Senate Bill 1984e1

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    SB 1984                                  First Engrossed (ntc)



  1                      A bill to be entitled

  2         An act relating to postsecondary education;

  3         creating s. 240.553, F.S.; establishing the

  4         Florida College Savings Program; providing

  5         legislative intent; providing definitions;

  6         providing for establishment of the program;

  7         providing for deposits in the program and

  8         earnings to be exempt from taxation; providing

  9         for the program to be administered by the

10         Florida Prepaid College Board; providing duties

11         and powers of the board; providing for the

12         program to be a qualified state tuition program

13         for federal tax purposes; providing

14         requirements for participation agreements;

15         providing for duration of participation

16         agreements; providing for distributions from an

17         account for qualified higher education

18         expenses; providing for refunds; providing a

19         penalty for making a material misrepresentation

20         in an application for a participation

21         agreement; providing for priorities for

22         expending assets; providing an exemption for

23         moneys in a program account from claims of

24         creditors; providing for payroll deduction;

25         providing a disclaimer regarding guarantee of

26         postsecondary admission; providing for program

27         termination; providing for nonlimitation or

28         alteration of rights under the program;

29         requiring an annual report to the Governor and

30         the Legislature; providing restrictions for

31         program implementation; amending s. 222.22,


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    SB 1984                                  First Engrossed (ntc)



  1         F.S.; exempting moneys in a program account

  2         from legal process; amending s. 732.402, F.S.;

  3         designating program accounts as exempt property

  4         for purposes of probate; providing

  5         severability; providing an effective date.

  6

  7  Be It Enacted by the Legislature of the State of Florida:

  8

  9         Section 1.  Section 240.553, Florida Statutes, is

10  created to read:

11         240.553  Florida College Savings Program.--

12         (1)  LEGISLATIVE INTENT.--The Legislature recognizes

13  that affordability and accessibility of higher education are

14  essential to the welfare and well-being of the residents of

15  the state and is a critical state interest. Promoting and

16  enhancing financial access to postsecondary institutions

17  serves a legitimate public purpose. Accordingly, as a

18  supplement and alternative to existing programs that promote

19  timely planning for postsecondary attendance, it is the intent

20  of the Legislature to allow the Florida Prepaid College Board

21  to establish a Florida College Savings Program to allow

22  persons to make contributions to a trust account that is

23  established for the purpose of meeting some or all of the

24  qualified higher education expenses of a designated

25  beneficiary, consistent with federal law authorizing such

26  programs. There is not any guarantee by the state that such

27  contributions, together with the investment return on such

28  contributions, if any, will be adequate to pay for qualified

29  higher education expenses. It is the intent of the Legislature

30  that this program enable participants in the Florida College

31  Savings Program to save for qualified higher education


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    SB 1984                                  First Engrossed (ntc)



  1  expenses. It is further the intent of the Legislature that

  2  this program provide a choice to persons who determine that

  3  the overall educational needs of their families are best

  4  suited to a savings program or who wish to save to meet

  5  postsecondary educational needs beyond the traditional 4-year

  6  curriculum. Finally, it is the intent of the Legislature that

  7  the program be conducted as a public-private partnership to

  8  maximize program efficiency and effectiveness.

  9         (2)  DEFINITIONS.--As used in this section, the term:

10         (a)  "Benefactor" means any person making a deposit,

11  payment, contribution, gift, or other expenditure to the

12  trust.

13         (b)  "Board" means the Florida Prepaid College Board.

14         (c)  "Designated beneficiary" means:

15         1.  Any individual designated in the participation

16  agreement;

17         2.  Any individual defined in s.152 (a), paragraphs (1)

18  through (8), of the Internal Revenue Code; or

19         3.  Any individual receiving a scholarship from

20  interests in the program purchased by a state or local

21  government or an organization described in s. 501(c)(3) of the

22  Internal Revenue Code.

23         (d)  "Eligible educational institution" means an

24  institution of higher education that qualifies under s. 529 of

25  the Internal Revenue Code as an eligible educational

26  institution.

27         (e)  "Internal Revenue Code" means the Internal Revenue

28  Code of 1986, as defined in s. 220.03(1).

29         (f)  "Participation agreement" means an agreement

30  between the board and a benefactor for participation in a

31  savings plan for a designated beneficiary.


