Current Status Introducing Body:Senate Bill Number:15 Primary Sponsor:Passailaigue Committee Number:06 Type of Legislation:GB Subject:Education Trust Act Residing Body:Senate Current Committee:Finance Computer Document Number:15 Introduced Date:Jan 08, 1991 Last History Body:Senate Last History Date:Sep 10, 1990 Last History Type:Prefiled, referred to Committee Scope of Legislation:Statewide All Sponsors:Passailaigue Type of Legislation:General Bill
Bill Body Date Action Description CMN
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15 Senate Jan 08, 1991 Introduced and read first 06
time, referred to Committee
15 Senate Sep 10, 1990 Prefiled, referred to 06
Committee
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TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 110 TO TITLE 59 SO AS TO PROVIDE FOR THE SOUTH CAROLINA EDUCATION TRUST ACT; TO AMEND SECTION 12-7-435, AS AMENDED, RELATING TO DEDUCTIONS FROM SOUTH CAROLINA TAXABLE INCOME, SO AS TO ALLOW THE DEDUCTION OF PAYMENTS PAID BY THE PURCHASER OF AN ADVANCE TUITION PAYMENT CONTRACT; TO REQUIRE THE SOUTH CAROLINA EDUCATION TRUST ESTABLISHED BY THIS ACT TO OBTAIN RULINGS FROM THE INTERNAL REVENUE SERVICE AND THE SECURITIES AND EXCHANGE COMMISSION BEFORE BEGINNING OPERATIONS AND TO PROVIDE FOR AN UNFAVORABLE RULING; TO REPEAL THE CHAPTER ADDED BY THIS ACT IF NO ADVANCE TUITION PAYMENT CONTRACT IS ENTERED INTO BY THE TRUST BEFORE JULY 1, 1992; AND TO PROVIDE FOR THE INITIAL TERMS OF THE MEMBERS OF THE EDUCATION TRUST COMMISSION.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 59 of the 1976 Code is amended by adding:
Section 59-110-10. This chapter may be cited as the 'South Carolina Education Trust Act'.
Section 59-110-20. As used in this chapter:
(1) 'Advance tuition payment contract' means a
contract entered into by the trust and a purchaser to provide for the higher education of a qualified beneficiary.
(2) 'Commission' means the South Carolina Education Trust Commission.
(3) 'Fund' means the advance tuition payment fund.
(4) 'Purchaser' means a person who makes or is obligated to make advance tuition payments pursuant to an advance tuition payment contract.
(5) 'Qualified beneficiary' means a resident of this State.
(6) 'State institution of higher education' means a college or university designated as such by the State Commission on Higher Education for purposes of this chapter.
(7) 'Trust' means the South Carolina Education Trust.
(8) 'Tuition' means the quarter or semester charges imposed to attend a state institution of higher education and all mandatory fees required as a condition of enrollment as determined by the commission.
(9) 'Weighted average tuition cost of state institutions of higher education' means the tuition cost arrived at by adding the products of the annual undergraduate tuition cost at each state institution of higher education and its total number of full-time equivalent undergraduate students and then by dividing the gross total of this cumulation by the total number of full-time equivalent undergraduate students attending state institutions of higher education.
Section 59-110-30. (A) There is created within the office of the State Treasurer the South Carolina Education Trust governed by a commission consisting of nine members as follows:
(1) the State Treasurer, ex officio;
(2) eight members appointed by the Governor with the advice and consent of the Senate as follows:
(a) one member nominated by the President
Pro Tempore of the Senate for a term coterminous with that of the President Pro Tempore;
(b) one member nominated by the Speaker of the House of Representatives for a term coterminous with that of the Speaker of the House;
(c) one member nominated by the Council of Presidents of State Institutions of Higher Learning for a term of four years;
(d) one member nominated by the Advisory Council of Private College Presidents for a term of four years;
(e) four members who shall serve for terms of four years, one of whom must be designated chairman.
(B) Vacancies must be filled in the manner of original appointment for the unexpired portion of the term. Members shall receive the per diem, mileage, and subsistence authorized by law for members of state boards, committees, and commissions.
(C) The staff necessary for the operation of the trust must be employees of the State Treasurer, and trust expenses must be derived from administrative charges imposed on trust principal and income after the trust has operated for three years.
