senate Bill S6698A

2013-2014 Legislative Session

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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Archive: Last Bill Status - Passed Senate


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jun 12, 2014 referred to higher education
delivered to assembly
passed senate
Jun 09, 2014 ordered to third reading cal.1217
committee discharged and committed to rules
May 05, 2014 print number 6698a
amend and recommit to higher education
Feb 28, 2014 referred to higher education

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Bill Amendments

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S6698 - Bill Details

See Assembly Version of this Bill:
A9656
Current Committee:
Law Section:
Education Law
Laws Affected:
Add §355-d, Ed L; add §78-c, St Fin L; amd §5205, CPLR; amd §612, Tax L

S6698 - Bill Texts

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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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BILL NUMBER:S6698

TITLE OF BILL: 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

PURPOSE: To create a New York pre-paid tuition plan to give parents
the opportunity to lock in current tuition rates for their children's
college education.

SUMMARY OF PROVISIONS:

Section 1 amends the education law by creating article 14-B of the
education law.

Section 696 of the new article establishes the short title of the act,
the New York state pre-paid tuition plan.

Section 696-a of the new article sets the definitions to be used in
the new article.

Section 696-b of the new act establishes the pre-paid tuition plan
board. The board shall have nine members, including the chancellor of
the state university, the chancellor of the city university, the state
comptroller, the chairman of the higher education services corporation
or their designees, three members appointed by the governor, and two
members representing community colleges appointed by the boards of
trustees of the state and city universities. Appointed members shall
serve three year terms and receive no compensation. The board is
deemed a public agency and is covered by the relevant laws.

Section 696-c of the new article sets the powers and duties of the
board. The board has the power to develop a pre-paid tuition plan and
establish a system by which tuition would be paid to the state and
city university and participating independent institutions. The board
shall establish the method by which the fund will be administrated and
how funds in accounts will be disbursed The board has the power to
engage the services of consultants on a contract basis as needed for
the implementation of the plan. The board shall develop the marketing
program for the plan.

Section 696-d of the new article establishes the post of executive
director of the plan and establishes the powers of the executive
director.

Section 696-e of the new article establishes the plan requirements.
Plan accounts will be for tuition expenses at the state or city
university or at any independent colleges that chose to participate.
This section lays out the rules for applying and in what form
contributions can be made. It establishes that four years must pass
between when an account in opened and when the tuition purchased can
be redeemed. Rules for withdrawals and other transfers will be in line
with such rules in section 529 of the internal revenue code.
Accounting and disclosure requirements are set. It is established that
opening an account does not entitle the beneficiary to acceptance into
a particular institution of higher learning.


Section 696-f of the new article establishes the fiscal and financial
powers and responsibilities of the board and the state comptroller's
office with regards to the funds deposited in the plan. These include
the ability to contract with financial organizations to deposit or
manage the funds. It lays out the requirements for annual audits of
the plan and examinations of the handling and management of accounts.

Section 696-g of the new article establishes that in the event that in
any one year the funds in the plan are insufficient to meet the
obligations in the plan, the executive budget shall include a sum
necessary to cover the shortfall. The appropriation of such funds
shall be subject to legislative approval. The sum shall be in the form
of a loan that must be repaid to the state.

Section 2 amends state finance law by adding a new section 78-c that
establishes the New York state pre-paid tuition plan fund. The
comptroller, acting with the consent of the pre-paid board, shall have
to power to invest the funds in the plan fund. Such investments shall
meet the requirements of article four-A of the retirement and social
security law, with exceptions.

Section 3 amends section 5205 of the civil practice law to state that
monies in a pre-paid tuition account are exempt from money judgments
against the account owner or designated beneficiary.

Section 4 of the bill amends subparagraph A of paragraph 2 of
subsection t of section 606 of the tax law to give pre-paid tuition
accounts the same treatment as college choice tuition accounts. The
maximum amounts that can be deducted for contributions to such
accounts is doubled, from five to ten thousand for individual filers
and from ten to twenty thousand for married individuals filing
jointly.

JUSTIFICATION: The cost of tuition and fees for college have grown
significantly faster than inflation for many years. Tuitions at both
private and public colleges and universities grew an average of 4%
between the 2011-2012 academic year and the 2012-2013 academic year.
This rate is significantly higher than that of inflation, which has
held below 2% since 2008, and it is certainly higher that the rate of
growth for the salaries and wages of families in New York State.

The IDC proposes the creation of the Pre-paid Tuition Plan which will
help families guard against such increases in tuition rates by
allowing them to buy tuition credit at both public or participating
private Colleges and Universities in New York for their children at
current tuition prices. This program also allows parents to spread out
the cost of paying for tuition over multiple years, thus lessening the
burden on their families.

The underlying idea behind a Pre-paid College Tuition Plan is the
creation of a fund into which parents can place money to pay future
college expenses. The payments into the fund come in the form of
paying for a portion of tuition at a participating college or
university at current tuition costs. The money in the fund is then
invested so that when that pre-paid tuition unit is redeemed by the
parent, the original payment plus the earned interest will be enough
so that the participating colleges and universities get the same


amount of revenue as if the parent were paying for tuition at that
moment. In this way, parents save money without participating colleges
and universities having to lose out on income.

Pre-paid College Tuition Plans exist in many other States, such as
Florida, Pennsylvania, Washington, Illinois, and Texas. There is a lot
of variations found between the different plans offered by those
varied States and the IDC proposal takes the best features from these
plans in order to ensure that parents are able to get the savings they
need while keeping the fund safe and viable. The IDC proposal would
allow parents to purchase whole or portions of semester credit hours
at current tuition rates with the guarantee that this payment will be
honored if their child is accepted to the participating college or
university. The plan gives parents the option to chose between
different plans depending on the possible educational choices that
their child will make. For example, parents could chose between buying
credits towards an Associate's degree at a community college or a
Bachelor's degree at a four-year university or a combination of the
two. Contributions into this fund would get the same preferential tax
treatment given to funds set aside in a 529 College Savings Account.

The Pre-paid College Tuition Plan fund would be under the supervision
of a new Pre-paid tuition board comprised of members from our public
universities, the comptroller's office, the corporation for higher
education services, and other experts in finance and higher education
funding and management. This independent board would have the
authority to chose the fund's administration. As with all other
Pre-paid College Tuition Plans, there would be certain safeguards and
limits in place to ensure the future viability of the fund, including
setting a limit on the time between when a semester credit hour of
tuition was purchased and when it could first be utilized and what the
minimum age for the beneficiary would be. The board would also set up
the rules regarding withdrawals that would conform to federal
guidelines governing pre-paid tuition programs.

The IDC believes that ensuring a strong and viable fund is a critical
requirement in order to make a Pre-paid College Tuition Plan
successful.

LEGISLATIVE HISTORY: This is a new bill

FISCAL IMPLICATIONS: The state will have to pay for the initial
creation of the pre-paid tuition board. The cost of this initial
creation is estimated to be $2 million. Doubling the amount that
individuals are able to deduct for contributions to both the existing
college choice savings accounts and the new pre-paid tuition accounts
could lead to a loss of revenue to the state of $55 million in the
most conservative estimate.

EFFECTIVE DATE: This act shall take effect immediately and apply for
the tax year commencing on December 31, 2014.

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                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  6698

                            I N  S E N A T E

                            February 28, 2014
                               ___________

Introduced  by  Sens. CARLUCCI, KLEIN, SAVINO, VALESKY -- read twice and
  ordered printed, and when printed to be committed to the Committee  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:

  Section 1. The education law is amended by adding a new  article  14-B
to read as follows:
                              ARTICLE 14-B
                  NEW YORK STATE PRE-PAID TUITION PLAN
SECTION 696. SHORT TITLE.
        696-A. DEFINITIONS.
        696-B. PRE-PAID TUITION PLAN BOARD.
        696-C. POWERS AND DUTIES OF THE BOARD.
        696-D. EXECUTIVE DIRECTOR.
        696-E. PLAN REQUIREMENTS.
        696-F. POWERS OF THE BOARD AND COMPTROLLER.
        696-G. STATE GUARANTEE.
  S  696.  SHORT  TITLE. THIS ARTICLE SHALL BE KNOWN AND MAY BE CITED AS
THE "NEW YORK STATE PRE-PAID TUITION PLAN".
  S 696-A. DEFINITIONS. AS USED IN THIS  ARTICLE,  THE  FOLLOWING  TERMS
SHALL HAVE THE FOLLOWING MEANINGS:
  1.  "ACCOUNT"  OR  "PRE-PAID TUITION ACCOUNT" SHALL MEAN AN INDIVIDUAL
PRE-PAID TUITION ACCOUNT ESTABLISHED IN ACCORDANCE WITH  THE  PROVISIONS
OF THIS ARTICLE.
  2.  "ACCOUNT  OWNER"  SHALL  MEAN  A PERSON WHO ENTERS INTO A PRE-PAID
TUITION AGREEMENT PURSUANT TO THE PROVISIONS OF THIS ARTICLE,  INCLUDING
A  PERSON  WHO  ENTERS INTO SUCH AN AGREEMENT AS A FIDUCIARY OR AGENT ON
BEHALF OF A TRUST, ESTATE, PARTNERSHIP, ASSOCIATION, COMPANY  OR  CORPO-
RATION.  THE ACCOUNT OWNER MAY ALSO BE THE DESIGNATED BENEFICIARY OF THE
ACCOUNT.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD13274-02-4

