§256-4  Program requirements; collegeaccount.  (a)  A college account may be opened by any person who desires tosave money for the payment of the qualified higher education expenses on behalfof a designated beneficiary.  The person shall be considered the account owneras defined in section 256-1.  An application for an account shall be in theform prescribed by the program and shall contain the following:

(1)  The name, address, and social security number oremployer identification number of the account owner;

(2)  The designation of a beneficiary;

(3)  The name, address, and social security number ofthe designated beneficiary;

(4)  A certification relating to no excesscontributions; and

(5)  Other information as the program may require.

(b)  Any person orentity, regardless of whether the person or entity is the account owner,may make contributions to the account after the account is opened.

(c)  Contributions to accounts may be made onlyin cash.

(d)  An account owner may withdraw all or partof the balance from an account on sixty days' notice or a shorter period as maybe authorized under rules governing the program.  The rules shall includeprovisions to generally enable the determination of whether a withdrawal is anonqualified withdrawal or a qualified withdrawal.  The rules may require oneor more of the following:

(1)  An account owner seeking to make a qualifiedwithdrawal shall provide certifications of qualified higher education expensesand other information required to comply with section 529 of the InternalRevenue Code of 1986, as amended, or successor legislation;

(2)  Withdrawals not meeting the requirements of thissection shall be treated as nonqualified withdrawals by the program manager,and if the withdrawals are subsequently deemed qualified withdrawals within areasonable time period as specified by the director of finance, the accountowner shall seek any refund of penalties directly from the program.

(e)  An account owner may change the designatedbeneficiary of an account to an individual who is a member of the family of theprior designated beneficiary.  An account owner may transfer all or a portionof an account to another college account, the designated beneficiary of whichis a member of the same family, as defined in section 529 of the InternalRevenue Code of 1986, as amended, or successor legislation, as the beneficiaryof the initial account.  Changes in designated beneficiaries and transfersunder this section shall not be permitted if they constitute excess contributions.

(f)  In the case of any nonqualified withdrawalfrom an account, an amount equal to ten per cent (or that rate imposed underfinal regulations adopted by the Internal Revenue Service) of the portion ofthe withdrawal constituting income as determined in accordance with theprinciples of section 529 of the Internal Revenue Code of 1986, as amended, orsuccessor legislation, shall be collected as a penalty and paid to the collegesavings program trust fund, as provided under section 529 of the InternalRevenue Code of 1986, as amended, successor legislation, or any guidance issuedby the Internal Revenue Service.

(g)  The percentage of the penalty described insubsection (f) may be increased if the director of finance determines that theamount of the penalty must be increased to constitute a greater than de minimispenalty for purposes of qualifying the program as a qualified state tuitionprogram under section 529 of the Internal Revenue Code of 1986, as amended, orsuccessor legislation.

(h)  The percentage of the penalty described insubsection (f) may be decreased by rule if it is determined the penalty isgreater than the amount required to constitute a greater than de minimispenalty for purposes of qualifying the program as a qualified state tuitionprogram under section 529 of the Internal Revenue Code of 1986, as amended, orsuccessor legislation.

(i)  The program shall provide separateaccounting for each designated beneficiary.

(j)  No account owner or designated beneficiaryof any account shall be permitted to direct the investment of any contributionsto an account or the earnings on it.

(k)  Neither an account owner nor a designatedbeneficiary shall use an interest in an account as security for a loan.  Anypledge of an interest in an account shall be of no force and effect.

(l)  Contributions on behalf of a designatedbeneficiary in excess of those necessary to provide for the qualified highereducation expenses of the designated beneficiary shall not be allowed.  Theprohibition on excess contributions shall conform to section 529 of theInternal Revenue Code of 1986, as amended, or successor legislation.

(m)  If there is any distribution from anaccount to any individual or for the benefit of any individual during acalendar year, the distribution shall be reported to the Internal RevenueService and the account owner, the designated beneficiary, or the distributee,to the extent required by federal law or regulation. 

Statements shall be provided to each accountowner at least once each year within sixty days after the end of thetwelve-month period to which they relate.  The statement shall identify thecontributions made during a preceding twelve-month period, the totalcontributions made to the account through the end of the period, the value ofthe account at the end of the period, distributions made during the period, andany other information that the director of finance requires to be reported tothe account owner.

Statements and information relating to accountsshall be prepared and filed to the extent required by federal and state taxlaw.

(n)  A local government or organizationdescribed in section 501(c)(3) of the Internal Revenue Code of 1986, asamended, or successor legislation, may open and become the account owner of anaccount to fund scholarships for persons whose identity shall be determinedupon disbursement.  Any account opened pursuant to this subsection is notrequired to comply with the condition set forth in subsection (a) that abeneficiary be designated when an account is opened, and each individual whoreceives an interest in the account as a scholarship shall be treated as adesignated beneficiary.

(o)  An annual fee may be imposed upon theaccount owner for the maintenance of the account.

(p)  A minimum length of time as determined bythe director of finance may be required of the account before distributions forqualified higher education can be made.

(q)  The program shall disclose in writing thefollowing information to each account owner and prospective account owner of acollege account:

(1)  The terms and conditions for purchasing a collegeaccount;

(2)  Any restrictions on the substitution ofbeneficiaries;

(3)  The person or entity entitled to terminate thetuition savings agreement;

(4)  The period of time during which a beneficiary mayreceive benefits under the tuition savings agreement;

(5)  The terms and conditions under which money may bewholly or partially withdrawn from the program, including any reasonablecharges and fees that may be imposed for withdrawal; and

(6)  The probable tax consequences associated withcontributions to and distributions from accounts. [L 1999, c 81, pt of §2; am L2000, c 90, §3; am L 2009, c 91, §2]

 

Note

 

  The 2009 amendmentapplies to taxable years beginning after December 31, 2008. L 2009, c 91, §4.