101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB3253

 

Introduced , by Rep. Norine K. Hammond

 

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, 2019, 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, 2019.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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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)(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. "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 481 of the Higher
19Education Act of 1965 (20 U.S.C. 1088) and that are eligible to
20participate in Department of Education student aid programs. A
21student shall be considered to be enrolled at least half-time
22if the student is enrolled for at least half the full-time
23academic workload for the course of study the student is
24pursuing as determined under the standards of the institution
25at which the student is enrolled.
26    (b) Establishment of the Pool. The State Treasurer may

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        (4) Beginning on July 1, 2019, for a designated
2    beneficiary who is a State resident, no contributions to
3    the College Savings Pool authorized under this Section may
4    be considered in evaluating the financial situation of the
5    designated beneficiary or be deemed a financial resource or
6    a form of financial aid or assistance to the designated
7    beneficiary for purposes of determining eligibility for
8    any scholarship, grant, or monetary assistance awarded by
9    the Illinois Student Assistance Commission. Contributions
10    to the College Savings Pool may not reduce the amount of
11    any scholarship, grant, or monetary assistance that the
12    designated beneficiary is eligible to be awarded by the
13    Illinois Student Assistance Commission.
14    (k) Illinois Student Assistance Commission. The Treasurer
15shall provide the Illinois Student Assistance Commission each
16year at a time designated by the Commission, an electronic
17report of all account owner accounts in the Treasurer's College
18Savings Pool, listing total contributions and disbursements
19from each individual account during the previous calendar year.
20As soon thereafter as is possible following receipt of the
21Treasurer's report, the Illinois Student Assistance Commission
22shall, in turn, provide the Treasurer with an electronic report
23listing those College Savings Pool account owners who also
24participate in the State's prepaid tuition program,
25administered by the Commission. The Commission shall be
26responsible for filing any combined tax reports regarding State

 

 

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1qualified savings programs required by the United States
2Internal Revenue Service.
3    The Treasurer shall work with the Illinois Student
4Assistance Commission to coordinate the marketing of the
5College Savings Pool and the Illinois Prepaid Tuition Program
6when considered beneficial by the Treasurer and the Director of
7the Illinois Student Assistance Commission. The Treasurer
8shall provide a separate accounting for each designated
9beneficiary to each account owner.
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 of the requirements for
9a qualified state tuition program under Section 529 of the
10Internal Revenue Code.
11    The rules shall provide for the administration expenses of
12the Pool to be paid from its earnings and for the investment
13earnings in excess of the expenses to be credited at least
14monthly to the account owners in the Pool in a manner which
15equitably reflects the differing amounts of their respective
16investments in the Pool and the differing periods of time for
17which those amounts were in the custody of the Pool.
18    The rules shall require the maintenance of records that
19enable the Treasurer's office to produce a report for each
20account in the Pool at least annually that documents the
21account balance and investment earnings.
22    Notice of any proposed amendments to the rules and
23regulations shall be provided to all account owners prior to
24adoption. Amendments to rules and regulations shall apply only
25to contributions made after the adoption of the amendment.
26    (o) Bond. The State Treasurer shall give bond with at least

 

 

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1one surety, payable to and for the benefit of the account
2owners in the College Savings Pool, in the penal sum of
3$10,000,000, conditioned upon the faithful discharge of his or
4her duties in relation to the College Savings Pool.
5(Source: P.A. 99-143, eff. 7-27-15; 100-161, eff. 8-18-17;
6100-863, eff. 8-14-18; 100-905, eff. 8-17-18; revised
710-18-18.)
 
8    Section 10. The Illinois Prepaid Tuition Act is amended by
9adding Section 45.5 as follows:
 
10    (110 ILCS 979/45.5 new)
11    Sec. 45.5. Scholarships, grants, or monetary assistance.
12Beginning on July 1, 2019, for a qualified beneficiary who is a
13State resident, no contributions toward the purchase of an
14Illinois prepaid tuition contract authorized under this Act may
15be considered in evaluating the financial situation of the
16qualified beneficiary or be deemed a financial resource or form
17of financial aid or assistance to the qualified beneficiary for
18purposes of determining the eligibility of the qualified
19beneficiary for any scholarship, grant, or monetary assistance
20awarded by the Commission. Contributions toward the purchase of
21an Illinois prepaid tuition contract may not reduce the amount
22of any scholarship, grant, or monetary assistance that the
23qualified beneficiary is eligible to be awarded by the
24Commission.
 

 

 

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1    Section 99. Effective date. This Act takes effect June 1,
22019.