S. 6698                             2

  3.  "BOARD"  SHALL  MEAN  THE PRE-PAID TUITION PLAN BOARD, ESTABLISHED
PURSUANT TO SECTION SIX HUNDRED NINETY-SIX-B OF THIS ARTICLE.
  4. "CITY UNIVERSITY" SHALL MEAN THE CITY UNIVERSITY OF NEW YORK.
  5. "COMPTROLLER" SHALL MEAN THE STATE COMPTROLLER.
  6.  "CORPORATION"  SHALL  MEAN  THE  NEW  YORK  STATE HIGHER EDUCATION
SERVICES CORPORATION.
  7. "DESIGNATED BENEFICIARY" SHALL MEAN, WITH RESPECT TO AN ACCOUNT  OR
ACCOUNTS,  THE  INDIVIDUAL  DESIGNATED  AS  THE INDIVIDUAL WHOSE TUITION
EXPENSES ARE EXPECTED TO BE PAID FROM THE ACCOUNT OR ACCOUNTS.
  8. "ELIGIBLE EDUCATIONAL INSTITUTION" SHALL MEAN  ANY  INSTITUTION  OF
HIGHER  EDUCATION  DEFINED  AS  AN  ELIGIBLE  EDUCATIONAL INSTITUTION IN
SECTION 529(E)(5) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
  9. "FINANCIAL ORGANIZATION" SHALL MEAN AN ORGANIZATION  AUTHORIZED  TO
DO  BUSINESS IN THE STATE AND A. WHICH IS AN AUTHORIZED FIDUCIARY TO ACT
AS A TRUSTEE PURSUANT TO THE PROVISIONS OF AN ACT OF  CONGRESS  ENTITLED
"EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974" AS SUCH PROVISIONS MAY
BE  AMENDED  FROM  TIME  TO TIME, OR AN INSURANCE COMPANY; AND B. (I) IS
LICENSED OR CHARTERED BY THE DEPARTMENT OF FINANCIAL SERVICES,  (II)  IS
CHARTERED  BY  AN  AGENCY OF THE FEDERAL GOVERNMENT, (III) IS SUBJECT TO
THE JURISDICTION AND REGULATION OF THE SECURITIES AND  EXCHANGE  COMMIS-
SION  OF  THE  FEDERAL GOVERNMENT, OR (IV) IS ANY OTHER ENTITY OTHERWISE
AUTHORIZED TO ACT IN THIS STATE AS A TRUSTEE PURSUANT TO THE  PROVISIONS
OF  AN ACT OF CONGRESS ENTITLED "EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974" AS SUCH PROVISIONS MAY BE AMENDED FROM TIME TO TIME.
  10. "MANAGEMENT CONTRACT" SHALL MEAN  THE  CONTRACT  EXECUTED  BY  THE
BOARD  AND  A FINANCIAL ORGANIZATION SELECTED TO ACT AS A DEPOSITORY AND
MANAGER OF THE PLAN.
  11. "MEMBER OF FAMILY" SHALL  MEAN  A  FAMILY  MEMBER  AS  DEFINED  IN
SECTION 529 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
  12. "NONQUALIFIED WITHDRAWAL" SHALL MEAN A WITHDRAWAL FROM AN ACCOUNT,
BUT SHALL NOT MEAN:
  A. A QUALIFIED WITHDRAWAL;
  B.  A  WITHDRAWAL MADE AS THE RESULT OF THE DEATH OR DISABILITY OF THE
DESIGNATED BENEFICIARY OF AN ACCOUNT; OR
  C. A WITHDRAWAL MADE ON THE ACCOUNT OF A SCHOLARSHIP.
  13. "PLAN" SHALL MEAN THE NEW YORK STATE PRE-PAID TUITION PLAN  ESTAB-
LISHED PURSUANT TO THIS ARTICLE.
  14. "PLAN MANAGER" SHALL MEAN A FINANCIAL ORGANIZATION SELECTED BY THE
BOARD TO ACT AS A DEPOSITORY AND MANAGER OF THE PLAN.
  15.  "QUALIFIED WITHDRAWAL" SHALL MEAN A WITHDRAWAL FROM AN ACCOUNT TO
PAY THE QUALIFIED TUITION EXPENSES OF THE DESIGNATED BENEFICIARY.
  16. "STATE UNIVERSITY" SHALL MEAN THE STATE UNIVERSITY OF NEW YORK.
  17. "TUITION" SHALL MEAN ANY MANDATORY CHARGES IMPOSED BY AN  ELIGIBLE
EDUCATIONAL  INSTITUTION FOR ATTENDANCE FOR AN ACADEMIC YEAR AS A CONDI-
TION OF ENROLLMENT. SUCH TERM SHALL NOT INCLUDE  LABORATORY  FEES,  ROOM
AND BOARD, OR OTHER SIMILAR FEES AND CHARGES.
  18.  "TUITION  SAVINGS  AGREEMENT" SHALL MEAN AN AGREEMENT BETWEEN THE
BOARD OR A FINANCIAL ORGANIZATION AND AN ACCOUNT OWNER.
  S 696-B. PRE-PAID TUITION PLAN BOARD. 1.  THE  PRE-PAID  TUITION  PLAN
BOARD  IS  HEREBY  ESTABLISHED.  SUCH  BOARD  SHALL  BE COMPOSED OF NINE
MEMBERS AS FOLLOWS:
  A. THE CHANCELLOR OF THE STATE UNIVERSITY, OR HIS OR HER DESIGNEE;
  B. THE CHANCELLOR OF THE CITY UNIVERSITY, OR HIS OR HER DESIGNEE;
  C. THE COMPTROLLER, OR HIS OR HER DESIGNEE;
  D. THE CHAIRMAN OF THE CORPORATION, OR HIS OR HER DESIGNEE;
  E. THREE MEMBERS APPOINTED BY THE GOVERNOR AS FOLLOWS:

S. 6698                             3

  (I) ONE INDIVIDUAL WITH EXPERIENCE IN HIGHER EDUCATION  ADMINISTRATION
OF AN INDEPENDENT COLLEGE OR UNIVERSITY, AND
  (II)  TWO  INDIVIDUALS  WITH  EXPERIENCE  IN  ACTUARIAL  PRACTICES AND
INVESTMENT BANKING;
  F. A MEMBER REPRESENTING COMMUNITY COLLEGES AFFILIATED WITH THE  STATE
UNIVERSITY  APPOINTED  BY THE BOARD OF TRUSTEES OF THE STATE UNIVERSITY;
AND
  G. A MEMBER REPRESENTING COMMUNITY COLLEGES AFFILIATED WITH  THE  CITY
UNIVERSITY APPOINTED BY THE BOARD OF TRUSTEES OF THE CITY UNIVERSITY.
  2. EACH MEMBER APPOINTED BY THE GOVERNOR, THE BOARD OF TRUSTEES OF THE
STATE  UNIVERSITY  OR THE BOARD OF TRUSTEES OF THE CITY UNIVERSITY SHALL
SERVE A TERM OF THREE YEARS. VACANCIES IN THE MEMBERSHIP  OF  THE  BOARD
SHALL BE FILLED IN THE MANNER PROVIDED FOR ORIGINAL APPOINTMENTS.
  3.  THE  MEMBERS  OF THE BOARD SHALL RECEIVE NO COMPENSATION FOR THEIR
SERVICES, BUT SHALL BE  ALLOWED  THEIR  ACTUAL  AND  NECESSARY  EXPENSES
INCURRED IN THE PERFORMANCE OF THEIR DUTIES PURSUANT TO THIS ARTICLE.
  4.  THE  BOARD  AND THE PLAN SHALL BE DEEMED TO BE PUBLIC AGENCIES AND
SHALL BE SUBJECT TO ALL PROVISIONS OF LAW RELATING THERETO.
  S 696-C. POWERS AND DUTIES OF THE BOARD.  THE BOARD  SHALL  ADMINISTER
THE  PLAN AND SHALL DEVELOP AND IMPLEMENT PROGRAMS FOR THE PREPAYMENT OF
UNDERGRADUATE TUITION, AT A FIXED, GUARANTEED LEVEL FOR  APPLICATION  AT
ANY TWO-YEAR OR FOUR-YEAR ELIGIBLE EDUCATIONAL INSTITUTION AS DEFINED IN
S  529 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR OTHER APPLI-
CABLE FEDERAL LAW. IN ADDITION, THE BOARD SHALL HAVE THE POWER AND  DUTY
TO:
  1.  DEVELOP  AND  IMPLEMENT  THE  PLAN IN A MANNER CONSISTENT WITH THE
PROVISIONS OF THIS ARTICLE THROUGH RULES AND REGULATIONS ESTABLISHED  IN
ACCORDANCE WITH THE STATE ADMINISTRATIVE PROCEDURE ACT;
  2.  MAKE  ARRANGEMENTS  WITH THE STATE UNIVERSITY, CITY UNIVERSITY AND
ANY ELIGIBLE EDUCATIONAL INSTITUTION  LOCATED  WITHIN  THE  STATE  WHICH
CHOOSES  TO  PARTICIPATE,  TO  FULFILL OBLIGATIONS UNDER PREPAID TUITION
CONTRACTS FOR TWO-YEAR OR FOUR-YEAR DEGREE PROGRAMS, INCLUDING, BUT  NOT
LIMITED TO, PAYMENT FROM THE PLAN OF THE THEN ACTUAL IN-STATE UNDERGRAD-
UATE  TUITION  COST  ON  BEHALF  OF A QUALIFIED BENEFICIARY OF A PREPAID
TUITION CONTRACT TO THE INSTITUTION IN WHICH SUCH BENEFICIARY IS  ADMIT-
TED AND ENROLLED, AND APPLICATION OF SUCH BENEFITS TOWARDS GRADUATE-LEV-
EL TUITION AND TOWARDS TUITION COSTS AT SUCH ELIGIBLE EDUCATIONAL INSTI-
TUTIONS,  AS  THAT  TERM  IS  DEFINED  IN  26  U.S.C. S 529 OR ANY OTHER
APPLICABLE SECTION OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED,  AS
DETERMINED  BY  THE BOARD IN ITS SOLE DISCRETION. SUCH ARRANGEMENTS MUST
INCLUDE PLANS THAT ALLOW AN ACCOUNT OWNER TO  ENTER  INTO  CONTRACTS  IN
WHICH  HE  OR SHE CAN PURCHASE TUITION IN INSTALLMENTS EQUAL TO THE COST
OF SEMESTERS AS A FULL TIME STUDENT, BUT CAN  ALSO  INCLUDE  PLANS  THAT
WOULD ALLOW FOR THE PREPAYMENT OF TUITION FOR INDIVIDUAL COURSE CREDITS;
  3.  ENGAGE THE SERVICES OF CONSULTANTS ON A CONTRACT BASIS FOR RENDER-
ING PROFESSIONAL AND TECHNICAL ASSISTANCE AND ADVICE;
  4. SEEK RULINGS AND OTHER GUIDANCE FROM THE UNITED  STATES  DEPARTMENT
OF TREASURY AND THE INTERNAL REVENUE SERVICE RELATING TO THE PROGRAM;
  5.  MAKE  CHANGES  TO THE PLAN REQUIRED FOR THE PARTICIPANTS TO OBTAIN
THE FEDERAL INCOME TAX BENEFITS OR TREATMENT PROVIDED BY SECTION 529  OF
THE  INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR ANY SIMILAR SUCCESSOR
LEGISLATION;
  6. CHARGE, IMPOSE AND COLLECT ADMINISTRATIVE FEES AND SERVICE  CHARGES
IN  CONNECTION  WITH  ANY AGREEMENT, CONTRACT OR TRANSACTION RELATING TO
THE PLAN;
  7. DEVELOP MARKETING PLANS AND PROMOTION MATERIAL;

