STATE OF NEW YORK
________________________________________________________________________
10627
IN ASSEMBLY
March 13, 2026
___________
Introduced by M. of A. HYNDMAN -- read once and referred to the Commit-
tee on Higher Education
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-f
2 to read as follows:
3 § 355-f. 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.
20 f. "Eligible educational institution" shall mean any institution of
21 higher education defined as an eligible educational institution in
22 section 529(e)(5) of the Internal Revenue Code of 1986, as amended.
23 g. "Financial organization" shall mean an organization authorized to
24 do business in the state and (i) which is an authorized fiduciary to act
25 as a trustee pursuant to the provisions of an act of congress entitled
26 "Employee Retirement Income Security Act of 1974" as such provisions may
27 be amended from time to time, or an insurance company; and (ii) (A) is
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD03784-03-6
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1 licensed or chartered by the department of financial services, (B) is
2 chartered by an agency of the federal government, (C) is subject to the
3 jurisdiction and regulation of the securities and exchange commission of
4 the federal government, or (D) is any other entity otherwise authorized
5 to act in this state as a trustee pursuant to the provisions of an act
6 of congress entitled "Employee Retirement Income Security Act of 1974"
7 as such provisions may be amended from time to time.
8 h. "Member of family" shall mean a family member as defined in section
9 529 of the Internal Revenue Code of 1986, as amended.
10 i. "Nonqualified withdrawal" shall mean a withdrawal from an account,
11 but shall not mean:
12 (i) a qualified withdrawal; (ii) a withdrawal made as the result of
13 the death or disability of the designated beneficiary of an account; or
14 (iii) a withdrawal made on the account of a scholarship.
15 j. "Plan" shall mean the New York state pre-paid tuition plan estab-
16 lished pursuant to this section.
17 k. "Plan manager" shall mean a financial organization selected by the
18 comptroller to act as a depository and manager of the plan.
19 l. "Qualified withdrawal" shall mean a withdrawal from an account to
20 pay the qualified tuition expenses of the designated beneficiary.
21 m. "State university" shall mean the state university of New York.
22 n. "Tuition" shall mean any mandatory charges imposed by an eligible
23 educational institution for attendance for an academic year as a condi-
24 tion of enrollment. Such term shall not include laboratory fees, room
25 and board, or other similar fees and charges.
26 o. "Tuition savings agreement" shall mean an agreement between the
27 comptroller or a financial organization and an account owner.
28 2. Powers and duties of the comptroller. The comptroller shall admin-
29 ister the plan and shall develop and implement programs for the pre-pay-
30 ment of undergraduate tuition, at a fixed, guaranteed level for applica-
31 tion at any two-year or four-year eligible educational institution as
32 defined in section 529 of the Internal Revenue Code of 1986, as amended,
33 or other applicable federal law. In addition, the comptroller shall have
34 the power and duty to:
35 a. develop and implement the plan in a manner consistent with the
36 provisions of this section through rules and regulations established in
37 accordance with the state administrative procedure act;
38 b. make arrangements with the state university, city university and
39 any eligible educational institution located within the state which
40 chooses to participate, to fulfill obligations under pre-paid tuition
41 contracts for two-year or four-year degree programs, including, but not
42 limited to, payment from the plan of the then actual in-state undergrad-
43 uate tuition cost on behalf of a qualified beneficiary of a pre-paid
44 tuition contract to the institution in which such beneficiary is admit-
45 ted and enrolled, and application of such benefits towards graduate-lev-
46 el tuition and towards tuition costs at such eligible educational insti-
47 tutions, as that term is defined in 26 U.S.C. § 529 or any other
48 applicable section of the Internal Revenue Code of 1986, as amended, as
49 determined by the comptroller in their sole discretion. Such arrange-
50 ments must include plans that allow an account owner to enter into
51 contracts in which such owner can purchase tuition in installments equal
52 to the cost of semesters as a full time student, but can also include
53 plans that would allow for the pre-payment of tuition for tuition credit
54 hours;
55 c. engage the services of consultants on a contract basis for render-
56 ing professional and technical assistance and advice;
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1 d. seek rulings and other guidance from the United States department
2 of Treasury and the Internal Revenue Service relating to the program;
3 e. make changes to the plan required for the participants to obtain
4 the federal income tax benefits or treatment provided by section 529 of
5 the Internal Revenue Code of 1986, as amended, or any similar successor
6 legislation;
7 f. charge, impose and collect administrative fees and service charges
8 in connection with any agreement, contract or transaction relating to
9 the plan;
10 g. develop marketing plans and promotion material;
11 h. establish the methods by which the funds held in such accounts be
12 disbursed;
13 i. establish the method by which funds shall be allocated to pay for
14 administrative costs; and
15 j. do all things necessary and proper to carry out the purposes of
16 this section.
