Chapter 12 Oregon Laws 2001

AN ACT

HB 2124

Relating to the Oregon Qualified Tuition Savings Program; creating new provisions; amending ORS 23.166, 348.841, 348.844, 348.857, 348.863 and 348.867; and prescribing an effective date.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 348.841 is amended to read:

348.841. As used in ORS 348.841 to 348.873:

(1) “Account” means an individual trust account or savings account established in accordance with ORS 348.841 to 348.873.

(2) “Account owner” means the [individual or individuals, other than the designated beneficiary identified at the time the account is opened, who have] person who has the right to withdraw funds from the account. The account owner may also be the designated beneficiary of the account.

(3) “Board” means the Oregon Qualified Tuition Savings Board.

(4) “Designated beneficiary” means, except as provided in ORS 348.867, the individual designated at the time the account is opened as having the right to receive a qualified withdrawal for the payment of qualified higher education expenses, or if the designated beneficiary is replaced in accordance with ORS 348.867, the replacement.

(5) “Financial institution” means a bank, a commercial bank, a national bank, a savings bank, a savings and loan, a thrift institution, a credit union, an insurance company, a trust company, a mutual fund, an investment firm or other similar entity authorized to do business in this state.

(6) “Higher education institution” means an eligible education institution as defined in section 529(e)(5) of the Internal Revenue Code.

(7) “Internal Revenue Code” means the federal Internal Revenue Code, as amended and in effect for the tax year of the taxpayer for whom the inclusion or exclusion of income from federal taxable income is being determined, in whole or part, under ORS 348.841 to 348.873.

(8) “Member of the family” shall have the same meaning as contained in section 529(e) of the Internal Revenue Code.

(9) “Nonqualified withdrawal” means a withdrawal from an account that is not:

(a) A qualified withdrawal;

(b) A withdrawal made as the result of the death or disability of the designated beneficiary;

(c) A withdrawal made as the result of a scholarship, allowance or payment described in section 135(d)(1)(B) or (C) of the Internal Revenue Code that is received by the designated beneficiary, but only to the extent of the amount of the scholarship, allowance, or payment; or

(d) A rollover or change in the designated beneficiary described in ORS 348.867.

(10) “Program” means the Oregon Qualified Tuition Savings Program established under ORS 348.841 to 348.873.

(11) “Qualified higher education expenses” means tuition and other permitted expenses as set forth in section 529(e) of the Internal Revenue Code for the enrollment or attendance of a designated beneficiary at a higher education institution.

(12) “Qualified withdrawal” means a withdrawal from an account to pay the qualified higher education expenses of the designated beneficiary, but only if the withdrawal is also made in accordance with the requirements of ORS 348.870.

SECTION 2. ORS 348.844 is amended to read:

348.844. It is the intent of the Legislative Assembly, in enacting ORS 348.841 to 348.873, to create a higher education tuition savings program:

(1) That increases the ability of families and individuals to save for higher education.

(2) In which the earnings on contributions of program participants are exempt from both federal and state income taxation until the moneys are withdrawn by the beneficiary for higher education expenses.

(3) In which qualified withdrawals are subject to tax at the rate applicable to the beneficiary's income bracket for both federal and state income tax purposes.

(4) That utilizes the private sector to administer and invest the contributions to the program under the guidance of the Oregon Qualified Tuition Savings Board.

(5) In which the contributions and earnings are held by the program in trust for the benefit of designated beneficiaries and account owners for the uses and purposes set forth in ORS 348.841 to 348.873, and for no other benefit, use or purpose.

SECTION 3. Section 4 of this 2001 Act is added to and made a part of ORS 348.841 to 348.873.

SECTION 4. The State of Oregon has no proprietary interest in the contributions or earnings of the Oregon Qualified Tuition Savings Program. Except as otherwise provided by law, the Oregon Qualified Tuition Savings Board is the trustee of the contributions and earnings.

SECTION 5. ORS 348.857 is amended to read:

348.857. (1) An account owner may establish an account by making an initial contribution to the Oregon Qualified Tuition Savings Program in the name of the designated beneficiary. [At the time of the initial contribution, either the account owner or designated beneficiary must be a resident of this state as defined by the Oregon Qualified Tuition Savings Board.] Once a contribution is made it becomes part of the program and subject to the provisions of ORS 348.841 to 348.873.

(2) Any person may make a contribution to an account once an account is opened.

(3) Contributions to an account shall be made only in cash.