Section 59-110-40. (A) The trust, on behalf of itself and the State, may contract with a purchaser for the advance payment of tuition by the purchaser for a qualified beneficiary to attend a state institution of higher education to which the qualified beneficiary is admitted, without further tuition cost to the qualified beneficiary. In addition, an advance tuition payment contract must set forth in a clear, understandable manner all of the following:
( 1) the amount of the payment required from the purchaser on behalf of the qualified beneficiary;
( 2) the terms and conditions for making the payment, including, but not limited to, the date upon which the payment or portions of the payment are due;
( 3) provisions for late payment charges and for default;
( 4) the name and age of the qualified beneficiary under the contract. The purchaser, with the approval of and on conditions determined by the trust, subsequently may substitute another person for the qualified beneficiary originally named;
( 5) the number of credit hours covered by the contract;
( 6) the name of the person entitled to terminate the contract, which, as provided by the contract, may be the purchaser, the qualified beneficiary, or a person to act on behalf of the purchaser or qualified beneficiary, or any combination of these persons;
( 7) the terms and conditions under which the contract may be terminated and the amount of the refund, if any, to which the person terminating the contract, or specifically the purchaser or designated qualified beneficiary if the contract so provides, is entitled upon termination;
( 8) the assumption of a contractual obligation by the trust of the qualified beneficiary on its own behalf and on behalf of the State to provide for credit hours of higher education, not to exceed the credit hours required for the granting of a baccalaureate degree, at a state institution of higher education to which the qualified beneficiary is admitted. The advance tuition payment contract must provide for the credit hours of higher education that a qualified beneficiary may receive under the contract if the qualified beneficiary is not entitled to in-state tuition rates;
( 9) the period of time from the beginning to the end of which the qualified beneficiary may receive the benefits under the contract;
(10) all other rights and obligations of the purchaser and the trust;
(11) other terms, conditions, and provisions as the trust considers in its sole discretion to be necessary or appropriate.
(B) The form of an advance tuition payment contract to be entered into by the trust must be approved first by the State Budget and Control Board.
(C) The trust shall make arrangements that are necessary or appropriate with state institutions of higher education in order to fulfill its obligations under advance tuition payment contracts, which arrangements may include, but are not limited to, the payment by the trust of the then actual in-state tuition cost on behalf of a qualified beneficiary to the state institution of higher education.
(D) An advance tuition payment contract must provide that the trust provide for the qualified beneficiary to attend a technical college in this State under the jurisdiction of the State Board for Technical and Comprehensive Education before entering a state institution of higher education if the beneficiary so chooses, and that the contract may be terminated pursuant to Section 59-110-60(A)(4) after completing the requirements for a degree at the technical college in this State or before entering the state institution of higher education.
(E) An advance tuition payment contract may provide that, if after a number of years specified in the contract the contract has not been terminated or the qualified beneficiary's rights under the contract have not been exercised, the trust, after making a reasonable effort to locate the purchaser and qualified beneficiary or the agent of either, shall retain the amounts otherwise payable, and the rights of the qualified beneficiary, the purchaser, or the agent of either are considered terminated.
Section 59-110-50. (A) At a minimum, the trust shall offer advance tuition payment contracts of the two types set forth in subsections (B) and (C), to be known as Plan One and Plan Two, respectively.
(B) Under Plan One:
(1) A payment or series of payments is required from the purchaser on behalf of a qualified beneficiary.
(2) If an advance tuition payment contract is terminated before a qualified beneficiary earns a high school diploma or reaches age eighteen or pursuant to Section 59-110-60(A)(4), the trust shall refund the face amount of the payment in accordance with the terms of the contract, less an administrative fee if specified in the contract, but may not refund investment income attributable to the payments.
(3) Except as provided in item (4), the trust shall provide for the qualified beneficiary to attend a state institution of higher education at which the qualified beneficiary attends for the number of credit hours required by the institution for the awarding of a baccalaureate degree, without further tuition cost to the qualified beneficiary, except as provided in Section 59-110-40(A)(8) for a qualified beneficiary who is not entitled to in-state tuition rates.
