69980. As used in this article, the following terms have the
following meanings, unless the context requires otherwise:
(a) "Administrative fund" means the funds used to administer this
article.
(b) "Beneficiary" has the same meaning as "designated beneficiary,"
as provided in paragraph (1) of subsection (e) of Section 529 of the
Internal Revenue Code of 1986, as it is amended from time to time,
if, as determined by the board, the amendment is consistent with the
purposes of this article.
(c) "Benefits" means the payment of higher education expenses on
behalf of a beneficiary by the Scholarshare trust during the
beneficiary's attendance at an institution of higher education.
(d) "Board" means the Scholarshare Investment Board established
pursuant to subparagraph (B) of paragraph (2) of subdivision (a) of
Section 69984.
(e) "Golden State Scholarshare College Savings Trust" or
"Scholarshare trust" means the trust created pursuant to this
article.
(f) "Executive director" means the administrator of the
Scholarshare trust appointed by the board to administer and manage
the Scholarshare trust.
(g) "Institution of higher education" has the same meaning as
"eligible educational institution," as provided in paragraph (5) of
subsection (e) of Section 529 of the Internal Revenue Code of 1986,
as it is amended from time to time, if, as determined by the board,
the amendment is consistent with the purposes of this article.
(h) "Investment manager" means a manager contracted to perform
functions delegated by the board. "Investment management" means the
functions performed by a manager contracted to perform functions
delegated by the board.
(i) "Participant" means an individual, trust, estate, partnership,
association, company or corporation, a custodian under the
California Uniform Transfers to Minors Act (Part 9 (commencing with
Section 3900) of Division 4 of the Probate Code) or similar
provisions adopted by another state, a state or local government
agency, or a legal representative of a participant who has entered
into a participation agreement pursuant to this article. "Participant"
also means an account owner.
(j) "Participation agreement" means an agreement between a
participant and the Scholarshare trust, pursuant to this article.
(k) "Program fund" means the program fund established by this
article, which shall be held as a separate fund within the
Scholarshare trust.
(l) "Qualified higher education expenses" means the expenses of
attendance at an institution of higher education as provided in
paragraph (3) of subsection (e) of Section 529 of the Internal
Revenue Code of 1986, as it is amended from time to time, if, as
determined by the board, the amendment is consistent with the
purposes of this article, and as determined and certified by the
institution of higher education in the same manner as prescribed in
Title IV of the Higher Education Act of 1965 (20 U.S.C. Sec. 1087l l,
as amended).
(m) "Tuition and fees" means the quarterly or semester charges
imposed to attend an institution of higher education and required as
a condition of enrollment.
69981. (a) There is hereby created an instrumentality of the State
of California to be known as the Golden State Scholarshare College
Savings Trust.
(b) The purposes, powers, and duties of the Scholarshare trust are
vested in, and shall be exercised by, the board.
(c) The board, in the capacity of trustee, shall have the power
and authority to do all of the following:
(1) Sue and be sued.
(2) Make and enter into contracts necessary for the administration
of the Scholarshare trust.
(3) Adopt a corporate seal and change and amend it from time to
time.
(4) Cause moneys in the program fund to be held and invested and
reinvested.
(5) Enter into agreements with any institution of higher education
or any federal or other state agency or other entity as required for
the effectuation of its rights and duties.
(6) Accept any grants, gifts, appropriation, and other moneys from
any unit of federal, state, or local government or any other person,
firm, partnership, or corporation for deposit to the administrative
fund or the program fund. Except as otherwise provided in Section
69982, the board may not accept any contribution by any nonpublic
entity, person, firm, partnership, or corporation that is not
designated for a specified beneficiary, unless the contribution is
deposited in the CalSAVE account pursuant to subdivision (d).
(7) Enter into participation agreements with participants, as set
forth in Section 69983.
(8) Make payments to institutions of higher education pursuant to
participation agreements on behalf of beneficiaries.
(9) Make refunds to participants upon the cancellation of
participation agreements pursuant to the provisions, limitations, and
restrictions set forth in this article.
(10) Appoint an executive director, who shall serve at the
pleasure of the board, and determine the duties of the executive
director and other staff as necessary and set their compensation. The
board may authorize the executive director to enter into contracts
on behalf of the board or conduct any business necessary for the
efficient operation of the board.
(11) Make provisions for the payment of costs of administration
and operation of the Scholarshare trust.
(12) Carry out the duties and obligations of the Scholarshare
trust pursuant to this article and have any and all other powers as
may be reasonably necessary for the effectuation of the purposes,
objectives, and provisions of this article.
(d) (1) There is established within the Scholarshare trust the
California Scholarshare Advancement Vehicle for Education (CalSAVE)
program to fund scholarships for beneficiaries to be determined by
the board that may include, but are not limited to, foster youth,
youth in at-risk categories, individuals with demonstrated economic
need, former and active members of the California National Guard,
individuals seeking undergraduate or postbaccalaureate courses in
disciplines in which the state faces shortages, including nursing and
teaching, and other categories to be determined by the board.
(2) The CalSAVE account is created within the program fund and is
continuously appropriated, without regard to fiscal years, to the
board for the purposes of the CalSAVE program. The board shall create
subaccounts within the CalSAVE account for each category of
beneficiary determined pursuant to paragraph (1). The CalSAVE account
shall be funded by contributions from federal or local governments,
or any other person, firm, partnership, or corporation, and from the
administrative fund established pursuant to Section 69984. Any person
contributing to the CalSAVE account may designate that his or her
contribution be deposited into any subaccount within the CalSAVE
account, or may contribute without any designation. The board shall
apportion any undesignated funds among the subaccounts, taking into
consideration factors, including, but not limited to, the number of
eligible applications received seeking funding from a particular
subaccount.
(e) The board shall adopt regulations as it deems necessary to
implement this article consistent with the federal Internal Revenue
Code and regulations issued pursuant to that code to ensure that this
program meets all criteria for federal tax-deferral or tax-exempt
benefits, or both.
69982. In addition to the powers and authority granted pursuant to
Section 69981, the board shall have the powers and authority to do
all of the following:
(a) Carry out studies and projections in order to advise
participants regarding present and estimated future higher education
expenses and the levels of financial participation in the
Scholarshare trust required in order to enable participants to
achieve their education funding objectives.
(b) Contract for goods and services and engage personnel,
including consultants, actuaries, managers, counsel, and auditors, as
necessary for the purpose of rendering professional, managerial, and
technical assistance and advice.
(c) Participate in any other way in any federal, state, or local
governmental program for the benefit of the Scholarshare trust.
(d) Promulgate, impose, and collect administrative fees and
charges in connection with transactions of the Scholarshare trust,
and provide for reasonable service charges, including penalties for
cancellations.
(e) Procure insurance against any loss in connection with the
property, assets, or activities of the Scholarshare trust.
(f) Administer the funds of the Scholarshare trust.
(g) Procure insurance indemnifying any member of the board from
personal loss or liability resulting from a member's action or
inaction as a member of the board.
(h) Adopt reasonable regulations for the administration of the
Scholarshare trust.
(i) Set minimum and maximum investment levels.
(j) (1) Except as otherwise provided in this section, the overall
maximum investment level for a designated beneficiary shall not
exceed the amount equivalent to the maximum estimated qualified
higher education expenses, as defined by subdivision (l) of Section
69980 and established by the board, that can be incurred by a
beneficiary. The maximum investment level shall be published by the
board as a monetary amount, in order to state contribution limits
clearly and to encourage participation on behalf of beneficiaries who
will attend all types of higher education institutions, both public
and independent.
