Regular Session 2017-2018 House Bill 2248 P.N. 3305

PRINTER'S NO. 3305

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

2248

Session of

2018

INTRODUCED BY MILNE, O'NEILL, PEIFER, C. QUINN, MILLARD, MURT,

SCHLOSSBERG, A. DAVIS, DRISCOLL, PICKETT, ROE, SCHLEGEL

CULVER, PASHINSKI, HENNESSEY, BARBIN, CONKLIN AND WATSON,

APRIL 10, 2018

REFERRED TO COMMITTEE ON FINANCE, APRIL 10, 2018

AN ACT

Amending the act of April 3, 1992 (P.L.28, No.11), entitled "An

act providing for the establishment of two programs for

postsecondary educational savings, a guaranteed savings

program and an investment program; establishing the Tuition

Account Programs Bureau within the Treasury Department and

providing duties for the Treasury Department; establishing

tuition account funds; providing for Tuition Account Program

Contracts; providing for the establishment of scholarship

programs; and further providing for duties of the

Pennsylvania Higher Education Assistance Agency," in tuition

account program, further providing for tuition account

programs and funds and establishing the Keystone Scholars

Grant Program and the Keystone Scholars Grant Program

Account; and making editorial changes.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. The heading of Chapter 3 of the act of April 3,

1992 (P.L.28, No.11), known as the Tuition Account Programs and

College Savings Bond Act, is amended and the chapter is amended

by adding a subchapter heading to read:

CHAPTER 3

[TUITION ACCOUNT PROGRAM]

POSTSECONDARY EDUCATIONAL SAVINGS PROGRAMS

SUBCHAPTER A

PRELIMINARY PROVISIONS

Section 2. The definition of "beneficiary" in section 302 of

the act is amended to read:

Section 302. Definitions.

The following words and phrases when used in this chapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

* * *

"Beneficiary." A person who meets the eligibility criteria

established [by this chapter] under this subchapter and by the

department and on whose behalf an account owner enters into a

Tuition Account Program Contract.

* * *

Section 3. Chapter 3 of the act is amended by adding a

subchapter heading after section 302 to read:

SUBCHAPTER B

TUITION ACCOUNT PROGRAMS

Section 4. Sections 305 introductory paragraph, 306(a) and

(b)(1), (2.1) and (3), 307, 309.2(b) introductory paragraph,

314(a) and (c) introductory paragraph and 317 of the act are

amended to read:

Section 305. Powers of department.

In addition to the powers granted by other provisions of this

[chapter] subchapter, the department shall have the powers

necessary or convenient to carry out this [chapter] subchapter,

including, but not limited to, the power to:

* * *

Section 306. Tuition account programs; funds.

(a) Establishment.--There are established in the State

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Treasury two special funds to be known as the Tuition Account

Guaranteed Savings Program Fund and the Tuition Account

Investment Program Fund. The money in these funds shall be

invested in accordance with this [chapter] subchapter. All money

in each of the funds is hereby appropriated to the department on

a continuing basis to carry out the provisions of this [chapter]

subchapter.

(b) Administration.--

(1) The assets of each of the funds shall be preserved,

invested and expended solely pursuant to and for the purposes

set forth in this [chapter] subchapter.

* * *

(2.1) (i) Annually, after the department's fiscal year

has ended, the department shall determine whether the

Tuition Account Guaranteed Savings Program Fund has been

actuarially certified as being sufficient to defray its

obligations and whether the actuarial soundness of the

Tuition Account Guaranteed Savings Program Fund, as

actuarially evaluated, can be maintained with fewer

assets and, if so, the dollar value of any excess surplus

assets. In making the determination, the department shall

consider the projected costs and expenses of the Tuition

Account Guaranteed Savings Program, including the Tuition

Account Guaranteed Savings Program Fund and the Keystone

Scholars Grant Program Account, as well as any material

subsequent events occurring between the end of the fiscal

year and the date on which the determination is made.

(ii) [If] Except as provided under Subchapter C, if

the department determines that there are assets in excess

of those needed to maintain actuarial soundness of the

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Tuition Account Guaranteed Savings Program Fund and the

assets actuarially certified as sufficient to defray the

costs of the Tuition Account Guaranteed Savings Program,

the department may, but shall not be obligated to,

distribute the dollar value of any excess surplus assets

by making additional contributions, which will be

converted to the equivalent of tuition credits pursuant

to section 309(c), into accounts established pursuant to

Tuition Account Guaranteed Savings Program Contracts that

have not been terminated as of the date of determination.

