101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB2768

 

Introduced 2/4/2020, by Sen. Laura Ellman

 

SYNOPSIS AS INTRODUCED:
 
15 ILCS 505/16.5

    Amends the State Treasurer Act. Modifies provisions concerning the College Savings Pool. Provides that the State Treasurer, in administering the College Savings Pool, may, among other actions, perform any other action he or she deems necessary to administer the Pool. Provides that the State Treasurer may delegate duties related to the College Savings Pool to one or more contractors. Provides that any fees, costs, and expenses related to the College Savings Pool shall be paid from the assets of the College Savings Pool. Provides further requirements concerning fees of the College Savings Pool. Modifies provisions concerning investment restrictions, distributions, and contributions of the College Savings Pool. Removes provisions requiring the maintenance of specified records. Modifies defined terms. Makes conforming and other changes. Effective immediately.


LRB101 17815 RJF 67246 b

 

 

A BILL FOR

 

SB2768LRB101 17815 RJF 67246 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    "Eligible educational institution" means public and
3private colleges, junior colleges, graduate schools, and
4certain vocational institutions that are described in Section
51001 of the Higher Education Resource and Student Assistance
6Chapter of Title 20 of the United States Code (20 U.S.C. 1001)
7and that are eligible to participate in Department of Education
8student aid programs.
9    "Member of the family" has the same meaning ascribed to
10that term under Section 529 of the Internal Revenue Code.
11    "Nonqualified withdrawal" means a distribution from an
12account other than a distribution that (i) is used for the
13qualified expenses of the designated beneficiary; (ii) results
14from the beneficiary's death or disability; (iii) is a rollover
15to another account in the College Savings Pool; or (iv) is a
16rollover to an ABLE account, as defined in Section 16.6 of this
17Act, or any distribution that, within 60 days after such
18distribution, is transferred to an ABLE account of the
19designated beneficiary or a member of the family of the
20designated beneficiary to the extent that the distribution,
21when added to all other contributions made to the ABLE account
22for the taxable year, does not exceed the limitation under
23Section 529A(b) of the Internal Revenue Code.
24    "Program manager" means any financial institution or
25entity lawfully doing business in the State of Illinois
26selected by the State Treasurer to oversee the recordkeeping,

 

 

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1custody, customer service, investment management, and
2marketing for one or more of the programs in the College
3Savings Pool.
4    "Qualified expenses" means: (i) tuition, fees, and the
5costs of books, supplies, and equipment required for enrollment
6or attendance at an eligible educational institution; (ii)
7expenses for special needs services, in the case of a special
8needs beneficiary, which are incurred in connection with such
9enrollment or attendance; (iii) certain expenses, to the extent
10they qualify as qualified higher education expenses under
11Section 529 of the Internal Revenue Code, for the purchase of
12computer or peripheral equipment, as defined in Section 168 of
13the federal Internal Revenue Code (26 U.S.C. 168), computer
14software, as defined in Section 197 of the federal Internal
15Revenue Code (26 U.S.C. 197), or Internet access and related
16services, if such equipment, software, or services are to be
17used primarily by the beneficiary during any of the years the
18beneficiary is enrolled at an eligible educational
19institution, except that, such expenses shall not include
20expenses for computer software designed for sports, games, or
21hobbies, unless the software is predominantly educational in
22nature; and (iv) room and board expenses incurred while
23attending an eligible educational institution at least
24half-time; (v) expenses for fees, books, supplies, and
25equipment required for the participation of a designated
26beneficiary in an apprenticeship program registered and

 

 

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1certified with the Secretary of Labor under the National
2Apprenticeship Act (29 U.S.C. 50); and (vi) amounts paid as
3principal or interest on any qualified education loan of the
4designated beneficiary or a sibling of the designated
5beneficiary, as allowed under Section 529 of the Internal
6Revenue Code. . "Eligible educational institutions", as used in
7this Section, means public and private colleges, junior
8colleges, graduate schools, and certain vocational
9institutions that are described in Section 1001 of the Higher
10Education Resource and Student Assistance Chapter of Title 20
11of the United States Code (20 U.S.C. 1001) and that are
12eligible to participate in Department of Education student aid
13programs. A student shall be considered to be enrolled at least
14half-time if the student is enrolled for at least half the
15full-time academic workload for the course of study the student
16is pursuing as determined under the standards of the
17institution at which the student is enrolled.
18    (b) Establishment of the Pool. The State Treasurer may
19establish and administer the College Savings Pool as a
20qualified tuition program under Section 529 of the Internal
21Revenue Code. The Pool may consist of one or more college
22savings programs. The State Treasurer, in administering the
23College Savings Pool, may: (1) receive, hold, and invest moneys
24paid into the Pool; and (2) perform any other action he or she
25deems necessary to administer the Pool, including any such
26other actions as are necessary to ensure that the Pool operates

