H.B. No. 3900
 
 
 
 
AN ACT
  relating to the Texas tomorrow fund II prepaid tuition unit
  undergraduate education program.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Chapter 54, Education Code, is amended by adding
  Subchapter H to read as follows:
  SUBCHAPTER H. PREPAID TUITION UNIT UNDERGRADUATE EDUCATION
  PROGRAM:  TEXAS TOMORROW FUND II
         Sec. 54.751.  DEFINITIONS. In this subchapter:
               (1)  "Accredited out-of-state institution of higher
  education" means a public or private institution of higher
  education that:
                     (A)  is located outside this state; and
                     (B)  is accredited by a recognized accrediting
  agency.
               (2)  "Beneficiary" means the person designated under a
  prepaid tuition contract as the person entitled to apply one or more
  tuition units purchased under the contract to the payment of the
  person's undergraduate tuition and required fees 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.
               (3)  "Board" means the Prepaid Higher Education Tuition
  Board.
               (4)  "Fund" means the Texas tomorrow fund II.
               (5)  "General academic teaching institution" has the
  meaning assigned by Section 61.003, except that the term does not
  include a public state college.
               (6)  "Prepaid tuition contract" means a contract under
  which a person purchases from the board on behalf of a beneficiary
  one or more tuition units that the beneficiary is entitled to apply
  to the payment of the beneficiary's undergraduate tuition and
  required fees 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.
               (7)  "Private or independent institution of higher
  education," "public junior college," "public state college,"
  "public technical institute," and "recognized accrediting agency" 
  have the meanings assigned by Section 61.003.
               (8)  "Program" means the prepaid tuition unit
  undergraduate education program.
               (9)  "Purchaser" means a person who enters into a
  prepaid tuition contract with the board on behalf of a beneficiary
  for the purchase of one or more tuition units.
               (10)  "Required fee" means a fee, other than a
  laboratory fee for a specific course, that is charged by a public or
  private institution of higher education to all students at the
  institution who are not exempt from the fee. For purposes of this
  subdivision, a fee is a required fee only to the extent that the fee
  is considered a qualified higher education expense under Internal
  Revenue Code provisions applicable to the program.
               (11)  "Two-year institution of higher education" means
  a public junior college, a public state college, and a public
  technical institute.
         Sec. 54.752.  POWERS AND DUTIES OF BOARD CONCERNING PROGRAM.
  (a) In addition to carrying out duties assigned under Subchapters F
  and G, the Prepaid Higher Education Tuition Board shall administer
  the prepaid tuition unit undergraduate education program
  established under this subchapter. The board shall comply with
  federal and state law related to the program.
         (b)  In addition to the board's powers assigned under
  Subchapters F and G, the board has the powers necessary or proper to
  carry out this subchapter, including the power to:
               (1)  adopt rules to implement this subchapter;
               (2)  sue and be sued;
               (3)  enter into contracts and other necessary
  instruments;
               (4)  enter into agreements or other transactions with
  the United States, state agencies, general academic teaching
  institutions, two-year institutions of higher education, and local
  governments;
               (5)  appear on its own behalf before governmental
  agencies;
               (6)  contract for necessary goods and services,
  including specifying in the contract duties to be performed by the
  provider of a good or service that are a part of or are in addition
  to the person's primary duties under the contract;
               (7)  engage the services of private consultants,
  actuaries, trustees, records administrators, managers, legal
  counsel, and auditors for administrative or technical assistance;
               (8)  solicit and accept gifts, grants, loans, and other
  aid from any source or participate in any other way in any
  government program to carry out this subchapter;
               (9)  impose administrative fees;
               (10)  contract with a person to market the program;
               (11)  purchase liability insurance covering the board
  and employees and agents of the board; and
               (12)  establish other policies, procedures, and
  eligibility criteria to implement this subchapter.
         (c)  In marketing the program, regardless of whether the
  board markets the program directly or under contract as authorized
  by Subsection (b)(10), the board, in coordination with the Health
  and Human Services Commission, the Texas Workforce Commission, and
  the Texas Higher Education Coordinating Board, shall ensure that:
               (1)  the program is marketed across the state in a
  manner that promotes the participation goals and targets of the
  most recent revision of "Closing the Gaps," the state's master plan
  for higher education; and
               (2)  any marketing plan for the program includes a
  specific strategy to promote enrollment in the program by persons
  likely to qualify for federal earned income tax credits.