(2) Contributions by entities exempt from taxation pursuant to
Section 501(c)(3) of the Internal Revenue Code and state and local
government agencies operating bona fide scholarship programs for the
benefit of beneficiaries to be named when the scholarships are
awarded are not subject to maximum contribution limits.
69983. The Scholarshare trust may enter into participation
agreements with participants on behalf of beneficiaries pursuant to
the following terms and agreements:
(a) The board may specify a required minimum length of time before
distributions for higher education expenses may be made, and may
impose a penalty on the early distribution of funds if deemed by the
board to be necessary.
(b) Beneficiaries designated in participation agreements may be
designated from date of birth.
(c) Participants shall be informed that the execution of a
participation agreement by the Scholarshare trust shall not guarantee
in any way that higher education expenses will be equal to
projections and estimates provided by the Scholarshare trust or that
the beneficiary named in any participation agreement will do any of
the following:
(1) Be admitted to an institution of higher education.
(2) If admitted, be determined a resident for tuition purposes by
the institution of higher education.
(3) Be allowed to continue attendance at the institution of higher
education following admission.
(4) Graduate from the institution of higher education.
(5) Have sufficient savings to cover fully all qualified education
expenses of attending an institution of higher education.
(d) Beneficiaries may be changed as permitted by the regulations
of the board upon request of the participant, provided that the
substitute beneficiary is eligible.
(e) Participation agreements shall be freely amended throughout
their terms in order to enable participants to change the designation
of beneficiaries and carry out similar matters.
(f) Each participation agreement shall provide that the
participation agreement may be canceled upon the terms and conditions
set forth and contained in the regulations adopted by the board.
(g) All contributions to Scholarshare accounts shall be in cash.
69984. (a) (1) The board shall segregate moneys received by the
Scholarshare trust into two funds, which shall be identified as the
program fund and the administrative fund. Notwithstanding Section
13340 of the Government Code, the program fund is hereby continuously
appropriated, without regard to fiscal years, to the board for the
purposes of this article. Funds in the administrative fund shall be
available for expenditure, upon appropriation, for the purposes
specified in this article.
(2) (A) The board shall separately account for any moneys received
by an entity exempt from taxation under Section 501(c)(3) of the
Internal Revenue Code or a state or local government agency,
depositing the money for the benefit of a beneficiary to be named
later pursuant to the operation of a bona fide scholarship program.
(B) There is hereby created the Scholarshare Investment Board,
that consists of the Treasurer, the Director of Finance, the
Secretary of Education, a member of the Student Aid Commission
appointed by the Governor, a member of the public appointed by the
Governor, a representative from a California public institution of
higher education appointed by the Senate Committee on Rules, and a
representative from a California independent college or university or
a state-approved college, university, or vocational/technical school
appointed by the Speaker of the Assembly. The Treasurer shall serve
as chair of the board. The board shall annually prepare and adopt a
written statement of investment policy. The board shall consider the
statement of investment policy and any changes in the investment
policy at a public hearing. The board shall approve the investment
management entity or entities consistent with subparagraph (D).
(C) Not later than 30 days after the close of each month, the
investment manager shall place on file for public inspection during
business hours a report with respect to investment performance. The
investment manager shall report the following information, to the
extent applicable, to the board within 30 days following the end of
each month:
(i) The type of investment, name of the issuer, date of maturity,
par and dollar amount invested in each security, investment, and
money within the program fund.
(ii) The weighted average maturity of the investments within the
program fund.
(iii) Any amounts in the program fund that are under the
management of an investment manager.
(iv) The market value as of the date of the report and the source
of this valuation for any security within the program fund.
(v) A description of the compliance with the statement of
investment policy.
(D) Moneys in the program fund may be invested or reinvested by
the Treasurer or may be invested in whole or in part under contract
with an investment manager, as determined by the board.
(b) Transfers may be made from the program fund to the
administrative fund for the purpose of paying operating costs
associated with administering the Scholarshare trust and as required
by this article. On an annual basis, expenditures from the
administrative fund shall not exceed more than 1 percent of the total
program fund. All costs of administration of the Scholarshare trust
shall be paid out of the administrative fund.
(c) All moneys paid by participants in connection with
participation agreements shall be deposited as received into the
program fund, and shall be promptly invested and accounted for
separately. Deposits and interest thereon accumulated on behalf of
participants in the program fund of the Scholarshare trust may be
used for payments to any institution of higher education.
69985. (a) Any participant may cancel a participation agreement at
will. A participant shall be entitled to a refund upon cancellation
thereof of an amount equal to the then current market value of the
amount of all contributions made to his or her account.
(b) Upon the occurrence of any of the following circumstances, no
penalty shall be levied by the Scholarshare trust in the event of
cancellation of a participation agreement:
(1) Death or disability of the beneficiary.
(2) The beneficiary's receipt of a scholarship or allowance or
payment described in Section 25A(g)(2) of the Internal Revenue Code
received by the designated beneficiary, to the extent that the amount
refunded does not exceed the amount of the scholarship, allowance,
or payment.
(c) In the event of cancellation of a participation agreement for
any of the causes listed in subdivision (b), the participant shall be
entitled to a refund equal to the then current market value of the
amount of all contributions made by the participant under the
participation agreement.
(d) Any cancellation of a participation agreement shall be deemed
to be made as of the close of business for the calendar month during
which notice of the cancellation is received by the board, and the
current market value of contributions as of that date shall be
determined by utilizing the monthly report for that month pursuant to
subparagraph (B) of paragraph (2) of subdivision (a) of Section
69984.
69986. For all purposes of California law, the following apply:
(a) The participant shall retain ownership of all contributions
made under any participation agreement up to the date of utilization
for payment of higher education costs for the beneficiary, and all
interest derived from the investment of the payments made by the
participant shall be deemed to be held in Scholarshare trust for the
benefit of the beneficiary. Neither the contributions, nor any
interest derived therefrom, may be pledged as collateral for any
loan.
(b) If the participation agreement is canceled prior to payment of
higher education expenses for the beneficiary, the participant shall
retain ownership of all contributions made under the participation
agreement and reversionary right to receive interest on all the
contributions at the rate of interest at which the contributions were
invested.
(c) Notwithstanding subdivision (b), if there has been a decrease
in the value of the funds in a participant's account at the time of
cancellation of the participation agreement, the participant shall
not have ownership rights to any amount above the market value of the
funds in the account at the time of cancellation.
(d) The board shall develop adequate measures to prevent
contributions on behalf of a designated beneficiary in excess of the
maximum contribution limits provided for in this article.
(e) If the beneficiary graduates from an institution of higher
education and has no intention of further attendance at an
institution of higher education, and a balance remains in the
participant's account, then the Scholarshare trust shall pay the
balance to the participant.
(f) The board shall develop a method to make payment of qualified
higher education expenses directly to higher education institutions
for the benefit of designated beneficiaries and to control for fraud
under any direct reimbursement method of payment that it may adopt.
The institution of higher education shall obtain ownership of the
payments made for the higher education expenses paid to the
institution at the time each payment is made to the institution.
(g) The board may also develop a method to make payment of
qualified higher education expenses directly to beneficiaries in a
manner that is consistent with applicable federal requirements and
restrictions.
(h) Any amounts paid pursuant to the Scholarshare trust that are
not listed in this section shall be owned by the Scholarshare trust.
(i) A participant may transfer ownership rights to another
eligible participant, including, but not necessarily limited to, a
gift of the ownership rights to an eligible minor beneficiary
pursuant to this article. The transfer shall be effected and the
property distributed in accordance with administrative regulations
adopted by the board or the terms of the participation agreement.
