By: Watson S.B. No. 1760

A BILL TO BE ENTITLED

AN ACT

relating to the Prepaid Tuition Unit Undergraduate Education Program, Higher Education Savings Plans, the Texas Save & Match Program and the treatment of a beneficiary's assets under the plans in determining eligibility for student financial assistance and other programs.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter H, Education Code, is amended to read as follows:

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) "Matching account" means an account in the Texas Save & Match Program established under this section.

(7) "Participating beneficiary" means a beneficiary for whom a matching account has been opened under this section.

(8) [(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.

(9) [(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.

(10) [(8)] "Program" means the prepaid tuition unit undergraduate education program.

(11) [(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.

(12) [(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.

(13) [(11)] "Two-year institution of higher education" means a public junior college, a public state college, and a public technical institute.

SECTION 2. Section 54.7521, Education Code, is amended to read as follows:

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 or higher education savings plan, applicable to plans and programs under Subchapters F, G, and H of this section, may be matched with:

(1) contributions made by any person to the Texas Save and Match program and used to purchase additional tuition units or savings plan contributions 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 or savings plan contributions on behalf of beneficiaries:

(A) whose annual household income is below 400% of the Federal Poverty Level [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.

SECTION 3. Subchapter H, Education Code, is amended by adding Sections 54.7522, 54.7523, 54.7524, and 54.7525 as follows:

Sec. 54.7522. SAVE & MATCH PROGRAM RATIOS. For those beneficiaries deemed eligible under Section 75.7521 of this subchapter, the board shall develop a variable formula to match purchases based upon annual household income. Depending on availability of funds, for each eligible dollar contributed to the prepaid tuition unit contract account or higher education savings plan, the board shall match these contributions using the following guidelines:

(1) $2, if the beneficiary's household adjusted income for the most recently completed tax year is less than or equal to 200 percent of the federal poverty level;

(2) $1, if the beneficiary's household adjusted income for the most recently completed tax year is more than 200 percent of the federal poverty level but not more than 300 percent of the federal poverty level; or

(3) 50 cents, if the beneficiary's household adjusted income for the most recently completed tax year is more than 300 percent of the federal poverty level but not more than 400 percent of the federal poverty level.

Sec. 54.7523 ADMINISTRATION OF MATCH ACCOUNT

(1) Contributions made to the beneficiary's savings trust account or prepaid tuition contract are matched with grant funds to the beneficiary's matching account as provided by this section.

(2) A matching account opened on behalf of a beneficiary under this section must be accounted separately from the beneficiary's traditional prepaid tuition unit balance or savings trust account balance.

(3) To the extent possible, assets in match accounts shall be expended prior to redemption of tuition units or qualified withdrawal from the beneficiary's primary account.

(4) Information relating to the beneficiary of a matching account established on behalf of the beneficiary under Section 54.717, including any personally identifiable information about the beneficiary, is confidential and is not subject to disclosure under Chapter 552, Government Code.

(5) The board shall, to the extent possible, provide the matching account balance with the periodic account statement for each beneficiary participating in the program established under Section 54.7521.

Sec. 54.7524 LIMITS ON PARTICIPATION

(a) To be initially eligible to participate in the program, a beneficiary, at the time a savings trust account is opened on the beneficiary's behalf, must:

(1) be:

(A) a resident of this state; or

(B) a dependent for purposes of Section 152, Internal Revenue Code of 1986, of a resident described by Paragraph (A);

(2) be younger than seven years of age; and

(3) have a household adjusted gross income, for the most recently completed tax year, that is not more than 400 percent of the federal poverty level.

(b) To determine whether a beneficiary is initially eligible to participate in the program, the board shall solicit from the individual who purchases tuition units or opens a savings trust account on the beneficiary's behalf under this subchapter, at the time the individual enters into a savings trust agreement with the board and in the manner prescribed by board rule, information necessary to determine the beneficiary's eligibility.

(c) An eligible beneficiary may participate in the program for a time period not to exceed five years if the beneficiary continues to meet the eligibility criteria prescribed by Subsection (d). The five-year period can be either consecutive or non-consecutive. The board shall prescribe procedures for verifying a participating beneficiary's annual and continual eligibility under this section.

(d) A participating beneficiary may receive a matching grant to the beneficiary's matching account in any particular calendar year only if at least $100 is contributed to the beneficiary's savings trust account during that year. Contributions to a beneficiary's savings trust account or prepaid tuition contract account in excess of $500 in any calendar year are not eligible for a matching grant to the beneficiary's matching account.

(e) Any funds in a matching account that are not withdrawn by the beneficiary's 30th birthday are forfeited and shall be returned to the pool of matching funds maintained by the direct-support organization established to operate this section.

