S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  6698

                            I N  S E N A T E

                            February 28, 2014
                               ___________

Introduced  by  Sens. CARLUCCI, KLEIN, SAVINO, VALESKY -- read twice and
  ordered printed, and when printed to be committed to the Committee  on
  Higher Education

AN  ACT  to  amend  the  education law, the state finance law, the civil
  practice law and rules and the tax law, in  relation  to  establishing
  the New York state pre-paid tuition plan

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. The education law is amended by adding a new  article  14-B
to read as follows:
                              ARTICLE 14-B
                  NEW YORK STATE PRE-PAID TUITION PLAN
SECTION 696. SHORT TITLE.
        696-A. DEFINITIONS.
        696-B. PRE-PAID TUITION PLAN BOARD.
        696-C. POWERS AND DUTIES OF THE BOARD.
        696-D. EXECUTIVE DIRECTOR.
        696-E. PLAN REQUIREMENTS.
        696-F. POWERS OF THE BOARD AND COMPTROLLER.
        696-G. STATE GUARANTEE.
  S  696.  SHORT  TITLE. THIS ARTICLE SHALL BE KNOWN AND MAY BE CITED AS
THE "NEW YORK STATE PRE-PAID TUITION PLAN".
  S 696-A. DEFINITIONS. AS USED IN THIS  ARTICLE,  THE  FOLLOWING  TERMS
SHALL HAVE THE FOLLOWING MEANINGS:
  1.  "ACCOUNT"  OR  "PRE-PAID TUITION ACCOUNT" SHALL MEAN AN INDIVIDUAL
PRE-PAID TUITION ACCOUNT ESTABLISHED IN ACCORDANCE WITH  THE  PROVISIONS
OF THIS ARTICLE.
  2.  "ACCOUNT  OWNER"  SHALL  MEAN  A PERSON WHO ENTERS INTO A PRE-PAID
TUITION AGREEMENT PURSUANT TO THE PROVISIONS OF THIS ARTICLE,  INCLUDING
A  PERSON  WHO  ENTERS INTO SUCH AN AGREEMENT AS A FIDUCIARY OR AGENT ON
BEHALF OF A TRUST, ESTATE, PARTNERSHIP, ASSOCIATION, COMPANY  OR  CORPO-
RATION.  THE ACCOUNT OWNER MAY ALSO BE THE DESIGNATED BENEFICIARY OF THE
ACCOUNT.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD13274-02-4
              