(4) As an alternative to item (3), the trust shall provide for the qualified beneficiary to attend a state institution of higher education at which the qualified beneficiary attends for a fixed number of credit hours, as permitted by the trust, less than the total number of credit hours required by the institution for the awarding of a baccalaureate degree, without further tuition cost to the qualified beneficiary for that fixed number of credit hours, except as provided in Section 59-110-40(A)(8) for a qualified beneficiary who is not entitled to in-state tuition rates.
(C) Under Plan Two:
(1) A payment or series of payments is required on behalf of a qualified beneficiary.
(2) If an advance tuition payment contract is terminated before a qualified beneficiary earns a high school diploma or reaches age eighteen or pursuant to Section 59-110-60(A)(4), the trust shall refund the face amount of the payment in accordance with the terms of the contract, less an administrative fee if specified in the contract, together with all or a specified portion of accrued investment income attributable to the payment as may be agreed to in the contract.
(3) Except as provided in item (4), the trust shall provide for the qualified beneficiary to attend a state institution of higher education at which the qualified beneficiary attends for the number of credit hours required by the institution for the awarding of a baccalaureate degree, without further tuition cost to the qualified beneficiary, except as provided in Section 59-110-40(A)(8) for a qualified beneficiary who is not entitled to in-state tuition rates.
(4) As an alternative to item (3), the trust shall provide for the qualified beneficiary to attend a state institution of higher education at which the qualified beneficiary attends for a fixed number of credit hours, as permitted by the trust, less than the total number of credit hours required by the institution for the awarding of a baccalaureate degree, without further tuition cost to the qualified beneficiary for that fixed number of credit hours, except as provided in Section 59-110-40(A)(8) for a qualified beneficiary who is not entitled to in-state tuition rates.
(D) Contracts required to be offered by this section may require that payment from a purchaser, on behalf of a qualified beneficiary who may attend a state institution of higher education in less than four years after the date the contract is entered into by the purchaser, be based upon attendance at a certain state institution of higher education or at that state institution of higher education with the highest prevailing tuition cost for the number of credit hours covered by the contract.
(E) Contracts required to be offered by this section must be offered with two alternatives. Alternative one must offer advance tuition
payment contracts that provide the credit hours of higher education necessary for the granting of a baccalaureate degree at a state institution of higher education. Alternative two must provide that the number of credit hours of higher education a qualified beneficiary may receive under the contract will be reduced to a percentage of the credit hours required for the granting of a baccalaureate degree at a state institution of higher education, as specified in the contract, if the qualified beneficiary enrolls in a state institution of higher education imposing at the time the qualified beneficiary enrolls an annual tuition rate that is greater than one hundred five percent of the weighted average annual tuition rate of all state institutions of higher education. This subsection does not preclude a state institution of higher education at which a qualified beneficiary is entitled to receive less than the minimum number of credit hours required for the granting of a baccalaureate degree from providing that qualified beneficiary, without further tuition charges, the additional credit hours necessary to receive a baccalaureate degree.
(F) If a beneficiary of an advance tuition payment contract with either an alternative one or alternative two designation, as described in subsection (E), attends a technical college under the jurisdiction of the State Board for Technical and Comprehensive Education, that beneficiary then may attend a state institution of higher education at no additional tuition cost and receive the number of credit hours necessary for the awarding of a baccalaureate degree. The number of credit hours the beneficiary may receive must be reduced to reflect credit hours previously paid for under the contract.
Section 59-110-60. (A) An advance tuition payment contract must authorize a termination of the contract when any one of the following occurs:
(1) the qualified beneficiary dies;
(2) the qualified beneficiary is not admitted to a state institution of higher education after making proper application;
(3) the qualified beneficiary certifies to the trust that he has decided to attend and has been accepted by a South Carolina independent, degree-granting institution of postsecondary education recognized by the State Commission on Higher Education or, after he has a high school diploma or has reached age eighteen, he has decided not to attend a state institution of higher education and requests, in writing, before July fifteenth of the year in which the qualified beneficiary desires to terminate the contract, that the advance tuition payment contract be terminated;
(4) other circumstances, determined by the trust and set forth in the advance tuition payment contract, occur.