17 3. Plan requirements. Every pre-paid tuition account shall comply with
18 the provisions of this section.
19 a. A pre-paid tuition account may be opened by any person who desires
20 to enter into a contract for pre-payment of tuition expenses at an
21 institution of the state university, the city university or any partic-
22 ipating eligible educational institution. An account owner may designate
23 another person as successor owner of the account in the event of the
24 death of the original account owner. Such person who opens an account or
25 any successor owner shall be considered the account owner.
26 b. An application for such account shall be in the form prescribed by
27 the comptroller and contain the following:
28 (i) the name, address and social security number or employer identifi-
29 cation number of the account owner;
30 (ii) the designation of a designated beneficiary;
31 (iii) the name, address and social security number of the designated
32 beneficiary; and
33 (iv) such other information as the comptroller may require.
34 c. The comptroller may establish a nominal fee for such application.
35 d. Any person, including the account owner, may make contributions to
36 an account after the account is opened.
37 e. Contributions to accounts may be made only in cash.
38 f. Four years must elapse between the establishment of a pre-paid
39 tuition account and the time the first qualified withdrawal is made for
40 the payment of tuition expenses.
41 g. An account owner may withdraw all or part of the balance from an
42 account on sixty days notice or such shorter period as may be authorized
43 under rules governing the plan. Such rules shall include provisions that
44 will generally enable the determination as to whether a withdrawal is a
45 nonqualified withdrawal or a qualified withdrawal.
46 h. An account owner may change the designated beneficiary of an
47 account to an individual who is a member of the family of the prior
48 designated beneficiary in accordance with procedures established by the
49 comptroller.
50 i. An account owner may transfer all or a portion of an account to
51 another family tuition account, the subsequent designated beneficiary of
52 which is a member of the family as defined in section 529 of the Inter-
53 nal Revenue Code of 1986, as amended.
54 j. The plan shall provide separate accounting for each designated
55 beneficiary.
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1 k. No account owner or designated beneficiary of any account shall be
2 permitted to direct the investment of any contributions to an account or
3 the earnings thereon.
4 l. Neither an account owner nor a designated beneficiary shall use an
5 interest in an account as security for a loan. Any pledge of an interest
6 in an account shall be of no force and effect.
7 m. (i) If there is any distribution from an account to any individual
8 or for the benefit of any individual during a calendar year, such
9 distribution shall be reported to the Internal Revenue Service and the
10 account owner, the designated beneficiary or the distributee to the
11 extent required by federal law or regulation.
12 (ii) Statements shall be provided to each account owner at least once
13 each year within sixty days after the end of the twelve month period to
14 which they relate. The statement shall identify the contributions made
15 during a preceding twelve month period, the total contributions made to
16 the account through the end of the period, the value of the account at
17 the end of such period, distributions made during such period and any
18 other information that the comptroller shall require to be reported to
19 the account owner.
20 (iii) Statements and information relating to accounts shall be
21 prepared and filed to the extent required by federal and state tax law.
22 n. (i) A local government or organization described in section
23 501(c)(3) of the Internal Revenue Code of 1986, as amended, may open and
24 become the account owner of an account to fund scholarships for persons
25 whose identity will be determined upon disbursement.
26 (ii) In the case of any account opened pursuant to paragraph a of this
27 subdivision the requirement set forth in this subdivision that a desig-
28 nated beneficiary be designated when an account is opened shall not
29 apply and each individual who receives an interest in such account as a
30 scholarship shall be treated as a designated beneficiary with respect to
31 such interest.
32 o. An annual fee may be imposed upon the account owner for the mainte-
33 nance of the account.
