MISSISSIPPI LEGISLATURE

2000 Regular Session

To: Universities and Colleges; Appropriations

By: Senator(s) Hewes, Browning, Burton, Canon, Carmichael, Chamberlin, Chaney, Farris, Frazier, Gordon, Hamilton, Harden, Horhn, Hyde-Smith, Jackson, Johnson (38th), King, Lee, Little, Simmons, Smith, Thames, Walls, Williamson

AN ACT TO CREATE THE MISSISSIPPI AFFORDABLE COLLEGE SAVINGS (MACS) PROGRAM; TO RECONSTITUTE THE MISSISSIPPI PREPAID AFFORDABLE COLLEGE TUITION (MPACT) PROGRAM BOARD OF DIRECTORS AS THE "BOARD OF DIRECTORS OF THE COLLEGE SAVINGS PLANS OF MISSISSIPPI" AND TO AUTHORIZE THAT BOARD TO MANAGE BOTH THE MPACT AND MACS PROGRAMS; TO ESTABLISH A COLLEGE SAVINGS PLAN FOR QUALIFIED HIGHER EDUCATIONAL EXPENSES; TO PROVIDE FOR AND DEFINE SAVINGS TRUST AGREEMENTS; TO AMEND SECTIONS 37-155-5 AND 37-155-7, MISSISSIPPI CODE OF 1972, IN CONFORMITY THERETO; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Title. This act shall be known and may be cited as the "Mississippi Affordable College Savings Program," hereinafter referred to as the MACS Program.

SECTION 2. Declaration of Policy. The Legislature hereby finds and declares as follows:

(a) Education costs at institutions of higher education are difficult for many to afford and difficult to predict. As a result, the ability of individuals and families to plan for future educational expenses has been adversely affected.

(b) It is in the best interest of the citizens of this state to foster higher education in order to provide well-educated citizens.

(c) It is in the best interest of the citizens of this state to encourage state residents to enroll in institutions of higher education.

(d) Providing a mechanism to help assure the higher education of the citizens of this state is necessary and desirable for the public health, safety and welfare.

(e) The purposes of this act are to:

(i) Provide wide and affordable access to the public institutions of higher education for the residents of this state.

(ii) Encourage attendance at institutions of higher education and help individuals plan for educational expenses.

(iii) Provide a program of savings trust agreements to apply distributions toward qualified higher education expenses at eligible educational institutions, as defined in Section 529 of the Internal Revenue Code, as amended, or other applicable federal law.

(iv) Provide for the creation of a trust fund, as an agency and instrumentality of the State of Mississippi, to assist qualified students in financing costs of attending institutions of higher education.

(v) Encourage timely financial planning for higher education by the creation of savings trust accounts.

(vi) To provide a choice of programs to persons who determine that the overall educational needs of their families are best suited to a prepaid tuition contract under the MPACT Program, a savings trust agreement under this act, or both.

(vii) To provide a savings program for those who wish to save to meet postsecondary educational needs beyond the traditional baccalaureate curriculum.

SECTION 3. Definitions. The following terms have the meanings ascribed to them in this section, unless the context clearly indicates otherwise:

(a) MACS Trust Fund. The special fund in the State of Mississippi Treasury Department designated as the "Mississippi Affordable College Savings Trust Fund" (hereinafter referred to as the "MACS trust fund") and administered by the State of Mississippi Treasury Department.

(b) Account Owner. Any resident or nonresident person, corporation, trust, charitable organization or other such entity who contributes to or invests money in a savings trust account under the MACS Program established pursuant to this act on behalf of a beneficiary and who is listed as the owner of the savings trust account.

(c) Beneficiary. Any resident or nonresident beneficiary of a savings trust agreement who meets the requirements of Section 529 of the Internal Revenue Code of 1986, as amended, or other applicable federal law, as well as any regulations established by the board.

(d) Institution of Higher Education. Any eligible education institution as defined in Section 529 of the Internal Revenue Code of 1986, as amended, or any other applicable federal law.

(e) Tuition. The quarter, semester or term charges and all required fees imposed by an institution of higher education as a condition of enrollment by all students.

(f) Board. The Board of Directors of the College Savings Plans of Mississippi Trust Funds as provided in Section 37-155-7 and this act.