         Sec. 54.7521.  TEXAS SAVE AND MATCH PROGRAM. The board by
  rule shall develop and shall implement the Texas Save and Match
  program under which money paid by a purchaser under a prepaid
  tuition contract may be matched with:
               (1)  contributions made by any person to the Texas Save
  and Match program and used to purchase additional tuition units on
  behalf of beneficiaries selected as provided by board rule; and
               (2)  money appropriated by the legislature for the
  Texas Save and Match program and used to purchase additional
  tuition units on behalf of beneficiaries:
                     (A)  whose annual household income is below the
  state median family income, adjusted for household size;
                     (B)  whose enrollment in the program would, as
  determined by the board, promote the participation goals and
  targets of the most recent revision of "Closing the Gaps," the
  state's master plan for higher education; or
                     (C)  who meet other criteria established by board
  rule.
         Sec. 54.753.  PREPAID TUITION UNITS: PURCHASE; ASSIGNED
  VALUE; TYPES; PRICE. (a) Under the program, a purchaser may prepay
  the costs of all or a portion of a beneficiary's undergraduate
  tuition and required fees 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 by entering into a
  prepaid tuition contract with the board to purchase one or more
  tuition units of a type described by this section at the applicable
  price established by the board for that type of unit for the year in
  which the unit is purchased. The portion of the beneficiary's
  undergraduate tuition and required fees for which a tuition unit
  may be redeemed at a particular general academic teaching
  institution or two-year institution of higher education is assigned
  to the tuition unit at the time of purchase, and the tuition unit
  may be redeemed to pay that portion of the tuition and fees at the
  general academic teaching institution or two-year institution of
  higher education in any academic year in which the unit is redeemed
  in accordance with this subchapter.  The purchaser may purchase one
  type of unit or a combination of two or three types of units.
         (b)  The assigned value of a tuition unit, purchased as
  provided by this section, when used to pay the cost of tuition and
  required fees at a general academic teaching institution or
  two-year institution of higher education, is equal to one percent
  of the amount necessary for the academic year in which the unit is
  redeemed to cover the applicable cost of undergraduate resident
  tuition and required fees for one academic year consisting of 30
  semester credit hours as follows:
               (1)  for a Type I tuition unit, the cost of
  undergraduate resident tuition and required fees charged by the
  general academic teaching institution with the highest such tuition
  and fee costs, determined as provided by Subsection (d);
               (2)  for a Type II tuition unit, the weighted average
  undergraduate resident tuition and required fees charged by general
  academic teaching institutions, determined as provided by
  Subsection (e); and
               (3)  for a Type III tuition unit, the weighted average
  undergraduate resident tuition and required fees of two-year
  institutions of higher education, determined as provided by
  Subsection (f).
         (c)  Each year, the board shall establish the price at which
  each type of tuition unit may be purchased during the next sales
  period and the percentage of the total cost of undergraduate
  resident tuition and required fees for one academic year consisting
  of 30 semester credit hours for which each type of tuition unit may
  be redeemed at each general academic teaching institution and
  two-year institution.  The percentage shall be based on the total
  cost of required tuition and fees at a particular general academic
  teaching institution or two-year institution of higher education in
  relation to the amount determined for the institution with the
  highest cost or weighted average cost, as applicable. The purchase
  price established for each type of unit must be equal to the
  applicable cost of tuition and required fees as determined under
  this section for the most recent academic year that began before the
  beginning of the sales period. The sales period to which those
  prices apply expires on the first anniversary of the date the units
  become available for purchase at the prices established for that
  year.
         (d)  The board shall base the purchase price of a Type I
  tuition unit on one percent of the cost of the undergraduate
  resident tuition and required fees for the applicable academic year
  at the general academic teaching institution with the highest such
  tuition and fee cost for that academic year.
