S01223 Summary:

BILL NOS01223A
 
SAME ASSAME AS A06590-A
 
SPONSORCARLUCCI
 
COSPNSRKLEIN, AVELLA, SAVINO, VALESKY
 
MLTSPNSR
 
Add §355-d, Ed L; add §78-c, St Fin L; amd §5205, CPLR; amd §612, Tax L
 
Establishes the New York state pre-paid tuition plan by which a person may contribute to an account for the pre-payment of college tuition, tax free.
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S01223 Actions:

BILL NOS01223A
 
01/09/2015REFERRED TO HIGHER EDUCATION
01/06/2016REFERRED TO HIGHER EDUCATION
01/14/2016AMEND AND RECOMMIT TO HIGHER EDUCATION
01/14/2016PRINT NUMBER 1223A
05/17/2016REPORTED AND COMMITTED TO FINANCE
06/01/2016COMMITTEE DISCHARGED AND COMMITTED TO RULES
06/01/2016ORDERED TO THIRD READING CAL.1210
06/17/2016RECOMMITTED TO RULES
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S01223 Committee Votes:

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S01223 Floor Votes:

There are no votes for this bill in this legislative session.
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S01223 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         1223--A
 
                               2015-2016 Regular Sessions
 
                    IN SENATE
 
                                     January 9, 2015
                                       ___________
 
        Introduced  by  Sens.  CARLUCCI,  KLEIN, AVELLA, SAVINO, VALESKY -- read
          twice and ordered printed, and when printed to  be  committed  to  the
          Committee on Higher Education -- recommitted to the Committee on High-
          er  Education  in  accordance  with Senate Rule 6, sec. 8 -- committee
          discharged, bill amended, ordered reprinted as amended and recommitted
          to said committee
 
        AN ACT to amend the education law, the  state  finance  law,  the  civil
          practice  law  and  rules and the tax law, in relation to establishing
          the New York state pre-paid tuition plan
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1. The education law is amended by adding a new section 355-d
     2  to read as follows:
     3    § 355-d. "New York state pre-paid tuition plan". 1. Definitions.   For
     4  the purposes of this section, the following terms shall have the follow-
     5  ing meanings:
     6    a.  "Account"  or  "pre-paid tuition account" shall mean an individual
     7  pre-paid tuition account established in accordance with  the  provisions
     8  of this section.
     9    b.  "Account  owner"  shall  mean  a person who enters into a pre-paid
    10  tuition agreement pursuant to the provisions of this article,  including
    11  a  person  who  enters into such an agreement as a fiduciary or agent on
    12  behalf of a trust, estate, partnership, association, company  or  corpo-
    13  ration.  The account owner may also be the designated beneficiary of the
    14  account.
    15    c. "City university" shall mean the city university of New York.
    16    d. "Comptroller" shall mean the state comptroller.
    17    e. "Designated beneficiary" shall mean, with respect to an account  or
    18  accounts,  the  individual  designated  as  the individual whose tuition
    19  expenses are expected to be paid from the account or accounts.

