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A BILL TO BE ENTITLED
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AN ACT
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relating to the Texas tomorrow fund II prepaid tuition unit |
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undergraduate education program. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Chapter 54, Education Code, is amended by adding |
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Subchapter H to read as follows: |
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SUBCHAPTER H. PREPAID TUITION UNIT UNDERGRADUATE EDUCATION |
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PROGRAM: TEXAS TOMORROW FUND II |
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Sec. 54.751. DEFINITIONS. In this subchapter: |
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(1) "Accredited out-of-state institution of higher |
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education" means a public or private institution of higher |
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education that: |
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(A) is located outside this state; and |
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(B) is accredited by a recognized accrediting |
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agency. |
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(2) "Beneficiary" means the person designated under a |
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prepaid tuition contract as the person entitled to apply one or more |
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tuition units purchased under the contract to the payment of the |
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person's undergraduate tuition and required fees at a general |
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academic teaching institution, two-year institution of higher |
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education, private or independent institution of higher education, |
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or accredited out-of-state institution of higher education. |
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(3) "Board" means the Prepaid Higher Education Tuition |
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Board. |
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(4) "Fund" means the Texas tomorrow fund II. |
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(5) "General academic teaching institution" has the |
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meaning assigned by Section 61.003, except that the term does not |
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include a public state college. |
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(6) "Prepaid tuition contract" means a contract under |
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which a person purchases from the board on behalf of a beneficiary |
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one or more tuition units that the beneficiary is entitled to apply |
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to the payment of the beneficiary's undergraduate tuition and |
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required fees at a general academic teaching institution, two-year |
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institution of higher education, private or independent |
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institution of higher education, or accredited out-of-state |
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institution of higher education. |
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(7) "Private or independent institution of higher |
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education," "public junior college," "public state college," |
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"public technical institute," and "recognized accrediting agency" |
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have the meanings assigned by Section 61.003. |
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(8) "Program" means the prepaid tuition unit |
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undergraduate education program. |
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(9) "Purchaser" means a person who enters into a |
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prepaid tuition contract with the board on behalf of a beneficiary |
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for the purchase of one or more tuition units. |
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(10) "Required fee" means a fee, other than a |
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laboratory fee for a specific course, that is charged by a public or |
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private institution of higher education to all students at the |
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institution who are not exempt from the fee. For purposes of this |
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subdivision, a fee is a required fee only to the extent that the fee |
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is considered a qualified higher education expense under Internal |
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Revenue Code provisions applicable to the program. |
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(11) "Two-year institution of higher education" means |
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a public junior college, a public state college, and a public |
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technical institute. |
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Sec. 54.752. POWERS AND DUTIES OF BOARD CONCERNING PROGRAM. |
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(a) In addition to carrying out duties assigned under Subchapters F |
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and G, the Prepaid Higher Education Tuition Board shall administer |
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the prepaid tuition unit undergraduate education program |
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established under this subchapter. The board shall comply with |
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federal and state law related to the program. |
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(b) In addition to the board's powers assigned under |
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Subchapters F and G, the board has the powers necessary or proper to |
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carry out this subchapter, including the power to: |
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(1) adopt rules to implement this subchapter; |
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(2) sue and be sued; |
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(3) enter into contracts and other necessary |
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instruments; |
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(4) enter into agreements or other transactions with |
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the United States, state agencies, general academic teaching |
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institutions, two-year institutions of higher education, and local |
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governments; |
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(5) appear on its own behalf before governmental |
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agencies; |
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(6) contract for necessary goods and services, |
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including specifying in the contract duties to be performed by the |
