Public Act 103-0778

SB3133 Enrolled LRB103 36417 SPS 66519 b

AN ACT concerning State government.

Be it enacted by the People of the State of Illinois,

represented in the General Assembly:

Section 5. The State Treasurer Act is amended by changing

Sections 16.5 and 16.8 as follows:

(15 ILCS 505/16.5)

Sec. 16.5. College Savings Pool.

(a) Definitions. As used in this Section:

"Account owner" means any person or entity who has opened

an account or to whom ownership of an account has been

transferred, as allowed by the Internal Revenue Code, and who

has authority to withdraw funds, direct withdrawal of funds,

change the designated beneficiary, or otherwise exercise

control over an account in the College Savings Pool.

"Donor" means any person or entity who makes contributions

to an account in the College Savings Pool.

"Designated beneficiary" means any individual designated

as the beneficiary of an account in the College Savings Pool by

an account owner. A designated beneficiary must have a valid

social security number or taxpayer identification number. In

the case of an account established as part of a scholarship

program permitted under Section 529 of the Internal Revenue

Code, the designated beneficiary is any individual receiving

benefits accumulated in the account as a scholarship.

"Eligible educational institution" means public and

private colleges, junior colleges, graduate schools, and

certain vocational institutions that are described in Section

1001 of the Higher Education Resource and Student Assistance

Chapter of Title 20 of the United States Code (20 U.S.C. 1001)

and that are eligible to participate in Department of

Education student aid programs.

"Member of the family" has the same meaning ascribed to

that term under Section 529 of the Internal Revenue Code.

"Nonqualified withdrawal" means a distribution from an

account other than a distribution that (i) is used for the

qualified expenses of the designated beneficiary; (ii) results

from the beneficiary's death or disability; (iii) is a

rollover to another account in the College Savings Pool; or

(iv) is a rollover to an ABLE account, as defined in Section

16.6 of this Act, or any distribution that, within 60 days

after such distribution, is transferred to an ABLE account of

the designated beneficiary or a member of the family of the

designated beneficiary to the extent that the distribution,

when added to all other contributions made to the ABLE account

for the taxable year, does not exceed the limitation under

Section 529A(b) of the Internal Revenue Code; or (v) is a

rollover to a Roth IRA account to the extent permitted by

Section 529 of the Internal Revenue Code.

"Qualified expenses" means: (i) tuition, fees, and the

costs of books, supplies, and equipment required for

enrollment or attendance at an eligible educational

institution; (ii) expenses for special needs services, in the

case of a special needs beneficiary, which are incurred in

connection with such enrollment or attendance; (iii) certain

expenses, to the extent they qualify as qualified higher

education expenses under Section 529 of the Internal Revenue

Code, for the purchase of computer or peripheral equipment or

Internet access and related services, if such equipment,

software, or services are to be used primarily by the

beneficiary during any of the years the beneficiary is

enrolled at an eligible educational institution, except that,

such expenses shall not include expenses for computer software

designed for sports, games, or hobbies, unless the software is

predominantly educational in nature; (iv) room and board

expenses incurred while attending an eligible educational

institution at least half-time; (v) expenses for fees, books,

supplies, and equipment required for the participation of a

designated beneficiary in an apprenticeship program registered

and certified with the Secretary of Labor under the National

Apprenticeship Act (29 U.S.C. 50); and (vi) amounts paid as

principal or interest on any qualified education loan of the

designated beneficiary or a sibling of the designated

beneficiary, as allowed under Section 529 of the Internal

Revenue Code. A student shall be considered to be enrolled at

least half-time if the student is enrolled for at least half

the full-time academic workload for the course of study the

student is pursuing as determined under the standards of the

institution at which the student is enrolled.

(b) Establishment of the Pool. The State Treasurer may

establish and administer the College Savings Pool as a

qualified tuition program under Section 529 of the Internal

Revenue Code. The Pool may consist of one or more college

savings programs. The State Treasurer, in administering the

College Savings Pool, may: (1) receive, hold, and invest

moneys paid into the Pool; and (2) perform any other action he

or she deems necessary to administer the Pool, including any

other actions necessary to ensure that the Pool operates as a

qualified tuition program in accordance with Section 529 of

the Internal Revenue Code.