S. 6698                             4

  8. ESTABLISH THE METHODS BY WHICH THE FUNDS HELD IN SUCH  ACCOUNTS  BE
DISPERSED;
  9.  ESTABLISH  THE METHOD BY WHICH FUNDS SHALL BE ALLOCATED TO PAY FOR
ADMINISTRATIVE COSTS; AND
  10. DO ALL THINGS NECESSARY AND PROPER TO CARRY OUT  THE  PURPOSES  OF
THIS ARTICLE.
  S  696-D. EXECUTIVE DIRECTOR. 1. THE BOARD SHALL APPOINT AND EMPLOY AN
EXECUTIVE DIRECTOR TO DIRECT, MANAGE AND ADMINISTER THE  PLAN,  AND  WHO
SHALL  BE  AUTHORIZED  TO EMPLOY SUCH PERSONNEL AS SHALL BE NECESSARY TO
IMPLEMENT THE PROVISIONS OF THIS ARTICLE.
  2. THE INDIVIDUAL APPOINTED AS EXECUTIVE DIRECTOR  SHALL  HAVE  DEMON-
STRATED  EXTENSIVE  EXPERIENCE  IN  MANAGEMENT, FINANCE, LAW, REGULATORY
AFFAIRS AND/OR INVESTMENT, AND SHALL HAVE SUCH OTHER  QUALIFICATIONS  AS
THE BOARD SHALL DETERMINE.
  3.  THE  EXECUTIVE  DIRECTOR  SHALL, IN ADDITION TO SUCH DUTIES AS THE
BOARD SHALL ESTABLISH:
  A. OVERSEE THE DEVELOPMENT, STRUCTURE, EVALUATION  AND  IMPLEMENTATION
OF THE PLAN'S STRATEGIC GOALS AND OBJECTIVES;
  B.  FACILITATE  COMMUNICATION  AMONG  AND  BETWEEN THE BOARD, ADVISORY
COMMITTEES, EMPLOYEES, ACCOUNT OWNERS, BENEFICIARIES AND OTHER  ENTITIES
INTERESTED IN THE PLAN;
  C.  ENHANCE THE BOARD'S ABILITY TO MAKE EFFECTIVE AND PROMPT DECISIONS
IN ALL MATTERS RELATED TO THE ADMINISTRATION OF THE PLAN;
  D. WITH THE  ASSISTANCE  OF  THE  BOARD  AND  INVESTMENT  CONSULTANTS,
DIRECT, MANAGE AND ADMINISTER THE PLAN'S ASSETS AND PROGRAMS; AND
  E. REPORT PERIODICALLY AND AS REQUESTED BY THE BOARD.
  S  696-E.  PLAN  REQUIREMENTS. 1. EVERY PRE-PAID TUITION ACCOUNT SHALL
COMPLY WITH THE PROVISIONS OF THIS SECTION.
  2. A PRE-PAID TUITION ACCOUNT MAY BE OPENED BY ANY PERSON WHO  DESIRES
TO  ENTER  INTO  A  CONTRACT  FOR  PRE-PAYMENT OF TUITION EXPENSES AT AN
INSTITUTION OF THE STATE UNIVERSITY, THE CITY UNIVERSITY OR ANY  PARTIC-
IPATING ELIGIBLE EDUCATIONAL INSTITUTION. AN ACCOUNT OWNER MAY DESIGNATE
ANOTHER  PERSON  AS  SUCCESSOR  OWNER OF THE ACCOUNT IN THE EVENT OF THE
DEATH OF THE ORIGINAL ACCOUNT OWNER. SUCH PERSON WHO OPENS AN ACCOUNT OR
ANY SUCCESSOR OWNER SHALL BE CONSIDERED THE ACCOUNT OWNER.
  A. AN APPLICATION FOR SUCH ACCOUNT SHALL BE IN THE FORM PRESCRIBED  BY
THE BOARD AND CONTAIN THE FOLLOWING:
  (I) THE NAME, ADDRESS AND SOCIAL SECURITY NUMBER OR EMPLOYER IDENTIFI-
CATION NUMBER OF THE ACCOUNT OWNER;
  (II) THE DESIGNATION OF A DESIGNATED BENEFICIARY;
  (III)  THE  NAME, ADDRESS AND SOCIAL SECURITY NUMBER OF THE DESIGNATED
BENEFICIARY; AND
  (IV) SUCH OTHER INFORMATION AS THE BOARD MAY REQUIRE.
  B. THE BOARD MAY ESTABLISH A NOMINAL FEE FOR SUCH APPLICATION.
  3. ANY PERSON, INCLUDING THE ACCOUNT OWNER, MAY MAKE CONTRIBUTIONS  TO
AN ACCOUNT AFTER THE ACCOUNT IS OPENED.
  4. CONTRIBUTIONS TO ACCOUNTS MAY BE MADE ONLY IN CASH.
  5.  FOUR  YEARS  MUST  ELAPSE  BETWEEN THE ESTABLISHMENT OF A PRE-PAID
TUITION ACCOUNT AND THE TIME THE FIRST QUALIFIED WITHDRAWAL IS MADE  FOR
THE PAYMENT OF TUITION EXPENSES.
  6.  AN  ACCOUNT  OWNER MAY WITHDRAW ALL OR PART OF THE BALANCE FROM AN
ACCOUNT ON SIXTY DAYS NOTICE OR SUCH SHORTER PERIOD AS MAY BE AUTHORIZED
UNDER RULES GOVERNING THE PLAN. SUCH RULES SHALL INCLUDE PROVISIONS THAT
WILL GENERALLY ENABLE THE DETERMINATION AS TO WHETHER A WITHDRAWAL IS  A
NONQUALIFIED WITHDRAWAL OR A QUALIFIED WITHDRAWAL.

S. 6698                             5

  7.  A.  AN  ACCOUNT  OWNER MAY CHANGE THE DESIGNATED BENEFICIARY OF AN
ACCOUNT TO AN INDIVIDUAL WHO IS A MEMBER OF  THE  FAMILY  OF  THE  PRIOR
DESIGNATED  BENEFICIARY IN ACCORDANCE WITH PROCEDURES ESTABLISHED BY THE
BOARD.
  B.  AN  ACCOUNT  OWNER  MAY TRANSFER ALL OR A PORTION OF AN ACCOUNT TO
ANOTHER FAMILY TUITION ACCOUNT, THE SUBSEQUENT DESIGNATED BENEFICIARY OF
WHICH IS A MEMBER OF THE FAMILY AS DEFINED IN SECTION 529 OF THE  INTER-
NAL REVENUE CODE OF 1986, AS AMENDED.
  8.  THE  PLAN  SHALL  PROVIDE  SEPARATE ACCOUNTING FOR EACH DESIGNATED
BENEFICIARY.
  9. NO ACCOUNT OWNER OR DESIGNATED BENEFICIARY OF ANY ACCOUNT SHALL  BE
PERMITTED TO DIRECT THE INVESTMENT OF ANY CONTRIBUTIONS TO AN ACCOUNT OR
THE EARNINGS THEREON.
  10. NEITHER AN ACCOUNT OWNER NOR A DESIGNATED BENEFICIARY SHALL USE AN
INTEREST IN AN ACCOUNT AS SECURITY FOR A LOAN. ANY PLEDGE OF AN INTEREST
IN AN ACCOUNT SHALL BE OF NO FORCE AND EFFECT.
  11.  A. IF THERE IS ANY DISTRIBUTION FROM AN ACCOUNT TO ANY INDIVIDUAL
OR FOR THE BENEFIT OF  ANY  INDIVIDUAL  DURING  A  CALENDAR  YEAR,  SUCH
DISTRIBUTION  SHALL  BE REPORTED TO THE INTERNAL REVENUE SERVICE AND THE
ACCOUNT OWNER, THE DESIGNATED BENEFICIARY  OR  THE  DISTRIBUTEE  TO  THE
EXTENT REQUIRED BY FEDERAL LAW OR REGULATION.
  B.  STATEMENTS  SHALL  BE PROVIDED TO EACH ACCOUNT OWNER AT LEAST ONCE
EACH YEAR WITHIN SIXTY DAYS AFTER THE END OF THE TWELVE MONTH PERIOD  TO
WHICH  THEY  RELATE. THE STATEMENT SHALL IDENTIFY THE CONTRIBUTIONS MADE
DURING A PRECEDING TWELVE MONTH PERIOD, THE TOTAL CONTRIBUTIONS MADE  TO
THE  ACCOUNT  THROUGH THE END OF THE PERIOD, THE VALUE OF THE ACCOUNT AT
THE END OF SUCH PERIOD, DISTRIBUTIONS MADE DURING SUCH  PERIOD  AND  ANY
OTHER  INFORMATION  THAT  THE  BOARD SHALL REQUIRE TO BE REPORTED TO THE
ACCOUNT OWNER.
  C. STATEMENTS AND INFORMATION RELATING TO ACCOUNTS SHALL  BE  PREPARED
AND FILED TO THE EXTENT REQUIRED BY FEDERAL AND STATE TAX LAW.
  12.  A.  A  LOCAL  GOVERNMENT  OR  ORGANIZATION  DESCRIBED  IN SECTION
501(C)(3) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, MAY OPEN AND
BECOME THE ACCOUNT OWNER OF AN ACCOUNT TO FUND SCHOLARSHIPS FOR  PERSONS
WHOSE IDENTITY WILL BE DETERMINED UPON DISBURSEMENT.
  B.  IN  THE CASE OF ANY ACCOUNT OPENED PURSUANT TO PARAGRAPH A OF THIS
SUBDIVISION THE REQUIREMENT SET FORTH IN SUBDIVISION TWO OF THIS SECTION
THAT A DESIGNATED BENEFICIARY BE DESIGNATED WHEN AN  ACCOUNT  IS  OPENED
SHALL  NOT  APPLY  AND  EACH INDIVIDUAL WHO RECEIVES AN INTEREST IN SUCH
ACCOUNT AS A SCHOLARSHIP SHALL BE TREATED AS  A  DESIGNATED  BENEFICIARY
WITH RESPECT TO SUCH INTEREST.
  13.  AN ANNUAL FEE MAY BE IMPOSED UPON THE ACCOUNT OWNER FOR THE MAIN-
TENANCE OF THE ACCOUNT.
  14. THE PLAN SHALL DISCLOSE THE FOLLOWING INFORMATION  IN  WRITING  TO
EACH  ACCOUNT  OWNER AND PROSPECTIVE ACCOUNT OWNER OF A PRE-PAID TUITION
ACCOUNT:
  A. THE TERMS AND CONDITIONS FOR PURCHASING A PRE-PAID TUITION ACCOUNT;
  B. ANY RESTRICTIONS ON THE SUBSTITUTION OF BENEFICIARIES;
  C. THE PERSON OR ENTITY ENTITLED TO TERMINATE THE TUITION  PRE-PAYMENT
AGREEMENT;
  D.  THE PERIOD OF TIME DURING WHICH A BENEFICIARY MAY RECEIVE BENEFITS
UNDER THE TUITION PRE-PAYMENT AGREEMENT;
  E. THE TERMS AND  CONDITIONS  UNDER  WHICH  MONEY  MAY  BE  WHOLLY  OR
PARTIALLY  WITHDRAWN  FROM  THE PLAN, INCLUDING, BUT NOT LIMITED TO, ANY
REASONABLE CHARGES AND FEES THAT MAY BE IMPOSED FOR WITHDRAWAL;

S. 6698                             6

  F. THE PROBABLE TAX CONSEQUENCES ASSOCIATED WITH CONTRIBUTIONS TO  AND
DISTRIBUTIONS FROM ACCOUNTS; AND
  G.  ALL  OTHER  RIGHTS  AND  OBLIGATIONS  PURSUANT TO PRE-PAID TUITION
AGREEMENTS, AND ANY OTHER TERMS, CONDITIONS AND PROVISIONS DEEMED NECES-
SARY AND APPROPRIATE BY THE BOARD PURSUANT TO SECTION SIX HUNDRED  NINE-
TY-SIX-C OF THIS ARTICLE.
  15.  PRE-PAID  TUITION  SAVINGS AGREEMENTS SHALL BE SUBJECT TO SECTION
FOURTEEN-C OF THE BANKING LAW  AND  THE  "TRUTH-IN-SAVINGS"  REGULATIONS
PROMULGATED THEREUNDER.
  16.  NOTHING IN THIS ARTICLE OR IN ANY PRE-PAID TUITION SAVINGS AGREE-
MENT ENTERED INTO PURSUANT TO THIS ARTICLE SHALL BE CONSTRUED AS A GUAR-
ANTEE BY THE STATE OR ANY COLLEGE THAT A BENEFICIARY WILL BE ADMITTED TO
A COLLEGE OR UNIVERSITY, OR, UPON ADMISSION TO A COLLEGE WILL BE PERMIT-
TED TO CONTINUE TO ATTEND OR WILL RECEIVE A DEGREE  FROM  A  COLLEGE  OR
UNIVERSITY.
  S 696-F. POWERS OF THE BOARD AND COMPTROLLER.
  1.  THE  BOARD,  IN  CONSULTATION  WITH  THE  COMPTROLLER, MAY SOLICIT
PROPOSALS FROM FINANCIAL ORGANIZATIONS TO ACT AS DEPOSITORIES AND MANAG-
ERS OF THE PLAN.  FINANCIAL  ORGANIZATIONS  SUBMITTING  PROPOSALS  SHALL
DESCRIBE  THE  INVESTMENT INSTRUMENT WHICH WILL BE HELD IN ACCOUNTS. THE
BOARD SHALL SELECT AS PROGRAM DEPOSITORIES AND  MANAGERS  THE  FINANCIAL
ORGANIZATION, FROM AMONG THE BIDDING FINANCIAL ORGANIZATIONS THAT DEMON-
STRATES  THE  MOST  ADVANTAGEOUS  COMBINATION, BOTH TO POTENTIAL PROGRAM
PARTICIPANTS AND THIS STATE, OF THE FOLLOWING FACTORS:
  A. FINANCIAL STABILITY AND INTEGRITY OF THE FINANCIAL ORGANIZATION;
  B. THE SAFETY OF THE INVESTMENT INSTRUMENT BEING OFFERED;
  C. THE ABILITY OF THE INVESTMENT INSTRUMENT TO TRACK INCREASING  COSTS
OF HIGHER EDUCATION;
  D.  THE ABILITY OF THE FINANCIAL ORGANIZATION TO SATISFY RECORDKEEPING
AND REPORTING REQUIREMENTS;
  E. THE FINANCIAL ORGANIZATION'S PLAN FOR PROMOTING THE  PLAN  AND  THE
INVESTMENT IT IS WILLING TO MAKE TO PROMOTE THE PLAN;
  F.  THE  FEES,  IF  ANY, PROPOSED TO BE CHARGED TO PERSONS FOR OPENING
ACCOUNTS;
  G. THE MINIMUM INITIAL DEPOSIT  AND  MINIMUM  CONTRIBUTIONS  THAT  THE
FINANCIAL ORGANIZATION WILL REQUIRE;
  H.  THE  ABILITY  OF  BANKING ORGANIZATIONS TO ACCEPT ELECTRONIC WITH-
DRAWALS, INCLUDING PAYROLL DEDUCTION PLANS; AND
  I. OTHER BENEFITS TO THE  STATE  OR  ITS  RESIDENTS  INCLUDED  IN  THE
PROPOSAL, INCLUDING FEES PAYABLE TO THE STATE TO COVER EXPENSES OF OPER-
ATION OF THE PROGRAM.
  2.  THE BOARD MAY ENTER INTO A CONTRACT WITH A FINANCIAL ORGANIZATION.
SUCH FINANCIAL ORGANIZATION MANAGEMENT MAY PROVIDE ONE OR MORE TYPES  OF
INVESTMENT INSTRUMENT.
  3.  THE  BOARD MAY SELECT MORE THAN ONE FINANCIAL ORGANIZATION FOR THE
PLAN.
  4. A MANAGEMENT CONTRACT SHALL INCLUDE, AT A MINIMUM, TERMS  REQUIRING
THE FINANCIAL ORGANIZATION TO:
  A.  TAKE  ANY  ACTION  REQUIRED  TO  KEEP  THE PLAN IN COMPLIANCE WITH
REQUIREMENTS OF THIS ARTICLE;
  B. KEEP ADEQUATE RECORDS OF EACH ACCOUNT, KEEP EACH ACCOUNT SEGREGATED
FROM EACH OTHER ACCOUNT, AND PROVIDE  THE  BOARD  WITH  THE  INFORMATION
NECESSARY TO PREPARE THE STATEMENTS REQUIRED BY THIS ARTICLE;
  C.  PROVIDE THE COMPTROLLER OR HIS OR HER DESIGNEE ACCESS TO THE BOOKS
AND RECORDS OF THE PLAN  MANAGER  TO  THE  EXTENT  NEEDED  TO  DETERMINE
COMPLIANCE WITH THE CONTRACT;

