Prepaid College Tuition Program

Section 1. Legislative findings. The legislature hereby finds and declares that it is an essential function of state government to foster higher education in order to provide for a well-educated and financially secure population. The legislature further finds that the cost of higher education is becoming less affordable and predictable, adversely affecting the ability of individuals and families to plan for future educational expenses. The legislature further finds that it is in the best interests of the state to provide its citizens with financing assistance for higher education and protection against rising costs, and to encourage savings to enhance the ability of residents of New York to obtain financial access to institutions of higher education. Accordingly, the legislature finds and declares that the creation of the New York state family tuition investment program for the advance purchase of tuition will help to make higher education affordable and accessible to all New York's students, to the ultimate benefit of all citizens of the state.

§ 2. The education law is amended by adding a new article 14-B to read as follows:

ARTICLE 14-B

NEW YORK STATE FAMILY TUITION

INVESTMENT PROGRAM ACT Section 696. Short title.

696-a. Definitions.

696-b. New York state family tuition investment program;

purpose.

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD10494-01-9

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696-c. Powers and duties of the higher education services corpo-

ration.

696-d. Prepayment agreements; pricing; redemption.

696-e. Disclosure to purchasers.

696-f. Termination of prepayment agreements; refunds.

696-g. State financial aid.

696-h. Scholarship program.

696-i. Annual accounting and actuarial study.

696-j. Exemption from security laws.

696-k. Relief from attachment.

§ 696. Short title. This article shall be known and may be cited as the "New York state family tuition investment program act".

§ 696-a. Definitions. For the purposes of this article, the following terms shall have the following meanings:

1. "Beneficiary" means an individual designated in a prepayment agreement as the individual entitled to apply tuition units purchased under such agreement to the payment of that individual's tuition.

2. "Comptroller" means the state comptroller.

3. "Corporation" means the New York state higher education services corporation.

4. "Owner" means the purchaser or beneficiary of a prepayment agreement designated by the purchaser pursuant to paragraph a of subdivision one of section six hundred ninety-six-d of this article.

5. "Prepayment agreement" means an agreement entered into by the corporation and a purchaser providing for the prepayment of tuition units by the purchaser, at a price determined by the corporation for the year in which the units are purchased, and the redemption of such units at the time of the beneficiary's college matriculation, at a value determined in accordance with section six hundred ninety-six-d of this article.

6. "Program" means the New York state family tuition investment program established by section six hundred ninety-six-b of this article.

7. "Purchaser" means a person, including a natural person, limited liability company, corporation, association, foundation, partnership or other legal entity, who enters into a prepayment agreement with the corporation for the prepayment of tuition.

8. "Trust fund" means the New York state family tuition investment program trust fund established pursuant to section seventy-eight-c of the state finance law.

9. "Tuition" means the charges imposed by colleges for attendance for an academic year as an undergraduate and all fees required as a condition of enrollment as determined by the corporation. Such term shall not include tuition charged to out-of-state residents, laboratory fees, room and board, or other similar fees and charges.

10. "Unit" or "tuition unit" means one percent of the annual weighted average tuition for a group of colleges, as described in and determined pursuant to section six hundred ninety-six-d of this article.

§ 696-b. New York state family tuition investment program; purpose. There is hereby established within the corporation the New York state family tuition investment program for the purpose of improving the higher educational opportunities of beneficiaries through the advance purchase of tuition at public institutions of higher education in this state, which shall be an official state function.

§ 696-c. Powers and duties of the higher education services corporation. 1. The corporation shall:

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a. promulgate necessary rules and regulations, within ninety days after the effective date of this article, for the implementation of the program, including but not limited to reasonable time limits for use of tuition units, reasonable limits on the number of program participants, reasonable restrictions on the substitution of beneficiaries, residency requirements for beneficiaries which shall be consistent with residency requirements established by qualified institutions, and reasonable administrative fees and charges in connection with any transaction under this article;

b. employ and fix the compensations of personnel, who shall be in the classified service, but shall not be in the competitive class, as necessary to carry out its responsibilities under this article;

c. engage, on a contract basis, the services of financial consultants, actuaries, auditors and other consultants as necessary to carry out its responsibilities under this article;

d. contract for other services, or for goods, needed by the corporation in the conduct of its business;

e. make, execute and deliver contracts, conveyances and other instruments necessary to the management and operation of the program;

f. purchase insurance from insurers licensed to do business in this state providing coverage against any loss in connection with the corporation's property, assets or activities, or to further ensure the value of units;

g. promote, advertise and publicize the program through, at a minimum, wide dissemination of informational materials to the public explaining the provisions of the program and specifically, a clear statement in plain language summarizing the provisions of sections six hundred ninety-six-e and six hundred ninety-six-f of this article, regarding disclosure and termination;