         (e)  The board shall base the purchase price of a Type II
  tuition unit on one percent of the cost of the weighted average
  general academic teaching institution undergraduate resident
  tuition and required fees for the applicable academic year. That
  cost is determined by:
               (1)  for each general academic teaching institution,
  multiplying the average amount of the institution's undergraduate
  resident tuition and required fees for an academic year consisting
  of 30 semester credit hours by the number of full-time equivalent
  undergraduate resident students at that institution;
               (2)  adding together the products computed under
  Subdivision (1) for each institution; and
               (3)  dividing the sum determined under Subdivision (2)
  by the total number of full-time equivalent undergraduate resident
  students at all general academic teaching institutions.
         (f)  The board shall base the purchase price of a Type III
  tuition unit on one percent of the cost of the weighted average
  two-year institution of higher education undergraduate resident
  tuition and required fees for the applicable academic year,
  disregarding any portion of the tuition charged by a public junior
  college to a resident of this state who does not reside within the
  taxing jurisdiction of the junior college. That cost is determined
  by:
               (1)  for each two-year institution of higher education,
  multiplying the average amount of the institution's undergraduate
  resident tuition and required fees for an academic year consisting
  of 30 semester credit hours by the number of full-time equivalent
  undergraduate resident students at that institution;
               (2)  adding together the products computed under
  Subdivision (1) for each institution; and
               (3)  dividing the sum determined under Subdivision (2)
  by the total number of full-time equivalent undergraduate resident
  students at all two-year institutions of higher education.
         (g)  The total amount paid under a prepaid tuition contract
  on behalf of a single beneficiary may not exceed any limit
  established on the amount by Section 529, Internal Revenue Code of
  1986. The board shall establish, in compliance with Section 529,
  Internal Revenue Code of 1986, the minimum amount that the
  purchaser is required to pay under the contract on behalf of a
  single beneficiary.
         (h)  At the time of the establishment of the account to which
  a purchaser's prepaid tuition contract money is assigned, the board
  may impose an administrative fee not to exceed $25.  Money from that
  fee must be used directly in maintaining the actuarial soundness of
  the fund as required by Section 54.770.  The board may not impose
  any other fee or charge in connection with the sale of a tuition
  unit.
         Sec. 54.754.  REDEMPTION OF TUITION UNITS. (a) In
  accordance with this subchapter, when a beneficiary under a prepaid
  tuition contract redeems one or more tuition units to pay costs of
  tuition and required fees, the board shall apply money in the fund,
  in the amount provided by Section 54.765 to pay all or the
  applicable portion of the costs of the beneficiary's tuition and
  required fees at the 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 in which the beneficiary enrolls.
  Subject to Subsection (b)(2) and the other provisions of this
  section, a beneficiary may redeem any type of tuition unit for
  attendance at an institution described by this section.  A general
  academic teaching institution or two-year institution of higher
  education shall accept the amount transferred to the institution
  under Section 54.765(c) when the unit or units are redeemed as
  payment for all or the applicable portion of the beneficiary's
  tuition and required fees.
         (b)  To pay for the entire cost of undergraduate resident
  tuition and required fees for an academic year consisting of 30
  semester credit hours, redemption of 100 Type I tuition units is
  required at the general academic teaching institution with the
  highest tuition and fee cost as described by Section 54.753(d),
  redemption of 100 Type II tuition units is required at a general
  academic teaching institution with the applicable tuition and fee
  cost at the weighted average as described by Subsection (e) of that
  section, and redemption of 100 Type III units is required at a
  two-year institution of higher education with the applicable
  tuition and fee cost at the weighted average as described by
  Subsection (f) of that section. The number of tuition units that
  must be redeemed to pay for the entire cost of tuition and required
  fees for an academic year at another general academic teaching
  institution or two-year institution of higher education may be
  higher or lower:
               (1)  in proportion to the amount that the cost of
  tuition and required fees at that institution is higher or lower
  than the amount determined for the institution with the highest
  cost or weighted average cost, as applicable; or
               (2)  if a more or less valuable type of tuition unit is
  redeemed.