(4) Total contributions to all accounts established on behalf of a particular beneficiary may not exceed those reasonably necessary, considering the return on contributions, the age and circumstances of the designated beneficiary, to provide for the qualified higher education expenses of the designated beneficiary. The board shall establish maximum contribution limits applicable to program accounts and shall require the provision of any information from the account owner and the designated beneficiary as is necessary to establish the limit as it relates to such account.

(5) Separate records and accounting shall be required for each account and reports shall be made no less frequently than annually to the account owner and the designated beneficiary.

(6) The board [shall be permitted to] may collect application, account or administrative fees to defray the costs of the program.

SECTION 6. ORS 348.863 is amended to read:

348.863. (1) An account and any interest in an account may not be assignable or pledged or otherwise used to secure or obtain a loan or other advancement.

(2) The right of a designated beneficiary to the payment of qualified higher education expenses or of an account owner to a withdrawal, payments and withdrawals made in exercise of those rights and moneys or property held within an account shall be exempt from garnishment and may not be subject to execution, attachment or any other process or to the operation of any bankruptcy or insolvency law.

[(2)] (3) A refund of a qualified educational expense payment may not be paid by a higher education institution directly to the designated beneficiary or to the account owner. Any refund of qualified tuition expenses owed by a higher education institution on account of an overpayment of educational expenses must be refunded to the program for credit to the designated beneficiary's account.

[(3)] (4) A qualified withdrawal that is used to pay for qualified higher education expenses must be paid [jointly to the designated beneficiary and the higher education institution or directly to the higher education institution. A payment of qualified education expenses may not be made directly to the beneficiary.] as prescribed by rules adopted by the Oregon Qualified Tuition Savings Board. The board may by rule establish, among other matters:

(a) Requirements for proof that the moneys involved in a qualified withdrawal are to be used only to pay qualified higher education expenses;

(b) Procedures and conditions for qualified withdrawals; and

(c) The parties that may receive payment of moneys that are the subject of qualified withdrawals.

[(4)] (5) Total contributions to all accounts established on behalf of a particular beneficiary in excess of those reasonably necessary to meet the designated beneficiary's qualified higher education expenses are prohibited.

SECTION 7. ORS 348.867 is amended to read:

348.867. (1) An account owner shall have the right at any time to change the designated beneficiary of an account to another individual who is a member of the family of the former designated beneficiary.

(2) An account owner shall have the right at any time to direct that all or a portion of an account be transferred to the account of another beneficiary if the designated beneficiaries are members of the same family.

(3) The right to change the designated beneficiary or to transfer between accounts contained in subsections (1) and (2) of this section may be denied if, under rules adopted by the Oregon Qualified Tuition Savings Board, the exercise of the right would result in either excess contributions to an account or the exercise of impermissible investment direction by the account owner.

(4) Individual account information, including but not limited to names, addresses, telephone numbers, personal identification information, amounts contributed and earnings on amounts contributed, is confidential and must be maintained as confidential:

(a) Except to the extent necessary to administer the Oregon Qualified Tuition Savings Program in a manner consistent with ORS 348.841 to 348.873, Oregon tax laws and the Internal Revenue Code; or

(b) Unless the person who provides the information or is the subject of the information expressly agrees in writing that the information may be disclosed.

SECTION 8. Section 4 of this 2001 Act and the amendments to ORS 348.841, 348.844, 348.857, 348.863 and 348.867 by sections 1, 2 and 5 to 7 of this 2001 Act apply to Oregon Qualified Tuition Savings Program accounts established on or after January 1, 2001, and to actions of the Oregon Qualified Tuition Savings Board taken on or after January 1, 2001.

SECTION 9. ORS 23.166 is amended to read:

23.166. (1) All funds exempt from execution and other process under ORS 23.170, 23.185 (1)(b), (c), (d) and (e), 238.445, 344.580, 348.863, 401.405, 407.595, 411.760, 412.115, 412.610, 413.130, 414.095, 655.530, 656.234, 657.855 and 748.207 and section 3101, title 38, United States Code and section 407, title 42, United States Code shall remain exempt when deposited in an account of a judgment debtor as long as the exempt funds are identifiable.

(2) The provisions of subsection (1) of this section shall not apply to any accumulation of funds greater than $7,500.

SECTION 10. This 2001 Act takes effect on the 91st day after the date on which the regular session of the Seventy-first Legislative Assembly adjourns sine die.

Approved by the Governor March 22, 2001

Filed in the office of Secretary of State March 22, 2001

Effective date October 6, 2001

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