(c) Administration of the College Savings Pool. The State

Treasurer may delegate duties related to the College Savings

Pool to one or more contractors. The contributions deposited

in the Pool, and any earnings thereon, shall not constitute

property of the State or be commingled with State funds and the

State shall have no claim to or against, or interest in, such

funds; provided that the fees collected by the State Treasurer

in accordance with this Act, scholarship programs administered

by the State Treasurer, and seed funds deposited by the State

Treasurer under Section 16.8 of the Act are State funds.

(c-5) College Savings Pool Account Summaries. The State

Treasurer shall provide a separate accounting for each

designated beneficiary. The separate accounting shall be

provided to the account owner of the account for the

designated beneficiary at least annually and shall show the

account balance, the investment in the account, the investment

earnings, and the distributions from the account.

(d) Availability of the College Savings Pool. The State

Treasurer may permit persons, including trustees of trusts and

custodians under a Uniform Transfers to Minors Act or Uniform

Gifts to Minors Act account, and certain legal entities to be

account owners, including as part of a scholarship program,

provided that: (1) an individual, trustee or custodian must

have a valid social security number or taxpayer identification

number, be at least 18 years of age, and have a valid United

States street address; and (2) a legal entity must have a valid

taxpayer identification number and a valid United States

street address. In-state and out-of-state persons, trustees,

custodians, and legal entities may be account owners and

donors, and both in-state and out-of-state individuals may be

designated beneficiaries in the College Savings Pool.

(e) Fees. Any fees, costs, and expenses, including

investment fees and expenses and payments to third parties,

related to the College Savings Pool, shall be paid from the

assets of the College Savings Pool. The State Treasurer shall

establish fees to be imposed on accounts to cover such fees,

costs, and expenses, to the extent not paid directly out of the

investments of the College Savings Pool, and to maintain an

adequate reserve fund in line with industry standards for

government operated funds. The Treasurer must use his or her

best efforts to keep these fees as low as possible and

consistent with administration of high quality competitive

college savings programs.

(f) Investments in the State. To enhance the safety and

liquidity of the College Savings Pool, to ensure the

diversification of the investment portfolio of the College

Savings Pool, and in an effort to keep investment dollars in

the State of Illinois, the State Treasurer may make a

percentage of each account available for investment in

participating financial institutions doing business in the

State.

(g) Investment policy. The Treasurer shall develop,

publish, and implement an investment policy covering the

investment of the moneys in each of the programs in the College

Savings Pool. The policy shall be published each year as part

of the audit of the College Savings Pool by the Auditor

General, which shall be distributed to all account owners in

such program. The Treasurer shall notify all account owners in

such program in writing, and the Treasurer shall publish in a

newspaper of general circulation in both Chicago and

Springfield, any changes to the previously published

investment policy at least 30 calendar days before

implementing the policy. Any investment policy adopted by the

Treasurer shall be reviewed and updated if necessary within 90

days following the date that the State Treasurer takes office.

(h) Investment restrictions. An account owner may,

directly or indirectly, direct the investment of his or her

account only as provided in Section 529(b)(4) of the Internal

Revenue Code. Donors and designated beneficiaries, in those

capacities, may not, directly or indirectly, direct the

investment of an account.

(i) Distributions. Distributions from an account in the

College Savings Pool may be used for the designated

beneficiary's qualified expenses, and if not used in that

manner, may be considered a nonqualified withdrawal. Funds

contained in a College Savings Pool account may be rolled over

into:

(1) an eligible ABLE account, as defined in Section

16.6 of this Act to the extent permitted by Section 529 of

the Internal Revenue Code; , or

(2) another qualified tuition program, to the extent

permitted by Section 529 of the Internal Revenue Code; or

(3) a Roth IRA account, to the extent permitted by

Section 529 of the Internal Revenue Code.

Distributions made from the College Savings Pool may be

made directly to the eligible educational institution,

directly to a vendor, in the form of a check payable to both

the designated beneficiary and the institution or vendor,

directly to the designated beneficiary or account owner, or in

any other manner that is permissible under Section 529 of the

Internal Revenue Code.

(j) Contributions. Contributions to the College Savings

Pool shall be as follows:

(1) Contributions to an account in the College Savings

Pool may be made only in cash.