34 p. The plan shall disclose the following information in writing to
35 each account owner and prospective account owner of a pre-paid tuition
36 account:
37 (i) the terms and conditions for purchasing a pre-paid tuition
38 account;
39 (ii) any restrictions on the substitution of beneficiaries;
40 (iii) the person or entity entitled to terminate the tuition pre-pay-
41 ment agreement;
42 (iv) the period of time during which a beneficiary may receive bene-
43 fits under the tuition pre-payment agreement;
44 (v) the terms and conditions under which money may be wholly or
45 partially withdrawn from the plan, including, but not limited to, any
46 reasonable charges and fees that may be imposed for withdrawal;
47 (vi) the probable tax consequences associated with contributions to
48 and distributions from accounts; and
49 (vii) all other rights and obligations pursuant to pre-paid tuition
50 agreements, and any other terms, conditions and provisions deemed neces-
51 sary and appropriate by the comptroller pursuant to this subdivision.
52 q. Pre-paid tuition savings agreements shall be subject to section
53 fourteen-c of the banking law and the "truth-in-savings" regulations
54 promulgated thereunder.
55 r. Nothing in this article or in any pre-paid tuition savings agree-
56 ment entered into pursuant to this article shall be construed as a guar-
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1 antee by the state or any college that a beneficiary will be admitted to
2 a college or university, or, upon admission to a college will be permit-
3 ted to continue to attend or will receive a degree from a college or
4 university.
5 4. State guarantee. a. Nothing in this section shall establish or be
6 deemed to establish any obligation of the state, the comptroller or any
7 agency or instrumentality of the state to guarantee any benefits to any
8 account owner or designated beneficiary.
9 b. Notwithstanding the provisions of subdivision one of this section,
10 in order to ensure that the plan is able to meet its obligations, the
11 governor shall include in the budget submitted pursuant to section twen-
12 ty-two of the state finance law, an appropriation sufficient for the
13 purpose of ensuring that the plan can meet its obligations. Any sums
14 appropriated for such purpose shall be transferred to the plan. All
15 amounts paid into the plan pursuant to this subdivision shall constitute
16 and be accounted for as advances by the state to the plan and, subject
17 to the rights of the plan's contract holders, shall be repaid to the
18 state without interest from available operating revenue of the plan in
19 excess of amounts required for the payment of the obligations of the
20 plan. As used in this section, "obligations of the plan" means amounts
21 required for the payment of contract benefits or other obligations of
22 the plan, the maintenance of the plan, and operating expenses for the
23 current fiscal year.
24 § 2. The state finance law is amended by adding a new section 78-c to
25 read as follows:
26 § 78-c. New York state pre-paid tuition plan fund. 1. There is hereby
27 established in the sole custody of the state comptroller a special fund
28 to be known as the New York state pre-paid tuition plan fund. All
29 payments from such fund shall be made in accordance with section three
30 hundred fifty-five-f of the education law.
31 2. (a) The comptroller shall invest the assets of the fund in invest-
32 ments authorized by article four-A of the retirement and social security
33 law, provided however, that:
34 (i) the provisions of paragraph (a) of subdivision two of section one
35 hundred seventy-seven of the retirement and social security law shall
36 not apply except for subparagraph (ii) of such paragraph; and (ii)
37 notwithstanding the provisions of subdivision seven of section one
38 hundred seventy-seven of the retirement and social security law or any
39 other law to the contrary, the assets of the fund may be invested in any
40 funding agreement issued in accordance with section three thousand two
41 hundred twenty-two of the insurance law by a domestic life insurance
42 company or a foreign life insurance company doing business in this
43 state, subject to the following:
44 (1) such a funding agreement may provide for a guaranteed minimum rate
45 of return;
46 (2) such a funding agreement may be allocated as either a separate
47 account or a general account of the issuer, as the comptroller may
48 decide;
49 (3) total investments of the fund pursuant to this paragraph in any
50 funding agreements issued by a single life insurance company which are
51 allocated as a general account of the issuer shall not, in the aggre-
52 gate, exceed three hundred fifty million dollars; and
53 (4) no assets of the fund shall be invested in any such funding agree-
54 ment unless, at the time of such investment, the general obligations or
55 financial strength of the issuer have received either the highest or
56 second highest rating by two nationally recognized rating services or by
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1 one nationally recognized rating service in the event that only one such
2 service rates such obligations.
