxpayer identification number and a valid United States street
4address. Both in-state and out-of-state persons may be account
5owners and donors, and both in-state and out-of-state
6individuals may be designated beneficiaries in the College
7Savings Pool.
8    (e) Fees. The State Treasurer shall establish fees to be
9imposed on accounts to recover the costs of administration,
10recordkeeping, and investment management. The Treasurer must
11use his or her best efforts to keep these fees as low as
12possible and consistent with administration of high quality
13competitive college savings programs.
14    (f) Investments in the State. To enhance the safety and
15liquidity of the College Savings Pool, to ensure the
16diversification of the investment portfolio of the College
17Savings Pool, and in an effort to keep investment dollars in
18the State of Illinois, the State Treasurer may make a
19percentage of each account available for investment in
20participating financial institutions doing business in the
21State.
22    (g) Investment policy. The Treasurer shall develop,
23publish, and implement an investment policy covering the
24investment of the moneys in each of the programs in the College
25Savings Pool. The policy shall be published each year as part
26of the audit of the College Savings Pool by the Auditor

 

 

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1General, which shall be distributed to all account owners in
2such program. The Treasurer shall notify all account owners in
3such program in writing, and the Treasurer shall publish in a
4newspaper of general circulation in both Chicago and
5Springfield, any changes to the previously published
6investment policy at least 30 calendar days before implementing
7the policy. Any investment policy adopted by the Treasurer
8shall be reviewed and updated if necessary within 90 days
9following the date that the State Treasurer takes office.
10    (h) Investment restrictions. An account owner may,
11directly or indirectly, direct the investment of any
12contributions to the College Savings Pool (or any earnings
13thereon) only as provided in Section 529(b)(4) of the Internal
14Revenue Code. Donors and designated beneficiaries, in those
15capacities, may not, directly or indirectly, direct the
16investment of any contributions to the Pool (or any earnings
17thereon).
18    (i) Distributions. Distributions from an account in the
19College Savings Pool may be used for the designated
20beneficiary's qualified expenses. Funds contained in a College
21Savings Pool account may be rolled over into an eligible ABLE
22account, as defined in Section 16.6 of this Act, to the extent
23permitted by Section 529(c)(3)(C) of the Internal Revenue Code.
24To the extent a nonqualified withdrawal is made from an
25account, the earnings portion of such distribution may be
26treated by the Internal Revenue Service as income subject to

 

 

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1income tax and a 10% federal penalty tax. Internet
2    Distributions made from the College Savings Pool may be
3made directly to the educational institution, directly to a
4vendor, in the form of a check payable to both the designated
5beneficiary and the institution or vendor, directly to the
6designated beneficiary or account owner, or in any other manner
7that is permissible under Section 529 of the Internal Revenue
8Code.
9    (j) Contributions. Contributions to the College Savings
10Pool shall be as follows:
11        (1) Contributions to an account in the College Savings
12    Pool may be made only in cash.
13        (2) The Treasurer shall limit the contributions that
14    may be made to the College Savings Pool on behalf of a
15    designated beneficiary, as required under Section 529 of
16    the Internal Revenue Code, to prevent contributions for the
17    benefit of a designated beneficiary in excess of those
18    necessary to provide for the qualified expenses of the
19    designated beneficiary. The Pool shall not permit any
20    additional contributions to an account as soon as the
21    aggregate accounts for the designated beneficiary in the
22    Pool reach a specified account balance limit applicable to
23    all designated beneficiaries.
24        (3) The contributions made on behalf of a designated
25    beneficiary who is also a beneficiary under the Illinois
26    Prepaid Tuition Program shall be further restricted to

 

 

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1    ensure that the contributions in both programs combined do
2    not exceed the limit established for the College Savings
3    Pool.
4    (k) Illinois Student Assistance Commission. The Treasurer
5shall provide the Illinois Student Assistance Commission each
6year at a time designated by the Commission, an electronic
7report of all account owner accounts in the Treasurer's College
8Savings Pool, listing total contributions and disbursements
9from each individual account during the previous calendar year.
10As soon thereafter as is possible following receipt of the
11Treasurer's report, the Illinois Student Assistance Commission
12shall, in turn, provide the Treasurer with an electronic report
13listing those College Savings Pool account owners who also
14participate in the State's prepaid tuition program,
15administered by the Commission. The Commission shall be
16responsible for filing any combined tax reports regarding State
17qualified savings programs required by the United States
18Internal Revenue Service.
19    The Treasurer shall work with the Illinois Student
20Assistance Commission to coordinate the marketing of the
21College Savings Pool and the Illinois Prepaid Tuition Program
22when considered beneficial by the Treasurer and the Director of
23the Illinois Student Assistance Commission. The Treasurer
24shall provide a separate accounting for each designated
25beneficiary to each account owner.
26    (l) Prohibition; exemption. No interest in the program, or

 

 

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1any portion thereof, may be used as security for a loan. Moneys
2held in an account invested in the College Savings Pool shall
3be exempt from all claims of the creditors of the account
4owner, donor, or designated beneficiary of that account, except
5for the non-exempt College Savings Pool transfers to or from
6the account as defined under subsection (j) of Section 12-1001
7of the Code of Civil Procedure.
8    (m) Taxation. The assets of the College Savings Pool and
9its income and operation shall be exempt from all taxation by
10the State of Illinois and any of its subdivisions. The accrued
11earnings on investments in the Pool once disbursed on behalf of
12a designated beneficiary shall be similarly exempt from all
13taxation by the State of Illinois and its subdivisions, so long
14as they are used for qualified expenses. Contributions to a
15College Savings Pool account during the taxable year may be
16deducted from adjusted gross income as provided in Section 203
17of the Illinois Income Tax Act. The provisions of this
18paragraph are exempt from Section 250 of the Illinois Income
19Tax Act.
20    (n) Rules. The Treasurer shall adopt rules he or she
21considers necessary for the efficient administration of the
22College Savings Pool. The rules shall provide whatever
23additional parameters and restrictions are necessary to ensure
24that the College Savings Pool meets all of the requirements for
25a qualified state tuition program under Section 529 of the
26Internal Revenue Code.

 

 

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1    The rules shall provide for the administration expenses of
2the Pool to be paid from its earnings and for the investment
3earnings in excess of the expenses to be credited at least
4monthly to the account owners in the Pool in a manner which
5equitably reflects the differing amounts of their respective
6investments in the Pool and the differing periods of time for
7which those amounts were in the custody of the Pool.
8    The rules shall require the maintenance of records that
9enable the Treasurer's office to produce a report for each
10account in the Pool at least annually that documents the
11account balance and investment earnings.
12    Notice of any proposed amendments to the rules and
13regulations shall be provided to all account owners prior to
14adoption. Amendments to rules and regulations shall apply only
15to contributions made after the adoption of the amendment.
16    (o) Bond. The State Treasurer shall give bond with at least
17one surety, payable to and for the benefit of the account
18owners in the College Savings Pool, in the penal sum of
19$10,000,000, conditioned upon the faithful discharge of his or
20her duties in relation to the College Savings Pool.
21(Source: P.A. 99-143, eff. 7-27-15; 100-161, eff. 8-18-17;
22100-863, eff. 8-14-18; 100-905, eff. 8-17-18; revised
2310-18-18.)
 
24    Section 99. Effective date. This Act takes effect upon
25becoming law.