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provider of a good or service that are a part of or are in addition |
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to the person's primary duties under the contract; |
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(7) engage the services of private consultants, |
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actuaries, trustees, records administrators, managers, legal |
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counsel, and auditors for administrative or technical assistance; |
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(8) solicit and accept gifts, grants, loans, and other |
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aid from any source or participate in any other way in any |
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government program to carry out this subchapter; |
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(9) impose administrative fees; |
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(10) contract with a person to market the program; |
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(11) purchase liability insurance covering the board |
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and employees and agents of the board; and |
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(12) establish other policies, procedures, and |
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eligibility criteria to implement this subchapter. |
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Sec. 54.753. PREPAID TUITION UNITS: PURCHASE; ASSIGNED |
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VALUE; TYPES; PRICE. (a) Under the program, a purchaser may prepay |
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the costs of all or a portion of a beneficiary's undergraduate |
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tuition and required fees at a general academic teaching |
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institution, two-year institution of higher education, private or |
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independent institution of higher education, or accredited |
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out-of-state institution of higher education by entering into a |
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prepaid tuition contract with the board to purchase one or more |
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tuition units of a type described by this section at the applicable |
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price established by the board for that type of unit for the year in |
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which the unit is purchased. The portion of the beneficiary's |
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undergraduate tuition and required fees for which a tuition unit |
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may be redeemed at a particular general academic teaching |
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institution or two-year institution of higher education is assigned |
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to the tuition unit at the time of purchase, and the tuition unit |
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may be redeemed to pay that portion of the tuition and fees at the |
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general academic teaching institution or two-year institution of |
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higher education in any academic year in which the unit is redeemed |
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in accordance with this subchapter. The purchaser may purchase one |
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type of unit or a combination of two or three types of units. |
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(b) The assigned value of a tuition unit, purchased as |
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provided by this section, when used to pay the cost of tuition and |
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required fees at a general academic teaching institution or |
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two-year institution of higher education, is equal to one percent |
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of the amount necessary for the academic year in which the unit is |
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redeemed to cover the applicable cost of undergraduate resident |
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tuition and required fees for one academic year consisting of 30 |
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semester credit hours as follows: |
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(1) for a Type I tuition unit, the cost of |
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undergraduate resident tuition and required fees charged by the |
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general academic teaching institution with the highest such tuition |
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and fee costs, determined as provided by Subsection (d); |
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(2) for a Type II tuition unit, the weighted average |
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undergraduate resident tuition and required fees charged by general |
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academic teaching institutions, determined as provided by |
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Subsection (e); and |
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(3) for a Type III tuition unit, the weighted average |
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undergraduate resident tuition and required fees of two-year |
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institutions of higher education, determined as provided by |
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Subsection (f). |
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(c) Each year, the board shall establish the price at which |
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each type of tuition unit may be purchased during the next sales |
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period and the percentage of the total cost of undergraduate |
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resident tuition and required fees for one academic year consisting |
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of 30 semester credit hours for which each type of tuition unit may |
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be redeemed at each general academic teaching institution and |
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two-year institution. The percentage shall be based on the total |
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cost of required tuition and fees at a particular general academic |
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teaching institution or two-year institution of higher education in |
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relation to the amount determined for the institution with the |
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highest cost or weighted average cost, as applicable. The purchase |
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price established for each type of unit must be equal to the |
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applicable cost of tuition and required fees as determined under |
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this section for the most recent academic year that began before the |
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beginning of the sales period. The sales period to which those |
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prices apply expires on the first anniversary of the date the units |