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    SB 1984                                  First Engrossed (ntc)



  1         (g)  "Program" means the Florida College Savings

  2  Program.

  3         (h)  "Qualified higher education expenses" means higher

  4  education expenses permitted under s. 529 of the Internal

  5  Revenue Code and required for the enrollment or attendance of

  6  a designated beneficiary at an eligible educational

  7  institution, including undergraduate and graduate schools, and

  8  any other higher education expenses that are permitted under

  9  s. 529 of the Internal Revenue Code.

10         (3)  FLORIDA COLLEGE SAVINGS PROGRAM; CREATION.--

11         (a)  The board is authorized to create and establish

12  the Florida College Savings Program to promote and enhance the

13  affordability and accessibility of higher education in the

14  state. Such program shall enable persons to contribute funds

15  that are combined and invested to pay the subsequent qualified

16  higher education expenses of a designated beneficiary. The

17  board shall administer the program and shall perform essential

18  governmental functions, as provided in this section.

19         (b)  The amounts on deposit in the program shall remain

20  therein and shall be available solely for carrying out the

21  purposes of this section. Any contract entered into by or any

22  obligation of the board on behalf of and for the benefit of

23  the program does not constitute a debt or obligation of the

24  state but is an obligation of the program. The state has no

25  obligation to any designated beneficiary or any other person

26  as a result of the program. The obligation of the program is

27  limited solely to those amounts deposited in the program. All

28  amounts obligated to be paid from the program are limited to

29  amounts available for such obligation. The amounts on deposit

30  in the program may only be disbursed in accordance with the

31  provisions of this section. Each participation agreement must


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    SB 1984                                  First Engrossed (ntc)



  1  clearly state that the contract is only a debt or obligation

  2  of the program and is not otherwise a debt or obligation of

  3  the state.

  4         (c)  The benefactor retains ownership of all amounts on

  5  deposit in his or her account with the program up to the date

  6  of distribution on behalf of a designated beneficiary.

  7  Earnings derived from investment of the contributions shall be

  8  considered to be held in trust in the same manner as

  9  contributions, except as applied for purposes of the

10  designated beneficiary and for purposes of maintaining and

11  administering the program as provided in this section. Nothing

12  in this paragraph or in any other provision of this section

13  permits any contributions or corresponding interest in the

14  program to be used as security for a loan by a benefactor or

15  designated beneficiary.

16         (d)  All amounts attributable to penalties shall be

17  used for purposes of the program, and other amounts received

18  other than contributions shall be properties of the program.

19  Proceeds from penalties shall remain with the program and may

20  be used for any costs or purposes of the program.

21         (e)  The board may not receive deposits in any form

22  other than cash. A benefactor or designated beneficiary may

23  not direct the investment of any contributions or amounts held

24  in the program other than the specific fund options provided

25  by the board, if any.

26         (f)  Appropriations, moneys acquired from other

27  governmental or private sources, and moneys remitted in

28  accordance with participation agreements, shall be deposited

29  into the Florida Prepaid College Trust Fund in accordance with

30  s. 240.551(4).

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    SB 1984                                  First Engrossed (ntc)



  1         (g)  Deposits and contributions to the program, the

  2  property of the board, and the earnings on the college savings

  3  accounts are exempt from taxation.

  4         (4)  PROGRAM ADMINISTRATION.--

  5         (a)  The Florida College Savings Program shall be

  6  administered by the Florida Prepaid College Board as an agency

  7  of the state. The Florida Prepaid College Board has all the

  8  powers of a body corporate for the purposes delineated in this

  9  section.

10         (b)  The assets of the program shall be continuously

11  invested and reinvested in a manner consistent with the

12  purposes of the program, expended on expenses incurred by the

13  operation and management of the program, or refunded to the

14  benefactor or designated beneficiary under the conditions

15  provided in the participation agreement. The board is not

16  required to invest directly in obligations of the state or any

17  political subdivision of the state or in any investment or

18  other fund administered by the state.

19         (5)  FLORIDA COLLEGE SAVINGS PROGRAM; BOARD

20  DUTIES.--The board shall:

21         (a)  Appoint an executive director to serve as the

22  chief administrative and operational officer of the board and

23  to perform other duties assigned to him or her by the board.

