HOUSE BILL 241
53rd legislature - STATE OF NEW MEXICO - second session, 2018
Carl Trujillo and Dennis J. Roch and Rebecca Dow
RELATING TO EDUCATION; CONFORMING THE EDUCATION TRUST ACT TO CHANGES MADE IN THE FEDERAL INTERNAL REVENUE CODE OF 1986 RELATED TO SECTION 529 PROGRAMS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 21-21K-2 NMSA 1978 (being Laws 2014, Chapter 76, Section 2) is amended to read:
"21-21K-2. DEFINITIONS.--As used in the Education Trust Act:
A. "account" means an individual trust account pursuant to a college investment agreement entered into pursuant to the college savings program;
B. "account owner" means the person who has entered into a college investment agreement with the board and is designated as having the right to withdraw money from the account before the account is disbursed to or for the benefit of the beneficiary;
C. "beneficiary" means the person who is designated at the time the account is opened, or the person who replaces a designated beneficiary, as the person whose education expenses are expected to be paid from the account;
D. "board" means the education trust board;
E. "college investment agreement" means an agreement entered into by the board and an account owner to participate in the college savings program and establish an account to be used for [the] qualified higher education expenses [of a beneficiary at an eligible institution of higher education];
F. "department" means the higher education department;
G. "eligible educational institution" means an educational institution eligible to receive payment for qualified higher education expenses in accordance with Section 529 of the Internal Revenue Code;
[G.] H. "financial institution" means a bank, broker-dealer, insurance company, mutual fund, savings and loan association or other financial entity;
[H. "institution of higher education" means a post- secondary educational institution eligible to participate in student financial aid programs administered by the United States department of education;]
I. "Internal Revenue Code" means the federal Internal Revenue Code of 1986, as amended; [and]
J. "manager" means a financial institution under contract with the board to serve as manager of a college savings plan in the college savings program and receive contributions on behalf of the program; and
K. "qualified higher education expenses" means those expenses allowed under Section 529 of the Internal Revenue Code."
SECTION 2. Section 21-21K-3 NMSA 1978 (being Laws 2014, Chapter 76, Section 3) is amended to read:
"21-21K-3. COLLEGE SAVINGS PROGRAM CREATED--EDUCATION TRUST FUND CREATED--PURPOSE--INVESTMENT OF ACCOUNTS BY THIRD PARTIES--BOARD REVIEW--PROGRAM ADMINISTRATION FUND CREATED--PURPOSE.--
A. The "college savings program" is created to allow interested persons to enter into college investment agreements with the board as a means to save money to pay a beneficiary's [eligible] qualified higher education expenses [for a college education]. The college savings program may consist of one or more college savings plans. The board shall administer the college savings program through accounts established in the education trust fund pursuant to college investment agreements. Money in an account may be used by the beneficiary at any eligible educational institution [of higher education] in New Mexico or any other state.
B. The board shall develop and administer the college savings program in a manner that allows account owners and beneficiaries to obtain and maintain federal income tax benefits or treatment provided by the Internal Revenue Code for qualified state tuition programs and exemptions under the federal securities laws.
C. The "education trust fund" is created as a nonreverting fund in the state treasury. The fund shall be administered by the board to carry out the college savings program. The fund consists of separate trust accounts held in the name of account owners. Income from investment of the fund shall be credited to the separate accounts.
D. The board may contract with one or more managers to invest the contributions deposited to the education trust fund. The board and the managers shall account for each contribution by an account owner.
E. Amounts may be withdrawn or transferred from trust accounts in the education trust fund only as provided in the related college investment agreements. All money contributed to accounts established in the fund are held in trust by the board and the respective managers for the sole benefit of the respective account owners and beneficiaries.
F. The "program administration fund" is created as a nonreverting fund in the state treasury. The fund consists of all administrative and other fees received by the board pursuant to college investment agreements and contracts with managers and any other money credited to the fund. The state treasurer shall invest the fund, and the investment income shall be credited to the fund. Money in the fund may be used to pay costs of establishing, marketing and otherwise administering the college savings program in accordance with the Education Trust Act. Disbursements from the fund shall be by warrants of the secretary of finance and administration on vouchers signed by the director of the board or the director's authorized representative."
SECTION 3. Section 21-21K-5 NMSA 1978 (being Laws 2014, Chapter 76, Section 6) is amended to read:
"21-21K-5. COLLEGE INVESTMENT AGREEMENTS--ACCOUNTS.--
A. An account owner may enter into a college investment agreement with the board under which an account in the education trust fund is established, and contributions may be made to the account from time to time, consistent with the terms of the agreement, to defray the cost of [eligible] qualified higher education expenses at eligible educational institutions [of higher education]. Each account shall be accounted for separately from all other accounts in the education trust fund. An account owner may enter into a college investment agreement on behalf of any beneficiary.
B. Gifts and bequests by persons other than the account owner may be made to an account in the education trust fund for the benefit of the beneficiary in accordance with the terms of the college investment agreement.
C. The board shall set forth procedures relating to the withdrawal of money from an account established in the education trust fund pursuant to a college investment agreement.
D. A college investment agreement may be terminated by the account owner at any time. The board shall specify by rule appropriate provisions for the term and termination of college investment agreements.
E. Contributions made to an account in the education trust fund, together with accrued investment earnings and capital appreciation in such account, shall be excluded from any calculation of the respective beneficiary's student financial aid eligibility in New Mexico.
F. The board shall notify each account owner annually about the status of the account owner's account in the education trust fund."
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