(iii) Any distribution of any excess surplus assets

of the fund shall be made on an equitable basis as

determined by the department.

(3) The department, in conjunction with the board, shall

make an annual report to the Governor and the General

Assembly showing the condition of each of the funds. This

report shall contain the findings and recommendations of the

department and the board and the recommendations of any

private consultant under contract or volunteering services to

the department or board. The report shall detail actions

taken or needed to modify the Tuition Account Guaranteed

Savings Program to insure the fiscal sufficiency of the

Tuition Account Guaranteed Savings Program Fund to meet its

obligations under this [chapter] subchapter. With regard to

the Tuition Account Guaranteed Savings Program Fund, the

report shall address the relationship between existing and

projected net investment returns and existing and projected

tuition levels and address the advisability or necessity of

modifying the authorized investment of fund assets, the

tuition credit price, the amount of administrative fee or

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charges or the amount of refunds offered upon termination of

a Tuition Account Guaranteed Savings Program Contract.

Further, consistent with the goal of providing for the

maintenance of the fiscal sufficiency of the fund, the report

regarding each of the funds shall detail those actions taken

or needed to modify the programs so that the funds, account

owners and beneficiaries will receive favorable treatment for

purposes of Federal taxation.

* * *

Section 307. Investment policies and guidelines.

(a) General rule.--The policies governing the investment of

the Tuition Account Guaranteed Savings Program Fund shall be

directed to obtaining sufficient income to meet the fund's

obligations under this [chapter] subchapter, maintaining

necessary reserves and covering operating expenses. The policies

governing the investment of the Tuition Account Investment

Program Fund shall be directed to providing for an appropriate

balance of risk, liquidity and return commensurate with the

management of a prudent investor. With regard to each of the

funds, the department, its investment managers, program managers

and trustees shall have the authority to invest and reinvest the

funds in all lawful investments.

(b) Investment manager and trustee.--The department may

contract with one or more persons or other legal entities to

serve as investment managers, program managers and trustees to

the department on behalf of either or both of the tuition

account programs. If the department contracts with investment

managers, program managers or trustees in order to fulfill the

objectives of the tuition account programs, the investment

managers, program managers and trustees shall work with the

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department to create an investment program or programs, to

develop investment portfolios and to supervise investments and

the investment programs selected. If the department contracts

with investment managers, program managers and trustees, the

department may require that the investment managers, program

managers and trustees agree, based on actuarial projections of

program costs and expenses supplied by the department, to meet

any obligations of the Tuition Account Guaranteed Savings

Program Fund if, as a result of the imprudent selection or

supervision of investments or the investment program by the

investment managers, program managers or trustees, the Tuition

Account Guaranteed Savings Program Fund is not fiscally

sufficient to meet the fund's obligations under this [chapter]

subchapter. The department, through contract, may also impose

liability on investment managers, program managers and trustees

for losses incurred by the Tuition Account Guaranteed Savings

Program Fund, the Tuition Account Investment Program Fund or the

account owners as a result of the investment managers', program

managers' and trustees' negligent, fraudulent or imprudent

selection or supervision of investments.

Section 309.2. General provisions governing both tuition

account programs.

* * *

(b) Period of participation.--Notwithstanding any of the

provisions of this [chapter] subchapter, the following shall

apply:

* * *

Section 314. Safeguards and protections.

(a) General rule.--Nothing in this [chapter] subchapter or

in a Tuition Account Program Contract entered into pursuant to

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this [chapter] subchapter shall be construed as a promise or

guarantee by the department that a person will be admitted to an

institution of higher education, will be allowed to continue to

attend an institution of higher education after having been

admitted or will be graduated from an institution of higher

education.

* * *

be construed to:

* * *

Section 317. Federal taxation.

The department may take appropriate action in order to obtain

a determination from the Internal Revenue Service or the Federal

courts as to whether contributions made pursuant to a Tuition

Account Program Contract, the increase in value of such

contributions and payment of qualified higher education expenses

pursuant to a Tuition Account Program Contract 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 such determination in any manner permitted under this

[chapter] subchapter.

Section 5. Chapter 3 of the act is amended by adding a

subchapter to read:

SUBCHAPTER C

KEYSTONE SCHOLARS GRANT PROGRAM

Section 321. Definitions.

The following words and phrases when used in this subchapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Account." The Keystone Scholars Grant Program Account

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established under section 324(a).

"Eligible child." An individual born after December 31,

2018, who is a resident of this Commonwealth at the time of

birth and at the time that the grant for qualified higher

education expenses is applied for or received. The term shall

not include an individual over 29 years of age.