(2) The Treasurer shall limit the contributions that

may be made to the College Savings Pool on behalf of a

designated beneficiary, as required under Section 529 of

the Internal Revenue Code, to prevent contributions for

the benefit of a designated beneficiary in excess of those

necessary to provide for the qualified expenses of the

designated beneficiary. The Pool shall not permit any

additional contributions to an account as soon as the sum

of (i) the aggregate balance in all accounts in the Pool

for the designated beneficiary and (ii) the aggregate

contributions in the Illinois Prepaid Tuition Program for

the designated beneficiary reaches the specified balance

limit established from time to time by the Treasurer.

(k) Illinois Student Assistance Commission. The Treasurer

and the Illinois Student Assistance Commission shall each

cooperate in providing each other with account information, as

necessary, to prevent contributions in excess of those

necessary to provide for the qualified expenses of the

designated beneficiary, as described in subsection (j).

The Treasurer shall work with the Illinois Student

Assistance Commission to coordinate the marketing of the

College Savings Pool and the Illinois Prepaid Tuition Program

when considered beneficial by the Treasurer and the Director

of the Illinois Student Assistance Commission.

(l) Prohibition; exemption. No interest in the program, or

any portion thereof, may be used as security for a loan. Moneys

held in an account invested in the College Savings Pool shall

be exempt from all claims of the creditors of the account

owner, donor, or designated beneficiary of that account,

except for the non-exempt College Savings Pool transfers to or

from the account as defined under subsection (j) of Section

12-1001 of the Code of Civil Procedure.

(m) Taxation. The assets of the College Savings Pool and

its income and operation shall be exempt from all taxation by

the State of Illinois and any of its subdivisions. The accrued

earnings on investments in the Pool once disbursed on behalf

of a designated beneficiary shall be similarly exempt from all

taxation by the State of Illinois and its subdivisions, so

long as they are used for qualified expenses. Contributions to

a College Savings Pool account during the taxable year may be

deducted from adjusted gross income as provided in Section 203

of the Illinois Income Tax Act. The provisions of this

paragraph are exempt from Section 250 of the Illinois Income

Tax Act.

(n) Rules. The Treasurer shall adopt rules he or she

considers necessary for the efficient administration of the

College Savings Pool. The rules shall provide whatever

additional parameters and restrictions are necessary to ensure

that the College Savings Pool meets all the requirements for a

qualified tuition program under Section 529 of the Internal

Revenue Code.

Notice of any proposed amendments to the rules and

regulations shall be provided to all account owners prior to

adoption.

(o) Bond. The State Treasurer shall give bond with at

least one surety, payable to and for the benefit of the account

owners in the College Savings Pool, in the penal sum of

$10,000,000, conditioned upon the faithful discharge of his or

her duties in relation to the College Savings Pool.

(p) The changes made to subsections (c) and (e) of this

Section by Public Act 101-26 are intended to be a restatement

and clarification of existing law.

(Source: P.A. 101-26, eff. 6-21-19; 101-81, eff. 7-12-19;

102-186, eff. 7-30-21.)

(15 ILCS 505/16.8)

Sec. 16.8. Illinois Higher Education Savings Program.

(a) Definitions. As used in this Section:

"Beneficiary" means an eligible child named as a recipient

of seed funds.

"Eligible child" means a child born or adopted after

December 31, 2022, to a parent who is a resident of Illinois at

the time of the birth or adoption, as evidenced by

documentation received by the Treasurer from the Department of

Revenue, the Department of Public Health, or another State or

local government agency, or a parent or legal guardian of the

child.

"Eligible educational institution" means institutions that

are described in Section 1001 of the federal Higher Education

Act of 1965 that are eligible to participate in Department of

Education student aid programs.

"Fund" means the Illinois Higher Education Savings Program

Fund.

"Omnibus account" means the pooled collection of seed

funds owned and managed by the State Treasurer in the College

Savings Pool under this Act.

"Program" means the Illinois Higher Education Savings

Program.