         (c)  To assist purchasers in determining the number of
  tuition units a beneficiary must redeem to cover the costs of
  tuition and required fees at general academic teaching institutions
  and two-year institutions of higher education, each year the board
  shall prepare a tuition unit redemption chart and shall post the
  chart on an Internet website. The chart must show for each general
  academic teaching institution and for each two-year institution of
  higher education the number of each type of units purchased that
  year that would be required to cover the cost of tuition and
  required fees, based on an academic year consisting of 30 semester
  credit hours.
         (d)  If a beneficiary redeems fewer tuition units of the type
  or combination of types necessary to pay the total cost of the
  beneficiary's tuition and required fees at the 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
  the beneficiary enrolls, the beneficiary is responsible for paying
  the amount of the difference between the amount of tuition and
  required fees for which the beneficiary pays through the redemption
  of one or more tuition units and the total cost of the beneficiary's
  tuition and required fees at the institution.
         (d-1)  A beneficiary who redeems one or more Type III tuition
  units to attend a public junior college and who does not reside
  within the taxing jurisdiction of the junior college is responsible
  for paying any portion of the tuition charged by the junior college
  to persons who do not reside within that taxing jurisdiction.
         (e)  If the beneficiary redeems fewer tuition units to pay
  the cost of tuition and required fees than the number of units
  purchased on behalf of the beneficiary under a prepaid tuition
  contract, other than to defer redemption as permitted in accordance
  with Section 54.758, the purchaser may:
               (1)  redeem for cash the amount of the purchase price of
  the excess units, plus annual interest earned on that money,
  accrued at a rate set by the board not to exceed five percent
  annually; or
               (2)  transfer the remaining units to another
  beneficiary in accordance with this subchapter.
         (f)  A beneficiary or purchaser may not redeem a tuition unit
  earlier than the third anniversary of the date the unit was
  purchased.
         Sec. 54.755.  PREPAID TUITION CONTRACT.  (a)  The board shall
  adopt a form for a prepaid tuition contract to be used by the board
  and purchasers.
         (b)  A prepaid tuition contract must:
               (1)  specify the terms under which the purchaser must
  pay any amounts owed under the contract;
               (2)  specify the consequences of default;
               (3)  specify the name and date of birth of the
  beneficiary under the contract and the terms under which another
  person may be substituted as the beneficiary;
               (4)  specify the date the beneficiary is projected to
  graduate from high school; and
               (5)  contain any other provisions the board considers
  necessary or appropriate.
         (c)  A prepaid tuition contract may provide for the purchase
  of additional tuition units in subsequent years at the then-current
  price of the additional units.
         Sec. 54.756.  PURCHASER; BENEFICIARY.  (a)  A purchaser may
  be any person who is permitted to be a purchaser under Section 529,
  Internal Revenue Code of 1986.  The purchaser is not required to be
  a resident of this state, except as provided by Subsection (c)(2).
         (b)  In accordance with applicable provisions of Section
  529, Internal Revenue Code of 1986, a purchaser is the owner of the
  account to which the purchaser's prepaid tuition contract money is
  assigned.
         (c)  At the time the purchaser enters into a prepaid tuition
  contract, the beneficiary of the contract must be:
               (1)  a resident of this state at the time the purchaser
  enters into the contract; or
               (2)  a nonresident who is the child of a parent who is a
  resident of this state at the time that parent enters into the
  contract.
         (d)  For purposes of Subsection (c), the board may require a
  reasonable period of residence in this state for a beneficiary or
  the parent of a beneficiary.
         (e)  Notwithstanding any provision of Subchapter B, the
  tuition and required fees charged by a general academic teaching
  institution or two-year institution of higher education that are
  paid for with tuition units shall be determined as if the
  beneficiary of that contract were a resident student.
         Sec. 54.757.  CONTRACT PAYMENT. (a) The board may provide
  for the receipt of payment under prepaid tuition contracts in lump
  sums or installment payments. If the board allows payments under a
  contract to be made in installments over a period longer than one
  year, the board must provide for a plan that permits those payments
  to be made in single annual installments in addition to any other
  permitted installment plans.
         (b)  A purchaser may make payments under a prepaid tuition
  contract by an electronic funds transfer.
         (c)  An employee of this state or a political subdivision of
  this state may make payments under a prepaid tuition contract by
  payroll deductions made by the appropriate officer of the state or
  political subdivision.  The board shall implement procedures to
  facilitate payments under this subsection.