"Program." The Keystone Scholars Grant Program established

under section 322(a).

Section 322. Keystone Scholars Grant Program.

(a) Establishment.--The department shall establish a grant

program as part of the Tuition Account Guaranteed Savings

Program Fund established under section 306 to be known as the

Keystone Scholars Grant Program.

(b) Purpose.--The purpose of the program shall be to promote

access to postsecondary educational opportunities for each

eligible child.

Section 323. Procedure.

(a) Department of Health.--No later than 90 days following

the birth of an eligible child, the Department of Health shall

transmit information and record data to the department necessary

to administer the program and establish the eligibility of each

child born after December 31, 2018. Information under this

section shall include, but not be limited to, record data such

as the full name and residential address of the child's parent

or legal guardian and birth date of the child.

(b) Notice.--Following receipt of the information under

subsection (a), the department shall notify each parent or

guardian of each eligible child about the program.

to be excluded from the program.

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(d) Security.--The department shall ensure the security and

confidentiality of the information and record data provided

under subsection (a).

Section 324. Keystone Scholars Grant Program Account.

(a) Establishment.--The Keystone Scholars Grant Program

Account is established as a separate account within the Tuition

Account Guaranteed Savings Program Fund. Money contained in this

account shall be for the exclusive purpose of providing

scholarship grants to eligible children to pay for qualified

higher education expenses associated with the attendance at an

eligible educational institution.

(b) Contributions and investment.--The following apply:

(1) Subject to paragraph (3), at the end of each fiscal

year, assets of the Tuition Account Guaranteed Savings

Program Fund that are in excess of 5% of the actuarially

determined liabilities of the Tuition Account Guaranteed

Savings Program Fund shall be allocated to the account.

(2) Annual allocations under this subsection may not

exceed an amount equal to $100 multiplied by the number of

children born in this Commonwealth in the fiscal year.

(3) An allocation under paragraph (1) may not be made if

the allocation would cause the actuarially determined surplus

of the Tuition Account Guaranteed Savings Program to fall

below 5% of the Tuition Account Guaranteed Savings Program's

actuarially determined liabilities.

(4) The department shall have the authority to invest

and reinvest money in the account as provided for under

section 307.

(5) A financial contribution may not be required from an

eligible child or an eligible child's parent or guardian as a

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condition to receive a grant under this subchapter.

(6) Annually, the State Treasurer shall report to the

Governor, the Appropriations Committee of the Senate and the

Appropriations Committee of House of Representatives the

actuarial status of the Tuition Account Guaranteed Savings

Program Fund as required under section 306(b)(2).

(7) This subsection shall expire December 31, 2029.

(d) Purpose.--Money in the account shall be used for the

purpose of providing grants for qualified higher education

expenses associated with the attendance at an eligible

educational institution and for costs associated with the

administration of the program. Costs associated with the

administration of the program shall be reported to the Governor,

the Appropriations Committee of the Senate and the

Appropriations Committee of the House of Representatives in the

same manner as required under paragraph (b)(6).

(e) Scholarship grants.--Upon application and the submission

of documentation necessary to establish the child's eligibility

and enrollment as a student at an eligible educational

institution, the department shall provide a scholarship grant in

the amount of $100, plus such investment earnings attributed the

initial grant amount since the birth date of the eligible child

as calculated by the department, for qualified higher education

expenses associated with attendance at an eligible educational

institution.

(f) Balances.--The department shall make program account

balances available to each parent or guardian of an eligible

child through a secured Internet account.

Section 325. Additional grants.

(a) Annual match.--Subject to the availability of money

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under section 324, the State Treasurer may establish an annual

match of contributions made by a parent or guardian of an

eligible child into an established Guaranteed Savings Plan

Account under section 309.

(b) Financial incentives.--Subject to the availability of

money from contributions made under section 309, the State

Treasurer may establish financial incentives, such as school

attendance, for additional grants for an eligible child.

Savings Program Fund may not be used for purposes under

subsections (a) and (b).

Section 326. Additional contributions.

Notwithstanding section 324(b)(3), the department may receive

contributions from any person or legal entity to the account on

behalf of, and make grants to, eligible children to pay for

qualified higher education expenses associated with attendance

at an eligible educational institution.

Section 327. Board.

In addition to the duties under section 304, the board shall

consider, study and review the work of the program, advise the

department on request and make recommendations for the

improvement of the program.

Section 6. This act shall take effect in 60 days.

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