"Qualified higher education expense" means the following:

(i) tuition, fees, and the costs of books, supplies, and

equipment required for enrollment or attendance at an eligible

educational institution; (ii) expenses for special needs

services, in the case of a special needs beneficiary, which

are incurred in connection with such enrollment or attendance;

(iii) certain expenses for the purchase of computer or

peripheral equipment, computer software, or Internet access

and related services as defined under Section 529 of the

Internal Revenue Code; (iv) room and board expenses incurred

while attending an eligible educational institution at least

half-time; (v) expenses for fees, books, supplies, and

equipment required for the participation of a designated

beneficiary in an apprenticeship program registered and

certified with the Secretary of Labor under the National

Apprenticeship Act (29 U.S.C. 50); and (vi) amounts paid as

principal or interest on any qualified education loan of the

designated beneficiary or a sibling of the designated

beneficiary, as allowed under Section 529 of the Internal

Revenue Code.

"Seed funds" means the deposit made by the State Treasurer

into the Omnibus Accounts for Program beneficiaries.

(b) Program established. The State Treasurer shall

establish the Illinois Higher Education Savings Program as a

part of the College Savings Pool under Section 16.5 of this

Act, subject to appropriation by the General Assembly. The

State Treasurer shall administer the Program for the purposes

of expanding access to higher education through savings.

(c) Program enrollment. The State Treasurer shall enroll

all eligible children in the Program beginning in 2023, after

receiving records of recent births, adoptions, or dependents

from the Department of Revenue, the Department of Public

Health, or another State or local government agency designated

by the Treasurer, or documentation as may be required by the

Treasurer from a parent or legal guardian of the eligible

child. Notwithstanding any court order which would otherwise

prevent the release of information, the Department of Public

Health is authorized to release the information specified

under this subsection (c) to the State Treasurer for the

purposes of the Program established under this Section.

(1) Beginning in 2021, the Department of Public Health

shall provide the State Treasurer with information on

recent Illinois births and adoptions including, but not

limited to: the full name, residential address, birth

date, and birth record number of the child and the full

name and residential address of the child's parent or

legal guardian for the purpose of enrolling eligible

children in the Program. This data shall be provided to

the State Treasurer by the Department of Public Health on

a quarterly basis, no later than 30 days after the end of

each quarter, or some other date and frequency as mutually

agreed to by the State Treasurer and the Department of

Public Health.

(1.5) Beginning in 2021, the Department of Revenue

shall provide the State Treasurer with information on tax

filers claiming dependents or the adoption tax credit

including, but not limited to: the full name, residential

address, email address, phone number, birth date, and

social security number or taxpayer identification number

of the dependent child and of the child's parent or legal

guardian for the purpose of enrolling eligible children in

the Program. This data shall be provided to the State

Treasurer by the Department of Revenue on at least an

annual basis, by July 1 of each year or another date

jointly determined by the State Treasurer and the

Department of Revenue. Notwithstanding anything to the

contrary contained within this paragraph (2), the

Department of Revenue shall not be required to share any

information that would be contrary to federal law,

regulation, or Internal Revenue Service Publication 1075.

(2) The State Treasurer shall ensure the security and

confidentiality of the information provided by the

Department of Revenue, the Department of Public Health, or

another State or local government agency, and it shall not

be subject to release under the Freedom of Information

Act.

(3) Information provided under this Section shall only

be used by the State Treasurer for the Program and shall

not be used for any other purpose.

(4) The State Treasurer and any vendors working on the

Program shall maintain strict confidentiality of any

information provided under this Section, and shall

promptly provide written or electronic notice to the

providing agency of any security breach. The providing

State or local government agency shall remain the sole and

exclusive owner of information provided under this

Section.

(d) Seed funds. After receiving information on recent

births, adoptions, or dependents from the Department of

Revenue, the Department of Public Health, or another State or

local government agency, or documentation as may be required

by the State Treasurer from a parent or legal guardian of the

eligible child, the State Treasurer shall make deposits into

an omnibus account on behalf of eligible children. The State

Treasurer shall be the owner of the omnibus accounts.

(1) Deposit amount. The seed fund deposit for each

eligible child shall be in the amount of $50. This amount

may be increased by the State Treasurer by rule. The State

Treasurer may use or deposit funds appropriated by the

General Assembly together with moneys received as gifts,

grants, or contributions into the Fund. If insufficient

funds are available in the Fund, the State Treasurer may

reduce the deposit amount or forego deposits.