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD03418-02-6

        S. 1223--A                          2
 
     1    f. "Eligible educational institution" shall mean  any  institution  of
     2  higher  education  defined  as  an  eligible  educational institution in
     3  section 529(e)(5) of the Internal Revenue Code of 1986, as amended.
     4    g.  "Financial  organization" shall mean an organization authorized to
     5  do business in the state and (i) which is an authorized fiduciary to act
     6  as a trustee pursuant to the provisions of an act of  congress  entitled
     7  "Employee Retirement Income Security Act of 1974" as such provisions may
     8  be  amended  from time to time, or an insurance company; and (ii) (A) is
     9  licensed or chartered by the department of financial  services,  (B)  is
    10  chartered  by an agency of the federal government, (C) is subject to the
    11  jurisdiction and regulation of the securities and exchange commission of
    12  the federal government, or (D) is any other entity otherwise  authorized
    13  to  act  in this state as a trustee pursuant to the provisions of an act
    14  of congress entitled "Employee Retirement Income Security Act  of  1974"
    15  as such provisions may be amended from time to time.
    16    h. "Member of family" shall mean a family member as defined in section
    17  529 of the Internal Revenue Code of 1986, as amended.
    18    i.  "Nonqualified withdrawal" shall mean a withdrawal from an account,
    19  but shall not mean:
    20    (i) a qualified withdrawal; (ii) a withdrawal made as  the  result  of
    21  the  death or disability of the designated beneficiary of an account; or
    22  (iii) a withdrawal made on the account of a scholarship.
    23    j. "Plan" shall mean the New York state pre-paid tuition  plan  estab-
    24  lished pursuant to this section.
    25    k.  "Plan manager" shall mean a financial organization selected by the
    26  comptroller to act as a depository and manager of the plan.
    27    l. "Qualified withdrawal" shall mean a withdrawal from an  account  to
    28  pay the qualified tuition expenses of the designated beneficiary.
    29    m. "State university" shall mean the state university of New York.
    30    n.  "Tuition"  shall mean any mandatory charges imposed by an eligible
    31  educational institution for attendance for an academic year as a  condi-
    32  tion  of  enrollment.  Such term shall not include laboratory fees, room
    33  and board, or other similar fees and charges.
    34    o. "Tuition savings agreement" shall mean  an  agreement  between  the
    35  comptroller or a financial organization and an account owner.
    36    2.  Powers and duties of the comptroller. The comptroller shall admin-
    37  ister the plan and shall develop and implement programs for the  prepay-
    38  ment of undergraduate tuition, at a fixed, guaranteed level for applica-
    39  tion  at  any  two-year or four-year eligible educational institution as
    40  defined in section 529 of the Internal Revenue Code of 1986, as amended,
    41  or other applicable federal law. In addition, the comptroller shall have
    42  the power and duty to:
    43    a. develop and implement the plan in  a  manner  consistent  with  the
    44  provisions  of this section through rules and regulations established in
    45  accordance with the state administrative procedure act;
    46    b. make arrangements with the state university,  city  university  and
    47  any  eligible  educational  institution  located  within the state which
    48  chooses to participate, to fulfill  obligations  under  prepaid  tuition
    49  contracts  for two-year or four-year degree programs, including, but not
    50  limited to, payment from the plan of the then actual in-state undergrad-
    51  uate tuition cost on behalf of a  qualified  beneficiary  of  a  prepaid
    52  tuition  contract to the institution in which such beneficiary is admit-
    53  ted and enrolled, and application of such benefits towards graduate-lev-
    54  el tuition and towards tuition costs at such eligible educational insti-
    55  tutions, as that term is defined  in  26  U.S.C.  §  529  or  any  other
    56  applicable  section of the Internal Revenue Code of 1986, as amended, as

        S. 1223--A                          3
 
     1  determined by the comptroller  in  his  or  her  sole  discretion.  Such
     2  arrangements  must  include  plans  that allow an account owner to enter
     3  into contracts in which he or she can purchase tuition  in  installments
     4  equal  to  the  cost  of  semesters as a full time student, but can also
     5  include plans that would allow for the prepayment of tuition for tuition
     6  credit hours;
     7    c. engage the services of consultants on a contract basis for  render-
     8  ing professional and technical assistance and advice;
     9    d.  seek  rulings and other guidance from the United States department
    10  of Treasury and the Internal Revenue Service relating to the program;
    11    e. make changes to the plan required for the  participants  to  obtain
    12  the  federal income tax benefits or treatment provided by section 529 of
    13  the Internal Revenue Code of 1986, as amended, or any similar  successor
    14  legislation;
    15    f.  charge, impose and collect administrative fees and service charges
    16  in connection with any agreement, contract or  transaction  relating  to
    17  the plan;
    18    g. develop marketing plans and promotion material;
    19    h.  establish  the methods by which the funds held in such accounts be
    20  disbursed;
    21    i. establish the method by which funds shall be allocated to  pay  for
    22  administrative costs; and
    23    j.  do  all  things  necessary and proper to carry out the purposes of
    24  this section.
    25    3. Plan requirements. Every pre-paid tuition account shall comply with
    26  the provisions of this section.
    27    a. A pre-paid tuition account may be opened by any person who  desires
    28  to  enter  into  a  contract  for  pre-payment of tuition expenses at an
    29  institution of the state university, the city university or any  partic-
    30  ipating eligible educational institution. An account owner may designate
    31  another  person  as  successor  owner of the account in the event of the
    32  death of the original account owner. Such person who opens an account or
    33  any successor owner shall be considered the account owner.
    34    b. An application for such account shall be in the form prescribed  by
    35  the comptroller and contain the following:
    36    (i) the name, address and social security number or employer identifi-
    37  cation number of the account owner;
    38    (ii) the designation of a designated beneficiary;
    39    (iii)  the  name, address and social security number of the designated
    40  beneficiary; and
    41    (iv) such other information as the comptroller may require.
    42    c. The comptroller may establish a nominal fee for such application.
    43    d. Any person, including the account owner, may make contributions  to
    44  an account after the account is opened.
    45    e. Contributions to accounts may be made only in cash.
    46    f.  Four  years  must  elapse  between the establishment of a pre-paid
    47  tuition account and the time the first qualified withdrawal is made  for
    48  the payment of tuition expenses.
    49    g.  An  account  owner may withdraw all or part of the balance from an
    50  account on sixty days notice or such shorter period as may be authorized
    51  under rules governing the plan. Such rules shall include provisions that
    52  will generally enable the determination as to whether a withdrawal is  a
    53  nonqualified withdrawal or a qualified withdrawal.
    54    h.  An  account  owner  may  change  the  designated beneficiary of an
    55  account to an individual who is a member of  the  family  of  the  prior