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become available for purchase at the prices established for that |
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year. |
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(d) The board shall base the purchase price of a Type I |
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tuition unit on one percent of the cost of the undergraduate |
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resident tuition and required fees for the applicable academic year |
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at the general academic teaching institution with the highest such |
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tuition and fee cost for that academic year. |
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(e) The board shall base the purchase price of a Type II |
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tuition unit on one percent of the cost of the weighted average |
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general academic teaching institution undergraduate resident |
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tuition and required fees for the applicable academic year. That |
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cost is determined by: |
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(1) for each general academic teaching institution, |
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multiplying the average amount of the institution's undergraduate |
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resident tuition and required fees for an academic year consisting |
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of 30 semester credit hours by the number of full-time equivalent |
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undergraduate resident students at that institution; |
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(2) adding together the products computed under |
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Subdivision (1) for each institution; and |
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(3) dividing the sum determined under Subdivision (2) |
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by the total number of full-time equivalent undergraduate resident |
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students at all general academic teaching institutions. |
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(f) The board shall base the purchase price of a Type III |
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tuition unit on one percent of the cost of the weighted average |
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two-year institution of higher education undergraduate resident |
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tuition and required fees for the applicable academic year, |
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disregarding any portion of the tuition charged by a public junior |
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college to a resident of this state who does not reside within the |
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taxing jurisdiction of the junior college. That cost is determined |
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by: |
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(1) for each two-year institution of higher education, |
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multiplying the average amount of the institution's undergraduate |
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resident tuition and required fees for an academic year consisting |
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of 30 semester credit hours by the number of full-time equivalent |
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undergraduate resident students at that institution; |
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(2) adding together the products computed under |
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Subdivision (1) for each institution; and |
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(3) dividing the sum determined under Subdivision (2) |
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by the total number of full-time equivalent undergraduate resident |
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students at all two-year institutions of higher education. |
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(g) The total amount paid under a prepaid tuition contract |
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on behalf of a single beneficiary may not exceed any limit |
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established on the amount by Section 529, Internal Revenue Code of |
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1986. The board shall establish, in compliance with Section 529, |
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Internal Revenue Code of 1986, the minimum amount that the |
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purchaser is required to pay under the contract on behalf of a |
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single beneficiary. |
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(h) At the time of the establishment of the account to which |
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a purchaser's prepaid tuition contract money is assigned, the board |
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may impose an administrative fee not to exceed $25. Money from that |
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fee must be used directly in maintaining the actuarial soundness of |
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the fund as required by Section 54.770. The board may not impose |
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any other fee or charge in connection with the sale of a tuition |
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unit. |
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Sec. 54.754. REDEMPTION OF TUITION UNITS. (a) In |
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accordance with this subchapter, when a beneficiary under a prepaid |
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tuition contract redeems one or more tuition units to pay costs of |
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tuition and required fees, the board shall apply money in the fund, |
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in the amount provided by Section 54.765(c) or (d), as applicable, |
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to pay all or the applicable portion of the costs of the |
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beneficiary's tuition and required fees at the general academic |
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teaching institution, two-year institution of higher education, |
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private or independent institution of higher education, or |
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accredited out-of-state institution of higher education in which |
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the beneficiary enrolls. Subject to Subsection (b)(2) and the other |
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provisions of this section, a beneficiary may redeem any type of |
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tuition unit for attendance at an institution described by this |
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section. A general academic teaching institution or two-year |
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institution of higher education shall accept the amount transferred |
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to the institution under Section 54.765(c) when the unit or units |
