Current Status Introducing Body:Senate Bill Number:348 Primary Sponsor:Fielding Committee Number:04 Type of Legislation:GB Subject:Tuition Account Program Act Residing Body:Senate Current Committee:Education Computer Document Number:348 Introduced Date:Jan 08, 1991 Last History Body:Senate Last History Date:Jan 08, 1991 Last History Type:Introduced and read first time, referred to Committee Scope of Legislation:Statewide All Sponsors:Fielding Type of Legislation:General Bill
Bill Body Date Action Description CMN
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348 Senate Jan 08, 1991 Introduced and read first 04
time, referred to Committee
348 Senate Dec 10, 1990 Prefiled, referred to 04
Committee
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TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 110 IN TITLE 59 SO AS TO PROVIDE FOR THE SOUTH CAROLINA TUITION ACCOUNT PROGRAM 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 TUITION ACCOUNT PROGRAM AGENCY ESTABLISHED BY THIS ACT TO OBTAIN RULINGS FROM THE INTERNAL REVENUE SERVICE AND THE SECURITIES AND EXCHANGE COMMISSION BEFORE COMMENCING OPERATIONS AND TO PROVIDE FOR AN UNFAVORABLE RULING.
Whereas, tuition at institutions of higher education is greatly increasing and is becoming difficult for individuals and families to afford and plan for future educational expenses; and
Whereas, this is adversely affecting the ability of many to provide and obtain a college education; and
Whereas, it is in the best interest of the people of South Carolina to promote higher education in this State in order to provide well-educated citizens; and
Whereas, it is the duty of the members of this body to help foster and assure the higher education of the citizens of this State; and
Whereas, thus, it is incumbent upon the General Assembly of this State to provide a mechanism to assist individuals and families in affording and planning future educational expenses. Now, therefore,
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 is known and may be cited as the 'South Carolina Tuition Account Program Act'.
Section 59-110-20. As used in this chapter:
(1) 'Advance tuition account payment contract' means a contract entered into by the South Carolina Tuition Account Program Fund and Commission and a purchaser to provide for the higher education of a qualified beneficiary.
(2) 'Advance tuition payment fund' includes all monies received pursuant to purchases of advance tuition payment contracts, any governmental appropriations into the fund and all other monies deposited into the fund that are received from any other source.
(3) 'Commission' means the South Carolina Tuition Account Program Commission.
(4) 'Fund' means the advance tuition payment fund.
(5) 'Purchaser' means a person who makes or is obligated to make advance tuition payments pursuant to an advance tuition payment contract.
(6) 'Qualified beneficiary' means any resident of this State who meets the eligibility criteria established by this act and by the commission and on whose behalf a purchaser enters into a tuition account payment contract.
(7) 'State institution of higher education' means a college or university designated as such by the Commission on Higher Education for purposes of this chapter.
(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 the South Carolina Tuition Account Program Commission consisting of eleven members as follows:
(1) the State Treasurer;
(2) the Commissioner on Higher Education;
(3) two members appointed by the Speaker of the House of Representatives;
(4) two members appointed by the President of the Senate;
(5) five members appointed by the Governor with the advice and consent of the Senate as follows:
(a) one member nominated by the Advisory Council of College Presidents for a term of four years;
(b) four members who shall serve for terms of four years, one of whom must be designated chairman, except that of those first appointed, two shall serve for terms of two years.
(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.
Section 59-110-40. 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 any money of the fund, at the commission's discretion, in any 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 fund;
( 3) impose reasonable residency requirements for qualified beneficiaries;
( 4) impose reasonable limits on the number of participants in the fund;
( 5) segregate contributions and payments to the fund 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 any money of the fund;
( 7) solicit and accept gifts, grants, loans, and other aids from any person or the federal, state, or a local government, or to participate in any other way in any federal, state, or local government program;
( 8) charge, impose, and collect administrative fees and charges in connection with any 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 fund's property, assets, or activities;
(10) enter into contracts on behalf of the State;
(11) administer the advance tuition account program and the fund;
(12) indemnify or procure insurance indemnifying any 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 any bonds or notes of the authority;
(13) impose reasonable time limits on use of the tuition benefits provided by the fund, if the limits are made a part of the contract;
(14) define the terms and conditions under which money may be withdrawn from the fund, including, but not limited to, reasonable charges and fees, if the terms and conditions are made a part of the contract;
(15) provide for receiving contributions in lump or periodic sums;
(16) establish policies, procedures, and eligibility criteria and to promulgate regulations to implement this chapter;
(17) contract and make any arrangements necessary with institutions of higher education to carry out the provisions of this act;
(18) terminate tuition accounts and make refunds;
(19) sue and be sued, have perpetual succession, make and execute and deliver contracts, conveyances, and other instruments necessary or convenient to the exercise of its powers;
(20) make and rules and regulations; and
(21) subject to legislative appropriations, employ an executive director and an administrative staff, to carry out the functions of the commission.
Section 59-110-50. (A) There is established, under the supervision of the State Treasurer, an advance tuition payment fund. The advance tuition payment fund must be invested and administered by the State Treasurer pursuant to the provisions of this chapter and the regulations established by the commission.
(B) The advance tuition payment fund consists of:
(1) all payments made by purchasers pursuant to tuition account payment contracts on behalf of qualified beneficiaries;
(2) all interest and earnings on money in the fund;
(3) any other money, public or private, made available to the tuition account program or commission for the fund from any source.
Section 59-110-60. The commission shall prepare or cause to be prepared annually an accounting of the program's funds 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 commission shall make available the accounting of the fund to purchasers. The accounts of the fund are subject to annual audits by the State Auditor.