S. 6698                             7

  D. HOLD ALL ACCOUNTS FOR THE BENEFIT OF THE ACCOUNT OWNER;
  E. BE AUDITED AT LEAST ANNUALLY BY A FIRM OF CERTIFIED PUBLIC ACCOUNT-
ANTS  SELECTED  BY THE COMPTROLLER AND THAT THE RESULTS OF SUCH AUDIT BE
PROVIDED TO THE BOARD AND THE COMPTROLLER;
  F. PROVIDE THE BOARD AND THE COMPTROLLER WITH COPIES OF ALL REGULATORY
FILINGS AND REPORTS MADE  BY  IT  DURING  THE  TERM  OF  THE  MANAGEMENT
CONTRACT  OR  WHILE  IT IS HOLDING ANY ACCOUNTS, OTHER THAN CONFIDENTIAL
FILINGS OR REPORTS THAT WILL NOT BECOME  PART  OF  THE  PLAN.  THE  PLAN
MANAGER  SHALL  MAKE AVAILABLE FOR REVIEW BY THE COMPTROLLER THE RESULTS
OF ANY PERIODIC EXAMINATION OF SUCH MANAGER  BY  ANY  STATE  OR  FEDERAL
BANKING,  INSURANCE  OR SECURITIES COMMISSION, EXCEPT TO THE EXTENT THAT
SUCH REPORT OR REPORTS MAY NOT BE DISCLOSED UNDER APPLICABLE LAW OR  THE
RULES OF SUCH COMMISSION; AND
  G.  ENSURE  THAT ANY DESCRIPTION OF THE PROGRAM, WHETHER IN WRITING OR
THROUGH THE USE OF ANY MEDIA, IS  CONSISTENT  WITH  THE  MARKETING  PLAN
DEVELOPED  IN THE MEMORANDUM OF UNDERSTANDING PURSUANT TO THE PROVISIONS
OF SECTION SIX HUNDRED NINETY-FIVE-C OF THIS ARTICLE.
  5. THE COMPTROLLER MAY PROVIDE THAT AN AUDIT SHALL BE CONDUCTED OF THE
OPERATIONS AND FINANCIAL POSITION OF THE PLAN DEPOSITORY AND MANAGER  AT
ANY  TIME IF THE BOARD OR THE COMPTROLLER HAS ANY REASON TO BE CONCERNED
ABOUT THE FINANCIAL POSITION, THE RECORDKEEPING PRACTICES, OR THE STATUS
OF ACCOUNTS OF SUCH PLAN DEPOSITORY AND MANAGER.
  6. DURING THE TERM OF ANY CONTRACT WITH  A  PLAN  MANAGER,  THE  COMP-
TROLLER SHALL CONDUCT AN EXAMINATION OF SUCH MANAGER AND ITS HANDLING OF
ACCOUNTS.  SUCH  EXAMINATION  SHALL  BE CONDUCTED AT LEAST BIENNIALLY IF
SUCH MANAGER IS NOT OTHERWISE SUBJECT TO  PERIODIC  EXAMINATION  BY  THE
SUPERINTENDENT  OF  FINANCIAL  SERVICES,  THE  FEDERAL DEPOSIT INSURANCE
CORPORATION OR OTHER SIMILAR ENTITY.
  7. A. IF SELECTION OF A FINANCIAL ORGANIZATION AS A  PLAN  MANAGER  OR
DEPOSITORY IS NOT RENEWED, AFTER THE END OF ITS TERM:
  (I) ACCOUNTS PREVIOUSLY ESTABLISHED AND HELD IN INVESTMENT INSTRUMENTS
AT SUCH FINANCIAL ORGANIZATION MAY BE TERMINATED;
  (II) ADDITIONAL CONTRIBUTIONS MAY BE MADE TO SUCH ACCOUNTS;
  (III)  NO NEW ACCOUNTS MAY BE PLACED WITH SUCH FINANCIAL ORGANIZATION;
AND
  (IV) EXISTING ACCOUNTS HELD BY SUCH DEPOSITORY SHALL REMAIN SUBJECT TO
ALL OVERSIGHT AND REPORTING REQUIREMENTS ESTABLISHED BY THE COMPTROLLER.
  B. IF THE COMPTROLLER TERMINATES A FINANCIAL ORGANIZATION  AS  A  PLAN
MANAGER  OR DEPOSITORY, HE OR SHE SHALL TAKE CUSTODY OF ACCOUNTS HELD BY
SUCH FINANCIAL ORGANIZATION AND SHALL SEEK  TO  PROMPTLY  TRANSFER  SUCH
ACCOUNTS  TO  ANOTHER  FINANCIAL ORGANIZATION THAT IS SELECTED AS A PLAN
MANAGER OR DEPOSITORY AND INTO INVESTMENT INSTRUMENTS AS SIMILAR TO  THE
ORIGINAL INSTRUMENTS AS POSSIBLE.
  S  696-G.  STATE GUARANTEE. 1. NOTHING IN THIS ARTICLE SHALL ESTABLISH
OR BE DEEMED TO ESTABLISH ANY OBLIGATION OF THE STATE,  THE  COMPTROLLER
OR  ANY AGENCY OR INSTRUMENTALITY OF THE STATE TO GUARANTEE ANY BENEFITS
TO ANY ACCOUNT OWNER OR DESIGNATED BENEFICIARY.
  2. NOTWITHSTANDING THE PROVISIONS OF SUBDIVISION ONE OF THIS  SECTION,
IN  ORDER  TO  ENSURE THAT THE PLAN IS ABLE TO MEET ITS OBLIGATIONS, THE
GOVERNOR SHALL INCLUDE IN THE BUDGET SUBMITTED PURSUANT TO SECTION TWEN-
TY-TWO OF THE STATE FINANCE LAW, AN  APPROPRIATION  SUFFICIENT  FOR  THE
PURPOSE  OF  ENSURING  THAT THE PLAN CAN MEET ITS OBLIGATIONS.  ANY SUMS
APPROPRIATED FOR SUCH PURPOSE SHALL BE  TRANSFERRED  TO  THE  PLAN.  ALL
AMOUNTS PAID INTO THE PLAN PURSUANT TO THIS SUBDIVISION SHALL CONSTITUTE
AND  BE  ACCOUNTED FOR AS ADVANCES BY THE STATE TO THE PLAN AND, SUBJECT
TO THE RIGHTS OF THE PLAN'S CONTRACT HOLDERS, SHALL  BE  REPAID  TO  THE

