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ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
AMENDED
family college savings program; treasurer
Purpose
Transfers the administration, powers and duties of the Arizona Commission on Postsecondary Education (ACPE) and Family College Savings Program Oversight Committee (Oversight Committee) relating to the Family College Savings Program (Program) and Program Trust Fund (Fund) to the State Treasurer and State Board of Investment (BOI). Establishes a Program Advisory Committee (Advisory Committee).
Background
ACPE must develop and implement the Program and administer and act as the sole trustee of the Fund (A.R.S. § 15-1873). ACPE implements the operation of the Program using one or more financial institutions to act as depositories of the Fund and managers of the Program. The Oversight Committee solicits proposals from financial institutions to act as depositories of Fund monies and managers of the Program. On recommendation of the Oversight Committee, ACPE selects a financial institution or institutions to implement the Program that demonstrates the most advantageous combination of certain statutory factors. The Program manager must take all actions required to keep the Program in compliance with statutory and federal requirements.
An account may be opened by any person who wishes to invest in the Fund
and save to pay qualified higher education expenses by satisfying certain
requirements. Money paid by account owners to the Fund for deposit in accounts
maintained at the financial institution must be paid to the financial
institution as an agent of the Fund. All monies paid by account owners to fund
accounts held at financial institutions must be paid in full (A.R.S.
§ 15-1874). Payments to the Fund for participation in the Program must be
made by account owners pursuant to tuition savings agreements. If there is a
distribution from an account to any person, the distribution must be reported
to the U.S. Internal Revenue Service to the extent required by federal law (A.R.S.
§ 15-1875).
Qualified higher education expenses include tuition, fees, books, supplies, room and board required for a designated beneficiary to enroll or attend an eligible educational institution and other authorized expenses incurred in connection with enrolling or attending an eligible educational institution (A.R.S. § 15-1871).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Transfers, from ACPE to the State Treasurer, authorities, duties and oversight relating to the Program, including:
a) adopting rules, guidelines and procedures to develop and implement the Program;
b) retaining professional services;
c) seeking rules and other guidance from the U.S. Department of the Treasury and the U.S. Internal Revenue Service;
d) making changes to the Program necessary for participants to obtain federal income tax benefits;
e) interpreting statutory requirements broadly in light of its purpose and objectives;
f) charging, imposing and collecting administrative fees and service charges in connection with the Program;
g) negotiating and selecting a financial institution or institutions to act as a depository and manager of the Program;
h) maintaining the Program on behalf of Arizona, as required by federal law;
i) entering into tuition savings agreements with account owners;
j) adopting application form requirements and fees and minimum contribution requirements for applicants; and
k) maintaining annual reporting requirements.
2. Allows the State Treasurer, on approval of the BOI, to use certain existing investment funds when selecting financial institutions to act as a depository and manager of the Program.
3. Transfers, from ACPE to the State Treasurer, administration of the Fund and related duties, including:
a) designating trust interests in the Fund for each account owner;
b) making transfers from the trust account to the operating account as necessary for the payment of obligations, operating expenses and administrative costs; and
c) depositing and investing monies or other amounts in the Fund with financial institutions.
4. Requires the BOI, rather than ACPE, to:
a) act as trustee of the Fund;
b) review quarterly reports of financial institutions and certify that the balance of all qualified tuition programs do not exceed certain caps; and
c) terminate a contract with a financial institution for good cause, on recommendation from the State Treasurer.
5. Requires the State Treasurer, rather than ACPE, to:
a) implement the operation of the Program using one or more financial institutions to act as depositories of the Fund and managers of the Program;
b) enter into a contract, on approval of the BOI, with a financial institution to serve as Program manager and depository; and
c) take custody of accounts held at the financial institution if a contract is terminated and transfer the accounts to another financial institution
6. Repeals the Oversight Committee.
7. Requires the State Treasurer, rather than the Oversight Committee, to solicit proposals from financial institutions to act as the depositories of Fund monies.