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are redeemed as payment for all or the applicable portion of the |
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beneficiary's tuition and required fees. |
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(b) To pay for the entire cost of undergraduate resident |
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tuition and required fees for an academic year consisting of 30 |
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semester credit hours, redemption of 100 Type I tuition units is |
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required at the general academic teaching institution with the |
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highest tuition and fee cost as described by Section 54.753(d), |
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redemption of 100 Type II tuition units is required at a general |
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academic teaching institution with the applicable tuition and fee |
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cost at the weighted average as described by Subsection (e) of that |
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section, and redemption of 100 Type III units is required at a |
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two-year institution of higher education with the applicable |
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tuition and fee cost at the weighted average as described by |
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Subsection (f) of that section. The number of tuition units that |
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must be redeemed to pay for the entire cost of tuition and required |
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fees for an academic year at another general academic teaching |
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institution or two-year institution of higher education may be |
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higher or lower: |
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(1) in proportion to the amount that the cost of |
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tuition and required fees at that institution is higher or lower |
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than the amount determined for the institution with the highest |
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cost or weighted average cost, as applicable; or |
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(2) if a more or less valuable type of tuition unit is |
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redeemed. |
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(c) To assist purchasers in determining the number of |
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tuition units a beneficiary must redeem to cover the costs of |
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tuition and required fees at general academic teaching institutions |
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and two-year institutions of higher education, each year the board |
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shall prepare a tuition unit redemption chart and shall post the |
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chart on an Internet website. The chart must show for each general |
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academic teaching institution and for each two-year institution of |
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higher education the number of each type of units purchased that |
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year that would be required to cover the cost of tuition and |
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required fees, based on an academic year consisting of 30 semester |
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credit hours. |
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(d) If a beneficiary redeems fewer tuition units of the type |
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or combination of types necessary to pay the total cost of the |
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beneficiary's tuition and required fees at the general academic |
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teaching institution, two-year institution of higher education, |
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private or independent institution of higher education, or |
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accredited out-of-state institution of higher education at which |
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the beneficiary enrolls, the beneficiary is responsible for paying |
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the amount of the difference between the amount of tuition and |
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required fees for which the beneficiary pays through the redemption |
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of one or more tuition units and the total cost of the beneficiary's |
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tuition and required fees at the institution. |
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(e) If the beneficiary redeems fewer tuition units to pay |
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the cost of tuition and required fees than the number of units |
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purchased on behalf of the beneficiary under a prepaid tuition |
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contract, other than to defer redemption as permitted in accordance |
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with Section 54.758, the purchaser may: |
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(1) redeem for cash the amount of the purchase price of |
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the excess units, plus annual interest earned on that money, |
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accrued at a rate set by the board not to exceed five percent |
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annually; or |
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(2) transfer the remaining units to another |
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beneficiary in accordance with this subchapter. |
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(f) A beneficiary or purchaser may not redeem a tuition unit |
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earlier than the third anniversary of the date the unit was |
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purchased. |
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Sec. 54.755. PREPAID TUITION CONTRACT. (a) The board shall |
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adopt a form for a prepaid tuition contract to be used by the board |
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and purchasers. |
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(b) A prepaid tuition contract must: |
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(1) specify the terms under which the purchaser must |
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pay any amounts owed under the contract; |
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(2) specify the consequences of default; |
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(3) specify the name and date of birth of the |
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beneficiary under the contract and the terms under which another |
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person may be substituted as the beneficiary; |
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(4) specify the date the beneficiary is projected to |
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graduate from high school; and |
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(5) contain any other provisions the board considers |