S. 6698                             8

STATE  WITHOUT  INTEREST FROM AVAILABLE OPERATING REVENUE OF THE PLAN IN
EXCESS OF AMOUNTS REQUIRED FOR THE PAYMENT OF  THE  OBLIGATIONS  OF  THE
PLAN.  AS  USED IN THIS SECTION, "OBLIGATIONS OF THE PLAN" MEANS AMOUNTS
REQUIRED  FOR  THE  PAYMENT OF CONTRACT BENEFITS OR OTHER OBLIGATIONS OF
THE PLAN, THE MAINTENANCE OF THE PLAN, AND OPERATING  EXPENSES  FOR  THE
CURRENT FISCAL YEAR.
  S  2. The state finance law is amended by adding a new section 78-c to
read as follows:
  S 78-C. NEW YORK STATE PRE-PAID TUITION PLAN FUND.  1. THERE IS HEREBY
ESTABLISHED IN THE SOLE CUSTODY OF THE STATE COMPTROLLER A SPECIAL  FUND
TO  BE  KNOWN  AS  THE  NEW  YORK  STATE PRE-PAID TUITION PLAN FUND. ALL
PAYMENTS FROM SUCH FUND SHALL BE MADE IN ACCORDANCE WITH  ARTICLE  FOUR-
TEEN-B OF THE EDUCATION LAW.
  2.  (A) THE COMPTROLLER, WITH THE CONSENT OF THE PRE-PAID TUITION PLAN
BOARD, SHALL INVEST THE ASSETS OF THE FUND IN INVESTMENTS AUTHORIZED  BY
ARTICLE  FOUR-A  OF  THE  RETIREMENT  AND  SOCIAL SECURITY LAW, PROVIDED
HOWEVER, THAT:
  (I) THE PROVISIONS OF PARAGRAPH (A) OF SUBDIVISION TWO OF SECTION  ONE
HUNDRED  SEVENTY-SEVEN  OF  THE RETIREMENT AND SOCIAL SECURITY LAW SHALL
NOT APPLY EXCEPT FOR THE FIRST CLAUSE OF SUBPARAGRAPH (II) OF SUCH PARA-
GRAPH; AND
  (II) NOTWITHSTANDING THE PROVISIONS OF SUBDIVISION  SEVEN  OF  SECTION
ONE  HUNDRED  SEVENTY-SEVEN OF THE RETIREMENT AND SOCIAL SECURITY LAW OR
ANY OTHER LAW TO THE CONTRARY, THE ASSETS OF THE FUND MAY BE INVESTED IN
ANY FUNDING AGREEMENT ISSUED IN ACCORDANCE WITH SECTION  THREE  THOUSAND
TWO HUNDRED TWENTY-TWO OF THE INSURANCE LAW BY A DOMESTIC LIFE INSURANCE
COMPANY  OR  A  FOREIGN  LIFE  INSURANCE  COMPANY DOING BUSINESS IN THIS
STATE, SUBJECT TO THE FOLLOWING:
  (1) SUCH A FUNDING AGREEMENT MAY PROVIDE FOR A GUARANTEED MINIMUM RATE
OF RETURN;
  (2) SUCH A FUNDING AGREEMENT MAY BE ALLOCATED  AS  EITHER  A  SEPARATE
ACCOUNT  OR  A  GENERAL  ACCOUNT  OF  THE ISSUER, AS THE COMPTROLLER MAY
DECIDE;
  (3) TOTAL INVESTMENTS OF THE FUND PURSUANT TO THIS  PARAGRAPH  IN  ANY
FUNDING  AGREEMENTS  ISSUED BY A SINGLE LIFE INSURANCE COMPANY WHICH ARE
ALLOCATED AS A GENERAL ACCOUNT OF THE ISSUER SHALL NOT,  IN  THE  AGGRE-
GATE, EXCEED THREE HUNDRED FIFTY MILLION DOLLARS; AND
  (4) NO ASSETS OF THE FUND SHALL BE INVESTED IN ANY SUCH FUNDING AGREE-
MENT  UNLESS, AT THE TIME OF SUCH INVESTMENT, THE GENERAL OBLIGATIONS OR
FINANCIAL STRENGTH OF THE ISSUER HAVE RECEIVED  EITHER  THE  HIGHEST  OR
SECOND HIGHEST RATING BY TWO NATIONALLY RECOGNIZED RATING SERVICES OR BY
ONE NATIONALLY RECOGNIZED RATING SERVICE IN THE EVENT THAT ONLY ONE SUCH
SERVICE RATES SUCH OBLIGATIONS.
  (B)  FUND  ASSETS  SHALL  BE KEPT SEPARATE AND SHALL NOT BE COMMINGLED
WITH OTHER ASSETS. THE  PRE-PAID  TUITION  PLAN  BOARD  MAY  ENTER  INTO
CONTRACTS  TO  PROVIDE  FOR  INVESTMENT ADVICE AND MANAGEMENT, CUSTODIAL
SERVICES AND OTHER PROFESSIONAL  SERVICES  FOR  THE  ADMINISTRATION  AND
INVESTMENT OF THE PLAN. ADMINISTRATIVE FEES, COSTS AND EXPENSES, INCLUD-
ING  INVESTMENT  FEES AND EXPENSES, SHALL BE PAID FROM THE ASSETS OF THE
FUND.
  3. THE COMPTROLLER SHALL PROVIDE FOR THE ADMINISTRATION OF  THE  TRUST
FUND,  INCLUDING  MAINTAINING  PARTICIPANT  RECORDS  AND  ACCOUNTS,  AND
PROVIDING  ANNUAL  AUDITED  REPORTS.  THE  COMPTROLLER  MAY  ENTER  INTO
CONTRACTS TO PROVIDE ADMINISTRATIVE SERVICES AND REPORTING.
  S  3.  Section  5205 of the civil practice law and rules is amended by
adding a new subdivision (p) to read as follows:

S. 6698                             9

  (P) EXEMPTION FOR NEW YORK STATE PRE-PAID TUITION PLAN MONIES.  MONIES
IN AN ACCOUNT CREATED PURSUANT TO ARTICLE FOURTEEN-B  OF  THE  EDUCATION
LAW  ARE EXEMPT FROM APPLICATION TO THE SATISFACTION OF A MONEY JUDGMENT
AS FOLLOWS:
  1.  ONE  HUNDRED  PERCENT OF MONIES IN AN ACCOUNT IN CONNECTION WITH A
PRE-PAID TUITION PLAN ESTABLISHED PURSUANT TO SUCH  ARTICLE  IS  EXEMPT;
AND
  2.  ONE  HUNDRED  PERCENT  OF MONIES IN AN ACCOUNT IS EXEMPT WHERE THE
JUDGMENT DEBTOR IS THE ACCOUNT OWNER OR DESIGNATED BENEFICIARY  OF  SUCH
ACCOUNT.
  FOR  THE  PURPOSES  OF THIS SUBDIVISION, THE TERMS "ACCOUNT OWNER" AND
"DESIGNATED BENEFICIARY" SHALL HAVE THE MEANINGS  ASCRIBED  TO  THEM  IN
ARTICLE FOURTEEN-B OF THE EDUCATION LAW.
  S  4. Subparagraph (A) of paragraph 2 of subsection (t) of section 606
of the tax law, as amended by section 1 of part N of chapter 85  of  the
laws of 2002, is amended to read as follows:
  (A)  The  term  "allowable  college  tuition  expenses" shall mean the
amount of qualified college tuition expenses of eligible  students  paid
by  the  taxpayer during the taxable year, limited to [ten] TWENTY thou-
sand dollars for each such student;
  S 5. Paragraph 34 of subsection (b) of section 612 of the tax law,  as
amended  by chapter 535 of the laws of 2000, subparagraph (B) as amended
by chapter 593 of the laws of 2003, is amended to read as follows:
  (34) (A) Excess distributions received during the taxable  year  by  a
distributee  of  a family tuition account established under the New York
state college choice tuition savings program provided for under  article
fourteen-A of the education law, OR OF A PRE-PAID TUITION ACCOUNT ESTAB-
LISHED  PURSUANT  TO  ARTICLE  FOURTEEN-B  OF  THE EDUCATION LAW, to the
extent such excess distributions are deemed attributable  to  deductible
contributions  under  paragraph  thirty-two  of  subsection  (c) of this
section.
  (B) (i) The term "excess distributions" means distributions which  are
not
  (I)  qualified  withdrawals  within the meaning of subdivision nine of
section six hundred ninety-five-b OR SUBDIVISION FIFTEEN OF SECTION  SIX
HUNDRED NINETY-SIX-A of the education law;
  (II)  withdrawals  made  as a result of the death or disability of the
designated beneficiary within the meaning of subdivision ten of  section
six  hundred  ninety-five-b OR SUBDIVISION TWELVE OF SECTION SIX HUNDRED
NINETY-SIX-A of such law; or
  (III) transfers described in paragraph b of subdivision six of section
six hundred ninety-five-e of such law.
  (ii) Excess distributions shall be deemed attributable  to  deductible
contributions  to the extent the amount of any such excess distribution,
when added to  all  previous  excess  distributions  from  the  account,
exceeds the aggregate of all nondeductible contributions to the account.
  S  6. Paragraphs 32 and 33 of subsection (c) of section 612 of the tax
law, paragraph 32 as amended by chapter 81 of the laws of 2008 and para-
graph 33 as added by chapter 546 of the laws of  1997,  are  amended  to
read as follows:
  (32) Contributions made during the taxable year by an account owner to
one or more family tuition accounts established under the New York state
college  choice tuition savings program provided for under article four-
teen-A, OR TO A PRE-PAID TUITION ACCOUNT PURSUANT TO ARTICLE  FOURTEEN-B
of the education law, to the extent not deductible or eligible for cred-
it  for  federal  income  tax purposes, provided, however, the exclusion

S. 6698                            10

provided for in this paragraph shall  not  exceed  [five]  TEN  thousand
dollars  for an individual or head of household, and for married couples
who file joint tax returns,  shall  not  exceed  [ten]  TWENTY  thousand
dollars;  provided, further, that such exclusion shall be available only
to the account owner and not to any other person.
  (33) Distributions from a family tuition account established under the
New York state college choice tuition savings program provided for under
article fourteen-A, OR FROM A PRE-PAID TUITION ACCOUNT PURSUANT TO ARTI-
CLE FOURTEEN-B of the education law, to the extent includible  in  gross
income for federal income tax purposes.
  S 7. This act shall take effect immediately and shall apply to taxable
years commencing after December 31, 2014.

Co-Sponsors

S6698A (ACTIVE) - Bill Details

See Assembly Version of this Bill:
A9656
Current Committee:
Law Section:
Education Law
Laws Affected:
Add §355-d, Ed L; add §78-c, St Fin L; amd §5205, CPLR; amd §612, Tax L

S6698A (ACTIVE) - Bill Texts

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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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BILL NUMBER:S6698A

TITLE OF BILL: 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

PURPOSE: To create a New York pre-paid tuition plan to give parents
the opportunity to lock in current tuition rates for their children's
college education.

SUMMARY OF PROVISIONS:

Section 1. Amends the education law by adding a new section 355-d to
create the "New York State Pre-Paid Tuition Plan." Subdivision 1 of
this section provides definitions.

Subdivision 2 of this section outlines the powers and duties of the
comptroller, which shall be to: develop and implement the plan; make
arrangements with the state university, city university and any
eligible educational institution located within the state which
chooses to participate, to fulfill obligations under prepaid tuition
contracts for two-year and four-year degree programs; engage the
services of consultants on a contract basis for rendering professional
and technical assistance and advice; seek rulings and other guidance
from the United States Department of Treasury and the IRS relating to
the program; make changes to the plan required for the participants to
obtain the federal income tax benefits or treatment provided by
section 529 of the Internal Revenue Code; charge, impose and collect
administrative fees and service charges in connection with any
agreement, contract or transaction relating to the plan; develop
marketing plans and promotional material; establish the methods by
which funds shall be allocated to pay for administrative costs; and do
all things necessary and proper to carry out the purposes of this
section.

Subdivision 3 of this section outlines the plan requirements and
provides that any person who desires to enter into a contract for
pre-payment of tuition expenses at an institution of SUNY, CUNY or any
participating eligible educational institution may open an account,
and outlines the information required to be provided by an account
applicant. This subdivision also authorizes the comptroller to
establish a nominal application fee, and provides that: any person,
including the account owner, may make contributions to an account
after it is opened; contributions may be made only in cash; four years
must elapse between the establishment of a pre-paid tuition account
and the time the first qualified withdrawal is made for the payment of
tuition expenses; an account owner may withdraw all or part of the
balance from an account on sixty days notice; an account owner may
change the designated beneficiary to a person who is a member of the
family of the prior designated beneficiary; an account owner may
transfer all or a portion of an account to another family tuition
account, the subsequent designated beneficiary of which is a member of
the family; the plan shall provide separate accounting for each
designated beneficiary; no account owner of designated beneficiary
shall be permitted to direct the investment of any contributions to an
account, or the earnings thereon; and neither an account owner nor a
designated beneficiary shall use an interest in an account as security


for a loan. Lastly, this subdivision: requires certain statements be
provided to the account owner, the designated beneficiary and the IRS;
permits local governments or certain nonprofit organizations to open
and become an account owner of an account to fund scholarships;
permits an annual fee to be imposed on the account owner for the
maintenance of the account; outlines required disclosures that must be
made to each account owner and prospective account owner; stipulates
that prepaid tuition savings agreements are subject to
"truth-in-savings" laws; and stipulates that nothing in any agreement
shall be construed as a guarantee by the state or any college that a
beneficiary will be admitted to a college or university, or, upon
admission will be permitted to continue to attend or will receive a
degree.

Subdivision 4 of this section provides that nothing in this section
shall establish or be deemed to establish any obligation of the state,
the comptroller, or any agency or instrumentality of the state to
guarantee any benefits to any account owner or designated beneficiary.
This subdivision also provides that, in order to ensure that the plan
is able to meet its obligations, the Governor shall provide an
appropriation in the budget sufficient for the purpose of ensuring
that the plan can meet its obligations.

Section 2. Adds a new section 78-c to the state finance law to
establish the New York State Pre-Paid Tuition Plan Fund and outlines
the conditions under which the comptroller shall invest the assets of
the fund.

Section 3. Adds a new subdivision (p) to section 5205 of the civil
practice law and rules to exempt the monies in a pre-paid tuition plan
account from application to the satisfaction of a money judgment.