24         (b)  Receive and hold all payments, deposits, and

25  contributions intended for the program, as well as gifts;

26  bequests; endowments; federal, state, or local grants; any

27  other public or private source of funds; and all earnings,

28  until disbursed to pay qualified higher education expenses or

29  refunds as authorized in this section.

30         (c)  Invest the contributions in a manner reasonable

31  and appropriate to achieve the objectives of the program,


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    SB 1984                                  First Engrossed (ntc)



  1  exercising the discretion and care of a prudent person in

  2  similar circumstances with similar objectives. The board shall

  3  give due consideration to rate of return, risk, term of

  4  maturity, diversification of total portfolio within the

  5  program, liquidity, projected disbursements and expenditures,

  6  and expected payments, deposits, contributions, and gifts to

  7  be received. Moneys in the program are exempt from s.

  8  215.20(1), state securities law, and the investment

  9  requirements of s. 18.10, but are subject to the investment

10  restrictions contained in s. 215.472.

11         (d)  Solicit proposals and contract, pursuant to s.

12  287.057, for a trustee-services firm to hold and maintain

13  assets of the board in conjunction with the operations of

14  product providers contracted under this section. Such firm may

15  also provide for the short-term investment of the board's

16  assets. In selecting a trustee-services firm, the board shall

17  seek to obtain the highest standards of professional trustee

18  services, to allow all qualified firms interested in providing

19  such services equal consideration, and to provide such

20  services to the state at no cost and to the participants at

21  the lowest cost possible. The trustee services firm shall

22  agree to meet the obligations of the program to designated

23  beneficiaries if money in the fund fails to offset the

24  obligations of the program as a result of imprudent selection

25  or supervision of short-term investments or in the event of

26  the loss of securities by such firm. Evaluations of proposals

27  submitted under this paragraph must include, but need not be

28  limited to, the following criteria:

29         1.  Adequacy of trustee services to hold and maintain

30  assets of the board, including current operations and staff

31  organization and commitment of management to the proposal.


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    SB 1984                                  First Engrossed (ntc)



  1         2.  Capability to execute program responsibilities

  2  within time and regulatory constraints.

  3         3.  Past experience in trustee services and current

  4  ability to maintain regular and continuous interactions with

  5  the board and product provider.

  6         4.  The minimum benefactor participation assumed within

  7  the proposal and any additional requirements of benefactors.

  8         5.  Adequacy of technical assistance and services

  9  proposed for staff.

10         6.  Adequacy of a management system for evaluating and

11  improving overall trustee services to the program.

12         7.  Adequacy of facilities, equipment, and electronic

13  data-processing services.

14         8.  Detailed projections of administrative costs,

15  including the amount and type of insurance coverage, and

16  detailed projections of total costs.

17         (e)  Solicit proposals and contract, pursuant to s.

18  287.057, for one or more investment consultants to advise the

19  board regarding investment management and performance. In

20  selecting investment consultants, the board shall seek to

21  obtain the highest standards of investment consulting, to

22  allow all qualified firms interested in providing such

23  services equal consideration, and to provide such services to

24  the state at no cost and to the participants at the lowest

25  cost possible. The investment consultants shall agree to meet

26  the obligations of the programs to designated beneficiaries if

27  money in the fund fails to offset the obligations of the

28  program as a result of imprudent supervision of the board's

29  investments. Evaluations of proposals submitted under this

30  paragraph must include, but need not be limited to, the

31  following criteria:


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    SB 1984                                  First Engrossed (ntc)



  1         1.  Capability to execute program responsibilities

  2  within time and regulatory constraints.

  3         2.  Past experience in investment consulting and

  4  current ability to maintain regular and continuous

  5  interactions with the board and product providers.

  6         3.  Adequacy of technical assistance and services

  7  proposed for staff.

  8         4.  Detailed projections of administrative costs.

  9         (f)  Solicit proposals and contract, pursuant to s.

10  287.057, for product providers to develop investment

11  portfolios on behalf of the board to achieve the purposes of

12  this section. Product providers shall be limited to authorized

13  insurers as defined in s. 624.09, banks as defined in s.