(B) Except as provided in Section 59-110-50(B)(2) and (C)(2), an advance tuition payment contract must provide for a refund pursuant to this section to a person to whom the refund is payable under the contract upon termination of the contract. If the qualified beneficiary has a high school diploma or has reached age eighteen, and attends an institution of higher education, the amount of a refund, except as provided in subsection (D), is the weighted average tuition cost of all state institutions of higher education on the date of termination of the contract, or the face amount of the payment and accrued investment income attributable to the payment, if he is covered by alternative one or the lowest tuition cost of all state institutions of higher education on the date of termination of the contract if he is covered by alternative two or does not attend an institution of higher education. The amount of a refund must be reduced by an appropriate
percentage if the purchaser entered into an advance tuition payment contract that provided for a fixed number of credit hours less than the total number of credit hours required by a state institution of higher education for the awarding of a baccalaureate degree, by the amount transferred to a technical college on behalf of a qualified beneficiary when the contract is terminated as provided in Section 59-110-40(D), and by the amount transferred to a state institution of higher education on behalf of a qualified beneficiary. Termination of a contract and the right to receive a refund must not be authorized under the contract if the qualified beneficiary has completed more than one-half of the credit hours required by the state institution of higher education for the awarding of a baccalaureate degree. This provision does not affect the termination and refund rights of a graduate of a technical college. Pursuant to this subsection and except as provided by subsection (C), the trust shall make refund payments in equal installments over four years and not later than August fifteenth of the year due.
(C) An advance tuition payment contract must authorize a person, who is entitled under the advance tuition payment contract to terminate the contract, to direct payment of the refund to an independent degree-granting college or university located in this State or to an independent junior college located in this State. If directed to make payments pursuant to this subsection, the trust shall transfer to the designated institution an amount equal to the tuition due for the qualified beneficiary, but the trust may not transfer a cumulative amount greater than the refund to which the person is entitled. If the refund exceeds the total amount of transfers directed to the designated institution, the excess must be returned to the person to whom the refund is otherwise payable.
(D) The amount of a refund paid upon termination of the advance tuition payment contract by a person who directs the trust pursuant to subsection (C) to transfer the refund to an independent degree-granting college or university located in this State must not be less than the prevailing weighted average tuition cost of state institutions of higher education for the number of credit hours covered by the contract on the date of termination. In calculating the amount of a refund for an advance payment contract containing the restrictions provided by Section 59-110-50(E), the prevailing weighted average tuition cost must be based upon only those state institutions of higher education at which the qualified beneficiary could have received sufficient credit hours for a baccalaureate degree.
Section 59-110-70. (A) There is created under the jurisdiction and control of the commission an advance tuition payment fund. Payments received by the trust from purchasers on behalf of qualified beneficiaries or from any other source, public or private, must be placed in the fund. The fund may be divided into separate accounts.
(B) Assets of the trust are not considered state funds for any purpose.
(C) Unless otherwise provided by resolution of the commission, assets of the trust must be expended in the following order of priority to:
(1) make payments to state institutions of higher education on behalf of qualified beneficiaries;
(2) make refunds upon termination of an advance tuition payment contract;
(3) pay the costs of administration and organization of the trust and the fund.
(D) Assets of the trust may be invested in an instrument, an obligation, security, or property considered appropriate by the trust and may be pooled for investment purposes with investments of the State, including, but not limited to, state pension funds on terms and conditions agreeable to the trust.
Section 59-110-80. In addition to the powers granted by other provisions of this chapter, the commission has the powers necessary to carry out and effectuate the purposes, objectives, and provisions of this chapter, including, but not limited to, the power to:
( 1) invest money of the trust, at the commission's discretion, in instruments, obligations, securities, or property determined proper by the commission and name and use depositories for its money;
( 2) pay money to state institutions of higher education from the trust;
( 3) impose reasonable residency requirements for qualified beneficiaries;
( 4) impose reasonable limits on the number of participants in the trust;
( 5) segregate contributions and payments to the trust into various accounts and funds;
( 6) contract for goods and services and engage personnel as necessary and engage the services of private consultants, actuaries, managers, legal counsel, and auditors for rendering professional, management, and technical assistance and advice, payable out of money of the trust;
( 7) solicit and accept gifts, grants, loans, and other aids from a person or the federal, state, or a local government, or to participate in any other way in a federal, state, or local government program;
( 8) charge, impose, and collect administrative fees and charges in connection with a transaction and provide for reasonable penalties, including default, for delinquent payment of fees or charges or for fraud;
( 9) procure insurance against any loss in connection with the trust's property, assets, or activities;
(10) enter into contracts on behalf of the State;
(11) administer the funds of the trust;
(12) indemnify or procure insurance indemnifying a member of the commission from personal loss or accountability from liability resulting from a member's action or inaction as a member of the board, including, but not limited to, liability asserted by a person on bonds or notes of the authority;
(13) impose reasonable time limits on use of the tuition benefits provided by the trust, if the limits are made a part of the contract;
(14) define the terms and conditions under which money may be withdrawn from the trust, including, but not limited to, reasonable charges and fees for a withdrawal, if the terms and conditions are made a part of the contract;
(15) provide for receiving contributions in lump sums or periodic sums;
(16) establish policies, procedures, and eligibility criteria and promulgate regulations to implement this chapter.