S. 6698                             2

  3.  "BOARD"  SHALL  MEAN  THE PRE-PAID TUITION PLAN BOARD, ESTABLISHED
PURSUANT TO SECTION SIX HUNDRED NINETY-SIX-B OF THIS ARTICLE.
  4. "CITY UNIVERSITY" SHALL MEAN THE CITY UNIVERSITY OF NEW YORK.
  5. "COMPTROLLER" SHALL MEAN THE STATE COMPTROLLER.
  6.  "CORPORATION"  SHALL  MEAN  THE  NEW  YORK  STATE HIGHER EDUCATION
SERVICES CORPORATION.
  7. "DESIGNATED BENEFICIARY" SHALL MEAN, WITH RESPECT TO AN ACCOUNT  OR
ACCOUNTS,  THE  INDIVIDUAL  DESIGNATED  AS  THE INDIVIDUAL WHOSE TUITION
EXPENSES ARE EXPECTED TO BE PAID FROM THE ACCOUNT OR ACCOUNTS.
  8. "ELIGIBLE EDUCATIONAL INSTITUTION" SHALL MEAN  ANY  INSTITUTION  OF
HIGHER  EDUCATION  DEFINED  AS  AN  ELIGIBLE  EDUCATIONAL INSTITUTION IN
SECTION 529(E)(5) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
  9. "FINANCIAL ORGANIZATION" SHALL MEAN AN ORGANIZATION  AUTHORIZED  TO
DO  BUSINESS IN THE STATE AND A. WHICH IS AN AUTHORIZED FIDUCIARY TO ACT
AS A TRUSTEE PURSUANT TO THE PROVISIONS OF AN ACT OF  CONGRESS  ENTITLED
"EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974" AS SUCH PROVISIONS MAY
BE  AMENDED  FROM  TIME  TO TIME, OR AN INSURANCE COMPANY; AND B. (I) IS
LICENSED OR CHARTERED BY THE DEPARTMENT OF FINANCIAL SERVICES,  (II)  IS
CHARTERED  BY  AN  AGENCY OF THE FEDERAL GOVERNMENT, (III) IS SUBJECT TO
THE JURISDICTION AND REGULATION OF THE SECURITIES AND  EXCHANGE  COMMIS-
SION  OF  THE  FEDERAL GOVERNMENT, OR (IV) IS ANY OTHER ENTITY OTHERWISE
AUTHORIZED TO ACT IN THIS STATE AS A TRUSTEE PURSUANT TO THE  PROVISIONS
OF  AN ACT OF CONGRESS ENTITLED "EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974" AS SUCH PROVISIONS MAY BE AMENDED FROM TIME TO TIME.
  10. "MANAGEMENT CONTRACT" SHALL MEAN  THE  CONTRACT  EXECUTED  BY  THE
BOARD  AND  A FINANCIAL ORGANIZATION SELECTED TO ACT AS A DEPOSITORY AND
MANAGER OF THE PLAN.
  11. "MEMBER OF FAMILY" SHALL  MEAN  A  FAMILY  MEMBER  AS  DEFINED  IN
SECTION 529 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
  12. "NONQUALIFIED WITHDRAWAL" SHALL MEAN A WITHDRAWAL FROM AN ACCOUNT,
BUT SHALL NOT MEAN:
  A. A QUALIFIED WITHDRAWAL;
  B.  A  WITHDRAWAL MADE AS THE RESULT OF THE DEATH OR DISABILITY OF THE
DESIGNATED BENEFICIARY OF AN ACCOUNT; OR
  C. A WITHDRAWAL MADE ON THE ACCOUNT OF A SCHOLARSHIP.
  13. "PLAN" SHALL MEAN THE NEW YORK STATE PRE-PAID TUITION PLAN  ESTAB-
LISHED PURSUANT TO THIS ARTICLE.
  14. "PLAN MANAGER" SHALL MEAN A FINANCIAL ORGANIZATION SELECTED BY THE
BOARD TO ACT AS A DEPOSITORY AND MANAGER OF THE PLAN.
  15.  "QUALIFIED WITHDRAWAL" SHALL MEAN A WITHDRAWAL FROM AN ACCOUNT TO
PAY THE QUALIFIED TUITION EXPENSES OF THE DESIGNATED BENEFICIARY.
  16. "STATE UNIVERSITY" SHALL MEAN THE STATE UNIVERSITY OF NEW YORK.
  17. "TUITION" SHALL MEAN ANY MANDATORY CHARGES IMPOSED BY AN  ELIGIBLE
EDUCATIONAL  INSTITUTION FOR ATTENDANCE FOR AN ACADEMIC YEAR AS A CONDI-
TION OF ENROLLMENT. SUCH TERM SHALL NOT INCLUDE  LABORATORY  FEES,  ROOM
AND BOARD, OR OTHER SIMILAR FEES AND CHARGES.
  18.  "TUITION  SAVINGS  AGREEMENT" SHALL MEAN AN AGREEMENT BETWEEN THE
BOARD OR A FINANCIAL ORGANIZATION AND AN ACCOUNT OWNER.
  S 696-B. PRE-PAID TUITION PLAN BOARD. 1.  THE  PRE-PAID  TUITION  PLAN
BOARD  IS  HEREBY  ESTABLISHED.  SUCH  BOARD  SHALL  BE COMPOSED OF NINE
MEMBERS AS FOLLOWS:
  A. THE CHANCELLOR OF THE STATE UNIVERSITY, OR HIS OR HER DESIGNEE;
  B. THE CHANCELLOR OF THE CITY UNIVERSITY, OR HIS OR HER DESIGNEE;
  C. THE COMPTROLLER, OR HIS OR HER DESIGNEE;
  D. THE CHAIRMAN OF THE CORPORATION, OR HIS OR HER DESIGNEE;
  E. THREE MEMBERS APPOINTED BY THE GOVERNOR AS FOLLOWS:

