H 3343 Session 112 (1997-1998)
H 3343 General Bill, By L.H. Limbaugh, Allison, Altman, Askins, Barfield,
Barrett, Battle, Bauer, J.M. Baxley, Beck, Boan, Bowers, Breeland, G. Brown,
H. Brown, T. Brown, Campsen, Cato, Chellis, Cooper, J.L.M. Cromer, Dantzler,
Davenport, Delleney, Edge, J.G. Felder, Fleming, Harrell, Harrison, Haskins,
Hawkins, J. Hines, Hinson, J.H. Hodges, Inabinett, Jennings, B.L. Jordan,
Keegan, Kelley, Kennedy, M.H. Kinon, Kirsh, Knotts, Koon, Leach, Lee, Limehouse,
Littlejohn, Mack, Maddox, Mason, McCraw, McKay, W. McLeod, McMahand,
J.D. McMaster, Miller, Moody-Lawrence, V.T. Mullen, Neilson, Phillips, Pinckney,
Quinn, Rice, Meacham, Robinson, Rodgers, Sandifer, Seithel, Sheheen, Simrill,
F. Smith, J. Smith, D. Smith, Stille, E.C. Stoddard, Stuart, Tripp, Trotter,
Vaughn, Walker, Webb, Whatley, Whipper, Wilder, Wilkes, Wilkins, Witherspoon,
Woodrum, Young-Brickell and W.J. Young
Similar(S 272)
A BILL TO AMEND TITLE 59, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO
EDUCATION, BY ADDING CHAPTER 4 SO AS TO ESTABLISH THE SOUTH CAROLINA TUITION
PREPAYMENT PROGRAM WITHIN THE SOUTH CAROLINA BUDGET AND CONTROL BOARD THROUGH
WHICH TUITION ASSOCIATED WITH PUBLIC POST-SECONDARY EDUCATION MAY BE PAID IN
ADVANCE AND FIXED AT A GUARANTEED LEVEL FOR FOUR YEARS OF UNDERGRADUATE
ENROLLMENT.
01/30/97 House Introduced and read first time HJ-2
01/30/97 House Referred to Committee on Ways and Means HJ-2
A BILL
TO AMEND TITLE 59, CODE OF LAWS OF SOUTH
CAROLINA, 1976, RELATING TO EDUCATION, BY ADDING
CHAPTER 4 SO AS TO ESTABLISH THE SOUTH CAROLINA
TUITION PREPAYMENT PROGRAM WITHIN THE SOUTH
CAROLINA BUDGET AND CONTROL BOARD THROUGH
WHICH TUITION ASSOCIATED WITH PUBLIC
POST-SECONDARY EDUCATION MAY BE PAID IN
ADVANCE AND FIXED AT A GUARANTEED LEVEL FOR
FOUR YEARS OF UNDERGRADUATE ENROLLMENT.
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:
"CHAPTER 4
South Carolina Tuition Prepayment Program
Section 59-4-10. This chapter may be cited as the 'South Carolina
Tuition Prepayment Program Act'.
Section 59-4-20. As used in this chapter:
(1) 'Advisory board' means the Advisory Board of the South
Carolina Tuition Prepayment Program.
(2) 'Board' means the State Budget and Control Board.
(3) 'College or university' means a state-chartered four-year public
educational institution of higher learning located in this State.
(4) 'Contributor' means a person who makes or is obligated to
make advance payments in accordance with a prepaid tuition
contract.
(5) 'Designated beneficiary' means the individual who is
designated as the beneficiary of amounts paid or to be paid to the
Tuition Prepayment Program or, in the case of a change in
beneficiaries as permitted under this chapter, the individual who is
the new beneficiary.
(6) 'Director' means the head of the South Carolina Tuition
Prepayment Program.
(7) 'Fund' means the South Carolina Tuition Prepayment Fund.
(8) 'Prepaid tuition contract' means the contract entered into by
the Director of the South Carolina Tuition Prepayment Program or
his designee on behalf of the program and a contributor pursuant to
this chapter for the advance payment by the contributor of
undergraduate tuition at a fixed, guaranteed level for a designated
beneficiary to attend a four-year public educational institution of
higher learning in the State or to another educational institution of
higher learning that may be provided in this chapter to which the
designated beneficiary is admitted.
(9) 'Program' means the South Carolina Tuition Prepayment
Program.
(10) 'Tuition' means the amount charged by an educational
institution of higher learning for registering for a credit hour of
undergraduate instruction and must not be construed to mean any
other fees, charges, or costs of textbooks.
Section 59-4-30. (A) The South Carolina Tuition Prepayment
Program is created as a program within the Budget and Control
Board. The chief administrative and operating official for the
program is the director, who must be appointed and supervised by the
executive director of the board. The director must be a state official.