         (d)  The board may impose a fee for a late payment under a
  prepaid tuition contract.
         Sec. 54.758.  DEFERRED USE OF PREPAID CREDIT HOURS. (a)  A
  prepaid tuition contract must permit the beneficiary to elect to
  pay from a source other than tuition units purchased under the
  contract the beneficiary's tuition and required fees for some or
  all of the tuition and required fees to which the beneficiary is
  entitled to payment under the contract, and to defer to a subsequent
  semester or other academic term the right to payment of the
  beneficiary's tuition and required fees by using tuition units
  remaining under the contract.
         (b)  This section does not affect the date on which a prepaid
  tuition contract terminates under this subchapter and does not give
  the beneficiary the right to a payment under the contract after
  termination of the contract.
         Sec. 54.759.  CHANGE OF BENEFICIARY. (a)  The purchaser of a
  prepaid tuition contract may designate a different beneficiary in
  place of the original beneficiary if the new beneficiary meets the
  requirements of a beneficiary on the date the designation is
  changed. The new beneficiary must meet the requirements of Section
  529, Internal Revenue Code of 1986, to prevent the change of
  beneficiary from being treated as a distribution under that law.
         (b)  The board may adjust the terms of the contract so that
  the purchaser is required to pay the amount the purchaser would have
  been required to pay had the purchaser originally designated the
  new beneficiary as the beneficiary, taking into account any
  payments made before the date the designation is changed.
         (c)  The board may not impose a fee in connection with the
  designation of a new beneficiary.
         (d)  The purchaser of a prepaid tuition contract may not sell
  the contract.
         Sec. 54.760.  VERIFICATION UNDER OATH. The board may
  require a purchaser to verify under oath a request to:
               (1)  change a beneficiary; or
               (2)  terminate a contract.
         Sec. 54.761.  PROMISE OR GUARANTEE OF ADMISSION. This
  subchapter is not a promise or guarantee that a beneficiary will be:
               (1)  admitted to any public or private institution of
  higher education;
               (2)  admitted to a particular public or private
  institution of higher education;
               (3)  allowed to continue enrollment at a public or
  private institution of higher education; or
               (4)  graduated from a public or private institution of
  higher education.
         Sec. 54.762.  CONTRACT TERMINATION. (a)  A prepaid tuition
  contract shall specify:
               (1)  the name of any person who may terminate the
  contract; and
               (2)  the terms under which the contract may be
  terminated.
         (b)  A prepaid tuition contract terminates on the 10th
  anniversary of the date the beneficiary is projected to graduate
  from high school, not counting time spent by the beneficiary as an
  active duty member of the United States armed services.
         Sec. 54.763.  REFUND. (a)  A prepaid tuition contract shall
  specify:
               (1)  the name of the person entitled to any refund if
  the contract is terminated;
               (2)  the terms under which a person is entitled to a
  refund; and
               (3)  the method by which the amount of the refund is
  computed.
         (b)  The person named in the contract is entitled to a refund
  following termination of a prepaid tuition contract.
         (c)  The board shall determine the method by which the amount
  of the refund is computed.
         Sec. 54.764.  FUND. (a)  The Texas tomorrow fund II prepaid
  tuition unit undergraduate education program fund is established as
  a trust fund outside of the state treasury.
         (b)  The board shall:
               (1)  deposit in the fund money paid under prepaid
  tuition contracts; and
               (2)  credit to the fund income earned on that money.
         (c)  The board shall provide for administering the assets of
  the fund and establishing and administering the accounts of
  purchasers under prepaid tuition contracts.
         (d)  The board shall provide for assigning payments to the
  fund to separate accounts for purchasers and may provide for
  assigning payments to other general accounts as otherwise
  considered appropriate by the board.
         (e)  The board may provide for acquiring, holding, managing,
  purchasing, selling, assigning, trading, transferring, or
  disposing of any security, evidence of indebtedness, or other
  investment in which the fund's assets may be invested.