(g) Legislature. The Legislature of the State of Mississippi.

(h) Payor. Any person, corporation, trust, charitable organization or other such entity who contributes money or makes a payment to either a savings trust account established pursuant to this act or a prepaid tuition account established under Section 37-155-1 et seq. on behalf of a beneficiary.

(i) Savings Trust Account. An account established by an account owner pursuant to this act on behalf of a beneficiary in order to apply distributions from the account toward qualified higher education expenses at eligible educational institutions, as defined in Section 529 of the Internal Revenue Code of 1986, as amended, or other applicable federal law.

(j) Savings Trust Agreement. The agreement entered into between the board and the account owner establishing a savings trust account.

(k) Qualified Higher Education Expense. Any higher education expense as defined in Section 529 of the Internal Revenue Code of 1986, as amended, or other applicable federal law.

(l) Qualified Withdrawal. A withdrawal by an account owner or beneficiary for qualified higher education expenses or as otherwise permitted under Section 529 of the Internal Revenue Code of 1986, as amended, without a penalty required thereunder.

SECTION 4. Board of Directors.

(a) The board of directors of the MACS Program shall consist of the existing Board of Directors of the Mississippi Prepaid Affordable College Tuition Program, as defined under Section 37-155-1 et seq.

(b) The MPACT Board shall be renamed the College Savings Plans of Mississippi Board of Directors, and shall have responsibility over both the MPACT Program and the MACS Program.

SECTION 5. Powers of the Board of Directors.

In addition to the powers granted by any other provision of this act, the board of directors shall have the powers necessary or convenient to carry out the purposes and provisions of this act, the purposes and objectives of the trust fund, and the powers delegated by any other law of the state or any executive order thereof, including, but not limited to, the following express powers:

(a) To adopt and amend bylaws;

(b) To adopt such rules and regulations as are necessary to implement the provisions of this act, subject to applicable federal laws and regulations, including rules regarding transfers of funds between accounts established under prepaid tuition contracts and savings trust agreements;

(c) To execute contracts and other necessary instruments;

(d) To impose reasonable requirements for residency for beneficiaries or account owners at the time of purchase of the savings trust agreement;

(e) To impose reasonable limits on the number of contract participants in the trust fund at any given period of time;

(f) To contract for necessary goods and services, to employ necessary personnel, and to engage the services of consultants and other qualified persons and entities for administrative and technical assistance in carrying out the responsibilities of the trust funds under terms and conditions that the board deems reasonable, to include contract terms for periods of up to ten (10) years, which contract may be terminated, extended or renewed with such entities for a term determined by the board, but in no event shall such contract exceed a term of ten (10) years at any one (1) time.

(g) To solicit and accept gifts, including bequests or other testamentary gifts made by will, trust or other disposition, grants, loans and other aids from any personal source or to participate in any other way in any federal, state or local governmental programs in carrying out the purposes of this act;

(h) To define the terms and conditions under which payments may be withdrawn or refunded from the trust fund and impose reasonable charges for such withdrawal or refund;

(i) To impose reasonable time limits on the use of savings trust account distributions provided by the program;

(j) To regulate the receipt of contributions or payments to the trust fund;

(k) To adopt an official seal and rules;

(l) To sue and be sued;

(m) To establish agreements or other transactions with federal, state and local agencies, including state universities and community colleges;

(n) To appear in its own behalf before boards, commissions or other governmental agencies;

(o) To segregate contributions and payments to the fund into various accounts and funds;

(p) To require and collect administrative fees and charges in connection with any transaction and to impose reasonable penalties for withdrawal of funds for nonqualified higher educational expenses or for entering into a savings trust agreement on a fraudulent basis;

(q) To procure insurance against any loss in connection with the property, assets and activities of the fund or the board;

(r) To require that account owners of savings trust agreements or purchasers of MPACT contracts pursuant to Section 37-155-1 et seq. verify, under oath, any requests for contract conversions, substitutions, transfers, cancellations, refund requests or contract changes of any nature;

(s) To solicit proposals and to contract for the marketing of the MACS Program, provided that (i) any materials produced by a marketing contractor for the purpose of marketing the program must be approved by the board prior to being made available to the public; and (ii) neither the state nor the board shall be liable for misrepresentation of the program by a marketing contractor;

(t) To delegate responsibility for administration of the comprehensive investment plan to a contractor or consultant (or contractors or consultants) the board determines to be qualified;

(u) To make all necessary and appropriate arrangements with colleges and universities or other entities in order to fulfill its obligations under savings trust agreements;

(v) To establish other policies, procedures and criteria necessary to implement and administer the provisions of this act;

(w) To exercise any other powers set forth in Sections 37-155-7 and 37-155-9; and

(x) To authorize the State of Mississippi Treasury Department and/or the State Treasurer to carry out any or all of the powers and duties enumerated above for efficient and effective administration of the program and trust fund.

