An Act to revise certain provisions of the Higher Education Savings Plan Act.
Be it enacted by the Legislature of the State of South Dakota:
Section 1. That § 13-63-1 be AMENDED:
13-63-1. Terms used in this chapter mean:
(1) "Account," an account established as prescribed in this chapter;
(2) "Account owner," the person who, under this chapter or rules promulgated by the council pursuant to chapter 1-26, is entitled to select or change the designated beneficiary of an account, to designate any person other than the designated beneficiary to whom funds may be paid from the account, or to receive distributions from the account if no such other person is designated;
(3) "Cash," currency, bills, and coins in circulation. A negotiable instrument may be converted to cash if properly endorsed and presented to a financial institution for deposit. An automatic transfer, cashier's check, certified check, money order, payroll deposit, traveler's check, personal check, and wire transfer may also be converted to cash if presented to a financial institution for deposit;
(4) "Contribution,"
any payment directly allocated to an account for the benefit of a
designated beneficiary or used to pay late fees or administrative
fees associated with an account, and that portion of any rollover
amount treated as a contribution under section 529 of the Internal
Revenue Code
and related regulations;
(4)(5) "Contributor,"
any person making a contribution to an account;
(5)(6) "Council,"
the South Dakota Investment Council;
(6)(7) "Designated
beneficiary," except as provided in § 13-63-25,
the individual designated at the time the account is opened as the
individual whose higher education expenses are expected to be paid
from the account or, if this designated beneficiary is replaced in
accordance with § 13-63-12,
13-63-13,
or 13-63-14,
the replacement beneficiary;
(7)(8) "Eligible
education institution,"
an institution that is eligible to participate in any financial
assistance program authorized by Title IV of the Higher Education Act
of 1965, as amended through January 1, 2001, and that is any of the
following as permitted by section 529 of the Internal Revenue Code
and related regulations:(a) An institution described in the Higher
Education Act of 1965 (P.L. 89-329, 79 stat. 1219; 20 United States
Code sections 1001 through 1150);
(b) An
area vocational educational school as defined in section 521(3),
subparagraph (C) or (D) of the Carl D. Perkins Vocational Education
Act (P.L. 98-524; 98 stat. 2435; 20 United States Code sections 2301
through 2471);
(c) An
institution accredited for private postsecondary education
as defined in section 529(e)(5) of the Internal Revenue Code;
(8)(9) "Financial
institution," any bank, commercial bank, national bank, savings
bank, savings and loan association, credit union, an insurance
company, brokerage firm, or other similar entity that is authorized
to do business in this state;
(10) "Investment direction," specifying or attempting to specify the particular financial instruments or ownership interests either individually, or within a fund family or other group of financial instruments or ownership interests held as an investment group, into which the contributions or earnings are invested. Selecting an initial type of investment program if more than one program is offered does not constitute an investment direction;
(11) "Internal Revenue Code," the United States Internal Revenue Code as amended and in effect on January 1, 2022;
(9)(12) "Member
of the family,"
any of the following:
(a) A
son or daughter of an individual or a descendant of the son or
daughter of the individual;
(b) A
stepson or stepdaughter of an individual;
(c) A
brother, sister, stepbrother, or stepsister of an individual. For
purposes of this subsection, the terms, brother and sister, include a
brother or sister by the half‑blood;
(d) The
father or mother of an individual or an ancestor of the father or
mother of an individual;
(e) A
stepfather or stepmother of an individual;
(f) A
son or daughter of an individual's brother or sister. For purposes of
this subsection, the terms, brother and sister, include a brother or
sister by the half‑blood;
(g) A
brother or sister of an individual's father or mother. For purposes
of this subsection, the terms, brother and sister, include a brother
or sister by the half‑blood;
(h) A
son‑in‑law, daughter‑in‑law, father‑in‑law,
mother‑in‑law, brother‑in‑law, or
sister‑in‑law of an individual;
(i) The
spouse of an individual or the spouse of an individual described in
this subdivision;
(j) Any
individual who meets the criteria to be a member of the family as
described in this subdivision as a result of legal adoption;
(k) Any
other individual who is considered a member of the family under
section 529 of the Internal Revenue Code and related regulations
as defined in section 529(e)(2) of the Internal Revenue Code;
(11)(13) "Person,"