14  658.12, associations as defined in s. 665.012, authorized

15  Securities and Exchange Commission investment advisers, and

16  investment companies as defined in the Investment Company Act

17  of 1940. All product providers must have their principal place

18  of business and corporate charter located and registered in

19  the United States. Each product provider must agree to meet

20  the obligations of the program to designated beneficiaries if

21  moneys in the fund fail to offset the obligations of the

22  program as a result of imprudent investing by such provider.

23  Each authorized insurer must evidence superior performance

24  overall on an acceptable level of surety in meeting its

25  obligations to its policyholders and other contractual

26  obligations. Only qualified public depositories approved by

27  the State Insurance Commissioner and Treasurer are eligible

28  for consideration. Each investment company must provide

29  investment plans as specified within the request for

30  proposals. In selecting a product provider, the board shall

31  seek to provide all participants with the most secure,


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    SB 1984                                  First Engrossed (ntc)



  1  well-diversified, and beneficially administered college

  2  savings plan possible, to allow all qualified firms interested

  3  in providing such services equal consideration, and to provide

  4  such services to participants at the lowest cost possible.

  5  Evaluations of proposals submitted under this paragraph must

  6  include, but need not be limited to, the following criteria:

  7         1.  Fees and other costs charged to participants which

  8  affect account values or operational costs related to the

  9  program.

10         2.  Past and current investment performance, including

11  investment and interest rate history, guaranteed minimum rates

12  of interest, consistency of investment performance, and any

13  terms and conditions under which moneys are held.

14         3.  Past experience and ability to provide timely and

15  accurate service in the areas of benefit payments, investment

16  management, and complaint resolution.

17         4.  Financial history and current financial strength

18  and capital adequacy to provide products, including operating

19  procedures and other methods of protecting program assets.

20         (g)  Establish an investment plan for the purposes of

21  this section with the approval of the State Board of

22  Administration. The investment plan must specify the

23  investment policies to be used by the board in its

24  administration of the program. The board may place assets of

25  the program in savings accounts or purchase fixed or variable

26  life insurance or annuity contracts, securities, evidence of

27  indebtedness, or other investment products pursuant to the

28  investment plan and in the proportions that are designated or

29  approved under the investment plan. The insurance, annuity,

30  savings, or investment products must be underwritten and

31  offered in compliance with the applicable federal and state


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  1  laws and rules by persons who are duly authorized by

  2  applicable federal and state authorities. Within the

  3  investment plan, the board may authorize investment vehicles,

  4  or products incident thereto, as are available or offered by

  5  qualified companies or persons. A benefactor may not direct

  6  the investment of his or her contribution to the program and a

  7  designated beneficiary may not direct the contribution made on

  8  his or her behalf to the program. Board members and employees

  9  of the board are not prohibited from participating in the

10  program by virtue of their fiduciary responsibilities as

11  members of the board or official duties as employees of the

12  board.

13         (h)  Administer the program in a manner that is

14  sufficiently actuarially sound to defray the obligations of

15  the trust. The board shall annually evaluate or cause to be

16  evaluated the actuarial soundness of the trust.

17         (i)  Establish adequate safeguards to prevent

18  contributions on behalf of a designated beneficiary in excess

19  of those necessary to provide for the qualified higher

20  education expenses of the beneficiary.

21         (j)  Maintain separate accounts for each designated

22  beneficiary and establish other accounts within the program as

23  necessary to appropriately account for all funds held in the

24  program.

25         (6)  FLORIDA COLLEGE SAVINGS PROGRAM; BOARD

26  POWERS.--The board shall have the powers necessary or proper

27  to carry out the provisions of this section, including, but

28  not limited to, the power to:

29         (a)  Adopt an official seal and rules.

30         (b)  Sue and be sued.

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    SB 1984                                  First Engrossed (ntc)



  1         (c)  Make and execute contracts and other necessary

  2  instruments.

  3         (d)  Establish agreements or other transactions with

  4  federal, state, and local agencies, including state

  5  universities and community colleges.

  6         (e)  Invest funds not required for immediate

  7  disbursement.

  8         (f)  Appear in its own behalf before boards,

  9  commissions, or other governmental agencies.

