PRINTER'S NO. 714
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
583
Session of
2015
INTRODUCED BY D. MILLER, MURT, MARSHALL, GAINEY, LONGIETTI,
CALTAGIRONE, A. HARRIS, STURLA, SCHLOSSBERG, KINSEY,
D. COSTA, COHEN, RAVENSTAHL, MILLARD, KORTZ, WHEATLEY,
READSHAW, SAMUELSON, SCHWEYER, REESE, GIBBONS, SANTARSIERO,
GINGRICH, MACKENZIE AND BRIGGS, FEBRUARY 26, 2015
REFERRED TO COMMITTEE ON FINANCE, FEBRUARY 26, 2015
AN ACT
Providing for tax deferred savings accounts for individuals with
disabilities; establishing the Pennsylvania ABLE Savings
Program; and imposing duties on the Treasury Department.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
CHAPTER 1
PRELIMINARY PROVISIONS
Section 101. Short title.
This act shall be known and may be cited as the Pennsylvania
ABLE Savings Program Act.
Section 102. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"ABLE savings account." An individual savings account
established in accordance with this act.
"Account." An ABLE savings account.
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"Account owner." A person who enters into a savings
agreement under this act as the designated beneficiary or the
trustee or guardian who is appointed for a designated
beneficiary who is a minor or lacks capacity to enter into an
agreement.
"Department." The Treasury Department of the Commonwealth.
"Designated beneficiary." A resident of this Commonwealth
whose qualified disability expenses may be paid from the
account.
"Eligible individual." An individual who is entitled to
benefits based on blindness or disability under Title II of the
Social Security Act (49 Stat. 620, 42 U.S.C. ยง 401 et seq.) or
Title XVI of the Social Security Act (42 U.S.C. ยง 1381 et seq.)
as long as the blindness or disability occurs before the date on
which the individual attains 26 years of age, or an individual
who files a disability certification, to the satisfaction of the
Secretary of the Treasury of the United States, with the
secretary for the taxable year.
"Financial organization." An organization authorized to do
business in this Commonwealth that is one of the following:
(1) Licensed or chartered by the Federal Government or
the Commonwealth.
(2) Subject to the jurisdiction and regulation of the
Securities and Exchange Commission.
"Management contract." A contract executed by the State
Treasurer and a financial organization selected to act as a
depository and manager of the program.
"Member of the family." As defined in section 529A of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. ยง
529A).
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"Nonqualified withdrawal." A withdrawal from an account
which is not:
(1) A qualified withdrawal.
(2) A rollover distribution.
"Program." The Pennsylvania ABLE Savings Program established
under section 301.
"Program manager." A financial organization selected by the
State Treasurer to act as a depository and manager of the
program.
"Qualified disability expense." Any qualified disability
expense included in section 529A of the Internal Revenue Code of
1986 (Public Law 99-514, 26 U.S.C. ยง 529A).
"Qualified withdrawal." A withdrawal from an account to pay
the qualified disability expenses of the designated beneficiary
of the account.
"Rollover distribution." A rollover distribution as defined
in section 529A of the Internal Revenue Code of 1986 (Public Law
99-514, 26 U.S.C. ยง 529A).
"Savings agreement." An agreement between the program
manager or the department and the account owner.
"Statement." Includes an amendment to a statement.
CHAPTER 3
PENNSYLVANIA ABLE SAVINGS PROGRAM
Section 301. Pennsylvania ABLE Savings Program.
An enabling savings program is established, to be known as
the Pennsylvania ABLE Savings Program. The purpose of the
program is:
(1) To authorize the establishment of savings accounts
to empower an individual with a disability and the
individual's family to save private funds to support the
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individual.
(2) To provide guidelines for the maintenance of the
savings accounts.
Section 302. Duties of department.
(a) Implementation and administration.--The department
shall:
(1) Develop and implement the program in a manner
consistent with the provisions of this act.
(2) Engage the services of consultants, including
organizations with experience in trust administration for
people with disabilities, on a contract basis for rendering
professional and technical assistance and advice.
(3) Seek rulings and other guidance from the Secretary
of the Treasury of the United States and the Internal Revenue
Service relating to the program.
(4) Make changes to the program required for
participants in the program to obtain the Federal income tax
benefits or treatment provided by section 529A of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. ยง
529A).
(5) Charge, impose and collect administrative fees and
service charges in connection with any agreement, contract or
transaction relating to the program.
(6) Develop marketing plans and promotion material.
(7) Establish the methods by which the funds held in
accounts shall be disbursed.
(8) Establish the method by which funds shall be
allocated to pay for administrative costs.
(9) Do all things necessary and proper to carry out the
purposes of this act.