S. 6698                             3

  (I) ONE INDIVIDUAL WITH EXPERIENCE IN HIGHER EDUCATION  ADMINISTRATION
OF AN INDEPENDENT COLLEGE OR UNIVERSITY, AND
  (II)  TWO  INDIVIDUALS  WITH  EXPERIENCE  IN  ACTUARIAL  PRACTICES AND
INVESTMENT BANKING;
  F. A MEMBER REPRESENTING COMMUNITY COLLEGES AFFILIATED WITH THE  STATE
UNIVERSITY  APPOINTED  BY THE BOARD OF TRUSTEES OF THE STATE UNIVERSITY;
AND
  G. A MEMBER REPRESENTING COMMUNITY COLLEGES AFFILIATED WITH  THE  CITY
UNIVERSITY APPOINTED BY THE BOARD OF TRUSTEES OF THE CITY UNIVERSITY.
  2. EACH MEMBER APPOINTED BY THE GOVERNOR, THE BOARD OF TRUSTEES OF THE
STATE  UNIVERSITY  OR THE BOARD OF TRUSTEES OF THE CITY UNIVERSITY SHALL
SERVE A TERM OF THREE YEARS. VACANCIES IN THE MEMBERSHIP  OF  THE  BOARD
SHALL BE FILLED IN THE MANNER PROVIDED FOR ORIGINAL APPOINTMENTS.
  3.  THE  MEMBERS  OF THE BOARD SHALL RECEIVE NO COMPENSATION FOR THEIR
SERVICES, BUT SHALL BE  ALLOWED  THEIR  ACTUAL  AND  NECESSARY  EXPENSES
INCURRED IN THE PERFORMANCE OF THEIR DUTIES PURSUANT TO THIS ARTICLE.
  4.  THE  BOARD  AND THE PLAN SHALL BE DEEMED TO BE PUBLIC AGENCIES AND
SHALL BE SUBJECT TO ALL PROVISIONS OF LAW RELATING THERETO.
  S 696-C. POWERS AND DUTIES OF THE BOARD.  THE BOARD  SHALL  ADMINISTER
THE  PLAN AND SHALL DEVELOP AND IMPLEMENT PROGRAMS FOR THE PREPAYMENT OF
UNDERGRADUATE TUITION, AT A FIXED, GUARANTEED LEVEL FOR  APPLICATION  AT
ANY TWO-YEAR OR FOUR-YEAR ELIGIBLE EDUCATIONAL INSTITUTION AS DEFINED IN
S  529 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR OTHER APPLI-
CABLE FEDERAL LAW. IN ADDITION, THE BOARD SHALL HAVE THE POWER AND  DUTY
TO:
  1.  DEVELOP  AND  IMPLEMENT  THE  PLAN IN A MANNER CONSISTENT WITH THE
PROVISIONS OF THIS ARTICLE THROUGH RULES AND REGULATIONS ESTABLISHED  IN
ACCORDANCE WITH THE STATE ADMINISTRATIVE PROCEDURE ACT;
  2.  MAKE  ARRANGEMENTS  WITH THE STATE UNIVERSITY, CITY UNIVERSITY AND