3 (b) Fund assets shall be kept separate and shall not be commingled
4 with other assets. The comptroller may enter into contracts to provide
5 for investment advice and management, custodial services and other
6 professional services for the administration and investment of the plan.
7 Administrative fees, costs and expenses, including investment fees and
8 expenses, shall be paid from the assets of the fund.
9 3. The comptroller shall provide for the administration of the trust
10 fund, including maintaining participant records and accounts, and
11 providing annual audited reports. The comptroller may enter into
12 contracts to provide administrative services and reporting.
13 § 3. Section 5205 of the civil practice law and rules is amended by
14 adding a new subdivision (q) to read as follows:
15 (q) Exemption for New York state pre-paid tuition plan monies. Monies
16 in an account created pursuant to section three hundred fifty-five-f of
17 the education law are exempt from application to the satisfaction of a
18 money judgment as follows:
19 1. one hundred percent of monies in an account in connection with a
20 pre-paid tuition plan established pursuant to such article is exempt;
21 and
22 2. one hundred percent of monies in an account is exempt where the
23 judgment debtor is the account owner or designated beneficiary of such
24 account.
25 For the purposes of this subdivision, the terms "account owner" and
26 "designated beneficiary" shall have the meanings ascribed to them in
27 article fourteen-A of the education law.
28 § 4. Paragraph 34 of subsection (b) of section 612 of the tax law, as
29 amended by chapter 535 of the laws of 2000, subparagraph (B) as amended
30 by chapter 593 of the laws of 2003, is amended to read as follows:
31 (34) (A) Excess distributions received during the taxable year by a
32 distributee of a family tuition account established under the New York
33 state college choice tuition savings program provided for under article
34 fourteen-A of the education law, or of a pre-paid tuition account estab-
35 lished pursuant to section three hundred fifty-five-f of the education
36 law, to the extent such excess distributions are deemed attributable to
37 deductible contributions under paragraph thirty-two of subsection (c) of
38 this section.
39 (B) (i) The term "excess distributions" means distributions which are
40 not
41 (I) qualified withdrawals within the meaning of subdivision nine of
42 section six hundred ninety-five-b or paragraph l of subdivision one of
43 section three hundred fifty-five-f of the education law;
44 (II) withdrawals made as a result of the death or disability of the
45 designated beneficiary within the meaning of subdivision ten of section
46 six hundred ninety-five-b or paragraph i of subdivision one of section
47 three hundred fifty-five-f of such law; or
48 (III) transfers described in paragraph b of subdivision six of section
49 six hundred ninety-five-e of such law.
50 (ii) Excess distributions shall be deemed attributable to deductible
51 contributions to the extent the amount of any such excess distribution,
52 when added to all previous excess distributions from the account,
53 exceeds the aggregate of all nondeductible contributions to the account.
54 § 5. Paragraphs 32 and 33 of subsection (c) of section 612 of the tax
55 law, paragraph 32 as amended by chapter 81 of the laws of 2008 and para-
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1 graph 33 as added by chapter 546 of the laws of 1997, are amended to
2 read as follows:
3 (32) Contributions made during the taxable year by an account owner to
4 one or more family tuition accounts established under the New York state
5 college choice tuition savings program provided for under article four-
6 teen-A, or to a pre-paid tuition account pursuant to section three
7 hundred fifty-five-f of the education law, to the extent not deductible
8 or eligible for credit for federal income tax purposes, provided, howev-
9 er, the exclusion provided for in this paragraph shall not exceed [five]
10 ten thousand dollars for an individual or head of household, and for
11 married couples who file joint tax returns, shall not exceed [ten] twen-
12 ty thousand dollars; provided, further, that such exclusion shall be
13 available only to the account owner and not to any other person.
14 (33) Distributions from a family tuition account established under the
15 New York state college choice tuition savings program provided for under
16 article fourteen-A, or from a pre-paid tuition account pursuant to
17 section three hundred fifty-five-f of the education law, to the extent
18 includible in gross income for federal income tax purposes.
19 § 6. This act shall take effect immediately and shall apply to taxable
20 years commencing after the thirty-first of December next succeeding the
21 date on which it shall have become a law.