Section 4. Amends paragraph 34 of subsection (b) of section 612 of the
tax law to give prepaid tuition accounts the same treatment as college
choice tuition accounts regarding the addition of excess distributions
from a pre-paid tuition account to federal adjusted gross income.

Section 5. Amends paragraphs 32 and 33 of subsection (c) of section
612 of the tax law to give pre-paid tuition accounts the same
treatment as college choice tuition accounts regarding deductions from
federal adjusted gross income.

Section 6. Effective date.

JUSTIFICATION: The cost of tuition and fees for college have grown
significantly faster than inflation for many years. Tuitions at both
private and public colleges and universities grew an average of 4%
between the 2011-2012 academic year and the 2012-2013 academic year.
This rate is significantly higher than that of inflation, which has
held below 2% since 2008, and it is certainly higher that the rate of
growth for the salaries and wages of families in New York State.

The IDC proposes the creation of the Pre-paid Tuition Plan which will
help families guard against such increases in tuition rates by
allowing them to buy tuition credit at both public or participating
private Colleges and Universities in New York for their children at
current tuition prices. This program also allows parents to spread out


the cost of paying for tuition over multiple years, thus lessening the
burden on their families.

The underlying idea behind a Pre-paid College Tuition Plan is the
creation of a fund into which parents can place money to pay future
college expenses. The payments into the fund come in the form of
paying for a portion of tuition at a participating college or
university at current tuition costs. The money in the fund is then
invested so that when that pre-paid tuition unit is redeemed by the
parent, the original payment plus the earned interest will be enough
so that the participating colleges and universities get the same
amount of revenue as if the parent were paying for tuition at that
moment. In this way, parents save money without participating colleges
and universities having to lose out on income.

Pre-paid College Tuition Plans exist in many other States, such as
Florida, Pennsylvania, Washington, Illinois, and Texas. There is a lot
of variations found between the different plans offered by those
varied States and the IDC proposal takes the best features from these
plans in order to ensure that parents are able to get the savings they
need while keeping the fund safe and viable. The IDC proposal would
allow parents to purchase whole or portions of semester credit hours
at current tuition rates with the guarantee that this payment will be
honored if their child is accepted to the participating college or
university. The plan gives parents the option to chose between
different plans depending on the possible educational choices that
their child will make. For example, parents could chose between buying
credits towards an Associate's degree at a community college or a
Bachelor's degree at a four-year university or a combination of the
two. Contributions into this fund would get the same preferential tax
treatment given to funds set aside in a 529 College Savings Account.

LEGISLATIVE HISTORY: New bill.

FISCAL IMPLICATIONS: It is estimated that enactment of this
legislation would result in a annual cost to the state of $2 million
for administration of the program.

EFFECTIVE DATE: This act shall take effect immediately and shall
apply to taxable years commencing after December 31, 2014.

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                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 6698--A

                            I N  S E N A T E

                            February 28, 2014
                               ___________

Introduced  by  Sens. CARLUCCI, KLEIN, SAVINO, VALESKY -- read twice and
  ordered printed, and when printed to be committed to the Committee  on
  Higher  Education  --  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:

  Section  1. The education law is amended by adding a new section 355-d
to read as follows:
  S 355-D. "NEW YORK STATE PRE-PAID TUITION PLAN". 1. DEFINITIONS.   FOR
THE PURPOSES OF THIS SECTION, THE FOLLOWING TERMS SHALL HAVE THE FOLLOW-
ING MEANINGS:
  A.  "ACCOUNT"  OR  "PRE-PAID TUITION ACCOUNT" SHALL MEAN AN INDIVIDUAL
PRE-PAID TUITION ACCOUNT ESTABLISHED IN ACCORDANCE WITH  THE  PROVISIONS
OF THIS SECTION.
  B.  "ACCOUNT  OWNER"  SHALL  MEAN  A PERSON WHO ENTERS INTO A PRE-PAID
TUITION AGREEMENT PURSUANT TO THE PROVISIONS OF THIS ARTICLE,  INCLUDING
A  PERSON  WHO  ENTERS INTO SUCH AN AGREEMENT AS A FIDUCIARY OR AGENT ON
BEHALF OF A TRUST, ESTATE, PARTNERSHIP, ASSOCIATION, COMPANY  OR  CORPO-
RATION.  THE ACCOUNT OWNER MAY ALSO BE THE DESIGNATED BENEFICIARY OF THE
ACCOUNT.
  C. "CITY UNIVERSITY" SHALL MEAN THE CITY UNIVERSITY OF NEW YORK.
  D. "COMPTROLLER" SHALL MEAN THE STATE COMPTROLLER.
  E. "DESIGNATED BENEFICIARY" SHALL MEAN, WITH RESPECT TO AN ACCOUNT  OR
ACCOUNTS,  THE  INDIVIDUAL  DESIGNATED  AS  THE INDIVIDUAL WHOSE TUITION
EXPENSES ARE EXPECTED TO BE PAID FROM THE ACCOUNT OR ACCOUNTS.
  F. "ELIGIBLE EDUCATIONAL INSTITUTION" SHALL MEAN  ANY  INSTITUTION  OF
HIGHER  EDUCATION  DEFINED  AS  AN  ELIGIBLE  EDUCATIONAL INSTITUTION IN
SECTION 529(E)(5) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
  G. "FINANCIAL ORGANIZATION" SHALL MEAN AN ORGANIZATION  AUTHORIZED  TO
DO BUSINESS IN THE STATE AND (I) WHICH IS AN AUTHORIZED FIDUCIARY TO ACT
AS  A  TRUSTEE PURSUANT TO THE PROVISIONS OF AN ACT OF CONGRESS ENTITLED

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD13274-03-4

S. 6698--A                          2

"EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974" AS SUCH PROVISIONS MAY
BE AMENDED FROM TIME TO TIME, OR AN INSURANCE COMPANY; AND (II)  (A)  IS
LICENSED  OR  CHARTERED  BY THE DEPARTMENT OF FINANCIAL SERVICES, (B) IS
CHARTERED  BY AN AGENCY OF THE FEDERAL GOVERNMENT, (C) IS SUBJECT TO THE
JURISDICTION AND REGULATION OF THE SECURITIES AND EXCHANGE COMMISSION OF
THE FEDERAL GOVERNMENT, OR (D) IS ANY OTHER ENTITY OTHERWISE  AUTHORIZED
TO  ACT  IN THIS STATE AS A TRUSTEE PURSUANT TO THE PROVISIONS OF AN ACT
OF CONGRESS ENTITLED "EMPLOYEE RETIREMENT INCOME SECURITY ACT  OF  1974"
AS SUCH PROVISIONS MAY BE AMENDED FROM TIME TO TIME.
  H. "MEMBER OF FAMILY" SHALL MEAN A FAMILY MEMBER AS DEFINED IN SECTION
529 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
  I.  "NONQUALIFIED WITHDRAWAL" SHALL MEAN A WITHDRAWAL FROM AN ACCOUNT,
BUT SHALL NOT MEAN:
  (I) A QUALIFIED WITHDRAWAL; (II) A WITHDRAWAL MADE AS  THE  RESULT  OF
THE  DEATH OR DISABILITY OF THE DESIGNATED BENEFICIARY OF AN ACCOUNT; OR
(III) A WITHDRAWAL MADE ON THE ACCOUNT OF A SCHOLARSHIP.
  J. "PLAN" SHALL MEAN THE NEW YORK STATE PRE-PAID TUITION  PLAN  ESTAB-
LISHED PURSUANT TO THIS SECTION.
  K.  "PLAN MANAGER" SHALL MEAN A FINANCIAL ORGANIZATION SELECTED BY THE
COMPTROLLER TO ACT AS A DEPOSITORY AND MANAGER OF THE PLAN.
  L. "QUALIFIED WITHDRAWAL" SHALL MEAN A WITHDRAWAL FROM AN  ACCOUNT  TO
PAY THE QUALIFIED TUITION EXPENSES OF THE DESIGNATED BENEFICIARY.
  M. "STATE UNIVERSITY" SHALL MEAN THE STATE UNIVERSITY OF NEW YORK.
  N.  "TUITION"  SHALL MEAN ANY MANDATORY CHARGES IMPOSED BY AN ELIGIBLE
EDUCATIONAL INSTITUTION FOR ATTENDANCE FOR AN ACADEMIC YEAR AS A  CONDI-
TION  OF  ENROLLMENT.  SUCH TERM SHALL NOT INCLUDE LABORATORY FEES, ROOM
AND BOARD, OR OTHER SIMILAR FEES AND CHARGES.
  O. "TUITION SAVINGS AGREEMENT" SHALL MEAN  AN  AGREEMENT  BETWEEN  THE
COMPTROLLER OR A FINANCIAL ORGANIZATION AND AN ACCOUNT OWNER.
  2.  POWERS AND DUTIES OF THE COMPTROLLER. THE COMPTROLLER SHALL ADMIN-
ISTER THE PLAN AND SHALL DEVELOP AND IMPLEMENT PROGRAMS FOR THE  PREPAY-
MENT OF UNDERGRADUATE TUITION, AT A FIXED, GUARANTEED LEVEL FOR APPLICA-
TION  AT  ANY  TWO-YEAR OR FOUR-YEAR ELIGIBLE EDUCATIONAL INSTITUTION AS
DEFINED IN SECTION 529 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED,
OR OTHER APPLICABLE FEDERAL LAW. IN ADDITION, THE COMPTROLLER SHALL HAVE
THE POWER AND DUTY TO:
  A. DEVELOP AND IMPLEMENT THE PLAN IN  A  MANNER  CONSISTENT  WITH  THE
PROVISIONS  OF THIS SECTION THROUGH RULES AND REGULATIONS ESTABLISHED IN
ACCORDANCE WITH THE STATE ADMINISTRATIVE PROCEDURE ACT;
  B. MAKE ARRANGEMENTS WITH THE STATE UNIVERSITY,  CITY  UNIVERSITY  AND
ANY  ELIGIBLE  EDUCATIONAL  INSTITUTION  LOCATED  WITHIN THE STATE WHICH
CHOOSES TO PARTICIPATE, TO FULFILL  OBLIGATIONS  UNDER  PREPAID  TUITION
CONTRACTS  FOR TWO-YEAR OR FOUR-YEAR DEGREE PROGRAMS, INCLUDING, BUT NOT
LIMITED TO, PAYMENT FROM THE PLAN OF THE THEN ACTUAL IN-STATE UNDERGRAD-
UATE TUITION COST ON BEHALF OF A  QUALIFIED  BENEFICIARY  OF  A  PREPAID
TUITION  CONTRACT TO THE INSTITUTION IN WHICH SUCH BENEFICIARY IS ADMIT-
TED AND ENROLLED, AND APPLICATION OF SUCH BENEFITS TOWARDS GRADUATE-LEV-
EL TUITION AND TOWARDS TUITION COSTS AT SUCH ELIGIBLE EDUCATIONAL INSTI-
TUTIONS, AS THAT TERM IS DEFINED  IN  26  U.S.C.  S  529  OR  ANY  OTHER
APPLICABLE  SECTION OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AS
DETERMINED BY THE COMPTROLLER IN HIS SOLE DISCRETION. SUCH  ARRANGEMENTS
MUST  INCLUDE  PLANS THAT ALLOW AN ACCOUNT OWNER TO ENTER INTO CONTRACTS
IN WHICH HE OR SHE CAN PURCHASE TUITION IN  INSTALLMENTS  EQUAL  TO  THE
COST  OF  SEMESTERS  AS  A FULL TIME STUDENT, BUT CAN ALSO INCLUDE PLANS
THAT WOULD ALLOW FOR THE PREPAYMENT OF TUITION FOR TUITION CREDIT HOURS;