Section 59-110-70. (A) The assets of the fund must be preserved, invested, and expended solely pursuant to and for the purposes set forth in this chapter and must not be commingled or managed together with any other accounts or funds established for other purposes.
(B) Assets of the fund are not considered state funds for any purpose.
(C) Unless otherwise provided by resolution of the commission, assets of the fund 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 fund and the program.
(D) Assets of the fund may be invested in any instrument, obligation, security, or property considered appropriate by the commission 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 commission.
Section 59-110-80. The investment policies of the tuition account program must be directed to obtaining sufficient income to meet the program's obligations under this chapter, maintaining such reserves as are considered necessary, and covering its operating expenses. The commission may not engage in an investment practice or activity which entails greater risk than necessary to meet these objectives.
Section 59-110-90. (A) The fund must be administered in a manner reasonably designed to be actuarially sound so that the assets of the fund are sufficient to defray the obligations of the program.
(B) In the accounting of the fund made pursuant to Section 59-110-60, the commission shall evaluate or cause to be evaluated annually by a nationally recognized actuary the actuarial soundness of the fund and determine the additional assets needed, if any, to defray the obligations of the program. If there are not funds sufficient to ensure the actuarial soundness of the fund, the commission 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 fund, the available assets of the program attributable to the plan must be prorated immediately among 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 59-110-100. (A) The commission may contract with a purchaser for the advance payment of tuition by the purchaser for a qualified beneficiary to attend any of the state institutions 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 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;
( 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 commission, 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 contractual obligations to the qualified beneficiary on behalf of the tuition account program and the State. The advance tuition payment contract shall 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 tuition account program;
(11) other terms, conditions, and provisions as the commission considers in its sole discretion to be necessary or appropriate.
(B) The form of any advance tuition payment contract to be entered into by the tuition account program must be approved first by the State Budget and Control Board.
(C) The commission shall make any 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 tuition account program 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 account program must 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 59-110-160(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 commission, 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 59-110-110. At a minimum, the program must offer advance tuition payment contracts pursuant to the following levels of tuition:
(1) weighted average tuition cost of state institutions of higher education, which includes 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; or
(2) the tuition at a specific institution of higher learning as designated by the purchaser.
Section 59-110-120. A designation made by a purchaser, for an advance tuition payment contract, pursuant to Section 59-110-90(2), must be made with the intention that the beneficiary will attend that specific institution as designated. If the beneficiary enters another institution of higher learning which is a participant in the tuition account program, the amount of the tuition payment contract must then be converted to that institution's tuition rate at the time the contract was procured.
Section 59-110-130. All advance tuition payment contracts entered into pursuant to the tuition account program must be executed pursuant to the following provisions:
(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 59-110-50(A), the commission shall refund the face amount of the payment in accordance with the terms of the contract, less any administrative fee specified in the contract, but may not refund any investment income attributable to the payments.
(3) Except as provided in item (4), the fund 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 59-110-100(A)(8) for a qualified beneficiary who is not entitled to in-state tuition rates.
(4) As an alternative to item (3), the fund must 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 fund, 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 59-110-100(A)(8) for a qualified beneficiary who is not entitled to in-state tuition rates.
Section 59-110-140. 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.
Section 59-110-150. If a beneficiary of an advance tuition payment contract attends a technical college under the jurisdiction of the State Board for Technical and Comprehensive Education, that beneficiary then may attend any 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 59-110-160. (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 commission that he has decided to attend and has been accepted by a South Carolina independent, degree-granting institution of postsecondary education recognized by the Commission on Higher Education or, after he has a high school diploma or has reached age eighteen, 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 commission and set forth in the advance tuition payment contract, occur.
Section 59-110-170. (A) 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 does not attend an institution of higher education, the amount of a refund is the face amount of the payment on the date of termination of the contract and any accrued investment income attributable to the payment. The amount of a refund must be reduced by an appropriate percentage pursuant to any amount transferred to a technical college on behalf of a qualified beneficiary when the contract is terminated or by the amount transferred to a state institution of higher education on behalf of a qualified beneficiary, if the beneficiary entered an institution of higher education. 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 (B), the commission shall make refund payments in equal installments over four years and not later than August fifteenth of the year due.
(B) 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 commission shall transfer to the designated institution an amount equal to the tuition due for the qualified beneficiary, but the fund may not transfer a cumulative amount greater than the refund to which the person is entitled.
Section 59-110-180. State institutions of higher education, purchasers, and qualified beneficiaries may enforce this chapter and any contract entered into pursuant to this chapter in the court of common pleas of Richland County.
Section 59-110-190. Nothing in this chapter or in an advance tuition payment contract entered into pursuant to this chapter is a promise or guarantee by the commission 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 59-110-200. 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 commission."
SECTION 2. Section 12-7-435 of the 1976 Code, as last amended by subsection A, Section 39, Part II, Act 189 of 1989, is further amended by adding an appropriately lettered item to read:
"( ) Amounts paid to the South Carolina Tuition Program Fund pursuant to an advance tuition payment contract."
SECTION 3. (A) No advance tuition contract may be entered into by the commission 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 commission obtains appropriate rulings from the Securities and Exchange Commission regarding the application of federal security laws to the fund.
SECTION 4. If no advance tuition payment contract has been entered into pursuant to this act before July 1, 1992, Chapter 110 of Title 59 of the 1976 Code, as added by this act, is repealed.
SECTION 5. This act takes effect upon approval by the Governor.