ANY ELIGIBLE EDUCATIONAL INSTITUTION  LOCATED  WITHIN  THE  STATE  WHICH
CHOOSES  TO  PARTICIPATE,  TO  FULFILL OBLIGATIONS UNDER PREPAID TUITION
CONTRACTS FOR TWO-YEAR OR FOUR-YEAR DEGREE PROGRAMS, INCLUDING, BUT  NOT
LIMITED TO, PAYMENT FROM THE PLAN OF THE THEN ACTUAL IN-STATE UNDERGRAD-
UATE  TUITION  COST  ON  BEHALF  OF A QUALIFIED BENEFICIARY OF A PREPAID
TUITION CONTRACT TO THE INSTITUTION IN WHICH SUCH BENEFICIARY IS  ADMIT-
TED AND ENROLLED, AND APPLICATION OF SUCH BENEFITS TOWARDS GRADUATE-LEV-
EL TUITION AND TOWARDS TUITION COSTS AT SUCH ELIGIBLE EDUCATIONAL INSTI-
TUTIONS,  AS  THAT  TERM  IS  DEFINED  IN  26  U.S.C. S 529 OR ANY OTHER
APPLICABLE SECTION OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED,  AS
DETERMINED  BY  THE BOARD IN ITS SOLE DISCRETION. SUCH ARRANGEMENTS MUST
INCLUDE PLANS THAT ALLOW AN ACCOUNT OWNER TO  ENTER  INTO  CONTRACTS  IN
WHICH  HE  OR SHE CAN PURCHASE TUITION IN INSTALLMENTS EQUAL TO THE COST
OF SEMESTERS AS A FULL TIME STUDENT, BUT CAN  ALSO  INCLUDE  PLANS  THAT
WOULD ALLOW FOR THE PREPAYMENT OF TUITION FOR INDIVIDUAL COURSE CREDITS;
  3.  ENGAGE THE SERVICES OF CONSULTANTS ON A CONTRACT BASIS FOR RENDER-
ING PROFESSIONAL AND TECHNICAL ASSISTANCE AND ADVICE;
  4. SEEK RULINGS AND OTHER GUIDANCE FROM THE UNITED  STATES  DEPARTMENT
OF TREASURY AND THE INTERNAL REVENUE SERVICE RELATING TO THE PROGRAM;
  5.  MAKE  CHANGES  TO THE PLAN REQUIRED FOR THE PARTICIPANTS TO OBTAIN
THE FEDERAL INCOME TAX BENEFITS OR TREATMENT PROVIDED BY SECTION 529  OF
THE  INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR ANY SIMILAR SUCCESSOR
LEGISLATION;
  6. CHARGE, IMPOSE AND COLLECT ADMINISTRATIVE FEES AND SERVICE  CHARGES
IN  CONNECTION  WITH  ANY AGREEMENT, CONTRACT OR TRANSACTION RELATING TO
THE PLAN;
  7. DEVELOP MARKETING PLANS AND PROMOTION MATERIAL;