        S. 1223--A                          4
 
     1  designated  beneficiary in accordance with procedures established by the
     2  comptroller.
     3    i.  An  account  owner  may transfer all or a portion of an account to
     4  another family tuition account, the subsequent designated beneficiary of
     5  which is a member of the family as defined in section 529 of the  Inter-
     6  nal Revenue Code of 1986, as amended.
     7    j.  The  plan  shall  provide  separate accounting for each designated
     8  beneficiary.
     9    k. No account owner or designated beneficiary of any account shall  be
    10  permitted to direct the investment of any contributions to an account or
    11  the earnings thereon.
    12    l.  Neither an account owner nor a designated beneficiary shall use an
    13  interest in an account as security for a loan. Any pledge of an interest
    14  in an account shall be of no force and effect.
    15    m. (i) If there is any distribution from an account to any  individual
    16  or  for  the  benefit  of  any  individual  during a calendar year, such
    17  distribution shall be reported to the Internal Revenue Service  and  the
    18  account  owner,  the  designated  beneficiary  or the distributee to the
    19  extent required by federal law or regulation.
    20    (ii) Statements shall be provided to each account owner at least  once
    21  each  year within sixty days after the end of the twelve month period to
    22  which they relate. The statement shall identify the  contributions  made
    23  during  a preceding twelve month period, the total contributions made to
    24  the account through the end of the period, the value of the  account  at
    25  the  end  of  such period, distributions made during such period and any
    26  other information that the comptroller shall require to be  reported  to
    27  the account owner.
    28    (iii)  Statements  and  information  relating  to  accounts  shall  be
    29  prepared and filed to the extent required by federal and state tax law.
    30    n. (i)  A  local  government  or  organization  described  in  section
    31  501(c)(3) of the Internal Revenue Code of 1986, as amended, may open and
    32  become  the account owner of an account to fund scholarships for persons
    33  whose identity will be determined upon disbursement.
    34    (ii) In the case of any account opened pursuant to paragraph a of this
    35  subdivision the requirement set forth in this subdivision that a  desig-
    36  nated  beneficiary  be  designated  when  an account is opened shall not
    37  apply and each individual who receives an interest in such account as  a
    38  scholarship shall be treated as a designated beneficiary with respect to
    39  such interest.
    40    o. An annual fee may be imposed upon the account owner for the mainte-
    41  nance of the account.
    42    p.  The  plan  shall  disclose the following information in writing to
    43  each account owner and prospective account owner of a  pre-paid  tuition
    44  account:
    45    (i)  the  terms  and  conditions  for  purchasing  a  pre-paid tuition
    46  account;
    47    (ii) any restrictions on the substitution of beneficiaries;
    48    (iii) the person or entity entitled to terminate the tuition  pre-pay-
    49  ment agreement;
    50    (iv)  the  period of time during which a beneficiary may receive bene-
    51  fits under the tuition pre-payment agreement;
    52    (v) the terms and conditions  under  which  money  may  be  wholly  or
    53  partially  withdrawn  from  the plan, including, but not limited to, any
    54  reasonable charges and fees that may be imposed for withdrawal;
    55    (vi) the probable tax consequences associated  with  contributions  to
    56  and distributions from accounts; and