SECTION 6. Description of Savings Trust Agreements.

(1) The board shall make savings trust agreements available to the public, under which account owners or other payors may make contributions on behalf of qualified beneficiaries. Such contributions and investment earnings thereof may be used for any qualified higher educational expenses of a designated beneficiary. There is no guarantee by the state that such contributions, together with the investment return on such contributions, if any, will be adequate to pay for qualified education expenses in full.

(2) Each savings trust agreement made pursuant to this act shall include the following terms and provisions:

(a) The maximum and minimum contribution allowed on behalf of each beneficiary for the payment of qualified higher education expenses at eligible institutions, both as defined in Section 529 of the Internal Revenue Code of 1986, as amended, or other applicable federal law;

(b) Provisions for withdrawals, refunds, transfers and any penalties;

(c) The name, address and date of birth of the beneficiary on whose behalf the savings trust account is opened;

(d) Terms and conditions for a substitution of the beneficiary originally named;

(e) Terms and conditions for termination of the account, including any refunds, withdrawals or transfers, and applicable penalties, and the name of the person or persons entitled to terminate the account;

(f) The time period during which the beneficiary must use benefits from the savings trust account;

(g) All other rights and obligations of the account owner and the MACS trust fund; and

(h) Any other terms and conditions which the board deems necessary or appropriate, including those necessary to conform the savings trust account with the requirements of Section 529 of the Internal Revenue Code of 1986, as amended, or other applicable federal law or regulations.

SECTION 7. Mississippi Affordable College Savings Trust Fund.

(1) There is hereby created a Mississippi Affordable College Savings Trust Fund (hereinafter referred to as the "MACS trust fund") as an instrumentality of the state to be administered by the State of Mississippi Treasury Department until and unless the Legislature shall determine otherwise. The MACS trust fund shall consist of state appropriations, monies acquired from other governmental or private sources, and money remitted in accordance with savings trust agreements and shall receive and hold all payments, contributions and deposits intended for it as well as gifts, bequests, endowments or federal, state or local grants and any other public or private source of funds and all earnings thereon until disbursed as provided hereunder. The amounts on deposit in the trust fund shall not constitute property of the state. Amounts on deposit in the trust shall not be commingled with state funds and the state shall have no claim to or interest in such funds. Savings trust agreements or any other contract entered into by or on behalf of the trust shall not constitute a debt or obligation of the state and no account owner shall be entitled to any amounts except for those amounts on deposit in or accrued to their account.

The MACS trust fund shall continue in existence as long as it holds any funds belonging to an account owner or otherwise has any obligations to any person or entity until its existence is terminated by the Legislature and remaining assets on deposit therein are returned to account owners or transferred to the state in accordance with unclaimed property law.

(2) There are hereby created three (3) separate accounts within the MACS trust fund: (a) the administrative account; (b) the endowment account; and (c) the program account. The administrative account shall accept, deposit and disburse funds for the purpose of administering and marketing the program. The endowment account shall receive and deposit amounts received in connection with the sales of interests in the MACS trust fund other than amounts for the administrative account and other than amounts received pursuant to a savings trust agreement. Amounts on deposit in the endowment account may be applied as specified by the board for any purpose related to the program or to otherwise assist Mississippi residents to attain a postsecondary education. The program account shall receive, invest and disburse amounts pursuant to savings trust agreements.

(3) The official location of the trust fund shall be the State of Mississippi Treasury Department, and the facilities of the State of Mississippi Treasury Department shall be used and employed in the administration of the fund, including, but without limitations thereto, the keeping of records, the management of bank accounts and other investments, the transfer of funds and the safekeeping of securities evidencing investments. These functions may be administered pursuant to a management agreement with a qualified entity or entities.