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(10) Promulgate rules and regulations necessary to
effectuate the provisions of this act.
(11) Make an annual evaluation of the program and
prepare an annual report of the evaluation to be submitted to
the Governor and the General Assembly.
(12) Notify the Secretary of the Treasury of the United
States when an account has been opened for a designated
beneficiary and submit other reports concerning the program
required by the secretary.
(b) Agreements.--The State Treasurer may enter into
agreements with other states to either allow residents of this
Commonwealth to participate in a plan operated by another state
or to allow residents of other states to participate in the
program.
Section 303. Program operation.
(a) Depositories and managers.--The department may implement
the program through use of financial organizations as account
depositories and managers. The department may solicit proposals
from financial organizations to act as depositories and managers
of the program. Financial organizations submitting proposals
shall describe the investment instruments which will be held in
accounts. The department may select more than one financial
organization and investment instrument for the program. The
department shall select as a program depository and manager the
financial organization, from among the bidding financial
organizations, that demonstrates the most advantageous
combination, both to potential program participants and this
Commonwealth, of the following factors:
(1) Financial stability and integrity of the financial
organization.
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(2) The safety of the investment instrument being
offered.
(3) The ability of the financial organization to satisfy
recordkeeping and reporting requirements.
(4) The financial organization's plan for promoting the
program and the investment the organization is willing to
make to promote the program.
(5) The fees, if any, proposed to be charged to the
account owners.
(6) The minimum initial deposit and minimum
contributions that the financial organization will require.
(7) The ability of the financial organization to accept
electronic withdrawals, including payroll deduction plans.
(8) Other benefits to the Commonwealth or its residents
included in the proposal, including fees payable to the
Commonwealth to cover expenses of operation of the program.
(9) Experience in trust administration for people with
disabilities.
(b) Contracts.--The State Treasurer may enter into any
contracts with a financial organization necessary to effectuate
the provisions of this act. A management contract shall include,
at a minimum, terms requiring the financial organization to:
(1) Take any action required to keep the program in
compliance with requirements of this act and any actions not
contrary to its contract to manage the program to qualify as
a "qualified ABLE program," as defined in section 529A of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. ยง
529A).
(2) Keep adequate records of each account, keep each
account segregated from each other account and provide the
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department with the information necessary to prepare the
statements required by section 501.
(3) Compile and total information contained in
statements required to be prepared under section 501 and
provide the compilations to the department.
(4) If there is more than one program manager, provide
the department with the information necessary to determine
compliance with section 501.
(5) Provide the department with access to the books and
records of the program manager to the extent needed to
determine compliance with the contract, this act and section
529A of the Internal Revenue Code of 1986.
(6) Hold all accounts for the benefit of the account
owner or owners.
(7) Review distributions from accounts for compliance
with terms and conditions relating to qualified and
nonqualified withdrawals.
(8) Be audited at least annually by a firm of certified
public accountants selected by the program manager and
provide the results of the audit to the department.
(9) Provide the department with copies of all regulatory
filings and reports made by the financial organization during
the term of the management contract or while the financial
organization is holding any accounts, other than confidential
filings or reports that will not become part of the program.
The program manager shall make available for review by the
department the results of any periodic examination of the
manager by any Federal or state banking, insurance or
securities commission, except to the extent that the report
may not be disclosed under law.
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(10) Ensure that any description of the program, whether
in writing or through the use of any media, is consistent
with the marketing plan developed under this act.
(c) Additional authority.--The State Treasurer may:
(1) Enter into such contracts as deemed necessary and
proper for the implementation of the program.
(2) Require that an audit be conducted of the operations
and financial position of the program depository and manager
at any time if the State Treasurer has any reason to be
concerned about the financial position, the recordkeeping
practices or the status of accounts of the program depository
and manager.
(3) Terminate or not renew a management agreement. If
the State Treasurer terminates or does not renew a management
agreement, the State Treasurer shall take custody of accounts
held by the program manager and shall seek to promptly
transfer the accounts to another financial organization that
is selected as a program manager or depository and into
investment instruments as similar to the original instruments
as possible.
(d) Agency cooperation.--The department may coordinate
efforts with other State agencies in carrying out the purposes
of this act.
CHAPTER 5
ACCOUNTS
Section 501. Requirements.
(a) Designated beneficiaries.--An ABLE savings account
established in accordance with this act must be opened by a
designated beneficiary or a trustee or guardian of a designated
beneficiary who lacks capacity to enter into a contract. Each
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designated beneficiary may have only one account. The designated
beneficiary must be an eligible individual at the time the
account is established.
(b) Application.--An application for an account shall be in
the form prescribed by the department and contain the following:
(1) Name, address and Social Security number of the
account owner.