        S. 1223--A                          5
 
     1    (vii)  all  other  right  and obligations pursuant to pre-paid tuition
     2  agreements, and any other terms, conditions and provisions deemed neces-
     3  sary and appropriate by the comptroller pursuant to this subdivision.
     4    q.  Pre-paid  tuition  savings  agreements shall be subject to section
     5  fourteen-c of the banking law  and  the  "truth-in-savings"  regulations
     6  promulgated thereunder.
     7    r.  Nothing  in this article or in any pre-paid tuition savings agree-
     8  ment entered into pursuant to this article shall be construed as a guar-
     9  antee by the state or any college that a beneficiary will be admitted to
    10  a college or university, or, upon admission to a college will be permit-
    11  ted to continue to attend or will receive a degree  from  a  college  or
    12  university.
    13    4.  State  guarantee. a. Nothing in this section shall establish or be
    14  deemed to establish any obligation of the state, the comptroller or  any
    15  agency  or instrumentality of the state to guarantee any benefits to any
    16  account owner or designated beneficiary.
    17    b. Notwithstanding the provisions of subdivision one of this  section,
    18  in  order  to  ensure that the plan is able to meet its obligations, the
    19  governor shall include in the budget submitted pursuant to section twen-
    20  ty-two of the state finance law, an  appropriation  sufficient  for  the
    21  purpose  of  ensuring  that  the plan can meet its obligations. Any sums
    22  appropriated for such purpose shall be  transferred  to  the  plan.  All
    23  amounts paid into the plan pursuant to this subdivision shall constitute
    24  and  be  accounted for as advances by the state to the plan and, subject
    25  to the rights of the plan's contract holders, shall  be  repaid  to  the
    26  state  without  interest from available operating revenue of the plan in
    27  excess of amounts required for the payment of  the  obligations  of  the
    28  plan.  As  used in this section, "obligations of the plan" means amounts
    29  required for the payment of contract benefits or  other  obligations  of
    30  the  plan,  the  maintenance of the plan, and operating expenses for the
    31  current fiscal year.
    32    § 2. The state finance law is amended by adding a new section 78-c  to
    33  read as follows:
    34    §  78-c. New York state pre-paid tuition plan fund. 1. There is hereby
    35  established in the sole custody of the state comptroller a special  fund
    36  to  be  known  as  the  New  York  state pre-paid tuition plan fund. All
    37  payments from such fund shall be made in accordance with  section  three
    38  hundred fifty-five-d of the education law.
    39    2.  (a) The comptroller shall invest the assets of the fund in invest-
    40  ments authorized by article four-A of the retirement and social security
    41  law, provided however, that:
    42    (i) the provisions of paragraph (a) of subdivision two of section  one
    43  hundred  seventy-seven  of  the retirement and social security law shall
    44  not apply except for subparagraph  (ii)  of  such  paragraph;  and  (ii)
    45  notwithstanding  the  provisions  of  subdivision  seven  of section one
    46  hundred seventy-seven of the retirement and social security law  or  any
    47  other law to the contrary, the assets of the fund may be invested in any
    48  funding  agreement  issued in accordance with section three thousand two
    49  hundred twenty-two of the insurance law by  a  domestic  life  insurance
    50  company  or  a  foreign  life  insurance  company doing business in this
    51  state, subject to the following:
    52    (1) such a funding agreement may provide for a guaranteed minimum rate
    53  of return;
    54    (2) such a funding agreement may be allocated  as  either  a  separate
    55  account  or  a  general  account  of  the issuer, as the comptroller may
    56  decide;