(j) Custodians for a minor under the California Uniform Transfers
to Minors Act (Part 9 (commencing with Section 3900) of Division 4 of
the Probate Code) or similar provisions adopted by another state may
enter into participation agreements in accordance with regulations
adopted by the board.
69989. (a) The board shall submit an annual audited financial
report, prepared in accordance with generally accepted accounting
principles, on the operations of the Scholarshare trust by October 31
to the Governor, the Controller, the State Auditor, and the
Legislature. The annual audit shall be made by an independent
certified public accountant, and shall include, but need not be
limited to, direct and indirect costs attributable to the use of
outside consultants, independent contractors, and any other persons
who are not state employees. Any contributions to the Scholarshare
trust that are not directed to a specified beneficiary shall be
accounted for and treated separately in the annual audit.
(b) The annual audit shall be supplemented by the following
information prepared by the board:
(1) Any studies or evaluations prepared in the preceding year.
(2) A summary of the benefits provided by the Scholarshare trust,
including the number of participants and beneficiaries in the
Scholarshare trust.
(3) Any other information that is relevant in order to make a
full, fair, and effective disclosure of the operations of the
Scholarshare trust.
69990. (a) The board shall provide an annual listing of
distributions to individuals with respect to an interest in a
participation agreement to the Franchise Tax Board at a time and in a
manner and form as specified by the Franchise Tax Board. The
taxpayers' identification numbers obtained through the participation
agreement process shall be used exclusively for state and federal tax
administration purposes.
(b) The board shall make a report to the appropriate individual of
any distribution to any individual with respect to an interest in a
participation agreement, at a time and in a form and manner as
required by the Franchise Tax Board.
(c) The board also shall report annually to each participant or
beneficiary all of the following:
(1) The value of the beneficiary's account.
(2) The interest earned thereon.
(3) The rate of return of the investments in the beneficiary's
account for that reporting period.
(4) Information on investments and education costs that
participants can use to set savings goals and contribution amounts.
(5) Information regarding the trends in qualified higher education
expenses at the state's public segments of higher education, which
shall include, but need not be limited to, the following:
(A) The actual increase or decrease in qualified higher education
expenses in the prior year.
(B) To the extent possible, any proposals by the segments to
increase or decrease fees or tuition in the next fiscal year.
(C) To the extent possible, any proposals by the Legislature or
the Governor to increase or decrease fees or tuition in the next
fiscal year.
(D) An Internet Web site and toll-free telephone number where the
names of the State Senator and Assembly Member who represent the
district in which the participant or beneficiary resides, and a
business address and telephone number where they may be reached, may
be accessed.
(d) The board, as an advocate for affordable higher education
opportunities for participants and beneficiaries of the program,
shall also provide a means for participants or beneficiaries to
express concerns or comments regarding the Scholarshare trust program
and any information required to be reported by this section.
69991. The assets of the trust, including the program fund, shall
at all times be preserved, invested, and expended solely and only for
the purposes of the trust and shall be held in trust for the
participants and beneficiaries and no property rights therein shall
exist in favor of the state. The assets shall not be transferred or
used by the State of California for any purposes other than the
purposes of the trust.
69992. The board shall aggressively market this program to the
citizens of the State of California. The board shall include in its
marketing efforts information designed to educate citizens about the
benefits of saving for higher education and information to help them
decide the level of Scholarshare participation and the combination of
savings strategies that may be appropriate for them. The board shall
also develop a mechanism to keep participants in this program
motivated about their current and future academic endeavors.
69993. Funding for startup and first-year administrative costs
shall be appropriated from the General Fund in the annual Budget Act.
The board shall repay, within five years, the amount appropriated,
plus interest calculated at the rate earned by the Pooled Money
Investment Account. Necessary administrative costs in future years
shall be paid out of the administrative fund.
69993.5. The board may adopt regulations for the purposes of this
chapter as emergency regulations in accordance with the rulemaking
provisions of the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code). For the purposes of the Administrative
Procedure Act, including Section 11349.6 of the Government Code, the
adoption of the regulations shall be deemed to be an emergency and
necessary for the immediate preservation of the public peace, health
and safety, or general welfare, notwithstanding subdivision (e) of
Section 11346.1 of the Government Code. Notwithstanding subdivision
(e) of Section 11346.1 of the Government Code, any regulation adopted
pursuant to this section shall not remain in effect more than 180
days unless the board complies with rulemaking provisions of the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code), as
required by subdivision (e) of Section 11346.1 of the Government
Code.
69993.7. No public funds nor any funds available pursuant to this
article may be expended to pay for, nor shall the board enter into
any agreement that provides for, the appearance of any elected
official or declared candidate for public office in any paid
advertisement promoting the act.
69994. This act shall be construed liberally in order to effectuate
its legislative intent. The purposes of this act and all of its
provisions with respect to powers granted shall be broadly
interpreted to effectuate that intent and purposes and not as to any
limitation of powers.
69980. As used in this article, the following terms have the
following meanings, unless the context requires otherwise:
(a) "Administrative fund" means the funds used to administer this
article.
(b) "Beneficiary" has the same meaning as "designated beneficiary,"
as provided in paragraph (1) of subsection (e) of Section 529 of the
Internal Revenue Code of 1986, as it is amended from time to time,
if, as determined by the board, the amendment is consistent with the
purposes of this article.
(c) "Benefits" means the payment of higher education expenses on
behalf of a beneficiary by the Scholarshare trust during the
beneficiary's attendance at an institution of higher education.
(d) "Board" means the Scholarshare Investment Board established
pursuant to subparagraph (B) of paragraph (2) of subdivision (a) of
Section 69984.
(e) "Golden State Scholarshare College Savings Trust" or
"Scholarshare trust" means the trust created pursuant to this
article.
(f) "Executive director" means the administrator of the
Scholarshare trust appointed by the board to administer and manage
the Scholarshare trust.
(g) "Institution of higher education" has the same meaning as
"eligible educational institution," as provided in paragraph (5) of
subsection (e) of Section 529 of the Internal Revenue Code of 1986,
as it is amended from time to time, if, as determined by the board,
the amendment is consistent with the purposes of this article.
(h) "Investment manager" means a manager contracted to perform
functions delegated by the board. "Investment management" means the
functions performed by a manager contracted to perform functions
delegated by the board.
(i) "Participant" means an individual, trust, estate, partnership,
association, company or corporation, a custodian under the
California Uniform Transfers to Minors Act (Part 9 (commencing with
Section 3900) of Division 4 of the Probate Code) or similar
provisions adopted by another state, a state or local government
agency, or a legal representative of a participant who has entered
into a participation agreement pursuant to this article. "Participant"
also means an account owner.
(j) "Participation agreement" means an agreement between a
participant and the Scholarshare trust, pursuant to this article.
(k) "Program fund" means the program fund established by this
article, which shall be held as a separate fund within the
Scholarshare trust.
(l) "Qualified higher education expenses" means the expenses of
attendance at an institution of higher education as provided in
paragraph (3) of subsection (e) of Section 529 of the Internal
Revenue Code of 1986, as it is amended from time to time, if, as
determined by the board, the amendment is consistent with the
purposes of this article, and as determined and certified by the
institution of higher education in the same manner as prescribed in
Title IV of the Higher Education Act of 1965 (20 U.S.C. Sec. 1087l l,
as amended).
