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PRINTER'S NO. 500
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
444
Session of
2015
INTRODUCED BY STEPHENS, V. BROWN, MACKENZIE, STURLA,
SCHLOSSBERG, KINSEY, DRISCOLL, KAVULICH, RAPP, CALTAGIRONE,
READSHAW, MARSHALL, HEFFLEY, ROSS, D. COSTA, KAUFFMAN,
PICKETT, R. BROWN, MOUL AND GROVE, FEBRUARY 12, 2015
REFERRED TO COMMITTEE ON FINANCE, FEBRUARY 12, 2015
AN ACT
Providing for a savings account program to pay for future
disability expenses of beneficiaries.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the ABLE Account
Program Act.
Section 2. 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 Account Program Contract." An Achieving a Better Life
Experience (ABLE) Account Investment Program Contract entered
into by an account owner and the department to provide for
savings to meet the future qualified disability expenses of a
beneficiary.
"Account owner." A person, including a natural person,
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corporation, association, partnership or other legal entity, who
enters into an ABLE Account Program Contract.
"Beneficiary." A person who meets the eligibility criteria
established by this act and by the department and on whose
behalf an account owner enters into an ABLE Account Program
Contract.
"Board." The ABLE Account Program Advisory Board.
"Bureau." The ABLE Account Program Bureau.
"Department." The Treasury Department of the Commonwealth.
"Fund." The ABLE Account Investment Program Fund.
"Lawful investment." Any of those investments described in
either 24 Pa.C.S. § 8521 (relating to management of fund and
accounts) or 71 Pa.C.S. § 5931 (relating to management of fund
and accounts).
"Qualified disability expenses." Expenses, as defined by
section 529A of the Internal Revenue Code of 1986 (Public Law
99-514, 26 U.S.C. § 529A).
"Value of the account." For an ABLE Account Investment
Program Contract, an amount determined by subtracting expenses,
fees and taxes, if any, from the value of the fund and then
prorating the remaining net value by shares.
Section 3. ABLE Account Program Bureau.
(a) Establishment.--The State Treasurer is directed to
establish the ABLE Account Program Bureau within the Treasury
Department for the purpose of establishing and administering a
disability expense savings investment program.
(b) Investment program.--The investment program shall
provide for monetary contributions pursuant to an ABLE Account
Program Investment Contract for the future payment of qualified
disability expenses. The investment program shall have no
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guarantee.
Section 4. ABLE Account Program Advisory Board.
(a) Establishment.--There is created an ABLE Account Program
Advisory Board.
(b) Composition.--The board shall be composed of the
following:
(1) The State Treasurer and the Secretary of the
Department of Human Services, both of whom shall be ex
officio members.
(2) Two members appointed by the President pro tempore
of the Senate, of which one shall be recommended by the
Majority Leader of the Senate and one must be recommended by
the Minority Leader of the Senate. Both appointees must have
knowledge, skill and expertise in financial affairs.
(3) Two shall be appointed by the Speaker of the House
of Representatives, of which one shall be recommended by the
Majority Leader of the House of Representatives and one must
be recommended by the Minority Leader of the House of
Representatives. Both appointees must have knowledge, skill
and expertise in financial affairs.
(4) Four members shall be appointed by the Governor, of
which at least two appointees must have knowledge, skill and
expertise in issues relating to individuals with
disabilities.
(c) Terms.--Board members shall be appointed for terms of
four years. A vacancy on the board shall be appointed in the
same manner as the member who vacated the board.
(d) Organizational meeting.--The Secretary of the Department
of Human Services shall call the organizational meeting of the
board, at which time a chairperson shall be selected from among
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the members. If a vacancy in the office of chairperson occurs,
such vacancy shall be filled by a selection from among the
members. Meetings of the board shall be held at least quarterly
or at the call of the chairperson.
(e) Duties.--The board shall:
(1) Consider, study and review the work of the bureau.
(2) Advise the department as the department requests and
make recommendations on its own initiative for the
improvement of the ABLE account program.
(3) Report annually to the Governor and to the General
Assembly, and make such interim reports as are deemed
advisable.
(f) Employees.--The department shall provide the board with
experts, stenographers and assistants as necessary to carry out
the work of the board. The board may enlist voluntary assistance
from citizens, research organizations and other agencies.
Section 5. Powers of department.
In addition to the powers granted by other provisions of this
act, the department shall have the powers necessary to carry out
this act, including, but not limited to:
(1) Administering the ABLE account program and the fund.
(2) Entering into ABLE Account Program Contracts with
account owners.
(3) Paying directly to an account owner, a beneficiary
or a third party authorized by the account owner, upon the
receipt of appropriate documentation, the funds due pursuant
to an ABLE Account Program Contract.
(4) Contracting for goods and services, and engaging and
employing personnel, including, but not limited to, the
services of private consultants, actuaries, managers, legal
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counsel and auditors for rendering professional, managerial
and technical assistance and advice.
(5) Charging and collecting administrative fees and
charges in connection with any transaction, including
continued participation in ABLE account programs.
