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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
family college savings program; treasurer
Purpose
Transfers administration of the Family College Savings Program (Program) and the Family College Savings Program Trust Fund (Trust Fund) from the Arizona Commission for Postsecondary Education (ACPE) to the State Treasurer. Expands the definition of qualified higher education expenses to conform to the federal Internal Revenue Code (IRC).
Background
The ACPE administers the Program and Trust Fund to allow individuals to save for educational expenses for a designated beneficiary. Investments in Program accounts grow on a tax-deferred basis and can be withdrawn free of federal and state taxes if used for the designated beneficiary's qualified higher education expenses (Arizona 529 Plan and 26 U.S.C. § 529).
ACPE's administration of the Program includes: 1) developing and implementing the Program; 2) acting as trustee of the Trust Fund; 3) changing the program as necessary for participants to obtain tax benefits or treatment provided by federal law; and 4) selecting the financial institutions to act as depositories and managers of the Program (A.R.S. §§ 15-1872 and 15-1873).
Current statute defines qualified higher education expenses as a designated beneficiary's: 1) tuition, fees, books, supplies, room and board, and equipment required to enroll at or attend an eligible educational institution; and 2) special needs services expenses if the expenses meet federal requirements and are incurred in connection with enrollment or attendance (A.R.S. § 15-1871).
In December 2017, the Federal Tax Cuts & Jobs Act expanded the federal definition of qualified higher education expenses to include reference to withdrawals, up to $10,000 per year, used for tuition in connection with enrollment or attendance at an elementary or secondary public, private or religious school (H.R. 1, 115th Congress, 2017).
The fiscal impact to the state General Fund associated with this legislation is unknown at this time.
Provisions
Program Administration Transfer
1. Transfers, from the ACPE to the State Treasurer, authorities and duties relating to the administration of the Program including:
a) adopting rules, guidelines and procedures to develop and implement the Program;
b) retaining necessary professional services;
c) seeking rulings and guidance from the U.S. Department of the Treasury and the Internal Revenue Service;
d) changing the Program as necessary for participants to obtain federal income tax benefits or treatment and maintaining the Program;
e) interpreting Program-related statute;
f) charging, imposing and collecting administrative fees and service charges in connection with Program-related agreements, contracts or transactions;
g) entering into tuition savings agreements with account owners; and
h) prescribing the form of applications and setting minimum contributions.
2. Transfers, from the ACPE to the State Treasurer, administration of the Fund and related duties including:
a) acting as trustee of the Fund;
b) selecting and contracting with financial institutions to implement the Program and act as Fund depositories and Program managers;
c) transferring monies from the trust account to the operating account as necessary for immediate payment of obligations; and
d) adopting rules relating to excess contributions and certifying that program balances do not exceed maximum amounts upon review of financial institutions' quarterly reports.
3. Transfers, from the ACPE to the Office of the State Treasurer, the Family College Savings Program Oversight Committee (Committee) and the authority to appoint the Committee chairperson and vice-chairperson.
4. Transfers, from the ACPE to the State Treasurer, the annual reporting requirement.
Program Accounts
5. Expands the definition of qualified withdrawal to include account withdrawals for tuition less than $10,000 to enroll or attend an elementary or secondary public, private or religious school of the designated account beneficiary.
6. Expands the definition of qualified higher education expenses to include:
a) purchase of a computer, peripheral equipment, computer software, internet access and related services to be primarily used by the beneficiary when the beneficiary is enrolled at an eligible education institution and if the expenses meet the definition in section 529 of the IRC; and
b) tuition to enroll or attend an elementary or secondary public, private or religious school.
7. Allows, through December 31, 2025, up to $15,000 of an account to roll over to an Achieving a Better Life Experience Act Account on direction of an account owner.
Miscellaneous
8. Defines State Treasurer.
9. Modifies, from College Savings Plan to Family College Savings Program, the article heading for statutes relating to the Program.
10. Makes technical and conforming changes.
11. Becomes effective on the general effective date.
Prepared by Senate Research
February 14, 2019
JO/LB/gs