S. 6698--A                          3

  C. ENGAGE THE SERVICES OF CONSULTANTS ON A CONTRACT BASIS FOR  RENDER-
ING PROFESSIONAL AND TECHNICAL ASSISTANCE AND ADVICE;
  D.  SEEK  RULINGS AND OTHER GUIDANCE FROM THE UNITED STATES DEPARTMENT
OF TREASURY AND THE INTERNAL REVENUE SERVICE RELATING TO THE PROGRAM;
  E. MAKE CHANGES TO THE PLAN REQUIRED FOR THE  PARTICIPANTS  TO  OBTAIN
THE  FEDERAL INCOME TAX BENEFITS OR TREATMENT PROVIDED BY SECTION 529 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR ANY SIMILAR  SUCCESSOR
LEGISLATION;
  F.  CHARGE, IMPOSE AND COLLECT ADMINISTRATIVE FEES AND SERVICE CHARGES
IN CONNECTION WITH ANY AGREEMENT, CONTRACT OR  TRANSACTION  RELATING  TO
THE PLAN;
  G. DEVELOP MARKETING PLANS AND PROMOTION MATERIAL;
  H.  ESTABLISH  THE METHODS BY WHICH THE FUNDS HELD IN SUCH ACCOUNTS BE
DISBURSED;
  I. ESTABLISH THE METHOD BY WHICH FUNDS SHALL BE ALLOCATED TO  PAY  FOR
ADMINISTRATIVE COSTS; AND
  J.  DO  ALL  THINGS  NECESSARY AND PROPER TO CARRY OUT THE PURPOSES OF
THIS SECTION.
  3. PLAN REQUIREMENTS. EVERY PRE-PAID TUITION ACCOUNT SHALL COMPLY WITH
THE PROVISIONS OF THIS SECTION.
  A. A PRE-PAID TUITION ACCOUNT MAY BE OPENED BY ANY PERSON WHO  DESIRES
TO  ENTER  INTO  A  CONTRACT  FOR  PRE-PAYMENT OF TUITION EXPENSES AT AN
INSTITUTION OF THE STATE UNIVERSITY, THE CITY UNIVERSITY OR ANY  PARTIC-
IPATING ELIGIBLE EDUCATIONAL INSTITUTION. AN ACCOUNT OWNER MAY DESIGNATE
ANOTHER  PERSON  AS  SUCCESSOR  OWNER OF THE ACCOUNT IN THE EVENT OF THE
DEATH OF THE ORIGINAL ACCOUNT OWNER. SUCH PERSON WHO OPENS AN ACCOUNT OR
ANY SUCCESSOR OWNER SHALL BE CONSIDERED THE ACCOUNT OWNER.
  B. AN APPLICATION FOR SUCH ACCOUNT SHALL BE IN THE FORM PRESCRIBED  BY
THE COMPTROLLER AND CONTAIN THE FOLLOWING:
  (I) THE NAME, ADDRESS AND SOCIAL SECURITY NUMBER OR EMPLOYER IDENTIFI-
CATION NUMBER OF THE ACCOUNT OWNER;
  (II) THE DESIGNATION OF A DESIGNATED BENEFICIARY;
  (III)  THE  NAME, ADDRESS AND SOCIAL SECURITY NUMBER OF THE DESIGNATED
BENEFICIARY; AND
  (IV) SUCH OTHER INFORMATION AS THE COMPTROLLER MAY REQUIRE.
  C. THE COMPTROLLER MAY ESTABLISH A NOMINAL FEE FOR SUCH APPLICATION.
  D. ANY PERSON, INCLUDING THE ACCOUNT OWNER, MAY MAKE CONTRIBUTIONS  TO
AN ACCOUNT AFTER THE ACCOUNT IS OPENED.
  E. CONTRIBUTIONS TO ACCOUNTS MAY BE MADE ONLY IN CASH.
  F.  FOUR  YEARS  MUST  ELAPSE  BETWEEN THE ESTABLISHMENT OF A PRE-PAID
TUITION ACCOUNT AND THE TIME THE FIRST QUALIFIED WITHDRAWAL IS MADE  FOR
THE PAYMENT OF TUITION EXPENSES.
  G.  AN  ACCOUNT  OWNER MAY WITHDRAW ALL OR PART OF THE BALANCE FROM AN
ACCOUNT ON SIXTY DAYS NOTICE OR SUCH SHORTER PERIOD AS MAY BE AUTHORIZED
UNDER RULES GOVERNING THE PLAN. SUCH RULES SHALL INCLUDE PROVISIONS THAT
WILL GENERALLY ENABLE THE DETERMINATION AS TO WHETHER A WITHDRAWAL IS  A
NONQUALIFIED WITHDRAWAL OR A QUALIFIED WITHDRAWAL.
  H.  AN  ACCOUNT  OWNER  MAY  CHANGE  THE  DESIGNATED BENEFICIARY OF AN
ACCOUNT TO AN INDIVIDUAL WHO IS A MEMBER OF  THE  FAMILY  OF  THE  PRIOR
DESIGNATED  BENEFICIARY IN ACCORDANCE WITH PROCEDURES ESTABLISHED BY THE
COMPTROLLER.
  I. AN ACCOUNT OWNER MAY TRANSFER ALL OR A PORTION  OF  AN  ACCOUNT  TO
ANOTHER FAMILY TUITION ACCOUNT, THE SUBSEQUENT DESIGNATED BENEFICIARY OF
WHICH  IS A MEMBER OF THE FAMILY AS DEFINED IN SECTION 529 OF THE INTER-
NAL REVENUE CODE OF 1986, AS AMENDED.

S. 6698--A                          4

  J. THE PLAN SHALL PROVIDE  SEPARATE  ACCOUNTING  FOR  EACH  DESIGNATED
BENEFICIARY.
  K.  NO ACCOUNT OWNER OR DESIGNATED BENEFICIARY OF ANY ACCOUNT SHALL BE
PERMITTED TO DIRECT THE INVESTMENT OF ANY CONTRIBUTIONS TO AN ACCOUNT OR
THE EARNINGS THEREON.
  L. NEITHER AN ACCOUNT OWNER NOR A DESIGNATED BENEFICIARY SHALL USE  AN
INTEREST IN AN ACCOUNT AS SECURITY FOR A LOAN. ANY PLEDGE OF AN INTEREST
IN AN ACCOUNT SHALL BE OF NO FORCE AND EFFECT.
  M.  (I) IF THERE IS ANY DISTRIBUTION FROM AN ACCOUNT TO ANY INDIVIDUAL
OR FOR THE BENEFIT OF  ANY  INDIVIDUAL  DURING  A  CALENDAR  YEAR,  SUCH
DISTRIBUTION  SHALL  BE REPORTED TO THE INTERNAL REVENUE SERVICE AND THE
ACCOUNT OWNER, THE DESIGNATED BENEFICIARY  OR  THE  DISTRIBUTEE  TO  THE
EXTENT REQUIRED BY FEDERAL LAW OR REGULATION.
  (II)  STATEMENTS SHALL BE PROVIDED TO EACH ACCOUNT OWNER AT LEAST ONCE
EACH YEAR WITHIN SIXTY DAYS AFTER THE END OF THE TWELVE MONTH PERIOD  TO
WHICH  THEY  RELATE. THE STATEMENT SHALL IDENTIFY THE CONTRIBUTIONS MADE
DURING A PRECEDING TWELVE MONTH PERIOD, THE TOTAL CONTRIBUTIONS MADE  TO
THE  ACCOUNT  THROUGH THE END OF THE PERIOD, THE VALUE OF THE ACCOUNT AT
THE END OF SUCH PERIOD, DISTRIBUTIONS MADE DURING SUCH  PERIOD  AND  ANY
OTHER  INFORMATION  THAT THE COMPTROLLER SHALL REQUIRE TO BE REPORTED TO
THE ACCOUNT OWNER.
  (III)  STATEMENTS  AND  INFORMATION  RELATING  TO  ACCOUNTS  SHALL  BE
PREPARED AND FILED TO THE EXTENT REQUIRED BY FEDERAL AND STATE TAX LAW.
  N.  (I)  A  LOCAL  GOVERNMENT  OR  ORGANIZATION  DESCRIBED  IN SECTION
501(C)(3) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, MAY OPEN AND
BECOME THE ACCOUNT OWNER OF AN ACCOUNT TO FUND SCHOLARSHIPS FOR  PERSONS
WHOSE IDENTITY WILL BE DETERMINED UPON DISBURSEMENT.
  (II) IN THE CASE OF ANY ACCOUNT OPENED PURSUANT TO PARAGRAPH A OF THIS
SUBDIVISION  THE REQUIREMENT SET FORTH IN THIS SUBDIVISION THAT A DESIG-
NATED BENEFICIARY BE DESIGNATED WHEN AN  ACCOUNT  IS  OPENED  SHALL  NOT
APPLY  AND EACH INDIVIDUAL WHO RECEIVES AN INTEREST IN SUCH ACCOUNT AS A
SCHOLARSHIP SHALL BE TREATED AS A DESIGNATED BENEFICIARY WITH RESPECT TO
SUCH INTEREST.
  O. AN ANNUAL FEE MAY BE IMPOSED UPON THE ACCOUNT OWNER FOR THE MAINTE-
NANCE OF THE ACCOUNT.
  P. THE PLAN SHALL DISCLOSE THE FOLLOWING  INFORMATION  IN  WRITING  TO
EACH  ACCOUNT  OWNER AND PROSPECTIVE ACCOUNT OWNER OF A PRE-PAID TUITION
ACCOUNT:
  (I) THE  TERMS  AND  CONDITIONS  FOR  PURCHASING  A  PRE-PAID  TUITION
ACCOUNT;
  (II) ANY RESTRICTIONS ON THE SUBSTITUTION OF BENEFICIARIES;
  (III)  THE PERSON OR ENTITY ENTITLED TO TERMINATE THE TUITION PRE-PAY-
MENT AGREEMENT;
  (IV) THE PERIOD OF TIME DURING WHICH A BENEFICIARY MAY  RECEIVE  BENE-
FITS UNDER THE TUITION PRE-PAYMENT AGREEMENT;
  (V)  THE  TERMS  AND  CONDITIONS  UNDER  WHICH  MONEY MAY BE WHOLLY OR
PARTIALLY WITHDRAWN FROM THE PLAN, INCLUDING, BUT NOT  LIMITED  TO,  ANY
REASONABLE CHARGES AND FEES THAT MAY BE IMPOSED FOR WITHDRAWAL;
  (VI)  THE  PROBABLE  TAX CONSEQUENCES ASSOCIATED WITH CONTRIBUTIONS TO
AND DISTRIBUTIONS FROM ACCOUNTS; AND
  (VII) ALL OTHER RIGHT AND OBLIGATIONS  PURSUANT  TO  PRE-PAID  TUITION
AGREEMENTS, AND ANY OTHER TERMS, CONDITIONS AND PROVISIONS DEEMED NECES-
SARY AND APPROPRIATE BY THE COMPTROLLER PURSUANT TO THIS SUBDIVISION.
  Q.  PRE-PAID  TUITION  SAVINGS  AGREEMENTS SHALL BE SUBJECT TO SECTION
FOURTEEN-C OF THE BANKING LAW  AND  THE  "TRUTH-IN-SAVINGS"  REGULATIONS
PROMULGATED THEREUNDER.