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necessary or appropriate. |
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(c) A prepaid tuition contract may provide for the purchase |
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of additional tuition units in subsequent years at the then-current |
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price of the additional units. |
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Sec. 54.756. PURCHASER; BENEFICIARY. (a) A purchaser may |
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be any person who is permitted to be a purchaser under Section 529, |
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Internal Revenue Code of 1986. The purchaser is not required to be |
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a resident of this state, except as provided by Subsection (c)(2). |
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(b) In accordance with applicable provisions of Section |
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529, Internal Revenue Code of 1986, a purchaser is the owner of the |
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account to which the purchaser's prepaid tuition contract money is |
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assigned. |
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(c) At the time the purchaser enters into a prepaid tuition |
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contract, the beneficiary of the contract must be: |
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(1) a resident of this state at the time the purchaser |
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enters into the contract; or |
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(2) a nonresident who is the child of a parent who is a |
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resident of this state at the time that parent enters into the |
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contract. |
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(d) For purposes of Subsection (c), the board may require a |
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reasonable period of residence in this state for a beneficiary or |
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the parent of a beneficiary. |
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(e) Notwithstanding any provision of Subchapter B, the |
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tuition and required fees charged by a general academic teaching |
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institution or two-year institution of higher education that are |
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paid for with tuition units shall be determined as if the |
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beneficiary of that contract were a resident student. |
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Sec. 54.757. CONTRACT PAYMENT. (a) The board may provide |
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for the receipt of payment under prepaid tuition contracts in lump |
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sums or installment payments. If the board allows payments under a |
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contract to be made in installments over a period longer than one |
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year, the board must provide for a plan that permits those payments |
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to be made in single annual installments in addition to any other |
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permitted installment plans. |
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(b) A purchaser may make payments under a prepaid tuition |
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contract by an electronic funds transfer. |
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(c) An employee of this state or a political subdivision of |
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this state may make payments under a prepaid tuition contract by |
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payroll deductions made by the appropriate officer of the state or |
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political subdivision. The board shall implement procedures to |
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facilitate payments under this subsection. |
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(d) The board may impose a fee for a late payment under a |
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prepaid tuition contract. |
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Sec. 54.758. DEFERRED USE OF PREPAID CREDIT HOURS. (a) A |
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prepaid tuition contract must permit the beneficiary to elect to |
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pay from a source other than tuition units purchased under the |
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contract the beneficiary's tuition and required fees for some or |
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all of the tuition and required fees to which the beneficiary is |
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entitled to payment under the contract, and to defer to a subsequent |
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semester or other academic term the right to payment of the |
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beneficiary's tuition and required fees by using tuition units |
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remaining under the contract. |
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(b) This section does not affect the date on which a prepaid |
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tuition contract terminates under this subchapter and does not give |
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the beneficiary the right to a payment under the contract after |
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termination of the contract. |
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Sec. 54.759. CHANGE OF BENEFICIARY. (a) The purchaser of a |
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prepaid tuition contract may designate a different beneficiary in |
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place of the original beneficiary if the new beneficiary meets the |
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requirements of a beneficiary on the date the designation is |
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changed. The new beneficiary must meet the requirements of Section |
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529, Internal Revenue Code of 1986, to prevent the change of |
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beneficiary from being treated as a distribution under that law. |
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(b) The board may adjust the terms of the contract so that |
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the purchaser is required to pay the amount the purchaser would have |
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been required to pay had the purchaser originally designated the |
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new beneficiary as the beneficiary, taking into account any |
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payments made before the date the designation is changed. |
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(c) The board may not impose a fee in connection with the |
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designation of a new beneficiary. |
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(d) The purchaser of a prepaid tuition contract may not sell |
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the contract. |