10         (g)  Hold, buy, and sell any instruments, obligations,

11  securities, and property determined appropriate by the board.

12         (h)  Require a reasonable length of state residence for

13  qualified beneficiaries.

14         (i)  Segregate contributions and payments to the fund

15  into various accounts and funds.

16         (j)  Contract for necessary goods and services; employ

17  necessary personnel; and engage the services of private

18  consultants, actuaries, managers, legal counsel, and auditors

19  for administrative or technical assistance.

20         (k)  Solicit and accept gifts, grants, loans, and other

21  aids from any source or participate in any other way in any

22  government program to carry out the purposes of this section.

23         (l)  Require and collect administrative fees and

24  charges in connection with any transaction and impose

25  reasonable penalties, including default, for delinquent

26  payments or for entering into a participation agreement on a

27  fraudulent basis.

28         (m)  Procure insurance against any loss in connection

29  with the property, assets, and activities of the program or

30  the board.

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  1         (n)  Impose reasonable time limits on use of the

  2  benefits provided by the program; however, any such limitation

  3  must be specified within the participation agreement.

  4         (o)  Delineate the terms and conditions under which

  5  contributions may be withdrawn from the fund and impose

  6  reasonable fees and charges for such withdrawal. Such terms

  7  and conditions must be specified within the participation

  8  agreement.

  9         (p)  Provide for the receipt of contributions in lump

10  sums or installments.

11         (q)  Require that benefactors verify, under oath, any

12  requests for conversions, substitutions, transfers,

13  cancellations, refunds, or other changes to a participation

14  agreement. Verification must be accomplished as authorized and

15  provided for in s. 92.525(1)(a).

16         (r)  Delegate responsibility for administering the

17  investment plan required in paragraph (5)(g) to a person the

18  board determines to be qualified. Such person shall be

19  compensated by the board. Directly or through such person, the

20  board may contract with a private corporation or institution

21  to provide the services that are a part of the investment plan

22  or that are deemed necessary or proper by the board or such

23  person, including, but not limited to, providing for

24  consolidated billing; individual and collective recordkeeping

25  and accountings; and the purchase, control, and safekeeping of

26  assets.

27         (s)  Endorse insurance coverage written exclusively for

28  program participants which may be issued in the form of a

29  group life policy and which is exempt from part V of chapter

30  627.

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  1         (t)  Solicit proposals and contract, pursuant to s.

  2  287.057, for the services of a records administrator. The

  3  goals of the board in selecting a records administrator shall

  4  be to provide all participants with the most secure,

  5  well-diversified, and beneficially administered postsecondary

  6  education expense plan possible, to allow all qualified firms

  7  interested in providing such services equal consideration, and

  8  to provide such services to the state at no cost and to

  9  participants at the lowest cost possible. Evaluations of

10  proposals submitted under this paragraph must include, but

11  need not be limited to, the following criteria:

12         1.  Fees and other costs charged to purchasers which

13  affect account values or operational costs related to the

14  program.

15         2.  Past experience in records administration and

16  current ability to provide timely and accurate service in the

17  areas of records administration, audit and reconciliation,

18  plan communication, participant service, and complaint

19  resolution.

20         3.  Sufficient staff and computer capability for the

21  scope and level of service expected by the board.

22         4.  Financial history and current financial strength

23  and capital adequacy to provide administrative services

24  required by the board.

25         (u)  Solicit proposals and contract, pursuant to s.

26  287.057, for the marketing of the Florida College Savings

27  Program. Any materials produced for the purpose of marketing

28  the program must be submitted to the board for review. Such

29  materials may not be made available to the public before the

30  materials are approved by the board. An educational

31  institution may distribute marketing materials produced for


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  1  the program; however, all such materials must be approved by

  2  the board prior to distribution. Neither the state nor the

  3  board is liable for misrepresentation by a marketing agent.

  4         (v)  Establish other policies, procedures, and criteria

  5  to implement and administer the provisions of this section.

  6         (7)  "QUALIFIED STATE TUITION PROGRAM"

  7  STATUS.--Notwithstanding any other provision of this section,

  8  the board may adopt rules necessary to enable the program to

  9  obtain and retain status as a "qualified state tuition

10  program" for federal tax purposes under the Internal Revenue

11  Code of 1986, as defined in s. 220.03(1). The board shall

12  inform participants of changes to the tax or securities status

13  of participation agreements.