Section 59-110-90. The commission shall prepare or cause to be prepared annually an accounting of the trust and shall transmit a copy of the accounting to the Governor, the President Pro Tempore of the Senate, the Speaker of the House of Representatives, and the respective chairmen of the Senate Finance Committee and House Ways and Means Committee. The board shall make available the accounting of the trust to the purchasers of the trust. The accounts of the board are subject to annual audits by the State Auditor.
Section 59-110-100. (A) The trust must be administered in a manner reasonably designed to be actuarially sound so that the assets of the trust are sufficient to defray the obligations of the trust.
(B) In the accounting of the trust made pursuant to Section 59-110-90, the commission shall evaluate or cause to be evaluated annually by a nationally recognized actuary the actuarial soundness of the trust and determine the additional assets needed, if any, to defray the obligations of the trust. If there are not funds sufficient to ensure the actuarial soundness of the trust as determined by the nationally recognized actuary, the trust shall adjust payments of subsequent purchasers to ensure its actuarial soundness. If there are insufficient numbers of new purchasers to ensure the actuarial soundness of a plan of the trust, the available assets of the trust attributable to the plan must be prorated immediately among the then existing contracts, and these shares must be applied, at the option of the person to whom the refund is payable or would be payable under the contract upon termination of the contract, either toward the purposes of the contract for a qualified beneficiary or disbursed to the person to whom the refund is payable or would be payable under the contract upon termination of the contract.
Section 59-110-110. State institutions of higher education, purchasers, and qualified beneficiaries may enforce this chapter and a contract entered into pursuant to this chapter in the court of common pleas of Richland County.
Section 59-110-120. Nothing in this chapter or in an advance tuition payment contract entered into pursuant to this chapter is a promise or guarantee by the trust or the State that a person will be admitted to a state institution of higher education or to a particular state institution of higher education, will be allowed to continue to attend a state institution of higher education after having been admitted, or will be graduated from a state institution of higher education.
Section 59-110-130. An advance tuition payment contract is exempt from the Uniform Securities Act. An advance tuition payment contract must not be sold or otherwise transferred by the purchaser or qualified beneficiary without the prior approval of the trust."
SECTION 2. Section 12-7-435 of the 1976 Code, as last amended by subsection E, Section 25,
Part II, Act 170 of 1987, is further amended by adding an appropriately lettered item to read:
"( ) Amounts paid to the South Carolina Education Trust pursuant to an advance tuition payment contract."
SECTION 3. (A) No advance tuition contract may be entered into by the trust established by this act unless the Internal Revenue Service issues a favorable ruling or opinion that the purchaser of an advance tuition payment contract will not be in actual or constructive receipt of income as a result. If the ruling is not favorable, the commission shall prepare and submit to the General Assembly a report outlining its recommendations for the modification and continuation of the program.
(B) No advance tuition payment contract may be entered into unless the trust obtains appropriate rulings from the Securities and Exchange Commission regarding the application of federal security laws to the trust.
SECTION 4. If no advance tuition payment contract has been entered into pursuant to this act before July 1, 1992, Chapter 110, Title 59 of the 1976 Code as added by this act is repealed.
SECTION 5. The initial terms of two of the four members of the South Carolina Education Trust Commission appointed by the Governor pursuant to Section 59-110-30(A)(2)(e) of the 1976 Code as added by this act are two years.
SECTION 6. This act takes effect upon approval by the Governor.