S. 6698--A                          5

  R.  NOTHING  IN THIS ARTICLE OR IN ANY PRE-PAID TUITION SAVINGS AGREE-
MENT ENTERED INTO PURSUANT TO THIS ARTICLE SHALL BE CONSTRUED AS A GUAR-
ANTEE BY THE STATE OR ANY COLLEGE THAT A BENEFICIARY WILL BE ADMITTED TO
A COLLEGE OR UNIVERSITY, OR, UPON ADMISSION TO A COLLEGE WILL BE PERMIT-
TED  TO  CONTINUE  TO  ATTEND OR WILL RECEIVE A DEGREE FROM A COLLEGE OR
UNIVERSITY.
  4. STATE GUARANTEE. A. NOTHING IN THIS SECTION SHALL ESTABLISH  OR  BE
DEEMED  TO ESTABLISH ANY OBLIGATION OF THE STATE, THE COMPTROLLER OR ANY
AGENCY OR INSTRUMENTALITY OF THE STATE TO GUARANTEE ANY BENEFITS TO  ANY
ACCOUNT OWNER OR DESIGNATED BENEFICIARY.
  B.  NOTWITHSTANDING THE PROVISIONS OF SUBDIVISION ONE OF THIS SECTION,
IN ORDER TO ENSURE THAT THE PLAN IS ABLE TO MEET  ITS  OBLIGATIONS,  THE
GOVERNOR SHALL INCLUDE IN THE BUDGET SUBMITTED PURSUANT TO SECTION TWEN-
TY-TWO  OF  THE  STATE  FINANCE LAW, AN APPROPRIATION SUFFICIENT FOR THE
PURPOSE OF ENSURING THAT THE PLAN CAN MEET  ITS  OBLIGATIONS.  ANY  SUMS
APPROPRIATED  FOR  SUCH  PURPOSE  SHALL  BE TRANSFERRED TO THE PLAN. ALL
AMOUNTS PAID INTO THE PLAN PURSUANT TO THIS SUBDIVISION SHALL CONSTITUTE
AND BE ACCOUNTED FOR AS ADVANCES BY THE STATE TO THE PLAN  AND,  SUBJECT
TO  THE  RIGHTS  OF  THE PLAN'S CONTRACT HOLDERS, SHALL BE REPAID TO THE
STATE WITHOUT INTEREST FROM AVAILABLE OPERATING REVENUE OF THE  PLAN  IN
EXCESS  OF  AMOUNTS  REQUIRED  FOR THE PAYMENT OF THE OBLIGATIONS OF THE
PLAN. AS USED IN THIS SECTION, "OBLIGATIONS OF THE PLAN"  MEANS  AMOUNTS
REQUIRED  FOR  THE  PAYMENT OF CONTRACT BENEFITS OR OTHER OBLIGATIONS OF
THE PLAN, THE MAINTENANCE OF THE PLAN, AND OPERATING  EXPENSES  FOR  THE
CURRENT FISCAL YEAR.
  S  2. The state finance law is amended by adding a new section 78-c to
read as follows:
  S 78-C. NEW YORK STATE PRE-PAID TUITION PLAN FUND. 1. THERE IS  HEREBY
ESTABLISHED  IN THE SOLE CUSTODY OF THE STATE COMPTROLLER A SPECIAL FUND
TO BE KNOWN AS THE NEW  YORK  STATE  PRE-PAID  TUITION  PLAN  FUND.  ALL
PAYMENTS  FROM  SUCH FUND SHALL BE MADE IN ACCORDANCE WITH SECTION THREE
HUNDRED FIFTY-FIVE-D OF THE EDUCATION LAW.
  2. (A) THE COMPTROLLER SHALL INVEST THE ASSETS OF THE FUND IN  INVEST-
MENTS AUTHORIZED BY ARTICLE FOUR-A OF THE RETIREMENT AND SOCIAL SECURITY
LAW, PROVIDED HOWEVER, THAT:
  (I)  THE PROVISIONS OF PARAGRAPH (A) OF SUBDIVISION TWO OF SECTION ONE
HUNDRED SEVENTY-SEVEN OF THE RETIREMENT AND SOCIAL  SECURITY  LAW  SHALL
NOT  APPLY  EXCEPT  FOR  SUBPARAGRAPH  (II)  OF SUCH PARAGRAPH; AND (II)
NOTWITHSTANDING THE PROVISIONS  OF  SUBDIVISION  SEVEN  OF  SECTION  ONE
HUNDRED  SEVENTY-SEVEN  OF THE RETIREMENT AND SOCIAL SECURITY LAW OR ANY
OTHER LAW TO THE CONTRARY, THE ASSETS OF THE FUND MAY BE INVESTED IN ANY
FUNDING AGREEMENT ISSUED IN ACCORDANCE WITH SECTION THREE  THOUSAND  TWO
HUNDRED  TWENTY-TWO  OF  THE  INSURANCE LAW BY A DOMESTIC LIFE INSURANCE
COMPANY OR A FOREIGN LIFE  INSURANCE  COMPANY  DOING  BUSINESS  IN  THIS
STATE, SUBJECT TO THE FOLLOWING:
  (1) SUCH A FUNDING AGREEMENT MAY PROVIDE FOR A GUARANTEED MINIMUM RATE
OF RETURN;
  (2)  SUCH  A  FUNDING  AGREEMENT MAY BE ALLOCATED AS EITHER A SEPARATE
ACCOUNT OR A GENERAL ACCOUNT OF  THE  ISSUER,  AS  THE  COMPTROLLER  MAY
DECIDE;
  (3)  TOTAL  INVESTMENTS  OF THE FUND PURSUANT TO THIS PARAGRAPH IN ANY
FUNDING AGREEMENTS ISSUED BY A SINGLE LIFE INSURANCE COMPANY  WHICH  ARE
ALLOCATED  AS  A  GENERAL ACCOUNT OF THE ISSUER SHALL NOT, IN THE AGGRE-
GATE, EXCEED THREE HUNDRED FIFTY MILLION DOLLARS; AND
  (4) NO ASSETS OF THE FUND SHALL BE INVESTED IN ANY SUCH FUNDING AGREE-
MENT UNLESS, AT THE TIME OF SUCH INVESTMENT, THE GENERAL OBLIGATIONS  OR

S. 6698--A                          6

FINANCIAL  STRENGTH  OF  THE  ISSUER HAVE RECEIVED EITHER THE HIGHEST OR
SECOND HIGHEST RATING BY TWO NATIONALLY RECOGNIZED RATING SERVICES OR BY
ONE NATIONALLY RECOGNIZED RATING SERVICE IN THE EVENT THAT ONLY ONE SUCH
SERVICE RATES SUCH OBLIGATIONS.
  (B)  FUND  ASSETS  SHALL  BE KEPT SEPARATE AND SHALL NOT BE COMMINGLED
WITH OTHER ASSETS. THE COMPTROLLER MAY ENTER INTO CONTRACTS  TO  PROVIDE
FOR  INVESTMENT  ADVICE  AND  MANAGEMENT,  CUSTODIAL  SERVICES AND OTHER
PROFESSIONAL SERVICES FOR THE ADMINISTRATION AND INVESTMENT OF THE PLAN.
ADMINISTRATIVE FEES, COSTS AND EXPENSES, INCLUDING INVESTMENT  FEES  AND
EXPENSES, SHALL BE PAID FORM THE ASSETS OF THE FUND.
  3.  THE  COMPTROLLER SHALL PROVIDE FOR THE ADMINISTRATION OF THE TRUST
FUND,  INCLUDING  MAINTAINING  PARTICIPANT  RECORDS  AND  ACCOUNTS,  AND
PROVIDING  ANNUAL  AUDITED  REPORTS.  THE  COMPTROLLER  MAY  ENTER  INTO
CONTRACTS TO PROVIDE ADMINISTRATIVE SERVICES AND REPORTING.
  S 3. Section 5205 of the civil practice law and rules  is  amended  by
adding a new subdivision (p) to read as follows:
  (P) EXEMPTION FOR NEW YORK STATE PRE-PAID TUITION PLAN MONIES.  MONIES
IN  AN ACCOUNT CREATED PURSUANT TO SECTION THREE HUNDRED FIFTY-FIVE-D OF
THE EDUCATION LAW ARE EXEMPT FROM APPLICATION TO THE SATISFACTION  OF  A
MONEY JUDGMENT AS FOLLOWS:
  1.  ONE  HUNDRED  PERCENT OF MONIES IN AN ACCOUNT IN CONNECTION WITH A
PRE-PAID TUITION PLAN ESTABLISHED PURSUANT TO SUCH  ARTICLE  IS  EXEMPT;
AND
  2.  ONE  HUNDRED  PERCENT  OF MONIES IN AN ACCOUNT IS EXEMPT WHERE THE
JUDGMENT DEBTOR IS THE ACCOUNT OWNER OR DESIGNATED BENEFICIARY  OF  SUCH
ACCOUNT.
  FOR  THE  PURPOSES  OF THIS SUBDIVISION, THE TERMS "ACCOUNT OWNER" AND
"DESIGNATED BENEFICIARY" SHALL HAVE THE MEANINGS  ASCRIBED  TO  THEM  IN
ARTICLE FOURTEEN-A OF THE EDUCATION LAW.
  S  4. Paragraph 34 of subsection (b) of section 612 of the tax law, as
amended by chapter 535 of the laws of 2000, subparagraph (B) as  amended
by chapter 593 of the laws of 2003, is amended to read as follows:
  (34)  (A)  Excess  distributions received during the taxable year by a
distributee of a family tuition account established under the  New  York
state  college choice tuition savings program provided for under article
fourteen-A of the education law, OR OF A PRE-PAID TUITION ACCOUNT ESTAB-
LISHED PURSUANT TO SECTION THREE HUNDRED FIFTY-FIVE-D OF  THE  EDUCATION
LAW,  to the extent such excess distributions are deemed attributable to
deductible contributions under paragraph thirty-two of subsection (c) of
this section.
  (B) (i) The term "excess distributions" means distributions which  are
not
  (I)  qualified  withdrawals  within the meaning of subdivision nine of
section six hundred ninety-five-b OR PARAGRAPH L OF SUBDIVISION  ONE  OF
SECTION THREE HUNDRED FIFTY-FIVE-D of the education law;
  (II)  withdrawals  made  as a result of the death or disability of the
designated beneficiary within the meaning of subdivision ten of  section
six  hundred  ninety-five-b OR PARAGRAPH I OF SUBDIVISION ONE OF SECTION
THREE HUNDRED FIFTY-FIVE-D of such law; or
  (III) transfers described in paragraph b of subdivision six of section
six hundred ninety-five-e of such law.
  (ii) Excess distributions shall be deemed attributable  to  deductible
contributions  to the extent the amount of any such excess distribution,
when added to  all  previous  excess  distributions  from  the  account,
exceeds the aggregate of all nondeductible contributions to the account.

S. 6698--A                          7

  S  5. Paragraphs 32 and 33 of subsection (c) of section 612 of the tax
law, paragraph 32 as amended by chapter 81 of the laws of 2008 and para-
graph 33 as added by chapter 546 of the laws of  1997,  are  amended  to
read as follows:
  (32) Contributions made during the taxable year by an account owner to
one or more family tuition accounts established under the New York state
college  choice tuition savings program provided for under article four-
teen-A, OR TO A PRE-PAID  TUITION  ACCOUNT  PURSUANT  TO  SECTION  THREE
HUNDRED  FIFTY-FIVE-D of the education law, to the extent not deductible
or eligible for credit for federal income tax purposes, provided, howev-
er, the exclusion provided for in this paragraph shall not exceed [five]
TEN thousand dollars for an individual or head  of  household,  and  for
married couples who file joint tax returns, shall not exceed [ten] TWEN-
TY  thousand  dollars;  provided,  further, that such exclusion shall be
available only to the account owner and not to any other person.
  (33) Distributions from a family tuition account established under the
New York state college choice tuition savings program provided for under
article fourteen-A, OR FROM  A  PRE-PAID  TUITION  ACCOUNT  PURSUANT  TO
SECTION  THREE  HUNDRED FIFTY-FIVE-D of the education law, to the extent
includible in gross income for federal income tax purposes.
  S 6. This act shall take effect immediately and shall apply to taxable
years commencing after December 31, 2014.

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