S. 6698                             4

  8. ESTABLISH THE METHODS BY WHICH THE FUNDS HELD IN SUCH  ACCOUNTS  BE
DISPERSED;
  9.  ESTABLISH  THE METHOD BY WHICH FUNDS SHALL BE ALLOCATED TO PAY FOR
ADMINISTRATIVE COSTS; AND
  10. DO ALL THINGS NECESSARY AND PROPER TO CARRY OUT  THE  PURPOSES  OF
THIS ARTICLE.
  S  696-D. EXECUTIVE DIRECTOR. 1. THE BOARD SHALL APPOINT AND EMPLOY AN
EXECUTIVE DIRECTOR TO DIRECT, MANAGE AND ADMINISTER THE  PLAN,  AND  WHO
SHALL  BE  AUTHORIZED  TO EMPLOY SUCH PERSONNEL AS SHALL BE NECESSARY TO
IMPLEMENT THE PROVISIONS OF THIS ARTICLE.
  2. THE INDIVIDUAL APPOINTED AS EXECUTIVE DIRECTOR  SHALL  HAVE  DEMON-
STRATED  EXTENSIVE  EXPERIENCE  IN  MANAGEMENT, FINANCE, LAW, REGULATORY
AFFAIRS AND/OR INVESTMENT, AND SHALL HAVE SUCH OTHER  QUALIFICATIONS  AS
THE BOARD SHALL DETERMINE.
  3.  THE  EXECUTIVE  DIRECTOR  SHALL, IN ADDITION TO SUCH DUTIES AS THE
BOARD SHALL ESTABLISH:
  A. OVERSEE THE DEVELOPMENT, STRUCTURE, EVALUATION  AND  IMPLEMENTATION
OF THE PLAN'S STRATEGIC GOALS AND OBJECTIVES;
  B.  FACILITATE  COMMUNICATION  AMONG  AND  BETWEEN THE BOARD, ADVISORY
COMMITTEES, EMPLOYEES, ACCOUNT OWNERS, BENEFICIARIES AND OTHER  ENTITIES
INTERESTED IN THE PLAN;
  C.  ENHANCE THE BOARD'S ABILITY TO MAKE EFFECTIVE AND PROMPT DECISIONS
IN ALL MATTERS RELATED TO THE ADMINISTRATION OF THE PLAN;
  D. WITH THE  ASSISTANCE  OF  THE  BOARD  AND  INVESTMENT  CONSULTANTS,
DIRECT, MANAGE AND ADMINISTER THE PLAN'S ASSETS AND PROGRAMS; AND
  E. REPORT PERIODICALLY AND AS REQUESTED BY THE BOARD.
  S  696-E.  PLAN  REQUIREMENTS. 1. EVERY PRE-PAID TUITION ACCOUNT SHALL
COMPLY WITH THE PROVISIONS OF THIS SECTION.
  2. A PRE-PAID TUITION ACCOUNT MAY BE OPENED BY ANY PERSON WHO  DESIRES
TO  ENTER  INTO  A  CONTRACT  FOR  PRE-PAYMENT OF TUITION EXPENSES AT AN
INSTITUTION OF THE STATE UNIVERSITY, THE CITY UNIVERSITY OR ANY  PARTIC-
IPATING ELIGIBLE EDUCATIONAL INSTITUTION. AN ACCOUNT OWNER MAY DESIGNATE
ANOTHER  PERSON  AS  SUCCESSOR  OWNER OF THE ACCOUNT IN THE EVENT OF THE
DEATH OF THE ORIGINAL ACCOUNT OWNER. SUCH PERSON WHO OPENS AN ACCOUNT OR
ANY SUCCESSOR OWNER SHALL BE CONSIDERED THE ACCOUNT OWNER.
  A. AN APPLICATION FOR SUCH ACCOUNT SHALL BE IN THE FORM PRESCRIBED  BY
THE BOARD AND CONTAIN THE FOLLOWING:
  (I) THE NAME, ADDRESS AND SOCIAL SECURITY NUMBER OR EMPLOYER IDENTIFI-
CATION NUMBER OF THE ACCOUNT OWNER;
  (II) THE DESIGNATION OF A DESIGNATED BENEFICIARY;
  (III)  THE  NAME, ADDRESS AND SOCIAL SECURITY NUMBER OF THE DESIGNATED
BENEFICIARY; AND
  (IV) SUCH OTHER INFORMATION AS THE BOARD MAY REQUIRE.
  B. THE BOARD MAY ESTABLISH A NOMINAL FEE FOR SUCH APPLICATION.
  3. ANY PERSON, INCLUDING THE ACCOUNT OWNER, MAY MAKE CONTRIBUTIONS  TO
AN ACCOUNT AFTER THE ACCOUNT IS OPENED.
  4. CONTRIBUTIONS TO ACCOUNTS MAY BE MADE ONLY IN CASH.
  5.  FOUR  YEARS  MUST  ELAPSE  BETWEEN THE ESTABLISHMENT OF A PRE-PAID
TUITION ACCOUNT AND THE TIME THE FIRST QUALIFIED WITHDRAWAL IS MADE  FOR
THE PAYMENT OF TUITION EXPENSES.
  6.  AN  ACCOUNT  OWNER MAY WITHDRAW ALL OR PART OF THE BALANCE FROM AN
ACCOUNT ON SIXTY DAYS NOTICE OR SUCH SHORTER PERIOD AS MAY BE AUTHORIZED
UNDER RULES GOVERNING THE PLAN. SUCH RULES SHALL INCLUDE PROVISIONS THAT
WILL GENERALLY ENABLE THE DETERMINATION AS TO WHETHER A WITHDRAWAL IS  A
NONQUALIFIED WITHDRAWAL OR A QUALIFIED WITHDRAWAL.

