CR 19-155 Rule Text

Proposed section 4 below. Regarding refunds, when students transfer or withdraw their enrollments, educational institutions may owe refunds of tuition and fees paid from those students’ college savings accounts. Under the current state administrative rule, such refunds must be paid “directly to the program manager for credit to the applicable designated beneficiary’s account.” DFI-CSP 1.12. That rule is more restrictive than federal law, which permits a refund to be paid to any qualified college savings account for the beneficiary. 26 U.S.C. s. 529(c)(3)(D). For that reason, the College Savings Program Board proposes replacing the above-quoted language with language authorizing the payment of refunds in any manner permitted by Section 529.

6.

Summary of, and comparison with, existing or proposed federal regulation:

Current federal law may afford participants greater flexibility in managing accounts under the college savings program than under the state's current administrative rules, in the four ways described above.

7.

Comparison with rules in adjacent states:

8.

Minnesota and Michigan do not have any administrative code provisions regarding Section 529 college savings programs. Consistent with the proposed language of section 1 below, Illinois defines “qualified expenses” as any “expenses treated as ‘qualified higher education expenses’ under section 529” of the internal revenue code, while Iowa defines them as any qualified education expenses “as defined in section 529.” 23 Ill. Admin. Code s. 2500.20; Iowa Admin. Code r. 781-16.2. The Illinois administrative code does not address multiple-owner accounts, rollovers or refunds for college savings accounts.   The Iowa administrative code authorizes rollovers, Iowa Admin. Code r. 781-16.13, and does not address multiple-owner accounts or refunds.

9.

Summary of factual data and analytical methodologies:

The proposed changes are based on staff review of 26 U.S.C. s. 529 and an identification of provisions wherein state administrative law may be more restrictive than federal law.

10.

Analysis and supporting documents used to determine effect on small business:

Small businesses are not affected by this rule.

11.

Anticipated costs incurred by private sector:

No costs are anticipated to be incurred by college savings program account owners.

12.

Effect on small business:

The proposed rule will have no effect on small business.

13.

Agency contact person: James Diulio, College Savings Program Officer, Department of Financial Institutions, PO Box 8861, Madison, WI 53708-8861, tel. [phone].

14.

Place where comments are to be submitted and deadline for submission:

Comments may be submitted to the contact person shown below no later than the date on which the public hearing on this proposed rule order is conducted. Information as to the place, date and time of the public hearing will be published in the Wisconsin Administrative Register.

By mail: Mark Schlei, Deputy Chief Legal Counsel, Department of Financial Institutions, PO Box 8861, Madison, WI 53708-8861.

By delivery: Mark Schlei, Deputy Chief Legal Counsel, 4822 Madison Yards Way, North Tower, Madison, WI 53703.

By e-mail: [e-mail]

Via the Legislative Council’s Clearinghouse: https://docs.legis.wisconsin.gov/code/chr/all/cr_19_155.

SECTION 1. DFI-CSP 1.02(17) is amended to read:

DFI-CSP 1.02(17) “Qualified higher education expenses” has the meaning found in includes any

expense treated as a “qualified higher education expense” under section 529(e)(3) of the internal

revenue code.

SECTION 2. DFI-CSP 1.03 is amended to read:

DFI-CSP 1.03 Account owner eligibility. Any person legally able to contract under applicable state law is eligible to establish an account for the benefit of a designated individual. To the

extent permitted by section 529 of the internal revenue code, there shall may be only more than

one account owner per account.

SECTION 3. DFI-CSP 1.09(4) is amended to read:

DFI-CSP 1.09(4) ROLLOVER CONTRIBUTIONS. If rollover distributions are allowed by another

state's qualified tuition program, an account owner may deposit all or part of the funds from an

account in that state's qualified tuition program to a new account in the program as provided

under section 529 of the internal revenue code, and any regulations issued thereunder Rollovers

from another state’s qualified tuition program are permitted to the extent allowed by that state’s

program and by section 529 of the internal revenue code. When making a rollover contribution,

the account owner shall complete the forms and make such disclosures of financial information as set forth in the program description and participation agreement. If the rollover distribution deposited in the program account would cause the total account balance of all accounts for that designated beneficiary to exceed the maximum contribution limit, the program manager shall refuse the excess funds.

SECTION 4. DFI-CSP 1.12 is amended to read:

DFI-CSP 1.12 Refund of qualified distribution payment. An eligible educational institution that owes a full or partial refund of a qualified distribution due to an overpayment of educational expenses or for any other reason shall pay the refund directly to the program manager for credit

to the applicable designated beneficiary's account. A refund may not be paid directly to the

designated beneficiary or account owner in any manner permitted by section 529 of the internal

revenue code.

SECTION 5. EFFECTIVE DATE. This rule shall take effect on the first day of the month following publication in the Wisconsin Administrative Register as provided in s. 227.22

(2) (intro.), Stats.

Department of Financial Institutions

Date: 04/23/2020     By: /s/ Matthew Lynch  

Matthew Lynch Chief Legal Counsel