        S. 1223--A                          6
 
     1    (3) total investments of the fund pursuant to this  paragraph  in  any
     2  funding  agreements  issued by a single life insurance company which are
     3  allocated as a general account of the issuer shall not,  in  the  aggre-
     4  gate, exceed three hundred fifty million dollars; and
     5    (4) no assets of the fund shall be invested in any such funding agree-
     6  ment  unless, at the time of such investment, the general obligations or
     7  financial strength of the issuer have received  either  the  highest  or
     8  second highest rating by two nationally recognized rating services or by
     9  one nationally recognized rating service in the event that only one such
    10  service rates such obligations.
    11    (b)  Fund  assets  shall  be kept separate and shall not be commingled
    12  with other assets. The comptroller may enter into contracts  to  provide
    13  for  investment  advice  and  management,  custodial  services and other
    14  professional services for the administration and investment of the plan.
    15  Administrative fees, costs and expenses, including investment  fees  and
    16  expenses, shall be paid from the assets of the fund.
    17    3.  The  comptroller shall provide for the administration of the trust
    18  fund,  including  maintaining  participant  records  and  accounts,  and
    19  providing  annual  audited  reports.  The  comptroller  may  enter  into
    20  contracts to provide administrative services and reporting.
    21    § 3. Section 5205 of the civil practice law and rules  is  amended  by
    22  adding a new subdivision (p) to read as follows:
    23    (p) Exemption for New York state pre-paid tuition plan monies.  Monies
    24  in  an account created pursuant to section three hundred fifty-five-d of
    25  the education law are exempt from application to the satisfaction  of  a
    26  money judgment as follows:
    27    1.  one  hundred  percent of monies in an account in connection with a
    28  pre-paid tuition plan established pursuant to such  article  is  exempt;
    29  and
    30    2.  one  hundred  percent  of monies in an account is exempt where the
    31  judgment debtor is the account owner or designated beneficiary  of  such
    32  account.
    33    For  the  purposes  of this subdivision, the terms "account owner" and
    34  "designated beneficiary" shall have the meanings  ascribed  to  them  in
    35  article fourteen-A of the education law.
    36    §  4. Paragraph 34 of subsection (b) of section 612 of the tax law, as
    37  amended by chapter 535 of the laws of 2000, subparagraph (B) as  amended
    38  by chapter 593 of the laws of 2003, is amended to read as follows:
    39    (34)  (A)  Excess  distributions received during the taxable year by a
    40  distributee of a family tuition account established under the  New  York
    41  state  college choice tuition savings program provided for under article
    42  fourteen-A of the education law, or of a pre-paid tuition account estab-
    43  lished pursuant to section three hundred fifty-five-d of  the  education
    44  law,  to the extent such excess distributions are deemed attributable to
    45  deductible contributions under paragraph thirty-two of subsection (c) of
    46  this section.
    47    (B) (i) The term "excess distributions" means distributions which  are
    48  not
    49    (I)  qualified  withdrawals  within the meaning of subdivision nine of
    50  section six hundred ninety-five-b or paragraph l of subdivision  one  of
    51  section three hundred fifty-five-d of the education law;
    52    (II)  withdrawals  made  as a result of the death or disability of the
    53  designated beneficiary within the meaning of subdivision ten of  section
    54  six  hundred  ninety-five-b or paragraph i of subdivision one of section
    55  three hundred fifty-five-d of such law; or

        S. 1223--A                          7
 
     1    (III) transfers described in paragraph b of subdivision six of section
     2  six hundred ninety-five-e of such law.
     3    (ii)  Excess  distributions shall be deemed attributable to deductible
     4  contributions to the extent the amount of any such excess  distribution,
     5  when  added  to  all  previous  excess  distributions  from the account,
     6  exceeds the aggregate of all nondeductible contributions to the account.
     7    § 5. Paragraphs 32 and 33 of subsection (c) of section 612 of the  tax
     8  law, paragraph 32 as amended by chapter 81 of the laws of 2008 and para-
     9  graph  33  as  added  by chapter 546 of the laws of 1997, are amended to
    10  read as follows:
    11    (32) Contributions made during the taxable year by an account owner to
    12  one or more family tuition accounts established under the New York state
    13  college choice tuition savings program provided for under article  four-
    14  teen-A,  or  to  a  pre-paid  tuition  account pursuant to section three
    15  hundred fifty-five-d of the education law, to the extent not  deductible
    16  or eligible for credit for federal income tax purposes, provided, howev-
    17  er, the exclusion provided for in this paragraph shall not exceed [five]
    18  ten  thousand  dollars  for  an individual or head of household, and for
    19  married couples who file joint tax returns, shall not exceed [ten] twen-
    20  ty thousand dollars; provided, further, that  such  exclusion  shall  be
    21  available only to the account owner and not to any other person.
    22    (33) Distributions from a family tuition account established under the
    23  New York state college choice tuition savings program provided for under
    24  article  fourteen-A,  or  from  a  pre-paid  tuition account pursuant to
    25  section three hundred fifty-five-d of the education law, to  the  extent
    26  includible in gross income for federal income tax purposes.
    27    § 6. This act shall take effect immediately and shall apply to taxable
    28  years commencing after December 31, 2016.
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