S. 6698                             5

  7.  A.  AN  ACCOUNT  OWNER MAY CHANGE THE DESIGNATED BENEFICIARY OF AN
ACCOUNT TO AN INDIVIDUAL WHO IS A MEMBER OF  THE  FAMILY  OF  THE  PRIOR
DESIGNATED  BENEFICIARY IN ACCORDANCE WITH PROCEDURES ESTABLISHED BY THE
BOARD.
  B.  AN  ACCOUNT  OWNER  MAY TRANSFER ALL OR A PORTION OF AN ACCOUNT TO
ANOTHER FAMILY TUITION ACCOUNT, THE SUBSEQUENT DESIGNATED BENEFICIARY OF
WHICH IS A MEMBER OF THE FAMILY AS DEFINED IN SECTION 529 OF THE  INTER-
NAL REVENUE CODE OF 1986, AS AMENDED.
  8.  THE  PLAN  SHALL  PROVIDE  SEPARATE ACCOUNTING FOR EACH DESIGNATED
BENEFICIARY.
  9. NO ACCOUNT OWNER OR DESIGNATED BENEFICIARY OF ANY ACCOUNT SHALL  BE
PERMITTED TO DIRECT THE INVESTMENT OF ANY CONTRIBUTIONS TO AN ACCOUNT OR
THE EARNINGS THEREON.
  10. NEITHER AN ACCOUNT OWNER NOR A DESIGNATED BENEFICIARY SHALL USE AN
INTEREST IN AN ACCOUNT AS SECURITY FOR A LOAN. ANY PLEDGE OF AN INTEREST
IN AN ACCOUNT SHALL BE OF NO FORCE AND EFFECT.
  11.  A. IF THERE IS ANY DISTRIBUTION FROM AN ACCOUNT TO ANY INDIVIDUAL
OR FOR THE BENEFIT OF  ANY  INDIVIDUAL  DURING  A  CALENDAR  YEAR,  SUCH
DISTRIBUTION  SHALL  BE REPORTED TO THE INTERNAL REVENUE SERVICE AND THE
ACCOUNT OWNER, THE DESIGNATED BENEFICIARY  OR  THE  DISTRIBUTEE  TO  THE
EXTENT REQUIRED BY FEDERAL LAW OR REGULATION.
  B.  STATEMENTS  SHALL  BE PROVIDED TO EACH ACCOUNT OWNER AT LEAST ONCE
EACH YEAR WITHIN SIXTY DAYS AFTER THE END OF THE TWELVE MONTH PERIOD  TO
WHICH  THEY  RELATE. THE STATEMENT SHALL IDENTIFY THE CONTRIBUTIONS MADE
DURING A PRECEDING TWELVE MONTH PERIOD, THE TOTAL CONTRIBUTIONS MADE  TO
THE  ACCOUNT  THROUGH THE END OF THE PERIOD, THE VALUE OF THE ACCOUNT AT
THE END OF SUCH PERIOD, DISTRIBUTIONS MADE DURING SUCH  PERIOD  AND  ANY
OTHER  INFORMATION  THAT  THE  BOARD SHALL REQUIRE TO BE REPORTED TO THE
ACCOUNT OWNER.
  C. STATEMENTS AND INFORMATION RELATING TO ACCOUNTS SHALL  BE  PREPARED
AND FILED TO THE EXTENT REQUIRED BY FEDERAL AND STATE TAX LAW.
  12.  A.  A  LOCAL  GOVERNMENT  OR  ORGANIZATION  DESCRIBED  IN SECTION
501(C)(3) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, MAY OPEN AND
BECOME THE ACCOUNT OWNER OF AN ACCOUNT TO FUND SCHOLARSHIPS FOR  PERSONS
WHOSE IDENTITY WILL BE DETERMINED UPON DISBURSEMENT.
  B.  IN  THE CASE OF ANY ACCOUNT OPENED PURSUANT TO PARAGRAPH A OF THIS
SUBDIVISION THE REQUIREMENT SET FORTH IN SUBDIVISION TWO OF THIS SECTION
THAT A DESIGNATED BENEFICIARY BE DESIGNATED WHEN AN  ACCOUNT  IS  OPENED
SHALL  NOT  APPLY  AND  EACH INDIVIDUAL WHO RECEIVES AN INTEREST IN SUCH
ACCOUNT AS A SCHOLARSHIP SHALL BE TREATED AS  A  DESIGNATED  BENEFICIARY
WITH RESPECT TO SUCH INTEREST.
  13.  AN ANNUAL FEE MAY BE IMPOSED UPON THE ACCOUNT OWNER FOR THE MAIN-
TENANCE OF THE ACCOUNT.
  14. THE PLAN SHALL DISCLOSE THE FOLLOWING INFORMATION  IN  WRITING  TO
EACH  ACCOUNT  OWNER AND PROSPECTIVE ACCOUNT OWNER OF A PRE-PAID TUITION
ACCOUNT:
  A. THE TERMS AND CONDITIONS FOR PURCHASING A PRE-PAID TUITION ACCOUNT;
  B. ANY RESTRICTIONS ON THE SUBSTITUTION OF BENEFICIARIES;
  C. THE PERSON OR ENTITY ENTITLED TO TERMINATE THE TUITION  PRE-PAYMENT
AGREEMENT;
  D.  THE PERIOD OF TIME DURING WHICH A BENEFICIARY MAY RECEIVE BENEFITS
UNDER THE TUITION PRE-PAYMENT AGREEMENT;
  E. THE TERMS AND  CONDITIONS  UNDER  WHICH  MONEY  MAY  BE  WHOLLY  OR
PARTIALLY  WITHDRAWN  FROM  THE PLAN, INCLUDING, BUT NOT LIMITED TO, ANY
REASONABLE CHARGES AND FEES THAT MAY BE IMPOSED FOR WITHDRAWAL;