 

 

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1as a qualified tuition program in accordance with Section 529
2of the Internal Revenue Code.
3    (c) Administration of the College Savings Pool. The State
4Treasurer may delegate duties related to the College Savings
5Pool to engage one or more contractors financial institutions
6to handle the overall administration, investment management,
7recordkeeping, and marketing of the programs in the College
8Savings Pool. The contributions deposited in the Pool, and any
9earnings thereon, shall not constitute property of the State or
10be commingled with State funds and the State shall have no
11claim to or against, or interest in, such funds; provided that
12the fees collected by the State Treasurer in accordance with
13this Act, scholarship programs administered by the State
14Treasurer, and seed funds deposited by the State Treasurer
15under Section 16.8 of the Act are State funds State Treasurer
16may collect fees in accordance with this Act.
17    (c-5) College Savings Pool Account Summaries. The State
18Treasurer shall provide a separate accounting for each
19designated beneficiary. The separate accounting shall be
20provided to the account owner of the account for the designated
21beneficiary at least annually and shall show the account
22balance, the investment in the account, the investment
23earnings, and the distributions from the account.
24    (d) Availability of the College Savings Pool. The State
25Treasurer may permit persons, including trustees of trusts and
26custodians under a Uniform Transfers to Minors Act or Uniform

 

 

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1Gifts to Minors Act account, and certain legal entities to be
2account owners, including as part of a scholarship program,
3provided that: (1) an individual, trustee or custodian must
4have a valid social security number or taxpayer identification
5number, be at least 18 years of age, and have a valid United
6States street address; and (2) a legal entity must have a valid
7taxpayer identification number and a valid United States street
8address. In-state Both in-state and out-of-state persons,
9trustees, custodians, and legal entities may be account owners
10and donors, and both in-state and out-of-state individuals may
11be designated beneficiaries in the College Savings Pool.
12    (e) Fees. Any fees, costs, and expenses, including
13investment fees and expenses and payments to third parties,
14related to the College Savings Pool, shall be paid from the
15assets of the College Savings Pool. The State Treasurer shall
16establish fees to be imposed on accounts to cover such fees,
17costs, and expenses, to the extent not paid directly out of the
18investments of the College Savings Pool, and to maintain an
19adequate reserve fund in line with industry standards for
20government operated funds the costs of administration,
21recordkeeping, and investment management. The Treasurer must
22use his or her best efforts to keep these fees as low as
23possible and consistent with administration of high quality
24competitive college savings programs. Administrative fees,
25costs, and expenses, including investment fees and expenses,
26shall be paid from the assets of the College Savings Pool.

 

 

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1    (f) Investments in the State. To enhance the safety and
2liquidity of the College Savings Pool, to ensure the
3diversification of the investment portfolio of the College
4Savings Pool, and in an effort to keep investment dollars in
5the State of Illinois, the State Treasurer may make a
6percentage of each account available for investment in
7participating financial institutions doing business in the
8State.
9    (g) Investment policy. The Treasurer shall develop,
10publish, and implement an investment policy covering the
11investment of the moneys in each of the programs in the College
12Savings Pool. The policy shall be published each year as part
13of the audit of the College Savings Pool by the Auditor
14General, which shall be distributed to all account owners in
15such program. The Treasurer shall notify all account owners in
16such program in writing, and the Treasurer shall publish in a
17newspaper of general circulation in both Chicago and
18Springfield, any changes to the previously published
19investment policy at least 30 calendar days before implementing
20the policy. Any investment policy adopted by the Treasurer
21shall be reviewed and updated if necessary within 90 days
22following the date that the State Treasurer takes office.
23    (h) Investment restrictions. An account owner may,
24directly or indirectly, direct the investment of his or her
25account of any contributions to the College Savings Pool (or
26any earnings thereon) only as provided in Section 529(b)(4) of