14         (8)  PARTICIPATION AGREEMENTS.--

15         (a)  A participation agreement may be freely amended

16  throughout its term in order to enable the benefactor to

17  increase or decrease the level of participation, change

18  designated beneficiaries, and carry out similar matters

19  permitted by this section and the Internal Revenue Code. A

20  participation agreement may provide for periodic deposits by

21  the benefactor.

22         (b)  Deposits to the program by benefactors may only be

23  in cash. Benefactors may contribute in a lump sum, in

24  installments, or through electronic funds transfer or employer

25  payroll deductions.

26         (c)  The board may establish plans to permit

27  benefactors to prepay the qualified higher education expenses

28  associated with enrollment in state public and private

29  colleges or universities and may establish a procedure to

30  permit account contributions in excess of such projected

31  expenses. The board shall prescribe by rule the methodology


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  1  and information sources that shall be used to determine the

  2  projected costs of qualified higher education expenses for

  3  designated beneficiaries of prescribed ages. Decisions by the

  4  board regarding the need for excess account contributions are

  5  subject to chapter 120.

  6         (d)  The board shall establish consistent provisions

  7  for each participation agreement, including, but not limited

  8  to:

  9         1.  The name, date of birth, and social security number

10  of the designated beneficiary. For newborns, the social

11  security number must be provided within 6 months after the

12  date the participation agreement is submitted.

13         2.  The amount of the contribution or contributions and

14  number of contributions required from a benefactor on behalf

15  of a designated beneficiary.

16         3.  The terms and conditions under which benefactors

17  shall remit contributions, including, but not limited to, the

18  date or dates upon which each contribution is due.

19         4.  Provisions for late contribution charges and for

20  default.

21         5.  Provisions for penalty fees for withdrawals from

22  the program.

23         6.  The name of the person who may terminate

24  participation in the program. The participation agreement must

25  specify whether the account may be terminated by the

26  benefactor, the designated beneficiary, a specific designated

27  person, or any combination of these persons.

28         7.  The terms and conditions under which an account may

29  be terminated, modified, or converted, the name of the person

30  entitled to any refund due as a result of termination of the

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  1  account pursuant to such terms and conditions, and the amount

  2  of refund, if any, due to the person so named.

  3         8.  Penalties for distributions not used or made in

  4  accordance with s. 529 of the Internal Revenue Code.

  5         9.  Any charges or fees in connection with the

  6  administration of the trust.

  7         10.  Other terms and conditions deemed by the board to

  8  be necessary or proper.

  9         (e)  Each participation agreement must clearly state

10  that participation in the program does not guarantee that

11  sufficient funds will be available to cover all qualified

12  higher education expenses for any designated beneficiary.

13         (f)  Each participation agreement must clearly state

14  that participation in the program does not guarantee admission

15  to or continued enrollment at an eligible educational

16  institution.

17         (9)  DURATION OF PARTICIPATION AGREEMENT.--The board

18  shall specify a period of time after which each participation

19  agreement shall be considered to be terminated. Upon

20  termination of an agreement, the balance of the account, after

21  notice to the benefactor, shall be declared unclaimed and

22  abandoned property and subject to disposition as such under

23  chapter 717. Time expended by a designated beneficiary as an

24  active-duty member of any of the armed services of the United

25  States shall be added to the period specified pursuant to this

26  subsection.

27         (10)  DISTRIBUTIONS FOR QUALIFIED HIGHER EDUCATION

28  EXPENSES.--

29         (a)  The board shall establish requirements and

30  procedures for beneficiaries to realize the benefits of

31  participation agreements. In establishing such requirements


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    SB 1984                                  First Engrossed (ntc)



  1  and procedures, the board shall make distributions in as

  2  efficient and expeditious manner as is prudent and possible.

  3         (b)  Each distribution of benefits from a participation

  4  agreement shall consist of a pro rata distribution of

  5  contributions and investment earnings or investment losses and

  6  shall be consistent with the regulations of the United States

  7  Treasury Department or Internal Revenue Service.

  8         (c)  All distributions made during a taxable year shall

  9  be treated as one distribution.

