Illinois General Assembly - Full Text of HB4697
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Full Text of HB4697  102nd General Assembly




State of Illinois
2021 and 2022


Introduced 1/21/2022, by Rep. Tim Ozinga


15 ILCS 505/16.5

    Amends the State Treasurer Act. Modifies provisions concerning the College Savings Pool. Expands the definition of "qualified expenses" to include the treatment of qualified education loan repayments under specified provisions of the Internal Revenue Code.

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HB4697LRB102 19286 RJF 28052 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    "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



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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) the treatment of
16qualified education loan repayments, as provided under
17paragraph (9) of subsection (c) of Section 529 of the Internal
18Revenue Code. "Eligible educational institutions", as used in
19this Section, means public and private colleges, junior
20colleges, graduate schools, and certain vocational
21institutions that are described in Section 1001 of the Higher
22Education Resource and Student Assistance Chapter of Title 20
23of the United States Code (20 U.S.C. 1001) and that are
24eligible to participate in Department of Education student aid
25programs. A student shall be considered to be enrolled at
26least half-time if the student is enrolled for at least half



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



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1account for the designated beneficiary at least annually and
2shall show the account balance, the investment in the account,
3the investment earnings, and the distributions from the
5    (d) Availability of the College Savings Pool. The State
6Treasurer may permit persons, including trustees of trusts and
7custodians under a Uniform Transfers to Minors Act or Uniform
8Gifts to Minors Act account, and certain legal entities to be
9account owners, including as part of a scholarship program,
10provided that: (1) an individual, trustee or custodian must
11have a valid social security number or taxpayer identification
12number, be at least 18 years of age, and have a valid United
13States street address; and (2) a legal entity must have a valid
14taxpayer identification number and a valid United States
15street address. Both in-state and out-of-state persons may be
16account owners and donors, and both in-state and out-of-state
17individuals may be designated beneficiaries in the College
18Savings Pool.
19    (e) Fees. The State Treasurer shall establish fees to be
20imposed on accounts to cover 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
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
20implementing the policy. Any investment policy adopted by the
21Treasurer shall be reviewed and updated if necessary within 90
22days following the date that the State Treasurer takes office.
23    (h) Investment restrictions. An account owner may,
24directly or indirectly, direct the investment of any
25contributions to the College Savings Pool (or any earnings
26thereon) only as provided in Section 529(b)(4) of the Internal



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



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



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1College Savings Pool and the Illinois Prepaid Tuition Program
2when considered beneficial by the Treasurer and the Director
3of the Illinois Student Assistance Commission.
4    (l) Prohibition; exemption. No interest in the program, or
5any portion thereof, may be used as security for a loan. Moneys
6held in an account invested in the College Savings Pool shall
7be exempt from all claims of the creditors of the account
8owner, donor, or designated beneficiary of that account,
9except for the non-exempt College Savings Pool transfers to or
10from the account as defined under subsection (j) of Section
1112-1001 of the Code of Civil Procedure.
12    (m) Taxation. The assets of the College Savings Pool and
13its income and operation shall be exempt from all taxation by
14the State of Illinois and any of its subdivisions. The accrued
15earnings on investments in the Pool once disbursed on behalf
16of a designated beneficiary shall be similarly exempt from all
17taxation by the State of Illinois and its subdivisions, so
18long as they are used for qualified expenses. Contributions to
19a College Savings Pool account during the taxable year may be
20deducted from adjusted gross income as provided in Section 203
21of the Illinois Income Tax Act. The provisions of this
22paragraph are exempt from Section 250 of the Illinois Income
23Tax Act.
24    (n) Rules. The Treasurer shall adopt rules he or she
25considers necessary for the efficient administration of the
26College Savings Pool. The rules shall provide whatever



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1additional parameters and restrictions are necessary to ensure
2that the College Savings Pool meets all the requirements for a
3qualified tuition program under Section 529 of the Internal
4Revenue Code.
5    The rules shall require the maintenance of records that
6enable the Treasurer's office to produce a report for each
7account in the Pool at least annually that documents the
8account balance and investment earnings.
9    Notice of any proposed amendments to the rules and
10regulations shall be provided to all account owners prior to
12    (o) Bond. The State Treasurer shall give bond with at
13least one surety, payable to and for the benefit of the account
14owners in the College Savings Pool, in the penal sum of
15$10,000,000, conditioned upon the faithful discharge of his or
16her duties in relation to the College Savings Pool.
17    (p) The changes made to subsections (c) and (e) of this
18Section by this amendatory Act of the 101st General Assembly
19are intended to be a restatement and clarification of existing
21(Source: P.A. 100-161, eff. 8-18-17; 100-863, eff. 8-14-18;
22100-905, eff. 8-17-18; 101-26, eff. 6-21-19; 101-81, eff.