SENATE BILL No. 536

June 13, 2001, Introduced by Senators PETERS and DE BEAUSSAERT and referred to the Committee on Appropriations.

A bill to amend 2000 PA 161, entitled

"Michigan education savings program act,"

by amending section 7 (MCL 390.1477).

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1 Sec. 7. (1) Beginning October 1, 2000, education savings

2 accounts may be established under this act.

3 (2) Any individual may open 1 or more education savings

4 accounts to save money to pay the qualified higher education

5 expenses of 1 or more designated beneficiaries.

6 (3) To open an education savings account, the individual

7 shall enter into a Michigan education savings program agreement

8 with the program manager. The Michigan education savings program

9 agreement shall be in the form prescribed by the program manager

10 and approved by the treasurer and contain all of the following:

03365'01 RJA

2

1 (a) The name, address, and social security number or

2 employer identification number of the account owner.

3 (b) A designated beneficiary.

4 (c) The name, address, and social security number of the

5 designated beneficiary.

6 (d) Any other information that the treasurer or program man-

7 ager considers necessary.

8 (4) Any individual may make contributions to an account.

9 (5) Contributions to accounts shall only be made in cash, by

10 check, by money order, by credit card, or by any similar method

11 but shall not be property.

12 (6) An account owner may withdraw all or part of the balance

13 from an account on 60 days' notice, or a shorter period as autho-

14 rized in the Michigan education savings program agreement.

15 (7) Distributions from an account shall be used to pay for

16 qualified higher education expenses incurred after the account is

17 established and only in any of the following circumstances:

18 (a) The distribution is made directly to an eligible educa-

19 tion institution.

20 (b) The distribution is made in the form of a check payable

21 to both the designated beneficiary and the eligible educational

22 institution.

23 (c) The distribution is made after the designated benefi-

24 ciary submits documentation to show that the distribution is a

25 reimbursement for qualified higher education expenses that the

26 designated beneficiary has already paid and the program has a

03365'01

3

1 process for reviewing the validity of the documentation prior to

2 the distribution.

3 (d) All of the following apply:

4 (i) The designated beneficiary certifies prior to the dis-

5 tribution that the distribution will be expended for his or her

6 qualified higher education expenses within a reasonable time

7 after the distribution is made.

8 (ii) The program requires the designated beneficiary to pro-

9 vide documentation of payment of qualified higher education

10 expenses within 30 days after making the distribution and has a

11 process for reviewing the documentation.

12 (iii) The program retains an account balance that is large

13 enough to collect any penalty owed on the distribution if valid

14 documentation is not produced.

15 (8) If a distribution that is not a qualified withdrawal is

16 made, the program manager shall withhold an amount equal to 10%

17 of the ACCUMULATED EARNINGS ATTRIBUTABLE TO THE distribution

18 amount as a penalty and pay that amount to the department for

19 deposit into the general fund. FOR PURPOSES OF THIS SUBSECTION,

20 DISTRIBUTIONS ARE CONSIDERED MADE FROM THE EARLIEST

21 CONTRIBUTIONS. The penalty under this subsection may be increased

22 or decreased if the treasurer and the program manager determine

23 that it is necessary to increase or decrease the penalty to con-

24 stitute a greater than de minimis penalty for purposes of quali-

25 fying under section 529 of the internal revenue code.

26 (9) The program shall provide separate accounting for each

27 designated beneficiary.

03365'01 Final page.