(B) To assist the board in its responsibilities there is created the
advisory board of the program. The advisory board shall consult and
advise the board on all aspects of investment policy, guidelines, and
strategy, as well as the costs and termination and withdrawal options
of the prepaid tuition contracts. The advisory board must have an
opportunity to comment and advise the board before the adoption of
investment policies, guidelines, and strategies for the fund.
(C) The advisory board shall consist of five members appointed by
the Governor, with the advice and consent of the Senate. Each
member shall possess knowledge, skill, and experience in one or
more of the following areas: accounting, actuarial science, risk
management, finance, banking, or investment management. The
members shall serve five-year terms, except that in making the initial
appointment the Governor shall appoint two members to terms of
three years, two members to terms of four years, and one member to
a term of five years. A person appointed to fill a vacancy on the
advisory board must be appointed in this manner and shall serve for
the remainder of the unexpired term. A member is eligible for
reappointment and a member shall serve until a successor is
appointed and qualified. To avoid a vacancy on the advisory board,
a member appointed by the Governor is authorized to exercise all of
the duties and powers of the position until the Senate votes upon the
nomination.
(D) The Governor shall designate one member of the advisory
board to serve as chairman. A majority of the membership
constitutes a quorum. The members of the advisory board are not
entitled to a salary for their service but shall receive per diem,
subsistence, and mileage as provided by law for members of state
boards, committees, and commissions. Administrative support for
the advisory board is provided by the board.
(E) With the assistance of the advisory board, the board is
responsible for developing and adopting the investment policies,
guidelines, and strategies for the fund and determining the costs,
termination, and withdrawal options of the prepaid tuition contracts.
The board, with the assistance of the advisory board, also shall:
(1) prescribe the terms and conditions of the prepaid tuition
contracts, including the terms and conditions under which payments
may be withdrawn from the fund. However, the prepaid tuition
contract must include a more than de minimis penalty on a refund
which is not used for payment of tuition of the designated beneficiary
or made on account of the death or disability of the designated
beneficiary;
(2) prescribe the requirements, procedures, and guidelines
regarding prepaid tuition contracts;
(3) provide for the receipt of advance payments which must be
in cash, but may be in lump sums or installments;
(4) prescribe regulations governing the program; and
(5) prescribe and retain fees and costs for services provided by
the program.
Section 59-4-40. The program shall implement the provisions of
this chapter in accordance with its legislative intent including, but not
limited to, the following:
(1) enter into all necessary contracts for services, supplies, goods,
space, and equipment including the authority to hire temporary
consultants, actuaries, managers, legal counsel, auditors, marketing
services, and other professional and technical expertise;
(2) invest and manage the fund as directed by the board;
(3) accept gifts, grants, and other financial assistance from any
source;
(4) establish and implement application procedures, prepare and
distribute necessary forms and documents, and prepare and distribute
the annual reports;
(5) establish other policies, procedures, and criteria to implement
and administer the provisions of the chapter;
(6) establish eligibility requirements for designated beneficiaries
including, but not limited to, a requirement of residency in this State
on the date that a prepaid tuition contract is signed by all parties;
(7) provide adequate safeguards to prevent contributions on behalf
of a designated beneficiary in excess of those necessary to provide
for the qualified higher education expenses of the designated
beneficiary; and
(8) prepare reports required by state and federal law.
Section 59-4-50. The fund is created as a nonpublic special,
revolving fund and established and maintained by the State of South
Carolina. The fund consists of monies received from contributors,
state appropriations, other monies acquired from governmental and
private sources, and proceeds from the investments of the fund. The
fund is expended only for the purposes of this chapter. There must
be a separate accounting for each designated beneficiary.
The fund must be invested as directed by the board after the advice
from the advisory board. However, interest in the fund or any
portion of the fund must not be used as security for a loan. An
attempt to use the fund, a contract, or a portion of either as security
for a loan is void. The fund may be invested in any manner
authorized by law. The custody and management of the fund is
directed by the board. The earnings from fund investments become
a part of the fund and expended only for the purposes of this chapter.