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Sec. 54.760. VERIFICATION UNDER OATH. The board may |
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require a purchaser to verify under oath a request to: |
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(1) change a beneficiary; or |
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(2) terminate a contract. |
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Sec. 54.761. PROMISE OR GUARANTEE OF ADMISSION. This |
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subchapter is not a promise or guarantee that a beneficiary will be: |
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(1) admitted to any public or private institution of |
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higher education; |
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(2) admitted to a particular public or private |
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institution of higher education; |
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(3) allowed to continue enrollment at a public or |
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private institution of higher education; or |
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(4) graduated from a public or private institution of |
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higher education. |
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Sec. 54.762. CONTRACT TERMINATION. (a) A prepaid tuition |
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contract shall specify: |
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(1) the name of any person who may terminate the |
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contract; and |
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(2) the terms under which the contract may be |
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terminated. |
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(b) A prepaid tuition contract terminates on the 10th |
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anniversary of the date the beneficiary is projected to graduate |
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from high school, not counting time spent by the beneficiary as an |
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active duty member of the United States armed services. |
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Sec. 54.763. REFUND. (a) A prepaid tuition contract shall |
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specify: |
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(1) the name of the person entitled to any refund if |
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the contract is terminated; |
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(2) the terms under which a person is entitled to a |
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refund; and |
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(3) the method by which the amount of the refund is |
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computed. |
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(b) The person named in the contract is entitled to a refund |
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following termination of a prepaid tuition contract. |
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(c) The board shall determine the method by which the amount |
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of the refund is computed. |
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Sec. 54.764. FUND. (a) The Texas tomorrow fund II prepaid |
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tuition unit undergraduate education program fund is established as |
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a trust fund outside of the state treasury. |
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(b) The board shall: |
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(1) deposit in the fund money paid under prepaid |
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tuition contracts; and |
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(2) credit to the fund income earned on that money. |
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(c) The board shall provide for administering the assets of |
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the fund and establishing and administering the accounts of |
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purchasers under prepaid tuition contracts. |
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(d) The board shall provide for assigning payments to the |
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fund to separate accounts for purchasers and may provide for |
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assigning payments to other general accounts as otherwise |
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considered appropriate by the board. |
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(e) The board may provide for acquiring, holding, managing, |
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purchasing, selling, assigning, trading, transferring, or |
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disposing of any security, evidence of indebtedness, or other |
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investment in which the fund's assets may be invested. |
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Sec. 54.765. COMPTROLLER. (a) Except as provided by |
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Subsection (e), the comptroller is the custodian of the assets of |
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the fund. |
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(b) The comptroller shall pay money from the fund on a |
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warrant drawn by the comptroller supported only on a voucher signed |
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by the comptroller or the comptroller's authorized representative. |
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(c) When a beneficiary enrolls at a general academic |
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teaching institution or two-year institution of higher education, |
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on written authorization from the purchaser of the tuition unit or |
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units for that beneficiary, the comptroller shall transfer to the |
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institution an amount equal to the total purchase price of the |
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tuition unit or units the beneficiary redeems for the semester or |
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other academic term plus the portion of the total return on all |
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investment assets of the fund attributable to that amount. |
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(d) When a beneficiary enrolls at a private or independent |
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institution of higher education or accredited out-of-state |
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institution of higher education, on written authorization from the |
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purchaser of the tuition unit or units for that beneficiary, the |
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comptroller shall transfer to the institution the lesser of: |
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(1) an amount equal to the current cost of the tuition |
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and required fees that would be covered by redemption of the number |
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and type of tuition units the beneficiary is redeeming if the |