(4) Payments received by the board on behalf of beneficiaries from account owners, other payors, or from any other source, public or private, shall be placed in the trust fund, and the board shall cause there to be maintained separate records and accounts for individual beneficiaries as may be required under Section 529 of the Internal Revenue Code of 1986, as amended, and any other applicable federal law.

(5) Account owners and any other payors or contributors shall only be permitted to contribute cash or any other form of payment or contribution as may be permitted under Section 529 of the Internal Revenue Code of 1986, as amended, and approved by the board. The board shall cause the program to maintain adequate safeguards against contributions in excess of what may be required for qualified higher education expenses. The trust fund, through the Treasurer, is hereby specifically authorized to receive and deposit into the trust fund any gift of any nature, real or personal property, made by an individual by testamentary disposition, including, without limitation, any specific gift or bequeath made by will, trust or other disposition to the extent permitted under Section 529 of the Internal Revenue Code of 1986, as amended. The trust fund may receive amounts transferred from an UGMA, UTMA or other account established for the benefit of a minor provided that the trust beneficiary of such an account is identified as the legal owner of the MACS trust fund account upon attaining majority age.

(6) The account owner retains ownership of all amounts on deposit in his or her account with the program up to the date of distribution on behalf of a designated beneficiary. Earnings derived from investment of the contributions shall be considered to be held in trust in the same manner as contributions, except as applied for purposes of the designated beneficiary and for purposes of maintaining and administrating the program as provided in this act. Amounts on deposit therein shall be available for expenses and penalties imposed by the board for the program as disclosed in the savings trust agreement.

(7) The trust fund shall constitute a fund of an instrumentality of the state, and its property and income shall be exempt from all taxation by the state and by all of its political subdivisions.

(8) The assets of the MACS trust fund shall be preserved, invested and expended solely pursuant to and for the purposes of this act and shall not be loaned or otherwise transferred or used by the State of Mississippi for any other purpose.

SECTION 8. Savings Trust Agreements; Tax Exclusions and Deductions.

(1) All property and income of the MACS trust fund, as an instrumentality of the state, shall be exempt from all taxation by the state and by its political subdivisions.

(2) Any interest, dividends, gains or income of any kind on any account in the MACS trust fund shall be excluded from the gross income of any account owner, contributor, payor or beneficiary for purposes of the Mississippi Income Tax Law to the extent such amounts remain on deposit in the MACS trust fund or are withdrawn pursuant to a qualified withdrawal. The MACS trust fund and MPACT shall constitute the only programs established pursuant to Section 529 of the Internal Revenue Code of 1986, as amended, to be exempt from Mississippi income tax. Any contributor or payor to a MACS account may deduct from their Mississippi taxable income any contributions or payments to an account or accounts in the MACS trust fund up to a maximum amount of Twenty Thousand Dollars ($20,000.00) for joint filers and Ten Thousand Dollars ($10,000.00) for single and other filers. Contributions or payments for such tax years may be made after such calendar years but prior to the deadline for making contributions to an individual retirement account under federal law for such years. The earnings portion of any withdrawals from an account that are not qualified withdrawals, as well as any amounts included in such nonqualified withdrawals previously deducted from taxable income under this section, shall be included in the gross income of the resident recipient of the withdrawal for purposes of the Mississippi Income Tax Law in the year of such withdrawal.

SECTION 9. Investment Authority.

(1) The board has authority to establish a comprehensive investment plan for the purposes of this act, to invest any funds of the trust fund in any instrument, obligation, security or property that constitutes legal investments for public funds in the state, and to name and use depositories for its investments and holdings. The comprehensive investment plan shall specify the investment policies to be utilized by the board in its administration of the funds. The board may authorize investments in any investment vehicle authorized for the MPACT Program under Section 37-155-9. However, the restrictions in Section 37-155-9 as to percentages of the total fund that may be invested in any category of authorized investment shall not apply to the MACS trust fund. The program account may, but shall not be required to, invest in obligations of the state of any political subdivision thereof or in any business entity in the state.

Notwithstanding any provisions of state law to the contrary, the board shall invest or cause to be invested amounts on deposit in the trust fund in a manner reasonable and appropriate to achieve the objectives of the program, exercising the discretion and care of a prudent person in similar circumstances with similar objectives. The board shall give due consideration to the risk, expected rate of return, term or maturity, diversification of total investments, liquidity and anticipated investments in and withdrawals from the trust fund.