(m) "Tuition and fees" means the quarterly or semester charges
imposed to attend an institution of higher education and required as
a condition of enrollment.
69981. (a) There is hereby created an instrumentality of the State
of California to be known as the Golden State Scholarshare College
Savings Trust.
(b) The purposes, powers, and duties of the Scholarshare trust are
vested in, and shall be exercised by, the board.
(c) The board, in the capacity of trustee, shall have the power
and authority to do all of the following:
(1) Sue and be sued.
(2) Make and enter into contracts necessary for the administration
of the Scholarshare trust.
(3) Adopt a corporate seal and change and amend it from time to
time.
(4) Cause moneys in the program fund to be held and invested and
reinvested.
(5) Enter into agreements with any institution of higher education
or any federal or other state agency or other entity as required for
the effectuation of its rights and duties.
(6) Accept any grants, gifts, appropriation, and other moneys from
any unit of federal, state, or local government or any other person,
firm, partnership, or corporation for deposit to the administrative
fund or the program fund. Except as otherwise provided in Section
69982, the board may not accept any contribution by any nonpublic
entity, person, firm, partnership, or corporation that is not
designated for a specified beneficiary, unless the contribution is
deposited in the CalSAVE account pursuant to subdivision (d).
(7) Enter into participation agreements with participants, as set
forth in Section 69983.
(8) Make payments to institutions of higher education pursuant to
participation agreements on behalf of beneficiaries.
(9) Make refunds to participants upon the cancellation of
participation agreements pursuant to the provisions, limitations, and
restrictions set forth in this article.
(10) Appoint an executive director, who shall serve at the
pleasure of the board, and determine the duties of the executive
director and other staff as necessary and set their compensation. The
board may authorize the executive director to enter into contracts
on behalf of the board or conduct any business necessary for the
efficient operation of the board.
(11) Make provisions for the payment of costs of administration
and operation of the Scholarshare trust.
(12) Carry out the duties and obligations of the Scholarshare
trust pursuant to this article and have any and all other powers as
may be reasonably necessary for the effectuation of the purposes,
objectives, and provisions of this article.
(d) (1) There is established within the Scholarshare trust the
California Scholarshare Advancement Vehicle for Education (CalSAVE)
program to fund scholarships for beneficiaries to be determined by
the board that may include, but are not limited to, foster youth,
youth in at-risk categories, individuals with demonstrated economic
need, former and active members of the California National Guard,
individuals seeking undergraduate or postbaccalaureate courses in
disciplines in which the state faces shortages, including nursing and
teaching, and other categories to be determined by the board.
(2) The CalSAVE account is created within the program fund and is
continuously appropriated, without regard to fiscal years, to the
board for the purposes of the CalSAVE program. The board shall create
subaccounts within the CalSAVE account for each category of
beneficiary determined pursuant to paragraph (1). The CalSAVE account
shall be funded by contributions from federal or local governments,
or any other person, firm, partnership, or corporation, and from the
administrative fund established pursuant to Section 69984. Any person
contributing to the CalSAVE account may designate that his or her
contribution be deposited into any subaccount within the CalSAVE
account, or may contribute without any designation. The board shall
apportion any undesignated funds among the subaccounts, taking into
consideration factors, including, but not limited to, the number of
eligible applications received seeking funding from a particular
subaccount.
(e) The board shall adopt regulations as it deems necessary to
implement this article consistent with the federal Internal Revenue
Code and regulations issued pursuant to that code to ensure that this
program meets all criteria for federal tax-deferral or tax-exempt
benefits, or both.
69982. In addition to the powers and authority granted pursuant to
Section 69981, the board shall have the powers and authority to do
all of the following:
(a) Carry out studies and projections in order to advise
participants regarding present and estimated future higher education
expenses and the levels of financial participation in the
Scholarshare trust required in order to enable participants to
achieve their education funding objectives.
(b) Contract for goods and services and engage personnel,
including consultants, actuaries, managers, counsel, and auditors, as
necessary for the purpose of rendering professional, managerial, and
technical assistance and advice.
(c) Participate in any other way in any federal, state, or local
governmental program for the benefit of the Scholarshare trust.
(d) Promulgate, impose, and collect administrative fees and
charges in connection with transactions of the Scholarshare trust,
and provide for reasonable service charges, including penalties for
cancellations.
(e) Procure insurance against any loss in connection with the
property, assets, or activities of the Scholarshare trust.
(f) Administer the funds of the Scholarshare trust.
(g) Procure insurance indemnifying any member of the board from
personal loss or liability resulting from a member's action or
inaction as a member of the board.
(h) Adopt reasonable regulations for the administration of the
Scholarshare trust.
(i) Set minimum and maximum investment levels.
(j) (1) Except as otherwise provided in this section, the overall
maximum investment level for a designated beneficiary shall not
exceed the amount equivalent to the maximum estimated qualified
higher education expenses, as defined by subdivision (l) of Section
69980 and established by the board, that can be incurred by a
beneficiary. The maximum investment level shall be published by the
board as a monetary amount, in order to state contribution limits
clearly and to encourage participation on behalf of beneficiaries who
will attend all types of higher education institutions, both public
and independent.
(2) Contributions by entities exempt from taxation pursuant to
Section 501(c)(3) of the Internal Revenue Code and state and local
government agencies operating bona fide scholarship programs for the
benefit of beneficiaries to be named when the scholarships are
awarded are not subject to maximum contribution limits.
69983. The Scholarshare trust may enter into participation
agreements with participants on behalf of beneficiaries pursuant to
the following terms and agreements:
(a) The board may specify a required minimum length of time before
distributions for higher education expenses may be made, and may
impose a penalty on the early distribution of funds if deemed by the
board to be necessary.
(b) Beneficiaries designated in participation agreements may be
designated from date of birth.
(c) Participants shall be informed that the execution of a
participation agreement by the Scholarshare trust shall not guarantee
in any way that higher education expenses will be equal to
projections and estimates provided by the Scholarshare trust or that
the beneficiary named in any participation agreement will do any of
the following:
(1) Be admitted to an institution of higher education.
(2) If admitted, be determined a resident for tuition purposes by
the institution of higher education.
(3) Be allowed to continue attendance at the institution of higher
education following admission.
(4) Graduate from the institution of higher education.
(5) Have sufficient savings to cover fully all qualified education
expenses of attending an institution of higher education.
(d) Beneficiaries may be changed as permitted by the regulations
of the board upon request of the participant, provided that the
substitute beneficiary is eligible.
(e) Participation agreements shall be freely amended throughout
their terms in order to enable participants to change the designation
of beneficiaries and carry out similar matters.
(f) Each participation agreement shall provide that the
participation agreement may be canceled upon the terms and conditions
set forth and contained in the regulations adopted by the board.
(g) All contributions to Scholarshare accounts shall be in cash.
69984. (a) (1) The board shall segregate moneys received by the
Scholarshare trust into two funds, which shall be identified as the
program fund and the administrative fund. Notwithstanding Section
13340 of the Government Code, the program fund is hereby continuously
appropriated, without regard to fiscal years, to the board for the
purposes of this article. Funds in the administrative fund shall be
available for expenditure, upon appropriation, for the purposes
specified in this article.
(2) (A) The board shall separately account for any moneys received
by an entity exempt from taxation under Section 501(c)(3) of the
Internal Revenue Code or a state or local government agency,
depositing the money for the benefit of a beneficiary to be named
later pursuant to the operation of a bona fide scholarship program.