Section 59-4-60. (A) The director shall construct prepaid tuition
contracts in accordance with the provisions of this chapter and at the
direction of the board. The contents of the contracts include, but are
not limited to the:
(1) amount of the payment or payments, which must be made
in cash only, and the number of payments required from the
contributor on behalf of the designated beneficiary;
(2) terms and conditions under which contributors remit
payments, including the date of the payments;
(3) provisions for late payment charges, defaults, withdrawals,
refunds, and penalties;
(4) name and date of birth of the designated beneficiary upon
whose behalf the contract is made and the terms and conditions under
which another person may be substituted as then designated
beneficiary including, but not limited to, additional payments that
may be required;
(5) terms and conditions for termination of the contract
including refunds, withdrawals, or transfers of prepayments, and the
name of the persons or combination of persons entitled to terminate
the contract. However, the program must impose a more than de
minimis penalty on a refund of earnings from the account which are
not:
(a) used for qualified higher education expenses for the
designated beneficiary; or
(b) made on account of the death or disability of the
designated beneficiary;
(6) time limitations within which the designated beneficiary
must claim benefits through the program;
(7) number of credit hours contracted for by the contributor;
(8) contractual obligation of the program to the designated
beneficiary to provide for the payment of a specified number of credit
hours of undergraduate instruction at an educational institution of
higher learning, not to exceed the average number of credit hours
required for the conference of the degree that corresponds to the plan
purchased on behalf of the designated beneficiary and to exceed the
actual cost of tuition;
(9) provision that:
(a) all payments to the program must be made in cash only;
(b) an interest in the program, the contract, or in either, may
not be used as security for a loan; and
(c) a contributor or designated beneficiary may not direct the
investment of contributions to the program or earnings on the
program;
(10) rights and obligations of the contributor and the fund; and
(11) terms and conditions which the director determines
necessary and appropriate.
(B) A prepaid tuition contract shall provide that a contract which
has not been terminated or the benefits exercised by the time the
designated beneficiary reaches his thirtieth birthday is terminated.
Not more than forty-eight continuous months expended by a
designated beneficiary as an active duty member of any branch of the
armed services of the State of South Carolina or the United States
must be added to the time specified pursuant to this subsection.
(C) A prepaid tuition contract guarantees the full payment of
tuition at a South Carolina public college or university or a South
Carolina public two-year educational institution of higher learning for
the number of credit hours purchased.
(D) Nothing in this chapter must be construed as a promise or
guarantee that a designated beneficiary may be admitted to an
educational institution of higher learning, allowed to continue
enrollment at an educational institution of higher learning after
admission, or graduated from an institution of higher learning.
(E) Information that identifies the contributors or designated
beneficiaries of a prepaid tuition contract and their advance payment
account activities is confidential and must not be disclosed without
the consent of the designated beneficiary, in accordance with a
judicial order, or to those persons with an official need to access the
information.
(F) An act or undertaking of the program shall not constitute a
debt of the State or any agency, department, institution, or political
subdivision, or a pledge of the full faith and credit of the State or any
agency, department, institution, or political subdivision, but is
payable solely from the fund.
Section 59-4-70. (A) As authorized by the board, up to one
percent of the fund each year may be applied and retained toward the
costs of administering the program.
(B) The General Assembly shall provide an appropriation from the
state's general fund for the necessary costs to initiate the
administration and operation of the program.
(C) All of the agencies, departments, and institutions of higher
learning of the State are required to provide reasonable cooperation
and assistance to the board and the director in the implementation of
the program under this chapter.
Section 59-4-80. The director or his designee shall prepare an
annual financial report of the fund and the program. This report must
be submitted to the board and the advisory board on the date required
by the board and in the format prescribed by the board. The program
and the fund also must be subject to audit by the State Auditor or his
designee. The director or his designee annually shall evaluate the
actuarial soundness of the fund and report this information to the
board and the advisory board.
Section 59-4-90. The director shall solicit answers to applicable
ruling requests from the Internal Revenue Service regarding the tax
status of fees paid pursuant to a prepaid tuition contract to the
contributor and to the designated beneficiary and from the Securities
and Exchange Commission regarding the application of federal
securities laws to the program. The director shall make the status of
these requests known to the board and the advisory board.
Section 59-4-100. The Comptroller General and the chief finance
officers of state agencies, departments, and institutions maintaining
separate payroll accounts, at the request of a state employee, may
collect and pay by payroll deduction to the fund the appropriate
payment in accordance with a prepaid tuition contract.
Section 59-4-110. Notwithstanding any other provision of law,
neither the program nor the fund is liable for income taxes, and
neither the program nor the fund is liable for local taxes, fees, or
assessments. In addition, contributions to the fund credited to a
beneficiary's account do not entitle the contributor to a deduction for
purposes of the state individual income tax, nor must these
contributions be included in the South Carolina gross income of the
beneficiary or anyone required to support the beneficiary. Earnings
on the account, tuition waivers, credits or payments for tuition, or any
money or payout that the designated beneficiary receives or from
which he benefits are included in the gross income of the beneficiary
or anyone required to support the beneficiary."
SECTION 2. This act takes effect July 1, 1997.
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