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beneficiary were redeeming the unit or units at a general academic |
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teaching institution or two-year institution of higher education as |
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follows: |
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(A) for a Type I unit, at the general academic |
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teaching institution that, in the sales year in which the unit was |
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purchased, had the highest tuition and required fee cost; |
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(B) for a Type II unit, at a general academic |
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teaching institution that, in the sales year in which the unit was |
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purchased, had tuition and required fee cost at the weighted |
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average; and |
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(C) for a Type III unit, at a two-year |
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institution of higher education that, in the sales year in which the |
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unit was purchased, had tuition and required fee cost at the |
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weighted average; or |
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(2) an amount equal to the total purchase price of the |
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tuition unit or units the beneficiary redeems for the semester or |
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other academic term plus the portion of the total return on assets |
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of the fund attributable to that amount. |
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(e) The comptroller annually shall provide to the board a |
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sworn statement of the amount of the fund's assets in the |
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comptroller's custody. |
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(f) The board may select one or more commercial banks, |
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depository trust companies, or other entities to serve as custodian |
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of all or part of the fund's assets. |
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Sec. 54.766. INVESTMENT OF FUND ASSETS. (a) The board |
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shall provide for investing the assets of the fund. In investing the |
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fund, the board has the same investment authority as that provided |
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by Section 11b, Article VII, Texas Constitution, or other law, to |
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the board of regents of The University of Texas System with respect |
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to the investment of the Permanent University Fund. |
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(b) The board shall contract with one or more private |
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professional investment managers to serve as plan manager and to |
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invest the assets of the fund on behalf of the board. In selecting a |
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manager, the board must: |
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(1) select a person who has served as a professional |
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investment manager for at least 10 years; |
|
(2) evaluate each person considered for the position |
|
based on the historical net returns of the person's professional |
|
investments and the consistency of the person's professional |
|
investment returns over a period of at least five years; and |
|
(3) comply with Section 54.704. |
|
(c) In monitoring the manager's investments, the board |
|
shall ensure that investments are made according to the standard of |
|
investment provided by this section. The plan manager has the same |
|
duties imposed on a plan manager by Section 54.705. |
|
(d) The board shall develop written objectives concerning |
|
the investment of the assets of the fund. The objectives may |
|
address desired rates of return, risks involved, investment time |
|
frames, and any other relevant considerations. |
|
(e) The board may specify in a contract under this section |
|
that the plan manager is required to establish and maintain an |
|
Internet website through which a purchaser may monitor the account |
|
to which the purchaser's prepaid tuition contract money is |
|
assigned. |
|
Sec. 54.767. USE OF FUND ASSETS. The assets of the fund may |
|
be used only to: |
|
(1) pay the costs of program administration and |
|
operations; |
|
(2) make payments to general academic teaching |
|
institutions, two-year institutions of higher education, private |
|
or independent institutions of higher education, and accredited |
|
out-of-state institutions of higher education on behalf of |
|
beneficiaries; and |
|
(3) make refunds under prepaid tuition contracts. |
|
Sec. 54.7671. TRANSFERS AMONG 529 PLANS. (a) The board by |
|
rule shall provide for a purchaser to transfer money between an |
|
account under this subchapter and an account under another plan |
|
established by this state or by another state or other authorized |
|
entity in accordance with Section 529, Internal Revenue Code of |
|
1986, to the extent and in the manner authorized by that section. |
|
(b) For purposes of a transfer of money from an account |
|
under this subchapter, the value of the account at the time of |
|
transfer is the lesser of: |
|
(1) an amount equal to the cost, at the time of the |
|
transfer, of the tuition and required fees that would be covered by |
|
redemption of the number and type of tuition units to be transferred |
|
from the account if the beneficiary were redeeming the units at a |
|
general academic teaching institution or two-year institution of |
|
higher education as follows: |
|
(A) for a Type I unit, at the general academic |
|
teaching institution that, in the sales year in which the unit was |
|
purchased, had the highest tuition and required fee cost; |
|
(B) for a Type II unit, at a general academic |
|
teaching institution that, in the sales year in which the unit was |
|
purchased, had tuition and required fee cost at the weighted |
|
average; and |
|
(C) for a Type III unit, at a two-year |
|
institution of higher education that, in the sales year in which the |
|
unit was purchased, had tuition and required fee cost at the |
|
weighted average; or |
|
(2) an amount equal to the total purchase price of the |
|
tuition units to be transferred from the account, plus the portion |
|
of the total return on assets of the fund attributable to that |
|
amount. |
|
Sec. 54.768. EXEMPTION FROM SECURITIES LAWS. The |
|
registration requirements of The Securities Act (Article 581-1 et |
|
seq., Vernon's Texas Civil Statutes) do not apply to the sale of a |
|
prepaid tuition contract by the board or by a registered securities |
|
dealer or registered investment adviser. |
|
Sec. 54.769. EXEMPTION FROM CREDITORS' CLAIMS. (a) Money |
|
in the fund is exempt from claims of creditors, including claims of |
|
creditors of a purchaser, a beneficiary, or a successor in interest |
|
of a purchaser or beneficiary. |
|
(b) The rights of a purchaser, beneficiary, or successor in |
|
interest of a purchaser or beneficiary in and under a prepaid |
|
tuition contract and the payment of tuition and required fees for a |
|