(B) There is hereby created the Scholarshare Investment Board,
that consists of the Treasurer, the Director of Finance, the
Secretary of Education, a member of the Student Aid Commission
appointed by the Governor, a member of the public appointed by the
Governor, a representative from a California public institution of
higher education appointed by the Senate Committee on Rules, and a
representative from a California independent college or university or
a state-approved college, university, or vocational/technical school
appointed by the Speaker of the Assembly. The Treasurer shall serve
as chair of the board. The board shall annually prepare and adopt a
written statement of investment policy. The board shall consider the
statement of investment policy and any changes in the investment
policy at a public hearing. The board shall approve the investment
management entity or entities consistent with subparagraph (D).
(C) Not later than 30 days after the close of each month, the
investment manager shall place on file for public inspection during
business hours a report with respect to investment performance. The
investment manager shall report the following information, to the
extent applicable, to the board within 30 days following the end of
each month:
(i) The type of investment, name of the issuer, date of maturity,
par and dollar amount invested in each security, investment, and
money within the program fund.
(ii) The weighted average maturity of the investments within the
program fund.
(iii) Any amounts in the program fund that are under the
management of an investment manager.
(iv) The market value as of the date of the report and the source
of this valuation for any security within the program fund.
(v) A description of the compliance with the statement of
investment policy.
(D) Moneys in the program fund may be invested or reinvested by
the Treasurer or may be invested in whole or in part under contract
with an investment manager, as determined by the board.
(b) Transfers may be made from the program fund to the
administrative fund for the purpose of paying operating costs
associated with administering the Scholarshare trust and as required
by this article. On an annual basis, expenditures from the
administrative fund shall not exceed more than 1 percent of the total
program fund. All costs of administration of the Scholarshare trust
shall be paid out of the administrative fund.
(c) All moneys paid by participants in connection with
participation agreements shall be deposited as received into the
program fund, and shall be promptly invested and accounted for
separately. Deposits and interest thereon accumulated on behalf of
participants in the program fund of the Scholarshare trust may be
used for payments to any institution of higher education.
69985. (a) Any participant may cancel a participation agreement at
will. A participant shall be entitled to a refund upon cancellation
thereof of an amount equal to the then current market value of the
amount of all contributions made to his or her account.
(b) Upon the occurrence of any of the following circumstances, no
penalty shall be levied by the Scholarshare trust in the event of
cancellation of a participation agreement:
(1) Death or disability of the beneficiary.
(2) The beneficiary's receipt of a scholarship or allowance or
payment described in Section 25A(g)(2) of the Internal Revenue Code
received by the designated beneficiary, to the extent that the amount
refunded does not exceed the amount of the scholarship, allowance,
or payment.
(c) In the event of cancellation of a participation agreement for
any of the causes listed in subdivision (b), the participant shall be
entitled to a refund equal to the then current market value of the
amount of all contributions made by the participant under the
participation agreement.
(d) Any cancellation of a participation agreement shall be deemed
to be made as of the close of business for the calendar month during
which notice of the cancellation is received by the board, and the
current market value of contributions as of that date shall be
determined by utilizing the monthly report for that month pursuant to
subparagraph (B) of paragraph (2) of subdivision (a) of Section
69984.
69986. For all purposes of California law, the following apply:
(a) The participant shall retain ownership of all contributions
made under any participation agreement up to the date of utilization
for payment of higher education costs for the beneficiary, and all
interest derived from the investment of the payments made by the
participant shall be deemed to be held in Scholarshare trust for the
benefit of the beneficiary. Neither the contributions, nor any
interest derived therefrom, may be pledged as collateral for any
loan.
(b) If the participation agreement is canceled prior to payment of
higher education expenses for the beneficiary, the participant shall
retain ownership of all contributions made under the participation
agreement and reversionary right to receive interest on all the
contributions at the rate of interest at which the contributions were
invested.
(c) Notwithstanding subdivision (b), if there has been a decrease
in the value of the funds in a participant's account at the time of
cancellation of the participation agreement, the participant shall
not have ownership rights to any amount above the market value of the
funds in the account at the time of cancellation.
(d) The board shall develop adequate measures to prevent
contributions on behalf of a designated beneficiary in excess of the
maximum contribution limits provided for in this article.
(e) If the beneficiary graduates from an institution of higher
education and has no intention of further attendance at an
institution of higher education, and a balance remains in the
participant's account, then the Scholarshare trust shall pay the
balance to the participant.
(f) The board shall develop a method to make payment of qualified
higher education expenses directly to higher education institutions
for the benefit of designated beneficiaries and to control for fraud
under any direct reimbursement method of payment that it may adopt.
The institution of higher education shall obtain ownership of the
payments made for the higher education expenses paid to the
institution at the time each payment is made to the institution.
(g) The board may also develop a method to make payment of
qualified higher education expenses directly to beneficiaries in a
manner that is consistent with applicable federal requirements and
restrictions.
(h) Any amounts paid pursuant to the Scholarshare trust that are
not listed in this section shall be owned by the Scholarshare trust.
(i) A participant may transfer ownership rights to another
eligible participant, including, but not necessarily limited to, a
gift of the ownership rights to an eligible minor beneficiary
pursuant to this article. The transfer shall be effected and the
property distributed in accordance with administrative regulations
adopted by the board or the terms of the participation agreement.
(j) Custodians for a minor under the California Uniform Transfers
to Minors Act (Part 9 (commencing with Section 3900) of Division 4 of
the Probate Code) or similar provisions adopted by another state may
enter into participation agreements in accordance with regulations
adopted by the board.
69989. (a) The board shall submit an annual audited financial
report, prepared in accordance with generally accepted accounting
principles, on the operations of the Scholarshare trust by October 31
to the Governor, the Controller, the State Auditor, and the
Legislature. The annual audit shall be made by an independent
certified public accountant, and shall include, but need not be
limited to, direct and indirect costs attributable to the use of
outside consultants, independent contractors, and any other persons
who are not state employees. Any contributions to the Scholarshare
trust that are not directed to a specified beneficiary shall be
accounted for and treated separately in the annual audit.
(b) The annual audit shall be supplemented by the following
information prepared by the board:
(1) Any studies or evaluations prepared in the preceding year.
(2) A summary of the benefits provided by the Scholarshare trust,
including the number of participants and beneficiaries in the
Scholarshare trust.
(3) Any other information that is relevant in order to make a
full, fair, and effective disclosure of the operations of the
Scholarshare trust.
69990. (a) The board shall provide an annual listing of
distributions to individuals with respect to an interest in a
participation agreement to the Franchise Tax Board at a time and in a
manner and form as specified by the Franchise Tax Board. The
taxpayers' identification numbers obtained through the participation
agreement process shall be used exclusively for state and federal tax
administration purposes.
(b) The board shall make a report to the appropriate individual of
any distribution to any individual with respect to an interest in a
participation agreement, at a time and in a form and manner as
required by the Franchise Tax Board.
(c) The board also shall report annually to each participant or
beneficiary all of the following:
(1) The value of the beneficiary's account.
(2) The interest earned thereon.
(3) The rate of return of the investments in the beneficiary's
account for that reporting period.
(4) Information on investments and education costs that
participants can use to set savings goals and contribution amounts.
(5) Information regarding the trends in qualified higher education
expenses at the state's public segments of higher education, which
shall include, but need not be limited to, the following:
(A) The actual increase or decrease in qualified higher education
expenses in the prior year.
(B) To the extent possible, any proposals by the segments to
increase or decrease fees or tuition in the next fiscal year.
(C) To the extent possible, any proposals by the Legislature or
the Governor to increase or decrease fees or tuition in the next
fiscal year.