8. Requires the BOI, on recommendation from the State Treasurer, to select the financial institution or institutions to implement the Program from among the bidding financial institutions based on outlined criteria.
9. Requires the BOI to approve the contract entered into between the State Treasurer and the financial institution serving as Program manager and depository.
10. Allows the BOI, rather than the Oversight Committee, to adopt rules to implement requirements related to the Program and Fund.
11. Specifies that the BOI is immune from personal liability relating to actions taken in good faith within the scope of the BOI's authority.
12. Allows the BOI, rather than ACPE, to select more than one financial institution and investment for the Program if certain conditions are met, including a determination by the State Treasurer that the choice of instrument vehicles is in the best interest of college savers.
13. Requires the Program manager to provide the State Treasurer, rather than ACPE, with:
a) information necessary to prepare statutorily required statements; and
b) access to books and records necessary to determine compliance with the contract.
14. Requires the BOI, on recommendation from the State Treasurer, to adopt rules to prevent contributions on behalf of a designated beneficiary in excess of those necessary to pay qualified higher education expenses and that include specified requirements.
15. Allows the BOI, if the State Treasurer determines not to renew the appointment of a financial institution as Program manager, to take actions consistent with its duties as the Fund trustee.
16. Specifies that all social security numbers, addresses and telephone numbers that come into possession of the State Treasurer relating to the Program are confidential and not public records.
17. Specifies that all administrative matters, contracts and judicial or quasi-judicial actions of ACPE relating to the Program transfer retain the same status with the State Treasurer.
18. Asserts that all rules adopted by ACPE relating to the Program remain in full force until superseded by rules adopted by the BOI or State Treasurer.
19. Transfers, from ACPE to the State Treasurer, all personnel, property, records, data, investigative findings, obligations and appropriated monies of ACPE related to the Program.
20. Requires the ACPE to cooperate and coordinate with the State Treasurer to ensure the successful transition of the Program.
21. Defines BOI and State Treasurer.
Advisory Committee
22. Requires the State Treasurer to appoint an Advisory Committee to assist the State Treasurer in promoting and raising awareness of the Program to residents of the state.
23. Requires the Advisory Committee promotion to have an emphasis on increasing access to the Program among economically disadvantaged, minority and underrepresented student populations.
24. Outlines Advisory Committee membership to include:
a) the State Treasurer, or a designee, to serve as Chair;
b) two members representing community college districts, one representing a community college district in a county with a population over 500,000 and one representing a county with a population below 500,000;
c) one member representing a university under the jurisdiction of the Arizona Board of Regents;
d) one member representing an accredited private educational institution offering associate, baccalaureate or other higher education degrees;
e) one member representing an accredited private educational institution offering private vocational training;
f) one member who is a teacher currently providing classroom instruction;
g) one member who represents a federally-recognized Indian tribe in Arizona; and
h) three public members that are residents of Arizona.
25. Requires the Advisory Committee to:
a) assist and make recommendations to the State Treasurer regarding promotional and informational activities relating to the Program; and
b) meet at least quarterly.
26. Specifies that a majority of membership of the Advisory Committee constitutes a quorum.
27. Specifies that Advisory Committee members are not eligible to receive compensation or reimbursement for expenses.
28. Requires the State Treasurer's Office to provide necessary staff services to the Advisory Committee.
29. Terminates the Advisory Committee on July 1, 2028.
Miscellaneous
30. Makes technical and conforming changes.
31. Becomes effective on October 1, 2020.
Amendments Adopted by Committee
1. Allows the State Treasurer, on approval of the BOI, to use certain existing investment funds when selecting financial institutions to act as a depository and manager of the Program.
2. Modifies the definition of financial institution to include the State Treasurer's Office.
3. Removes the requirement that the State Treasurer act as trustee of the Fund.
Senate Action
GOV 2/10/20 DPA 5-0-2
Prepared by Senate Research
February 12, 2020
MH/gs/kja