beneficiary under a prepaid tuition contract to a general academic |
|
teaching institution, two-year institution of higher education, |
|
private or independent institution of higher education, or |
|
accredited out-of-state institution of higher education under this |
|
chapter are exempt from attachment, levy, garnishment, execution, |
|
and seizure for the satisfaction of any debt, judgment, or claim |
|
against a purchaser, beneficiary, or successor in interest of a |
|
purchaser or beneficiary. |
|
(c) A claim or judgment against a purchaser, beneficiary, or |
|
successor in interest of a purchaser or beneficiary does not impair |
|
or entitle the claim or judgment holder to assert or enforce a lien |
|
against: |
|
(1) the rights of a purchaser, beneficiary, or |
|
successor in interest of a purchaser or beneficiary in and under a |
|
prepaid tuition contract; or |
|
(2) the right of a beneficiary to the payment of |
|
tuition and required fees to a general academic teaching |
|
institution, two-year institution of higher education, private or |
|
independent institution of higher education, or accredited |
|
out-of-state institution of higher education under a prepaid |
|
tuition contract. |
|
Sec. 54.770. ACTUARIAL SOUNDNESS OF FUND. (a) The board |
|
shall administer the fund in a manner that is sufficiently |
|
actuarially sound to pay the costs of program administration and |
|
operations and to meet the obligations of the program. |
|
(b) The board shall annually evaluate the actuarial |
|
soundness of the fund. |
|
(c) The board may adjust the terms of subsequent prepaid |
|
tuition contracts as necessary to ensure the actuarial soundness of |
|
the fund. |
|
Sec. 54.771. COMPLIANCE WITH LIMITS ON CONTRIBUTIONS AND |
|
WITHDRAWALS. The board shall monitor contributions to and |
|
withdrawals from the fund and any account within the fund to ensure |
|
that any applicable limits on contributions or withdrawals are not |
|
exceeded. |
|
Sec. 54.772. TAX EXEMPT STATUS REQUIREMENTS. (a) This |
|
section is intended to meet the requirements of Section 529, |
|
Internal Revenue Code of 1986. |
|
(b) A payment of an amount due to the fund for a prepaid |
|
tuition contract must be made in cash or cash equivalent. A person |
|
may not make a payment to the fund in excess of the amounts required |
|
to be paid under a prepaid tuition contract. |
|
(c) The board shall maintain a separate accounting for each |
|
beneficiary. |
|
(d) The purchaser under a prepaid tuition contract and the |
|
beneficiary under the contract may not: |
|
(1) control or direct the investment of payments under |
|
the contract or any earnings of the fund; or |
|
(2) use any interest in the contract as security for a |
|
loan or other obligation. |
|
(e) The board shall make reports required by the secretary |
|
of the United States Treasury. |
|
Sec. 54.773. SUSPENSION OF NEW ENROLLMENT; PROGRAM |
|
MODIFICATION OR TERMINATION. (a) On the request of the comptroller |
|
as the comptroller considers necessary to ensure the actuarial |
|
soundness of the fund, the board may temporarily suspend new |
|
enrollment in the program. |
|
(b) If the comptroller determines that the program is |
|
financially infeasible, the comptroller shall notify the governor |
|
and the legislature and recommend that the program be modified or |
|
terminated. |
|
Sec. 54.774. EFFECT OF PROGRAM TERMINATION ON CONTRACT. |
|
(a) A prepaid tuition contract remains in effect after the program |
|
is terminated if, when the program is terminated, the beneficiary: |
|
(1) has been accepted by or is enrolled at a general |
|
academic teaching institution, two-year institution of higher |
|
education, private or independent institution of higher education, |
|
or accredited out-of-state institution of higher education; or |
|
(2) is projected to graduate from high school not |
|
later than the third anniversary of the date the program is |
|
terminated. |
|
(b) A prepaid tuition contract terminates when the program |
|
is terminated if the contract does not remain in effect under |
|
Subsection (a). |
|
Sec. 54.775. CONFIDENTIALITY. (a) Records in the custody |
|
of the board relating to the participation of specific purchasers |
|
and beneficiaries in the program are confidential. |
|
(b) Notwithstanding Subsection (a), the board may release |
|
information described by that subsection to a general academic |
|
teaching institution, two-year institution of higher education, |
|
private or independent institution of higher education, or |
|
accredited out-of-state institution of higher education at which a |
|
beneficiary may enroll or is enrolled. The institution shall keep |
|
the information confidential. |
|
(c) Notwithstanding any other provision of this subchapter, |
|
the board may release information to the Internal Revenue Service |
|
and to any state tax agencies as required by applicable tax law. |
|
Sec. 54.776. STATEMENT REGARDING STATUS OF PREPAID TUITION |
|
CONTRACT. Not later than January 1 of each year, the board shall |
|
provide without charge to each purchaser a statement of: |
|
(1) the amount paid by the purchaser under the prepaid |
|
tuition contract; |
|
(2) the total number of each type of tuition unit |
|
covered by the contract at any one time; |
|
(3) the number of each type of tuition unit remaining |
|
under the contract; |
|
(4) the value of the purchasers' tuition units if |
|
redeemed at any general academic teaching institution or two-year |
|
institution of higher education designated for that year by the |
|
purchaser in the time and manner required by the board, not to |
|
exceed five institutions; and |
|
(5) any other information the board determines by rule |
|
is necessary or appropriate. |
|
Sec. 54.777. REPORTS. (a) Not later than December 1 of |
|
each year, the board shall submit to the governor, lieutenant |
|
governor, speaker of the house of representatives, Legislative |
|
Budget Board, Legislative Audit Committee, state auditor, and Texas |
|
Higher Education Coordinating Board a report including: |
|
(1) the fiscal transactions of the board and the plan |
|
manager under this subchapter during the preceding fiscal year; |
|
(2) the market and book value of the fund as of the end |
|
of the preceding fiscal year; |
|
(3) the asset allocations of the fund expressed in |
|
percentages of stocks, fixed income, cash, or other financial |
|
investments; |
|
(4) the rate of return on the investment of the fund's |
|
assets during the preceding fiscal year; and |
|
(5) an actuarial valuation of the assets and |
|
liabilities of the program, including the extent to which the |
|
program's liabilities are unfunded. |
|
(b) The board shall make the report described by Subsection |
|
(a) available to purchasers of prepaid tuition contracts. |
|
(c) Not later than December 1 of each year, the board shall |
|
provide to the coordinating board complete prepaid tuition contract |
|
sales information, including projected enrollments of |
|
beneficiaries at general academic teaching institutions and |
|
two-year institutions of higher education. |
|
Sec. 54.778. AUDIT. The fiscal transactions of the board |
|
under this subchapter, including the administration of the fund, |
|
are subject to audit by the state auditor in accordance with Chapter |
|
321, Government Code. |
|
SECTION 2. Beginning September 1, 2008, the Prepaid Higher |
|
Education Tuition Board may enter into prepaid tuition contracts |
|
with purchasers and begin selling tuition units under those |
|
contracts in accordance with Subchapter H, Chapter 54, Education |
|
Code, as added by this Act. |
|
SECTION 3. This Act takes effect immediately if it receives |
|
a vote of two-thirds of all the members elected to each house, as |
|
provided by Section 39, Article III, Texas Constitution. If this |
|
Act does not receive the vote necessary for immediate effect, this |
|
Act takes effect September 1, 2007. |