(D) An Internet Web site and toll-free telephone number where the
names of the State Senator and Assembly Member who represent the
district in which the participant or beneficiary resides, and a
business address and telephone number where they may be reached, may
be accessed.
(d) The board, as an advocate for affordable higher education
opportunities for participants and beneficiaries of the program,
shall also provide a means for participants or beneficiaries to
express concerns or comments regarding the Scholarshare trust program
and any information required to be reported by this section.
69991. The assets of the trust, including the program fund, shall
at all times be preserved, invested, and expended solely and only for
the purposes of the trust and shall be held in trust for the
participants and beneficiaries and no property rights therein shall
exist in favor of the state. The assets shall not be transferred or
used by the State of California for any purposes other than the
purposes of the trust.
69992. The board shall aggressively market this program to the
citizens of the State of California. The board shall include in its
marketing efforts information designed to educate citizens about the
benefits of saving for higher education and information to help them
decide the level of Scholarshare participation and the combination of
savings strategies that may be appropriate for them. The board shall
also develop a mechanism to keep participants in this program
motivated about their current and future academic endeavors.
69993. Funding for startup and first-year administrative costs
shall be appropriated from the General Fund in the annual Budget Act.
The board shall repay, within five years, the amount appropriated,
plus interest calculated at the rate earned by the Pooled Money
Investment Account. Necessary administrative costs in future years
shall be paid out of the administrative fund.
69993.5. The board may adopt regulations for the purposes of this
chapter as emergency regulations in accordance with the rulemaking
provisions of the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code). For the purposes of the Administrative
Procedure Act, including Section 11349.6 of the Government Code, the
adoption of the regulations shall be deemed to be an emergency and
necessary for the immediate preservation of the public peace, health
and safety, or general welfare, notwithstanding subdivision (e) of
Section 11346.1 of the Government Code. Notwithstanding subdivision
(e) of Section 11346.1 of the Government Code, any regulation adopted
pursuant to this section shall not remain in effect more than 180
days unless the board complies with rulemaking provisions of the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code), as
required by subdivision (e) of Section 11346.1 of the Government
Code.
69993.7. No public funds nor any funds available pursuant to this
article may be expended to pay for, nor shall the board enter into
any agreement that provides for, the appearance of any elected
official or declared candidate for public office in any paid
advertisement promoting the act.
69994. This act shall be construed liberally in order to effectuate
its legislative intent. The purposes of this act and all of its
provisions with respect to powers granted shall be broadly
interpreted to effectuate that intent and purposes and not as to any
limitation of powers.
69980. As used in this article, the following terms have the
following meanings, unless the context requires otherwise:
(a) "Administrative fund" means the funds used to administer this
article.
(b) "Beneficiary" has the same meaning as "designated beneficiary,"
as provided in paragraph (1) of subsection (e) of Section 529 of the
Internal Revenue Code of 1986, as it is amended from time to time,
if, as determined by the board, the amendment is consistent with the
purposes of this article.
(c) "Benefits" means the payment of higher education expenses on
behalf of a beneficiary by the Scholarshare trust during the
beneficiary's attendance at an institution of higher education.
(d) "Board" means the Scholarshare Investment Board established
pursuant to subparagraph (B) of paragraph (2) of subdivision (a) of
Section 69984.
(e) "Golden State Scholarshare College Savings Trust" or
"Scholarshare trust" means the trust created pursuant to this
article.
(f) "Executive director" means the administrator of the
Scholarshare trust appointed by the board to administer and manage
the Scholarshare trust.
(g) "Institution of higher education" has the same meaning as
"eligible educational institution," as provided in paragraph (5) of
subsection (e) of Section 529 of the Internal Revenue Code of 1986,
as it is amended from time to time, if, as determined by the board,
the amendment is consistent with the purposes of this article.
(h) "Investment manager" means a manager contracted to perform
functions delegated by the board. "Investment management" means the
functions performed by a manager contracted to perform functions
delegated by the board.
(i) "Participant" means an individual, trust, estate, partnership,
association, company or corporation, a custodian under the
California Uniform Transfers to Minors Act (Part 9 (commencing with
Section 3900) of Division 4 of the Probate Code) or similar
provisions adopted by another state, a state or local government
agency, or a legal representative of a participant who has entered
into a participation agreement pursuant to this article. "Participant"
also means an account owner.
(j) "Participation agreement" means an agreement between a
participant and the Scholarshare trust, pursuant to this article.
(k) "Program fund" means the program fund established by this
article, which shall be held as a separate fund within the
Scholarshare trust.
(l) "Qualified higher education expenses" means the expenses of
attendance at an institution of higher education as provided in
paragraph (3) of subsection (e) of Section 529 of the Internal
Revenue Code of 1986, as it is amended from time to time, if, as
determined by the board, the amendment is consistent with the
purposes of this article, and as determined and certified by the
institution of higher education in the same manner as prescribed in
Title IV of the Higher Education Act of 1965 (20 U.S.C. Sec. 1087l l,
as amended).
(m) "Tuition and fees" means the quarterly or semester charges
imposed to attend an institution of higher education and required as
a condition of enrollment.
69981. (a) There is hereby created an instrumentality of the State
of California to be known as the Golden State Scholarshare College
Savings Trust.
(b) The purposes, powers, and duties of the Scholarshare trust are
vested in, and shall be exercised by, the board.
(c) The board, in the capacity of trustee, shall have the power
and authority to do all of the following:
(1) Sue and be sued.
(2) Make and enter into contracts necessary for the administration
of the Scholarshare trust.
(3) Adopt a corporate seal and change and amend it from time to
time.
(4) Cause moneys in the program fund to be held and invested and
reinvested.
(5) Enter into agreements with any institution of higher education
or any federal or other state agency or other entity as required for
the effectuation of its rights and duties.
(6) Accept any grants, gifts, appropriation, and other moneys from
any unit of federal, state, or local government or any other person,
firm, partnership, or corporation for deposit to the administrative
fund or the program fund. Except as otherwise provided in Section
69982, the board may not accept any contribution by any nonpublic
entity, person, firm, partnership, or corporation that is not
designated for a specified beneficiary, unless the contribution is
deposited in the CalSAVE account pursuant to subdivision (d).
(7) Enter into participation agreements with participants, as set
forth in Section 69983.
(8) Make payments to institutions of higher education pursuant to
participation agreements on behalf of beneficiaries.
(9) Make refunds to participants upon the cancellation of
participation agreements pursuant to the provisions, limitations, and
restrictions set forth in this article.
(10) Appoint an executive director, who shall serve at the
pleasure of the board, and determine the duties of the executive
director and other staff as necessary and set their compensation. The
board may authorize the executive director to enter into contracts
on behalf of the board or conduct any business necessary for the
efficient operation of the board.
(11) Make provisions for the payment of costs of administration
and operation of the Scholarshare trust.
(12) Carry out the duties and obligations of the Scholarshare
trust pursuant to this article and have any and all other powers as
may be reasonably necessary for the effectuation of the purposes,
objectives, and provisions of this article.
(d) (1) There is established within the Scholarshare trust the
California Scholarshare Advancement Vehicle for Education (CalSAVE)
program to fund scholarships for beneficiaries to be determined by
the board that may include, but are not limited to, foster youth,
youth in at-risk categories, individuals with demonstrated economic
need, former and active members of the California National Guard,
individuals seeking undergraduate or postbaccalaureate courses in
disciplines in which the state faces shortages, including nursing and
teaching, and other categories to be determined by the board.