 

 

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

 

 

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1    the Internal Revenue Code, to prevent contributions for the
2    benefit of a designated beneficiary in excess of those
3    necessary to provide for the qualified expenses of the
4    designated beneficiary. The Pool shall not permit any
5    additional contributions to an account as soon as the sum
6    of (i) the aggregate balance in all accounts in the Pool
7    for the designated beneficiary and (ii) the aggregate value
8    of credits in the Illinois Prepaid Tuition Program for the
9    designated beneficiary reaches the specified balance limit
10    established from time to time by the Treasurer. in the Pool
11    reach a specified account balance limit applicable to all
12    designated beneficiaries.
13        (3) The contributions made on behalf of a designated
14    beneficiary who is also a beneficiary under the Illinois
15    Prepaid Tuition Program shall be further restricted to
16    ensure that the contributions in both programs combined do
17    not exceed the limit established for the College Savings
18    Pool.
19    (k) Illinois Student Assistance Commission. The Treasurer
20shall provide the Illinois Student Assistance Commission each
21year at a time designated by the Commission, an electronic
22report of all account owner accounts in the Treasurer's College
23Savings Pool, listing total contributions and disbursements
24from each individual account during the previous calendar year.
25As soon thereafter as is possible following receipt of the
26Treasurer's report, the Illinois Student Assistance Commission

 

 

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1shall, in turn, provide the Treasurer with an electronic report
2listing those College Savings Pool account owners who also
3participate in the Illinois Prepaid Tuition Program,
4administered by the Commission.
5    The Treasurer shall work with the Illinois Student
6Assistance Commission to coordinate the marketing of the
7College Savings Pool and the Illinois Prepaid Tuition Program
8when considered beneficial by the Treasurer and the Director of
9the Illinois Student Assistance Commission.
10    (l) Prohibition; exemption. No interest in the program, or
11any portion thereof, may be used as security for a loan. Moneys
12held in an account invested in the College Savings Pool shall
13be exempt from all claims of the creditors of the account
14owner, donor, or designated beneficiary of that account, except
15for the non-exempt College Savings Pool transfers to or from
16the account as defined under subsection (j) of Section 12-1001
17of the Code of Civil Procedure.
18    (m) Taxation. The assets of the College Savings Pool and
19its income and operation shall be exempt from all taxation by
20the State of Illinois and any of its subdivisions. The accrued
21earnings on investments in the Pool once disbursed on behalf of
22a designated beneficiary shall be similarly exempt from all
23taxation by the State of Illinois and its subdivisions, so long
24as they are used for qualified expenses. Contributions to a
25College Savings Pool account during the taxable year may be
26deducted from adjusted gross income as provided in Section 203

 

 

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1of the Illinois Income Tax Act. The provisions of this
2paragraph are exempt from Section 250 of the Illinois Income
3Tax Act.
4    (n) Rules. The Treasurer shall adopt rules he or she
5considers necessary for the efficient administration of the
6College Savings Pool. The rules shall provide whatever
7additional parameters and restrictions are necessary to ensure
8that the College Savings Pool meets all the requirements for a
9qualified tuition program under Section 529 of the Internal
10Revenue Code.
11    The rules shall require the maintenance of records that
12enable the Treasurer's office to produce a report for each
13account in the Pool at least annually that documents the
14account balance and investment earnings.
15    Notice of any proposed amendments to the rules and
16regulations shall be provided to all account owners prior to
17adoption.
18    (o) Bond. The State Treasurer shall give bond with at least
19one surety, payable to and for the benefit of the account
20owners in the College Savings Pool, in the penal sum of
21$10,000,000, conditioned upon the faithful discharge of his or
22her duties in relation to the College Savings Pool.
23    (p) The changes made to subsections (c) and (e) of this
24Section by Public Act 101-26 this amendatory Act of the 101st
25General Assembly are intended to be a restatement and
26clarification of existing law.

 

 

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1(Source: P.A. 100-161, eff. 8-18-17; 100-863, eff. 8-14-18;
2100-905, eff. 8-17-18; 101-26, eff. 6-21-19; 101-81, eff.
37-12-19.)
 
4    Section 99. Effective date. This Act takes effect upon
5becoming law.