Sec. 54.7525 DEMONSTRATIONS To fulfill the intent of the Texas Save & Match Program established under Section 54.7521, the Board may establish pilot projects under the program in an effort to incentivize participation in the plan, including projects that encourage participation by:

(a) awarding additional matching grants based on a beneficiary's achievement of specified academic goals;

(b) offering additional seed matching grants on the opening of a savings trust account; and

(c) providing incentives for employers to contribute matching funds to the program.

SECTION 4. Subchapter H, Chapter 54, Education Code, is amended by adding Sections 54.761 to read as follows

Sec. 54.761. EFFECT OF ACCOUNT BALANCE ON BENEFICIARY'S ELIGIBILITY FOR STUDENT FINANCIAL ASSISTANCE. Money in a beneficiary's savings trust account or matching account may not be considered as available to the beneficiary, or otherwise included in the beneficiary's household income or financial resources, for purposes of determining the beneficiary's eligibility for a TEXAS grant or any other state-funded student financial assistance.

SECTION 5. Subchapter H, Education Code, is amended by adding Section 54.762 as follows:

Sec. 54.762. REMITTANCE OF ACTUARIAL SOUNDNESS (OR ENROLLMENT) FEE FOR CERTAIN INDIVIDUALS. For beneficiaries deemed eligible under Section 54.7521, the board may waive the amount of any enrollment fee charged by the board for a new account under this subchapter only for a beneficiary whose household adjusted gross income for the most recently completed tax year is not more than 200 percent of the federal poverty level. If waived for any beneficiary, the actuarial soundness fee must be remitted to the plan fund through funds collected or appropriated to operate the program.

SECTION 6. Subchapter C, Chapter 62, Health and Safety Code, is amended by adding Section 62.1012 to read as follows:

Sec. 62.1012. EXCLUSION OF ASSETS IN PREPAID TUITION UNIT UNDERGRADUATE EDUCATION PROGRAMS AND HIGHER EDUCATION SAVINGS PLANS. For purposes of determining whether a child meets family income and resource requirements for eligibility for the child health plan, the commission may not consider as income or resources a right to assets held in or a right to receive payments or benefits under any fund or plan established under Subchapters F, G and H, Chapter 54, Education Code, including an interest in a savings trust account, prepaid tuition contract account, or related matching account.

SECTION 7. Subchapter A, Chapter 31, Human Resources Code, is amended by adding Section 31.0039 to read as follows:

Sec. 31.0039. EXCLUSION OF ASSETS IN PREPAID TUITION UNIT UNDERGRADUATE EDUCATION PROGRAMS AND HIGHER EDUCATION SAVINGS PLANS. For purposes of determining the amount of financial assistance granted to an individual under this chapter for the support of dependent children or determining whether the family meets household income and resource requirements for financial assistance under this chapter, the department may not consider the right to assets held in or the right to receive payments or benefits under any fund or plan established under Subchapters F, G and H, Chapter 54, Education Code, including an interest in a savings trust account, prepaid tuition unit contract account, or related matching account.

SECTION 8. Subchapter B, Chapter 32, Human Resources Code, is amended by adding Section 32.02611 to read as follows:

Sec. 32.02611. EXCLUSION OF ASSETS IN PREPAID TUITION UNIT UNDERGRADUATE EDUCATION PROGRAMS AND HIGHER EDUCATION SAVINGS PLANS. In determining eligibility and need for medical assistance, the department may not consider as assets or resources a right to assets held in or a right to receive payments or benefits under any fund or plan established under Subchapters G and H, Chapter 54, Education Code, including an interest in a savings trust account, prepaid tuition contract account, or related matching account.

SECTION 9. The Prepaid Higher Education Tuition Board shall adopt rules as required by Section 54.752, Education Code, as added by this Act, not later than November 1, 2009.

SECTION 10. The changes in law made by this Act to Subchapter H, Chapter 54, Education Code, apply to a prepaid tuition unit undergraduate contract account opened for a beneficiary under Subchapter H, Chapter 54, Education Code, on or after January 1, 2010.

SECTION 11. If before implementing any provision of this Act a state agency determines that a waiver or authorization from a federal agency is necessary for implementation of that provision, the agency affected by the provision shall request the waiver or authorization and may delay implementing that provision until the waiver or authorization is granted.

SECTION 12. The changes in law made by this Act apply to a person who receives health benefits coverage under Chapter 62, Health and Safety Code, financial assistance under Chapter 31, Human Resources Code, or medical assistance under Chapter 32, Human Resources Code, on or after the effective date of this Act, regardless of the date on which eligibility for coverage or assistance was initially determined.

SECTION 13. This Act takes effect September 1, 2009.