(2) Use of seed funds. Seed funds, including any

interest, dividends, and other earnings accrued, will be

eligible for use by a beneficiary for qualified higher

education expenses if:

(A) the parent or guardian of the eligible child

claimed the seed funds for the beneficiary by the

beneficiary's 10th birthday;

(B) the beneficiary has completed secondary

education or has reached the age of 18; and

(C) the beneficiary is currently a resident of the

State of Illinois. Non-residents are not eligible to

claim or use seed funds.

(3) Notice of seed fund availability. The State

Treasurer shall make a good faith effort to notify

beneficiaries and their parents or legal guardians of the

seed funds' availability and the deadline to claim such

funds.

(4) Unclaimed seed funds. Seed funds and any interest

earnings that are unclaimed by the beneficiary's 10th

birthday or unused by the beneficiary's 26th birthday will

be considered forfeited. Unclaimed and unused seed funds

and any interest earnings will remain in the omnibus

account for future beneficiaries.

(e) Financial education. The State Treasurer may develop

educational materials that support the financial literacy of

beneficiaries and their legal guardians, and may do so in

collaboration with State and federal agencies, including, but

not limited to, the Illinois State Board of Education and

existing nonprofit agencies with expertise in financial

literacy and education.

(f) Supplementary deposits and partnerships. The State

Treasurer may make supplementary deposits to children in

financially insecure households if sufficient funds are

available. Furthermore, the State Treasurer may develop

partnerships with private, nonprofit, or governmental

organizations to provide additional savings incentives,

including conditional cash transfers or matching contributions

that provide a savings incentive based on specific actions

taken or other criteria.

(g) Illinois Higher Education Savings Program Fund. The

Illinois Higher Education Savings Program Fund is hereby

established as a special fund in the State treasury. The Fund

shall be the official repository of all contributions,

appropriated funds, interest, and dividend payments, gifts, or

other financial assets received by the State Treasurer in

connection with the operation of the Program or related

partnerships. All such moneys shall be deposited into the Fund

and held by the State Treasurer as custodian thereof. The

State Treasurer may accept gifts, grants, awards, matching

contributions, interest income, and appropriated funds from

individuals, businesses, governments, and other third-party

sources to implement the Program on terms that the Treasurer

deems advisable. All interest or other earnings accruing or

received on amounts in the Illinois Higher Education Savings

Program Fund shall be credited to and retained by the Fund and

used for the benefit of the Program. Assets of the Fund must at

all times be preserved, invested, and expended only for the

purposes of the Program and must be held for the benefit of the

beneficiaries. Assets may not be transferred or used by the

State or the State Treasurer for any purposes other than the

purposes of the Program. In addition, no moneys, interest, or

other earnings paid into the Fund shall be used, temporarily

or otherwise, for inter-fund borrowing or be otherwise used or

appropriated except as expressly authorized by this Act.

Notwithstanding the requirements of this subsection (g),

amounts in the Fund may be used by the State Treasurer to pay

the administrative costs of the Program.

(g-5) Fund deposits and payments. On July 15 of each year,

beginning July 15, 2023, or as soon thereafter as practical,

the State Comptroller shall direct and the State Treasurer

shall transfer the sum of $2,500,000, or the amount that is

appropriated annually by the General Assembly, whichever is

greater, from the General Revenue Fund to the Illinois Higher

Education Savings Program Fund to be used for the

administration and operation of the Program.

(h) Audits and reports. The State Treasurer shall include

the Illinois Higher Education Savings Program as part of the

audit of the College Savings Pool described in Section 16.5.

The State Treasurer shall annually prepare a report that

includes a summary of the Program operations for the preceding

fiscal year, including the number of children enrolled in the

Program, the total amount of seed fund deposits, the rate of

seed deposits claimed, and, to the extent data is reported and

available, the racial, ethnic, socioeconomic, and geographic

data of beneficiaries and of children in financially insecure

households who may receive automatic bonus deposits. Such

other information that is relevant to make a full disclosure

of the operations of the Program and Fund may also be reported.

The report shall be made available on the Treasurer's website

by January 31 each year, starting in January of 2024. The State

Treasurer may include the Program in other reports as

warranted.

(i) Rules. The State Treasurer may adopt rules necessary

to implement this Section.

(Source: P.A. 102-129, eff. 7-23-21; 102-558, eff. 8-20-21;

102-1047, eff. 1-1-23; 103-8, eff. 6-7-23.)