as defined in the regulations to section 529 of the Internal Revenue
Code
an individual, a corporation, a partnership, a trust or estate, a
joint-stock company, an association, or a syndicate, group, pool,
joint venture, or other unincorporated organization or group;
(12)(14) "Program,"
the higher education savings program established under this chapter;
(13)(15) "Program
manager," any financial institution selected by the council to
act as the depository and manager for an account;
(16) "Qualified
higher education expenses,"
tuition, fees, books, supplies, and equipment required for enrollment
or attendance and room and board of a designated beneficiary at an
eligible education institution, and any other expenses qualifying as
qualified higher education expenses under section 529 of the Internal
Revenue Code and related regulations; provided that room and board
expenses qualify only if the beneficiary enrolls at least half time
and only if the expenses do not exceed the minimum room and board
allowance determined in calculating costs of attendance for federal
financial aid programs
as defined in section 529(e)(3) of the Internal Revenue Code;
(17) "Qualified tuition program," as defined in section 529(b) of the Internal Revenue Code;
(17)(18) "Rollover,"
a disbursement or transfer from an account of a designated
beneficiary that is transferred to or deposited within sixty days
into an account of
the same designated beneficiary or
another individual who is a member of the family of the designated
beneficiary, if the transferee account was created under this chapter
or under a qualified
state
tuition program maintained by another state in accordance with
section 529 of the Internal Revenue Code
and related regulations,
or any other rollover allowed by section 529 of the Internal Revenue
Code.
Section 2. That § 13-63-3 be AMENDED:
13-63-3. The council may implement the program through the use of one or more financial institutions to act as the depositories and managers. Under the program, persons may establish accounts through the program at a depository. The council may solicit proposals from financial institutions to act as the depositories and managers of the program. Financial institutions that submit proposals must describe the financial instruments that will be held in accounts. Any program depositories and managers selected by the council shall be selected from among bidding financial institutions that demonstrate the most advantageous combination, both to potential program participants and this state, of the following factors:
(1) Financial stability and integrity;
(2) The safety of the investment instruments being offered, taking into account any insurance provided with respect to these instruments;
(3) The ability of the financial institution to track estimated costs of higher education as calculated by the council;
(4) The ability of the financial institutions, directly or through a subcontract, to satisfy record‑ keeping and reporting requirements;
(5) The financial institution's plan for promoting the program and the investment it is willing to make to promote the program;
(6) The fees, if any, proposed to be charged to persons for maintaining accounts;
(7) The minimum initial deposit and minimum contributions that the financial institution will require and the willingness of the financial institution to accept contributions through payroll deduction plans and other deposit plans; and
(8) Any other benefits to this state or its residents included in the proposal, including, if applicable, an account opening fee payable to the council by the account owner and an additional fee from the financial institution for statewide program marketing by the council.
Section 3. That § 13-63-4 be AMENDED:
13-63-4.
The council
shall
may enter into
a contract with any financial institution
engaged
selected to
serve as a program manager and depository.
The
council may select more than one financial institution if both of the
following conditions exist:
(1) The
United States Internal Revenue Service has provided guidance that
giving a contributor such a choice will not cause the program to fail
to qualify for favorable tax treatment under section 529 of the
Internal Revenue Code and related regulations; and
(2) The
council concludes that the choice of financial institutions is in the
best interest of program beneficiaries and will not interfere with
the promotion of the programThe
contract may include terms and conditions, not contrary to federal or
state law, as agreed to by the parties.
Section 4. That § 13-63-9 be AMENDED:
13-63-9.
The program
shall
must be
operated through the use of accounts. An account may be opened by any
person who desires to save to pay the qualified higher education
expenses of an individual by satisfying each of the following
requirements:
(1) Completing an application in
the form prescribed by the council.