         Sec. 54.765.  COMPTROLLER'S DUTIES; TRANSFERS TO
  INSTITUTIONS ON REDEMPTION OF TUITION UNITS. (a)  Except as
  provided by Subsection (e), the comptroller is the custodian of the
  assets of the fund.
         (b)  The comptroller shall pay money from the fund on a
  warrant drawn by the comptroller supported only on a voucher signed
  by the comptroller or the comptroller's authorized representative.
         (c)  When a beneficiary enrolls at a general academic
  teaching institution or two-year institution of higher education,
  on written authorization from the purchaser of the tuition unit or
  units for that beneficiary, the comptroller shall transfer to the
  institution an amount equal to the lesser of:
               (1)  the sum of:
                     (A)  the total purchase price of the tuition unit
  or units the beneficiary redeems for the semester or other academic
  term;  and
                     (B)  the amount determined under Subsection (d);
  or
               (2)  an amount equal to 101 percent of the amount of
  tuition and required fees covered by the tuition units being
  redeemed.
         (d)  The amount required to be transferred under Subsection
  (c)(1)(B) is the greater of:
               (1)  an amount equal to the portion of the actual total
  return on all investment assets of the fund attributable to the
  amount transferred under Subsection (c)(1)(A); or
               (2)  an amount equal to the portion of the total return
  on all investment assets of the fund attributable to the amount
  transferred under Subsection (c)(1)(A) that would result assuming
  an annual return on all investment assets of the fund of five
  percent, subject to the availability of money in the fund for that
  purpose.
         (e)  If the amount that would otherwise be transferred under
  Subsections (c)(1)(A) and (B) exceeds the amount that may be
  transferred under Subsection (c)(2), the excess amount shall be
  retained in the fund and used as necessary to provide sufficient
  money to meet the minimum transfer requirements under Subsection
  (c)(1)(B) as specified by Subsection (d).
         (f)  When a beneficiary enrolls at a private or independent
  institution of higher education or accredited out-of-state
  institution of higher education, on written authorization from the
  purchaser of the tuition unit or units for that beneficiary, the
  comptroller shall transfer to the institution the lesser of:
               (1)  an amount equal to the current cost of the tuition
  and required fees that would be covered by redemption of the number
  and type of tuition units the beneficiary is redeeming if the
  beneficiary were redeeming the unit or 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 unit or units the beneficiary redeems for the semester or
  other academic term plus the portion of the total return on assets
  of the fund attributable to that amount.
         (g)  The comptroller annually shall provide to the board a
  sworn statement of the amount of the fund's assets in the
  comptroller's custody.
         (h)  The board may select one or more commercial banks,
  depository trust companies, or other entities to serve as custodian
  of all or part of the fund's assets.
         Sec. 54.766.  INVESTMENT OF FUND ASSETS. (a)  The board
  shall provide for investing the assets of the fund. In investing the
  fund, the board has the same investment authority as that provided
  by Section 11b, Article VII, Texas Constitution, or other law, to
  the board of regents of The University of Texas System with respect
  to the investment of the Permanent University Fund.  The board and
  the board of regents of The University of Texas System may contract
  for the board of regents to manage and invest the assets of the
  fund, and for that purpose the board may delegate its duties under
  this section to the board of regents.
         (b)  If the board does not contract with the board of regents
  of The University of Texas System under Subsection (a) to manage and
  invest the assets of the fund, the board shall contract with one or
  more private professional investment managers to serve as plan
  manager and to invest the assets of the fund on behalf of the board.
  In selecting a manager, the board must:
               (1)  select a person who has served as a professional
  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 fund and the operations of the
  board 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.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 3900 was passed by the House on May 1,
  2007, by the following vote:  Yeas 145, Nays 0, 1 present, not
  voting; and that the House concurred in Senate amendments to H.B.
  No. 3900 on May 21, 2007, by the following vote:  Yeas 141, Nays 0,
  2 present, not voting.
 
  ______________________________
  Chief Clerk of the House   
 
         I certify that H.B. No. 3900 was passed by the Senate, with
  amendments, on May 17, 2007, by the following vote:  Yeas 31, Nays
  0.
 
  ______________________________
  Secretary of the Senate   
  APPROVED: __________________
                  Date       
   
           __________________
                Governor