10         (d)  Distributions from accounts that lack a valid

11  social security number are subject to penalties and

12  withholding taxes at the time of distribution.

13         (11)  REFUNDS.--

14         (a)  A benefactor may request a refund of the principal

15  amount of his or her contributions, plus actual investment

16  earnings or minus actual investment losses on the

17  contributions, less any applicable penalty, and less any

18  amounts used to provide benefits to the designated

19  beneficiary.

20         (b)  Notwithstanding paragraph (a), a penalty may not

21  be levied if a benefactor requests a refund from the program

22  due to:

23         1.  Death of the beneficiary.

24         2.  Total disability of the beneficiary.

25         3.  Scholarship, allowance, or payment received by the

26  beneficiary to the extent that the amount of the refund does

27  not exceed the amount of the scholarship, allowance, or

28  payment in accordance with federal law.

29         (c)  If a benefactor requests a refund of funds

30  contributed to the program for any cause other than those

31  listed in paragraph (b), there shall be imposed a penalty of


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    SB 1984                                  First Engrossed (ntc)



  1  10 percent of the earnings of the account and any applicable

  2  taxes, or the penalty prescribed in the Internal Revenue Code

  3  or by rule of the Internal Revenue Service. Earnings shall be

  4  calculated as the total value of the participation agreement,

  5  less the aggregate contributions, or in the manner prescribed

  6  in the Internal Revenue Code or by rule of the Internal

  7  Revenue Service.

  8         (12)  MATERIAL MISREPRESENTATION; PENALTY.--If the

  9  benefactor or the designated beneficiary makes any material

10  misrepresentation in the application for a participation

11  agreement or in any communication with the board regarding the

12  program, especially regarding the withdrawal or distribution

13  of funds therefrom, the account may be involuntarily

14  liquidated by the board. If the account is so liquidated, the

15  benefactor is entitled to a refund, subject to a 10-percent

16  penalty or the amount required by the Internal Revenue Code.

17         (13)  ASSETS OF THE FUND; EXPENDITURE PRIORITY.--The

18  assets of the fund shall be maintained, invested, and expended

19  solely for the purposes of this section and may not be loaned,

20  transferred, or otherwise used by the state for any purpose

21  other than the purposes of this section. This subsection does

22  not prohibit the board from investing in, by purchase or

23  otherwise, bonds, notes, or other obligations of the state or

24  an agency or instrumentality of the state. Unless otherwise

25  specified by the board, assets of the fund shall be expended

26  in the following order of priority:

27         (a)  To make payments on behalf of designated

28  beneficiaries.

29         (b)  To make refunds upon termination of participation

30  in the program.

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    SB 1984                                  First Engrossed (ntc)



  1         (c)  To pay the costs of program administration and

  2  operations.

  3         (14)  EXEMPTION FROM CLAIMS OF CREDITORS.--Moneys paid

  4  into or out of the program by or on behalf of a benefactor or

  5  designated beneficiary of a participation agreement whose

  6  account has not been terminated, are exempt, as provided by s.

  7  222.22 from all claims of creditors of the benefactor or the

  8  designated beneficiary.

  9         (15)  PAYROLL DEDUCTION AUTHORITY.--The state or any

10  state agency, county, municipality, or other political

11  subdivision may, by contract or collective bargaining

12  agreement, agree with any employee to remit payments toward

13  participation agreements through payroll deductions made by

14  the appropriate officer or officers of the state, state

15  agency, county, municipality, or political subdivision. Such

16  payments shall be held and administered in accordance with

17  this section.

18         (16)  DISCLAIMER.--This section or any participation

19  agreement does not constitute, and may not be deemed to

20  constitute, an agreement, pledge, promise, or guarantee of

21  admission or continued enrollment of any designated

22  beneficiary or any other person to or in any eligible

23  educational institution.

24         (17)  PROGRAM TERMINATION.--The program shall continue

25  in existence until its existence is terminated by law. Upon

26  termination of the program, all deposits shall be returned to

27  benefactors, to the extent possible, and any unclaimed assets

28  in the program shall revert to the state in accordance with

29  general law regarding unclaimed property. If the state

30  determines that the program is financially infeasible, the

31  state may discontinue the the program.