The application shall include the following information
that includes:
(a) The name, address, and social security number or employer identification number of the contributor;
(b) The name, address, and social security number or employer identification number of the account owner if the account owner is not the contributor;
(c) The name, address, and social security number of the designated beneficiary;
(d) The
certification relating toA
certification acknowledging that
no excess contributions
required by § 13-63-21
will be permitted pursuant to applicable law;
and
(e) Any other information that the council may require;
(2) Paying
the
any one‑time
application fee established by the council;
(3) Making the minimum contribution required by the council; and
(4) Designating the type of account to be opened if more than one type of account is offered.
Section 5. That § 13-63-12 be AMENDED:
13-63-12. An account owner may change the designated beneficiary of an account to an individual who is a member of the family of the former designated beneficiary or to any other individual in accordance with this section or with procedures established by the council by rules promulgated pursuant to chapter 1-26.
To change the designated beneficiary, the owner shall certify to the financial institution the name, address, social security number, and relationship of the new designated beneficiary to the previously named designated beneficiary. The change is effective upon the financial institution's receipt of the certification.
Section 6. That § 13-63-13 be AMENDED:
13-63-13.
On the direction
of an account owner, all or a portion of an account may be
transferred to another account of which the designated beneficiary is
a member of the family of the designated beneficiary of the
transferee account, if the transferee account was created by this
chapter or under a qualified state tuition program maintained by
another state in accordance with section 529 of the Internal Revenue
Code
and related regulations,
or to an Achieving a Better Life Experience account in accordance
with section 529A of the Internal Revenue Code.
Section 7. That § 13-63-18 be AMENDED:
13-63-18.
NoA
contributor to, account owner of, or designated beneficiary of, any
account may
not, directly
or indirectly,
direct the investment of any contributions to an account or the
earnings from the account, except to the extent permitted under
section 529 of the Internal Revenue Code
and related regulations.
A financial institution may not permit a contributor, account owner,
or designated beneficiary to act with respect to an account in a
manner that constitutes investment direction, except to the extent
permitted under section 529(b)(4) of the Internal Revenue Code.
The council, as trustee, may
offer participants a choice of several investment options, some of
which may require investment counseling prior to participation. Any
investment vehicle offered by the council
shall
must be in
accordance with policies of the council adopted pursuant to this
chapter and
shall
must be
consistent with the investments of a prudent person with similar
objectives and
shall
must further be
separate from, and not commingled with, other investment programs of
the council.
Section 8. That chapter 13-63 be amended with a NEW SECTION:
For each designated beneficiary, the balance in the qualified tuition program may not exceed the limits as defined in section 529 of the Internal Revenue Code. If the financial institution determines that a contribution would cause the account balance limit to be exceeded, the financial institution may only deposit that portion of the contribution, if any, that does not result in an excess balance. The financial institution shall return the excess to the contributor or permit the account owner to transfer the excess to another account in accordance with § 13-63-13. The program manager shall continuously monitor the current, cumulative balance in the accounts for each designated beneficiary.
Section 9. That § 13-63-23 be AMENDED:
13-63-23.
The financial
institution shall provide statements to each account ownerat
least once each year
annually within
thirty‑one days after the twelve‑month period to which
they relate. The statement
shall identify the
must include a minimum of the beginning balance; all
contributions made during
a
the preceding
twelve‑month period,;
the
sum total of
contributions
made through the end of the period,;
any interest accrued, penalties charged, and distributions made
during the period;
the value of the account as of the end of
this
the period,
distribution made during this period,;
and any other matters that the council requires be reported to the
account owner.
Section 10. That § 13-63-30 be AMENDED:
13-63-30.
Every contract,
application, deposit slip, or
any other
similar
document that may be used in connection with a contribution to an
account shall clearly indicate,
in a typeface and a location that are readily visible,
that the account is not insured by this state and neither the
principal deposited nor the investment return is guaranteed by this
state.
Signed February 9, 2022
Catchlines are not law. (§ 2-16-13.1) Underscores indicate new language.
Overstrikes
indicate deleted language.