(2) Name, address and Social Security number of the
designated beneficiary, if the account owner is the
beneficiary's trustee or guardian.
(3) Certification relating to no excess contributions.
(4) Additional information as the department may
require.
(c) Application fee.--The department may establish a
nonrefundable application fee.
(d) Contributions.--Any person may make contributions to an
ABLE savings account after the account is opened, subject to the
limitations imposed by section 529A of the Internal Revenue Code
of 1986 (Public Law 99-514, 26 U.S.C. ยง 529A), or any rules and
regulations promulgated by the Secretary of the Treasury of the
United States applicable to this act.
(e) Form of contributions.--Contributions to ABLE savings
accounts may only be made in cash. The department or program
manager shall reject or promptly withdraw contributions:
(1) in excess of the limits established under subsection
(d); or
(2) the total contributions if the:
(i) value of the account is equal to or greater than
the account maximum established by the department. The
account maximum is equal to the account maximum for
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postsecondary education savings accounts established
under the act of April 3, 1992 (P.L.28, No.11), known as
the Tuition Account Programs and College Savings Bond
Act; or
(ii) designated beneficiary is not an eligible
individual in the current calendar year.
(f) Permitted conduct.--An account owner may:
(1) Change the designated beneficiary of an account to
an individual who is a member of the family of the prior
designated beneficiary in accordance with procedures
established by the department.
(2) Transfer all or a portion of an account to another
ABLE savings account, the designated beneficiary of which is
a member of the family as defined in section 529A of the
Internal Revenue Code of 1986.
(g) Prohibition.--No account owner may use an interest in an
account as security for a loan. Any pledge of an interest in an
account shall be of no force and effect.
(h) Report of distribution.--If there is any distribution
from an account to any individual or for the benefit of any
individual during a calendar year, the distribution shall be
reported to the Internal Revenue Service and each account owner,
the designated beneficiary or the distributee to the extent
required by Federal or State law.
(i) Statements.--Statements shall be provided to each
account owner on a quarterly basis. The statement shall
identify:
(1) The contributions made during the preceding period.
(2) The total contributions made to the account through
the end of the period.
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(3) The value of the account at the end of the period.
(4) Distributions made during the period.
(5) Any other information that the department shall
require to be reported to the account owner.
(j) Filing as required.--Statements and information relating
to accounts shall be prepared and filed to the extent required
by this act and any other Federal or State law.
(k) Separate accounting.--The program shall provide separate
accounting for each designated beneficiary. An annual fee may be
imposed upon the account owner for the maintenance of an
account.
Section 502. Exemption from security laws.
Savings accounts are exempt from any statute regulating
securities, including the act of December 5, 1972 (P.L.1280,
No.284), known as the Pennsylvania Securities Act of 1972.
Section 503. State tax exemption.
(a) Property of funds.--The property of each of the funds
and their income and operation and qualified withdrawals shall
be exempt from all taxation by the Commonwealth and its
political subdivisions.
(b) Contributions.--Contributions made pursuant to a savings
account, any increase in the value of those contributions, the
retention or transfer during life or as a result of death of any
legal interest in a savings account and payment of qualified
disability expenses of beneficiaries made pursuant to a savings
account shall be exempt from all taxation by the Commonwealth
and its political subdivisions.
Section 504. Federal taxation.
The department may take appropriate action in order to obtain
a determination from the Internal Revenue Service or the Federal
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courts as to whether contributions made to a savings account,
the increase in value of the contributions and payment of
qualified disability expenses pursuant to a savings account
shall be a transaction which will subject account owners or the
income of either or both of the funds to Federal taxation and
may respond to the determination in any manner permitted under
this act.
Section 505. Medical assistance.
Money in an ABLE savings account may be claimed for medical
assistance reimbursement, only after the death of the designated
beneficiary, subject to limitations imposed by the Secretary of
the Treasury of the United States.
Section 506. Construction.
(a) General rule.--Nothing in this act shall create or be
construed to create any obligation of the department, the
Commonwealth or any agency or instrumentality of the
Commonwealth to guarantee for the benefit of an account owner or
designated beneficiary with respect to the:
(1) Return of principal.
(2) Rate of interest or other return on any account.
(3) Payment of interest or other return on any account.
(b) Regulations.--The department may promulgate regulations
to provide that every contract, application or other similar
document that may be used in connection with opening an account
clearly indicates that the account is not insured by the
Commonwealth and that the principal deposited and the investment
return are not guaranteed by the Commonwealth.
CHAPTER 21
MISCELLANEOUS PROVISIONS
Section 2101. Effective date.
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This act shall take effect immediately.
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