(6) Terminating ABLE accounts and making refunds.
(7) Contracting for insurance, letters of credit and
collateral agreements.
(8) Restricting the number of participants in the ABLE
account program.
(9) Adjusting the terms of ABLE Account Program
Contracts.
(10) Soliciting answers from the appropriate Federal
agencies regarding the application of security or other
Federal laws to the program.
(11) Limiting the times and dates during which ABLE
Account Program Contracts may be entered into.
(12) Considering means whereby an account owner may have
contributions deducted from salary.
(13) Promulgating regulations.
(14) Notwithstanding any other provision of this act,
administering the ABLE account program in such manner as to
ensure and maintain its status as "qualified ABLE program" as
defined in section 529A of the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. § 529A).
Section 6. ABLE account program fund.
(a) Establishment.--The ABLE Account Investment Program Fund
is established in the State Treasury. The money in the fund
shall be invested in accordance with this act.
(b) Appropriation.--All money in the fund is appropriated on
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a continuing basis to the department to carry out the provisions
of this act.
(c) Administration.--The assets of the fund shall be
preserved, invested and expended pursuant to this act.
(d) Composition.--The fund shall consist of:
(1) All contributions made by account owners pursuant to
an ABLE Account Program Contract and all interest, earnings
and additions thereto.
(2) Any other money, public or private, appropriated or
made available to the department for the fund from any source
and all interest, earnings and additions thereto.
(e) Operating and administrative costs.--The department
shall prepare and, through the Governor, submit annually to the
General Assembly a budget covering the operating and
administrative expenses of the bureau and the board. Upon
approval by the General Assembly in an appropriation bill,
expenses as incurred by the bureau and the board shall be paid
from the fees, charges and investment earnings of the fund.
(f) Limitation.--Notwithstanding any other provision of law,
the department and the board shall not pledge the credit or
taxing powers of the Commonwealth. Any obligation or debt under
this act shall not be deemed an obligation or debt of the
Commonwealth, nor shall the Commonwealth be liable to pay
principal and interest on obligations or to offset any loss of
principal and interest earnings on investments made by the
department or recommended by the board under this act.
(g) Statement of limitation.--ABLE Account Program Contracts
issued by the department with an account owner shall contain a
plain language statement explaining the limitation contained in
this subsection.
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Section 7. Investment policies and guidelines for the fund.
(a) General rule.--The investment policies shall provide for
an appropriate balance of risk, liquidity and return
commensurate with the management of a prudent investor.
(b) Authority to invest.--The department, its investment
managers, program managers and trustees shall have the authority
to invest and reinvest the fund in all lawful investments.
(c) 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 the ABLE account program. The
investment managers, program managers and trustees shall work
with the department to create an investment program or programs,
to develop investment portfolios and to supervise investments
and the investment programs selected.
(d) Liability.--The department, through contract, may impose
liability on investment managers, program managers and trustees
for losses incurred by the 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 8. ABLE Account Investment Program.
(a) Establishment.--The department shall establish an
investment plan that defines the ABLE Account Investment Program
structure and sets forth investment policies and guidelines. The
department may obtain the services of investment managers,
program managers and trustees as described in section 7(c) to
assist in establishing and administering the plan.
(b) Rules and procedures.--The department, pursuant to an
ABLE Account Investment Program Contract, shall specify the
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following:
(1) The minimum and maximum amounts of contributions.
(2) The terms and conditions for transferring the ABLE
Account Investment Program Contract to another account owner
or substituting a beneficiary for the originally named
beneficiary.
(3) The terms and conditions for withdrawing
contributions or terminating the ABLE Account Investment
Program Contract.
(4) The method and procedures for making payments
pursuant to the ABLE Account Investment Program Contracts for
the payment of beneficiaries' qualified disability expenses.
(5) All other rights and obligations of the account
owner and the department.
Section 9. General provisions governing the ABLE account
program.
(a) Levy, execution and security for loans.--An ABLE account
or any legal interest therein shall not be subject to
attachment, levy or execution by any creditor of an account
owner or beneficiary and shall not be used as security for a
loan.
(b) Period of participation.--Notwithstanding any of the
provisions of this act, the following shall apply:
(1) Except as provided in paragraph (2), a minimum
period of one year must elapse between the time a
contribution is made pursuant to an ABLE Account Program
Contract and the time that contribution and any increase in
its value may be used for payment of qualified disability
expenses under section 8.
(2) The board may prescribe an alternative minimum
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period of time which must elapse between a contribution and
its use for payment of qualified disability expenses.
(c) Program eligibility.--Any amounts contributed pursuant
to an ABLE Account Program Contract and any increase in the
value thereof shall not be used in calculating personal asset
contributions for determining eligibility and need for any
program administered by any agency of the Commonwealth, except
as otherwise may be provided by Federal law.
(d) Excess contributions.--The department shall institute
adequate safeguards to prevent contributions to an account that
are in excess of those necessary to provide for the qualified
disability expenses of the beneficiary of that account, as
specified in section 529A of the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. § 529A).