(2) The CalSAVE account is created within the program fund and is
continuously appropriated, without regard to fiscal years, to the
board for the purposes of the CalSAVE program. The board shall create
subaccounts within the CalSAVE account for each category of
beneficiary determined pursuant to paragraph (1). The CalSAVE account
shall be funded by contributions from federal or local governments,
or any other person, firm, partnership, or corporation, and from the
administrative fund established pursuant to Section 69984. Any person
contributing to the CalSAVE account may designate that his or her
contribution be deposited into any subaccount within the CalSAVE
account, or may contribute without any designation. The board shall
apportion any undesignated funds among the subaccounts, taking into
consideration factors, including, but not limited to, the number of
eligible applications received seeking funding from a particular
subaccount.
(e) The board shall adopt regulations as it deems necessary to
implement this article consistent with the federal Internal Revenue
Code and regulations issued pursuant to that code to ensure that this
program meets all criteria for federal tax-deferral or tax-exempt
benefits, or both.
69982. In addition to the powers and authority granted pursuant to
Section 69981, the board shall have the powers and authority to do
all of the following:
(a) Carry out studies and projections in order to advise
participants regarding present and estimated future higher education
expenses and the levels of financial participation in the
Scholarshare trust required in order to enable participants to
achieve their education funding objectives.
(b) Contract for goods and services and engage personnel,
including consultants, actuaries, managers, counsel, and auditors, as
necessary for the purpose of rendering professional, managerial, and
technical assistance and advice.
(c) Participate in any other way in any federal, state, or local
governmental program for the benefit of the Scholarshare trust.
(d) Promulgate, impose, and collect administrative fees and
charges in connection with transactions of the Scholarshare trust,
and provide for reasonable service charges, including penalties for
cancellations.
(e) Procure insurance against any loss in connection with the
property, assets, or activities of the Scholarshare trust.
(f) Administer the funds of the Scholarshare trust.
(g) Procure insurance indemnifying any member of the board from
personal loss or liability resulting from a member's action or
inaction as a member of the board.
(h) Adopt reasonable regulations for the administration of the
Scholarshare trust.
(i) Set minimum and maximum investment levels.
(j) (1) Except as otherwise provided in this section, the overall
maximum investment level for a designated beneficiary shall not
exceed the amount equivalent to the maximum estimated qualified
higher education expenses, as defined by subdivision (l) of Section
69980 and established by the board, that can be incurred by a
beneficiary. The maximum investment level shall be published by the
board as a monetary amount, in order to state contribution limits
clearly and to encourage participation on behalf of beneficiaries who
will attend all types of higher education institutions, both public
and independent.
(2) Contributions by entities exempt from taxation pursuant to
Section 501(c)(3) of the Internal Revenue Code and state and local
government agencies operating bona fide scholarship programs for the
benefit of beneficiaries to be named when the scholarships are
awarded are not subject to maximum contribution limits.
69983. The Scholarshare trust may enter into participation
agreements with participants on behalf of beneficiaries pursuant to
the following terms and agreements:
(a) The board may specify a required minimum length of time before
distributions for higher education expenses may be made, and may
impose a penalty on the early distribution of funds if deemed by the
board to be necessary.
(b) Beneficiaries designated in participation agreements may be
designated from date of birth.
(c) Participants shall be informed that the execution of a
participation agreement by the Scholarshare trust shall not guarantee
in any way that higher education expenses will be equal to
projections and estimates provided by the Scholarshare trust or that
the beneficiary named in any participation agreement will do any of
the following:
(1) Be admitted to an institution of higher education.
(2) If admitted, be determined a resident for tuition purposes by
the institution of higher education.
(3) Be allowed to continue attendance at the institution of higher
education following admission.
(4) Graduate from the institution of higher education.
(5) Have sufficient savings to cover fully all qualified education
expenses of attending an institution of higher education.
(d) Beneficiaries may be changed as permitted by the regulations
of the board upon request of the participant, provided that the
substitute beneficiary is eligible.
(e) Participation agreements shall be freely amended throughout
their terms in order to enable participants to change the designation
of beneficiaries and carry out similar matters.
(f) Each participation agreement shall provide that the
participation agreement may be canceled upon the terms and conditions
set forth and contained in the regulations adopted by the board.
(g) All contributions to Scholarshare accounts shall be in cash.
69984. (a) (1) The board shall segregate moneys received by the
Scholarshare trust into two funds, which shall be identified as the
program fund and the administrative fund. Notwithstanding Section
13340 of the Government Code, the program fund is hereby continuously
appropriated, without regard to fiscal years, to the board for the
purposes of this article. Funds in the administrative fund shall be
available for expenditure, upon appropriation, for the purposes
specified in this article.
(2) (A) The board shall separately account for any moneys received
by an entity exempt from taxation under Section 501(c)(3) of the
Internal Revenue Code or a state or local government agency,
depositing the money for the benefit of a beneficiary to be named
later pursuant to the operation of a bona fide scholarship program.
(B) There is hereby created the Scholarshare Investment Board,
that consists of the Treasurer, the Director of Finance, the
Secretary of Education, a member of the Student Aid Commission
appointed by the Governor, a member of the public appointed by the
Governor, a representative from a California public institution of
higher education appointed by the Senate Committee on Rules, and a
representative from a California independent college or university or
a state-approved college, university, or vocational/technical school
appointed by the Speaker of the Assembly. The Treasurer shall serve
as chair of the board. The board shall annually prepare and adopt a
written statement of investment policy. The board shall consider the
statement of investment policy and any changes in the investment
policy at a public hearing. The board shall approve the investment
management entity or entities consistent with subparagraph (D).
(C) Not later than 30 days after the close of each month, the
investment manager shall place on file for public inspection during
business hours a report with respect to investment performance. The
investment manager shall report the following information, to the
extent applicable, to the board within 30 days following the end of
each month:
(i) The type of investment, name of the issuer, date of maturity,
par and dollar amount invested in each security, investment, and
money within the program fund.
(ii) The weighted average maturity of the investments within the
program fund.
(iii) Any amounts in the program fund that are under the
management of an investment manager.
(iv) The market value as of the date of the report and the source
of this valuation for any security within the program fund.
(v) A description of the compliance with the statement of
investment policy.
(D) Moneys in the program fund may be invested or reinvested by
the Treasurer or may be invested in whole or in part under contract
with an investment manager, as determined by the board.
(b) Transfers may be made from the program fund to the
administrative fund for the purpose of paying operating costs
associated with administering the Scholarshare trust and as required
by this article. On an annual basis, expenditures from the
administrative fund shall not exceed more than 1 percent of the total
program fund. All costs of administration of the Scholarshare trust
shall be paid out of the administrative fund.
(c) All moneys paid by participants in connection with
participation agreements shall be deposited as received into the
program fund, and shall be promptly invested and accounted for
separately. Deposits and interest thereon accumulated on behalf of
participants in the program fund of the Scholarshare trust may be
used for payments to any institution of higher education.
69985. (a) Any participant may cancel a participation agreement at
will. A participant shall be entitled to a refund upon cancellation
thereof of an amount equal to the then current market value of the
amount of all contributions made to his or her account.
(b) Upon the occurrence of any of the following circumstances, no
penalty shall be levied by the Scholarshare trust in the event of
cancellation of a participation agreement:
(1) Death or disability of the beneficiary.
(2) The beneficiary's receipt of a scholarship or allowance or
payment described in Section 25A(g)(2) of the Internal Revenue Code
received by the designated beneficiary, to the extent that the amount
refunded does not exceed the amount of the scholarship, allowance,
or payment.