(2) All investments shall be acquired by the board at prices not exceeding the prevailing market values for such securities.

(3) Any limitations herein set forth shall be applicable only at the time of purchase and shall not require the liquidation of any investment at any time. All investments shall be clearly marked to indicate ownership by the system and to the extent possible shall be registered in the name of the system.

(4) Subject to the above terms, conditions, limitations and restrictions, the board shall have power to sell, assign, transfer and dispose of any of the securities and investments of the system, provided that said sale, assignment or transfer has the majority approval of the entire board. The board may employ or contract with investment managers, evaluation services, or other such services as determined by the board to be necessary for the effective and efficient operation of the system.

(5) Except as otherwise provided herein, no trustee and no employee of the board shall have any direct or indirect interest in the income, gains or profits of any investment made by the board, nor shall any such person receive any pay or emolument for his services in connection with any investment made by the board. No trustee or employee of the board shall become an endorser or surety, or in any manner an obligor for money loaned by or borrowed from the system.

(6) Under the authority granted in Section 5(t), the board may establish criteria for investment managers, mutual funds or other such entities to act as contractors or consultants to the board. The board may contract, either directly or through such contractors or consultants, to provide such services as may be a part of the comprehensive investment plan or as may be deemed necessary or proper by the board, including, but not limited to, providing consolidated billing, individual and collective record keeping and accounting, and asset purchase, control and safekeeping.

(7) No account owner, contributor, payor or beneficiary may directly or indirectly direct the investment of any account except as may be permitted under Section 529 of the Internal Revenue Code of 1986, as amended.

(8) The board may approve different investment plans and options to be offered to participants to the extent permitted under Section 529 of the Internal Revenue Code of 1986, as amended, and consistent with the objectives of this act and may require the assistance of investment counseling prior to participation in different options.

(9) Interests or accounts in the MACS trust fund and transactions in such interests or accounts shall be exempt from Sections 75-71-113 and 75-71-401 of the Mississippi Uniform Securities Laws.

SECTION 10. Statement and Reports.

(1) The board shall furnish without charge to each account owner an annual statement of:

(a) The amount contributed by the account owner under the savings trust agreement;

(b) The annual earnings and accumulated earnings on the savings trust account; and

(c) Any other terms and conditions which the board deems by rule is necessary or appropriate, including those necessary to conform the savings trust account with the requirements of Section 529 of the Internal Revenue Code of 1986, as amended, or other applicable federal law or regulations.

(2) The board shall furnish an additional statement complying with subsection (a) to an account owner or beneficiary on written request. The board may charge a reasonable fee for each statement furnished under this subsection.

(3) The board shall prepare or cause to be prepared an annual report setting forth in appropriate detail an accounting of the funds and a description of the financial condition of the program at the close of each fiscal year. Such report shall be submitted to the Governor, Lieutenant Governor, the President of the Senate, the Speaker of the House of Representatives, and members of the Board of Trustees of State Institutions of Higher Learning, the Junior College Board and the State Board of Education. In addition, the board shall make the report available to account owners of savings trust agreements. The accounts of the fund shall be subject to annual audits by the State Auditor, or his designee.

SECTION 11. No Promise or Guarantee of Admission.

This act is not a promise or guarantee that the beneficiary will be:

(a) Admitted to any institution of higher education;

(b) Admitted to a particular institution of higher education after admission;

(c) Allowed to continue enrollment at an institution of higher education; or

(d) Graduated from an institution of higher education.

SECTION 12. No Promise or Guarantee of Returns.

Nothing in this act or in any savings trust agreement entered into pursuant to this act shall be construed as a promise or guarantee by the state or any agency or instrumentality thereof that either qualified higher education expenses in general or any specific qualified higher education expense shall be covered in full by contributions or earnings on any savings trust account. Savings trust accounts and agreements entered into pursuant to this act are not guaranteed by the full faith and credit of the State of Mississippi.

SECTION 13. Financial Aid.