h. enter into agreements with any agency of the state, the comptroller, political subdivisions of the state and with private employers under which an employee may agree to have a designated amount deducted in each payroll period from the wages or salary due such employee for the purpose of purchasing tuition units pursuant to a prepayment agreement;

i. enter into an agreement with the comptroller under which the comptroller will receive and credit to the trust fund, from any banking institution authorized to do business in this state, amounts that a depositor of the banking institution authorizes such institution to withdraw periodically from his or her account for the purpose of purchasing units pursuant to a prepayment agreement;

j. solicit and accept gifts, grants or loans from any person, association, board, foundation or governmental agency; and

k. perform all acts necessary and proper to carry out the duties and responsibilities of the corporation pursuant to this article.

2. The comptroller shall act as the sole trustee of the trust fund. The comptroller will have authority to make all investment decisions regarding the trust fund.

3. The corporation shall submit a request to the division of the budget for funds sufficient, as determined by such corporation, to cover the expenses of initial planning, organization and administration of the program. Any appropriations to the corporation shall be repaid to the state from the fees, charges and investment earnings of the trust fund within a five-year period, commencing two years after units have been offered for sale to the public. Commencing one year after units have been offered for sale to the public, expenses incurred by the corpo-

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ration shall be paid from the fees, charges and investment earnings of the fund or any other available funds.

4. The program is backed by the full faith and credit of the state. The state pledges to benefactors and designated beneficiaries of the program that the state will not limit or alter the rights which are vested in the program until such obligations are met and discharged. However, this subdivision shall not be deemed to preclude such limitation if adequate provision is made by law for the protection of the benefactors and designated beneficiaries pursuant to the obligations of the corporation.

§ 696-d. Prepayment agreements; pricing; redemption. 1. Election of options. The corporation may enter into prepayment agreements with any person or entity for the purchase of any number of tuition units. A purchaser shall elect one of the following options at the time of entering into a prepayment agreement under this section:

a. One or more specific individuals shall be designated as the beneficiaries of the units. A purchaser selecting this option shall also elect whether to retain ownership of the units or to allocate ownership of the units in the account to one or more of the designated beneficiaries. A purchaser who retains ownership may allocate units among the specified beneficiaries at the time of enrollment in a college. If the purchaser assigns ownership of the units to the beneficiaries, each beneficiary is entitled to use those units. In accordance with rules of the corporation, beneficiaries may be deleted, added or substituted for those originally named in the prepayment agreement and ownership of the assets may be changed during the life of the agreement, provided that no more than five unrelated individuals shall be included under one prepayment agreement at any one time; or

b. A unit account may be established for no more than five unrelated beneficiaries. From time to time, the purchaser may transfer units from such account to one or more specified beneficiaries in accordance with paragraph a of this subdivision, or to a scholarship program established pursuant to this section. The purchaser shall be the owner of the units until they are transferred; or

c. Any number of units of any group may be purchased and donated directly to a scholarship program established pursuant to this section. The person or organization that establishes such scholarship program shall be the owner of units purchased pursuant to this paragraph, and the purchaser shall have no right to the units.

2. Unit pricing. a. In accordance with sound actuarial practices, the corporation shall establish, and re-establish annually, prices for tuition units which shall be redeemable in specific years or periods of years. Tuition unit prices shall be based on in-state tuition, and shall be established for a twelve month period to be determined by the corporation. Annually, the corporation shall have the actuarial soundness of the trust fund evaluated by a nationally recognized actuary and shall determine whether additional assets are necessary to meet the current and projected future obligations of the corporation.

b. Separate tuition unit prices shall be established for each of the following college groups:

(i) colleges for which annual tuition does not exceed five thousand dollars;

(ii) colleges for which annual tuition is greater than five thousand dollars but not more than ten thousand dollars;

(iii) colleges for which annual tuition is greater than ten thousand dollars but not more than fifteen thousand dollars;

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(iv) colleges for which annual tuition is greater than fifteen thousand dollars but not more than twenty thousand dollars; and

(v) colleges for which annual tuition exceeds twenty thousand dollars.

The corporation may, by regulation, adjust the dollar parameters of the groups set forth in this paragraph, and any such adjustment shall operate only prospectively.

c. Tuition unit prices shall be based on an amount which approximates one percent of the weighted average tuition for each group of colleges. The term "weighted average tuition," as used in this section, means the tuition cost resulting from the following calculation:

(i) add the products of the annual tuition for each college within a group, multiplied by total undergraduate fiscal year enrollment at each college; and

(ii) divide the gross total of the products from subparagraph (i) of this paragraph by the total undergraduate academic year enrollment for each group of colleges.