102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
SB1560

 

Introduced 2/26/2021, by Sen. Celina Villanueva

 

SYNOPSIS AS INTRODUCED:
 
15 ILCS 505/16.5

    Amends the State Treasurer Act. Modifies provisions concerning the College Savings Pool. Provides that "qualified expenses" includes qualified higher education expenses, including amounts paid as principal or interest on any qualified education loan of a designated beneficiary or a sibling of the designated beneficiary, as provided under the Internal Revenue Code.


LRB102 16645 RJF 22045 b

 

 

A BILL FOR

 

SB1560LRB102 16645 RJF 22045 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

 

 

SB1560- 2 -LRB102 16645 RJF 22045 b

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
8rollover to another account in the College Savings Pool; or
9(iv) is a rollover to an ABLE account, as defined in Section
1016.6 of this Act, or any distribution that, within 60 days
11after such distribution, is transferred to an ABLE account of
12the designated 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
25enrollment or attendance at an eligible educational
26institution; (ii) expenses for special needs services, in the

 

 

SB1560- 3 -LRB102 16645 RJF 22045 b

1case of a special needs beneficiary, which are incurred in
2connection with such enrollment or attendance; (iii) certain
3expenses for the purchase of computer or peripheral equipment,
4as defined in Section 168 of the federal Internal Revenue Code
5(26 U.S.C. 168), computer software, as defined in Section 197
6of the federal Internal Revenue Code (26 U.S.C. 197), or
7Internet access and related services, if such equipment,
8software, or services are to be used primarily by the
9beneficiary during any of the years the beneficiary is
10enrolled at an eligible educational institution, except that,
11such expenses shall not include expenses for computer software
12designed for sports, games, or hobbies, unless the software is
13predominantly educational in nature; and (iv) room and board
14expenses incurred while attending an eligible educational
15institution at least half-time; and (v) qualified higher
16education expenses, including amounts paid as principal or
17interest on any qualified education loan of the designated
18beneficiary or a sibling of the designated beneficiary, as
19provided under Section 529 of the Internal Revenue Code.
20"Eligible educational institutions", as used in this Section,
21means public and private colleges, junior colleges, graduate
22schools, and certain vocational institutions that are
23described in Section 1001 of the Higher Education Resource and
24Student Assistance Chapter of Title 20 of the United States
25Code (20 U.S.C. 1001) and that are eligible to participate in
26Department of Education student aid programs. A student shall

 

 

SB1560- 4 -LRB102 16645 RJF 22045 b

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

 

 

SB1560- 5 -LRB102 16645 RJF 22045 b

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

 

 

SB1560- 6 -LRB102 16645 RJF 22045 b

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

 

 

SB1560- 7 -LRB102 16645 RJF 22045 b

1contributions to the College Savings Pool (or any earnings
2thereon) only as provided in Section 529(b)(4) of the Internal
3Revenue Code. Donors and designated beneficiaries, in those
4capacities, may not, directly or indirectly, direct the
5investment of any contributions to the Pool (or any earnings
6thereon).
7    (i) Distributions. Distributions from an account in the
8College Savings Pool may be used for the designated
9beneficiary's qualified expenses. Funds contained in a College
10Savings Pool account may be rolled over into an eligible ABLE
11account, as defined in Section 16.6 of this Act, 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

 

 

SB1560- 8 -LRB102 16645 RJF 22045 b

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

 

 

SB1560- 9 -LRB102 16645 RJF 22045 b

1    The Treasurer shall work with the Illinois Student
2Assistance Commission to coordinate the marketing of the
3College Savings Pool and the Illinois Prepaid Tuition Program
4when considered beneficial by the Treasurer and the Director
5of the Illinois Student Assistance Commission.
6    (l) Prohibition; exemption. No interest in the program, or
7any portion thereof, may be used as security for a loan. Moneys
8held in an account invested in the College Savings Pool shall
9be exempt from all claims of the creditors of the account
10owner, donor, or designated beneficiary of that account,
11except for the non-exempt College Savings Pool transfers to or
12from the account as defined under subsection (j) of Section
1312-1001 of the Code of Civil Procedure.
14    (m) Taxation. The assets of the College Savings Pool and
15its income and operation shall be exempt from all taxation by
16the State of Illinois and any of its subdivisions. The accrued
17earnings on investments in the Pool once disbursed on behalf
18of a designated beneficiary shall be similarly exempt from all
19taxation by the State of Illinois and its subdivisions, so
20long as they are used for qualified expenses. Contributions to
21a College Savings Pool account during the taxable year may be
22deducted from adjusted gross income as provided in Section 203
23of the Illinois Income Tax Act. The provisions of this
24paragraph are exempt from Section 250 of the Illinois Income
25Tax Act.
26    (n) Rules. The Treasurer shall adopt rules he or she

 

 

SB1560- 10 -LRB102 16645 RJF 22045 b

1considers necessary for the efficient administration of the
2College Savings Pool. The rules shall provide whatever
3additional parameters and restrictions are necessary to ensure
4that the College Savings Pool meets all the requirements for a
5qualified tuition program under Section 529 of the Internal
6Revenue Code.
7    The rules shall require the maintenance of records that
8enable the Treasurer's office to produce a report for each
9account in the Pool at least annually that documents the
10account balance and investment earnings.
11    Notice of any proposed amendments to the rules and
12regulations shall be provided to all account owners prior to
13adoption.
14    (o) Bond. The State Treasurer shall give bond with at
15least one surety, payable to and for the benefit of the account
16owners in the College Savings Pool, in the penal sum of
17$10,000,000, conditioned upon the faithful discharge of his or
18her duties in relation to the College Savings Pool.
19    (p) The changes made to subsections (c) and (e) of this
20Section by this amendatory Act of the 101st General Assembly
21are intended to be a restatement and clarification of existing
22law.
23(Source: P.A. 100-161, eff. 8-18-17; 100-863, eff. 8-14-18;
24100-905, eff. 8-17-18; 101-26, eff. 6-21-19; 101-81, eff.
257-12-19.)