Notwithstanding any provision of state law to the contrary, no monies on deposit in either the MACS or MPACT programs shall be considered an asset of either the parent, guardian or student for purposes of determining an individual's eligibility for a need-based grant, need-based scholarship or need-based work opportunity offered or administered by any state agency except as may be required by the funding source of such financial aid.

SECTION 14. Severability.

The provisions of this act are severable. If any part of this act is declared invalid or unconstitutional, such declaration shall not affect the part which remains.

SECTION 15. Section 37-155-5, Mississippi Code of 1972, is amended as follows:

37-155-5. The following terms have the meanings ascribed to them in this section, unless the context clearly indicates otherwise:

(a) Prepaid Tuition Contract. A contract entered into between the Mississippi Prepaid Affordable College Tuition Program Board and a purchaser pursuant to this chapter.

(b) Trust Fund. There is created a special fund in the State of Mississippi Treasury Department to be designated as the "Mississippi Prepaid Affordable College Tuition Trust Fund" (hereinafter referred to as the trust fund or fund) and to be administered by the State of Mississippi Treasury Department. The fund shall consist of state appropriations, monies acquired from other governmental or private sources, and money remitted in accordance with prepaid tuition contracts. In the event that dividends, interest and gains exceed the amount necessary for program administration and disbursements, the board may designate a percentage of the fund to serve as a contingency fund.

(c) Purchaser. A person, corporation, trust, charitable organization or other such entity that makes or is obligated to make advance payments in accordance with a prepaid tuition contract entered into pursuant to this chapter.

(d) Beneficiary. (i) The beneficiary of a prepaid tuition contract must be eighteen (18) years of age or younger at the time the purchaser enters into the contract and must be: (A) a resident of this state at the time the purchaser enters into the contract; or (B) a nonresident if the purchaser is a resident of this state at the time that the contract is entered into.

(ii) The board may require a reasonable period of residence in this state for a beneficiary or the purchaser.

(iii) A beneficiary is considered a resident for purposes of tuition regardless of the beneficiary's residence on the date of enrollment.

(e) Institution of Higher Education. Any public institution of higher learning or public community or junior college located in Mississippi.

(f) Tuition. The quarter, semester or term charges and all required fees imposed by an institution of higher education as a condition of enrollment by all students.

(g) Board. The Board of Directors of the College Savings Plans of Mississippi as provided in Section 37-155-7.

(h) Legislature. The Legislature of Mississippi.

SECTION 16. Section 37-155-7, Mississippi Code of 1972, is amended as follows:

37-155-7. (1) From and after July 1, 2000, the board of directors created herein shall be reconstituted as the Board of Directors of the College Savings Plans of Mississippi. The board of directors shall consist of thirteen (13) members as follows:

(a) Nine (9) voting members as follows: the State Treasurer; the Commissioner of Higher Education; the Executive

Director of the Community and Junior College Board; Department of Finance and Administration Executive Director; and one (1) member from each congressional district to be appointed by the Governor with the advice and consent of the Senate. One (1) member shall be appointed for an initial term of one (1) year; one (1) member shall be appointed for an initial term of two (2) years; one (1) member for an initial term of three (3) years; one (1) member for an initial term of four (4) years; and one (1) member for an initial term of five (5) years. On the expiration of any of the terms of office, the Governor shall appoint successors by and with the advice and consent of the Senate for terms of five (5) years in each case.

(b) Two (2) nonvoting, advisory members of the board shall be appointed by each of the following officers: the Lieutenant Governor and the Speaker of the House of Representatives. Successors to the appointed members shall serve for the length of the term for each appointing official and shall be eligible for reappointment, and shall serve until a successor is appointed. Any person appointed to fill a vacancy on the board shall be appointed in a like manner and shall serve for only the unexpired term.

(2) Each member appointed shall possess knowledge, skill and experience in business or financial matters commensurate with the duties and responsibilities of the trust fund.

(3) Members of the board of directors shall serve without compensation, but shall be reimbursed for each day's official duties of the board at the same per diem as established by Section 25-36-69 and actual travel and lodging expenses as established by Section 25-3-41.

(4) The board of directors shall annually elect one (1) member to serve as chairman of the board and one (1) member to serve as vice chairman. The vice chairman shall act as chairman in the absence of or upon the disability of the chairman or in the event of a vacancy of the office of chairman.

SECTION 17. This act shall take effect and be in force from and after July 1, 2000.