(e) Cash contributions.--A contribution made pursuant to an
ABLE Account Program Contract may only be made in cash, which
may, at the department's discretion, include checks, money
orders, credit cards or other similar methods of payment.
(f) Limitation.--A beneficiary is limited to one ABLE
account.
Section 10. ABLE Account Program Contracts.
Account owners making contributions for the use of
beneficiaries shall enter into ABLE Account Program Contracts
with the department. These contracts shall be in such form as is
determined by the department.
Section 11. Eligible beneficiaries.
Notwithstanding any other eligibility criteria established by
the board, the following shall apply:
(1) In order to be eligible as a beneficiary, a person
must be one of the following:
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(i) A resident of this Commonwealth at the time the
ABLE Account Program Contract is entered into on the
person's behalf.
(ii) A nonresident if the ABLE Account Program
Contract entered into on the person's behalf is entered
into by a resident of this Commonwealth, including any
legal entity with its principal place of business located
within this Commonwealth.
(iii) A nonresident if the state of residence has
contracted with the Commonwealth for the purposes of
qualified ABLE accounts.
(2) The account owner must designate a beneficiary at
the time the account owner enters into an ABLE Account
Program Contract.
(3) The account owner may substitute for the current
beneficiary only a member of the family of that beneficiary
upon approval by the department. "Member of the family" is
defined by section 529A of the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. § 529A).
Section 12. Termination and refund.
(a) Death.--Upon termination of an ABLE Account Program
Contract, the account owner or the account owner's designee
shall receive the value of the account if the account is
terminated upon the death of the beneficiary.
(b) Refunds for reasons other than death.--
(1) Except as provided in paragraph (2), refunds for an
ABLE Account Investment Program Contract for reasons other
than that set forth in subsection (a) shall be:
(i) in the event the value of the account is less
than or equal to the sum of the contributions made
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pursuant to the ABLE Account Investment Program Contract,
the value of the account; and
(ii) in the event the value of the account is more
than the sum of the contributions made pursuant to the
ABLE Account Investment Program Contract, the sum of the
contributions plus 90% of the difference between the sum
of the contributions and the value of the account.
(2) The board may alter the refund provisions set forth
in paragraph (1) so long as such alterations are consistent
with the requirements for "qualified ABLE programs" provided
in section 529A of the Internal Revenue Code of 1986 (Public
Law 99-514, 26 U.S.C. § 529A).
(c) Fees.--The department may impose a fee for
administrative costs upon termination of the account and deduct
the fee from the amount otherwise payable.
(d) Taxation of refunds.--In the event of a refund upon the
termination of an ABLE Account Program Contract, to the extent
the refund amount an account owner receives exceeds the sum of
the contributions, it shall be subject to taxation as income
under the laws of this Commonwealth.
(e) Change of beneficiary or type of ABLE account program.--
The substitution of the beneficiary of an account under section
11(3) shall not be deemed a termination of the account for
purposes of this section.
Section 13. Safeguards and protections.
(a) Disclosure.--ABLE Account Program Contracts shall
disclose the following information in writing to each account
owner or prospective owner of an ABLE account:
(1) The terms and conditions for purchasing an ABLE
account.
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(2) Any restrictions on the substitution of
beneficiaries.
(3) The time period during which and the purposes for
which a designated beneficiary may receive benefits under the
program established in section 8.
(4) The terms and conditions under which money may be
withdrawn from an account, the reasonable charges that may
apply and the penalty for a nonqualified withdrawal.
(5) The probable tax consequences associated with
contributions to and withdrawals from an ABLE account.
(6) All other rights and obligations pertaining to
participation in the program.
(b) Construction.--Nothing in this act can be construed to:
(1) Give any designated beneficiary any rights or legal
interest in an account unless the designated beneficiary is
also the account owner.
(2) Establish State residency for an individual solely
because that individual is a designated beneficiary of an
account established under this act.
Section 14. Exemption from security laws.
ABLE Account Program Contracts 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 15. State tax exemption.
(a) Property of fund.--The property of the fund and its
income and operation shall be exempt from all taxation by the
Commonwealth and its political subdivisions.
(b) Contributions.--The following shall be exempt from all
taxation by the Commonwealth and its political subdivisions:
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(1) Contributions made pursuant to an ABLE Account
Program Contract.
(2) An increase in the value of those contributions.
(3) The retention or transfer during life or as a result
of death of any legal interest in an ABLE Account Program
Contract.
(4) Payment of qualified disability expenses of
beneficiaries made pursuant to ABLE Account Program
Contracts.
Section 16. 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 an ABLE
Account Program Contract, the increase in value of such
contributions and payment of qualified disability expenses
pursuant to an ABLE Account Program Contract, shall be a
transaction which will subject account owners or the income of
the fund to Federal taxation and may respond to such
determination in any manner permitted under this act.
Section 17. Effective date.
This act shall take effect in 60 days.
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