(c) In the event of cancellation of a participation agreement for
any of the causes listed in subdivision (b), the participant shall be
entitled to a refund equal to the then current market value of the
amount of all contributions made by the participant under the
participation agreement.
(d) Any cancellation of a participation agreement shall be deemed
to be made as of the close of business for the calendar month during
which notice of the cancellation is received by the board, and the
current market value of contributions as of that date shall be
determined by utilizing the monthly report for that month pursuant to
subparagraph (B) of paragraph (2) of subdivision (a) of Section
69984.
69986. For all purposes of California law, the following apply:
(a) The participant shall retain ownership of all contributions
made under any participation agreement up to the date of utilization
for payment of higher education costs for the beneficiary, and all
interest derived from the investment of the payments made by the
participant shall be deemed to be held in Scholarshare trust for the
benefit of the beneficiary. Neither the contributions, nor any
interest derived therefrom, may be pledged as collateral for any
loan.
(b) If the participation agreement is canceled prior to payment of
higher education expenses for the beneficiary, the participant shall
retain ownership of all contributions made under the participation
agreement and reversionary right to receive interest on all the
contributions at the rate of interest at which the contributions were
invested.
(c) Notwithstanding subdivision (b), if there has been a decrease
in the value of the funds in a participant's account at the time of
cancellation of the participation agreement, the participant shall
not have ownership rights to any amount above the market value of the
funds in the account at the time of cancellation.
(d) The board shall develop adequate measures to prevent
contributions on behalf of a designated beneficiary in excess of the
maximum contribution limits provided for in this article.
(e) If the beneficiary graduates from an institution of higher
education and has no intention of further attendance at an
institution of higher education, and a balance remains in the
participant's account, then the Scholarshare trust shall pay the
balance to the participant.
(f) The board shall develop a method to make payment of qualified
higher education expenses directly to higher education institutions
for the benefit of designated beneficiaries and to control for fraud
under any direct reimbursement method of payment that it may adopt.
The institution of higher education shall obtain ownership of the
payments made for the higher education expenses paid to the
institution at the time each payment is made to the institution.
(g) The board may also develop a method to make payment of
qualified higher education expenses directly to beneficiaries in a
manner that is consistent with applicable federal requirements and
restrictions.
(h) Any amounts paid pursuant to the Scholarshare trust that are
not listed in this section shall be owned by the Scholarshare trust.
(i) A participant may transfer ownership rights to another
eligible participant, including, but not necessarily limited to, a
gift of the ownership rights to an eligible minor beneficiary
pursuant to this article. The transfer shall be effected and the
property distributed in accordance with administrative regulations
adopted by the board or the terms of the participation agreement.
(j) Custodians for a minor under the California Uniform Transfers
to Minors Act (Part 9 (commencing with Section 3900) of Division 4 of
the Probate Code) or similar provisions adopted by another state may
enter into participation agreements in accordance with regulations
adopted by the board.
69989. (a) The board shall submit an annual audited financial
report, prepared in accordance with generally accepted accounting
principles, on the operations of the Scholarshare trust by October 31
to the Governor, the Controller, the State Auditor, and the
Legislature. The annual audit shall be made by an independent
certified public accountant, and shall include, but need not be
limited to, direct and indirect costs attributable to the use of
outside consultants, independent contractors, and any other persons
who are not state employees. Any contributions to the Scholarshare
trust that are not directed to a specified beneficiary shall be
accounted for and treated separately in the annual audit.
(b) The annual audit shall be supplemented by the following
information prepared by the board:
(1) Any studies or evaluations prepared in the preceding year.
(2) A summary of the benefits provided by the Scholarshare trust,
including the number of participants and beneficiaries in the
Scholarshare trust.
(3) Any other information that is relevant in order to make a
full, fair, and effective disclosure of the operations of the
Scholarshare trust.
69990. (a) The board shall provide an annual listing of
distributions to individuals with respect to an interest in a
participation agreement to the Franchise Tax Board at a time and in a
manner and form as specified by the Franchise Tax Board. The
taxpayers' identification numbers obtained through the participation
agreement process shall be used exclusively for state and federal tax
administration purposes.
(b) The board shall make a report to the appropriate individual of
any distribution to any individual with respect to an interest in a
participation agreement, at a time and in a form and manner as
required by the Franchise Tax Board.
(c) The board also shall report annually to each participant or
beneficiary all of the following:
(1) The value of the beneficiary's account.
(2) The interest earned thereon.
(3) The rate of return of the investments in the beneficiary's
account for that reporting period.
(4) Information on investments and education costs that
participants can use to set savings goals and contribution amounts.
(5) Information regarding the trends in qualified higher education
expenses at the state's public segments of higher education, which
shall include, but need not be limited to, the following:
(A) The actual increase or decrease in qualified higher education
expenses in the prior year.
(B) To the extent possible, any proposals by the segments to
increase or decrease fees or tuition in the next fiscal year.
(C) To the extent possible, any proposals by the Legislature or
the Governor to increase or decrease fees or tuition in the next
fiscal year.
(D) An Internet Web site and toll-free telephone number where the
names of the State Senator and Assembly Member who represent the
district in which the participant or beneficiary resides, and a
business address and telephone number where they may be reached, may
be accessed.
(d) The board, as an advocate for affordable higher education
opportunities for participants and beneficiaries of the program,
shall also provide a means for participants or beneficiaries to
express concerns or comments regarding the Scholarshare trust program
and any information required to be reported by this section.
69991. The assets of the trust, including the program fund, shall
at all times be preserved, invested, and expended solely and only for
the purposes of the trust and shall be held in trust for the
participants and beneficiaries and no property rights therein shall
exist in favor of the state. The assets shall not be transferred or
used by the State of California for any purposes other than the
purposes of the trust.
69992. The board shall aggressively market this program to the
citizens of the State of California. The board shall include in its
marketing efforts information designed to educate citizens about the
benefits of saving for higher education and information to help them
decide the level of Scholarshare participation and the combination of
savings strategies that may be appropriate for them. The board shall
also develop a mechanism to keep participants in this program
motivated about their current and future academic endeavors.
69993. Funding for startup and first-year administrative costs
shall be appropriated from the General Fund in the annual Budget Act.
The board shall repay, within five years, the amount appropriated,
plus interest calculated at the rate earned by the Pooled Money
Investment Account. Necessary administrative costs in future years
shall be paid out of the administrative fund.
69993.5. The board may adopt regulations for the purposes of this
chapter as emergency regulations in accordance with the rulemaking
provisions of the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code). For the purposes of the Administrative
Procedure Act, including Section 11349.6 of the Government Code, the
adoption of the regulations shall be deemed to be an emergency and
necessary for the immediate preservation of the public peace, health
and safety, or general welfare, notwithstanding subdivision (e) of
Section 11346.1 of the Government Code. Notwithstanding subdivision
(e) of Section 11346.1 of the Government Code, any regulation adopted
pursuant to this section shall not remain in effect more than 180
days unless the board complies with rulemaking provisions of the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code), as
required by subdivision (e) of Section 11346.1 of the Government
Code.
69993.7. No public funds nor any funds available pursuant to this
article may be expended to pay for, nor shall the board enter into
any agreement that provides for, the appearance of any elected
official or declared candidate for public office in any paid
advertisement promoting the act.
69994. This act shall be construed liberally in order to effectuate
its legislative intent. The purposes of this act and all of its
provisions with respect to powers granted shall be broadly
interpreted to effectuate that intent and purposes and not as to any
limitation of powers.