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    SB 1984                                  First Engrossed (ntc)



  1         (18)  STATE PLEDGE.--The state pledges to benefactors

  2  and designated beneficiaries of the program that the state

  3  will not limit or alter the rights under this section which

  4  are vested in the program until such obligations are met and

  5  discharged. However, this subsection does not preclude such

  6  limitation if adequate provision is made by law for the

  7  protection of the benefactors and designated beneficiaries

  8  pursuant to the obligations of the board, and, if the state or

  9  the board determines that the program is not financially

10  feasible, the state or the board may discontinue the program.

11  If the program is discontinued, the board shall refund to

12  benefactors their contributions to the program, plus any

13  investment earnings or minus any investment losses. The board,

14  on behalf of the state, may include this pledge and

15  undertaking by the state in participation agreements.

16         (19)  ANNUAL REPORT.--On or before March 31 each year,

17  the board shall prepare, or cause to be prepared, a report

18  setting forth in appropriate detail an accounting of the

19  program and a description of the financial condition of the

20  program at the close of the fiscal year. The board shall

21  submit a copy of the report to the Governor, the President of

22  the Senate, the Speaker of the House of Representatives, and

23  the minority leaders of the House and Senate and shall make

24  the report available to each benefactor and designated

25  beneficiary. The accounts of the fund are subject to annual

26  audits by the Auditor General or his or her designee.

27         (20)  PROGRAM IMPLEMENTATION

28  RESTRICTIONS.--Implementation of the program may not begin

29  until the board has received the following:

30         (a)  A favorable written and unqualified opinion from

31  counsel specializing in federal tax matters indicating that


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    SB 1984                                  First Engrossed (ntc)



  1  the program constitutes a qualified state tuition program

  2  under s. 529 of the Internal Revenue Code;

  3         (b)  A written and unqualified opinion from a qualified

  4  member of the United States Patent Bar indicating that the

  5  implementation of the program or the operation of the program

  6  will not infringe upon any patent or copyright;

  7         (c)  A written and unqualified opinion of qualified

  8  counsel specializing in federal securities law that the

  9  program and the offering of participation in the program are

10  not subject to federal securities law; and

11         (d)  A written and unqualified opinion from the board's

12  litigation counsel indicating that the implementation or

13  operation of the program will not adversely impact any pending

14  litigation against the board.

15         Section 2.  Subsection (1) of section 222.22, Florida

16  Statutes, 1998 Supplement, is amended to read:

17         222.22  Exemption of moneys in the Prepaid

18  Postsecondary Education Expense Trust Fund and in a Medical

19  Savings Account from legal process.--

20         (1)(a)  Moneys paid into or out of the Florida Prepaid

21  College Trust Fund by or on behalf of a purchaser or qualified

22  beneficiary pursuant to an advance payment contract made under

23  s. 240.551, which contract has not been terminated, are not

24  liable to attachment, garnishment, or legal process in the

25  state in favor of any creditor of the purchaser or beneficiary

26  of such advance payment contract.

27         (b)  Moneys paid into or out of the Prepaid College

28  Trust Fund by or on behalf of a benefactor or designated

29  beneficiary pursuant to a participation agreement made under

30  s. 240.553, which agreement has not been terminated, are not

31  liable to attachment, garnishment, or legal process in the


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    SB 1984                                  First Engrossed (ntc)



  1  state in favor of any creditor of the purchaser or beneficiary

  2  of such participation agreement.

  3         Section 3.  Paragraph (c) of subsection (2) of section

  4  732.402, Florida Statutes, 1998 Supplement, is amended to

  5  read:

  6         732.402  Exempt property.--

  7         (2)  Exempt property shall consist of:

  8         (c)  Florida Prepaid College Program contracts

  9  purchased under pursuant to s. 240.551 and Florida College

10  Savings agreements established under s. 240.553.

11         Section 4.  If any provision of this act or the

12  application thereof to any person or circumstance is held

13  invalid, the invalidity does not affect other provisions or

14  applications of the act which can be given effect without the

15  invalid provision or application, and to this end the

16  provisions of this act are declared severable.

17         Section 5.  This act shall take effect upon becoming a

18  law.

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