S. 6698                             6

  F. THE PROBABLE TAX CONSEQUENCES ASSOCIATED WITH CONTRIBUTIONS TO  AND
DISTRIBUTIONS FROM ACCOUNTS; AND
  G.  ALL  OTHER  RIGHTS  AND  OBLIGATIONS  PURSUANT TO PRE-PAID TUITION
AGREEMENTS, AND ANY OTHER TERMS, CONDITIONS AND PROVISIONS DEEMED NECES-
SARY AND APPROPRIATE BY THE BOARD PURSUANT TO SECTION SIX HUNDRED  NINE-
TY-SIX-C OF THIS ARTICLE.
  15.  PRE-PAID  TUITION  SAVINGS AGREEMENTS SHALL BE SUBJECT TO SECTION
FOURTEEN-C OF THE BANKING LAW  AND  THE  "TRUTH-IN-SAVINGS"  REGULATIONS
PROMULGATED THEREUNDER.
  16.  NOTHING IN THIS ARTICLE OR IN ANY PRE-PAID TUITION SAVINGS AGREE-
MENT ENTERED INTO PURSUANT TO THIS ARTICLE SHALL BE CONSTRUED AS A GUAR-
ANTEE BY THE STATE OR ANY COLLEGE THAT A BENEFICIARY WILL BE ADMITTED TO
A COLLEGE OR UNIVERSITY, OR, UPON ADMISSION TO A COLLEGE WILL BE PERMIT-
TED TO CONTINUE TO ATTEND OR WILL RECEIVE A DEGREE  FROM  A  COLLEGE  OR
UNIVERSITY.
  S 696-F. POWERS OF THE BOARD AND COMPTROLLER.
  1.  THE  BOARD,  IN  CONSULTATION  WITH  THE  COMPTROLLER, MAY SOLICIT
PROPOSALS FROM FINANCIAL ORGANIZATIONS TO ACT AS DEPOSITORIES AND MANAG-
ERS OF THE PLAN.  FINANCIAL  ORGANIZATIONS  SUBMITTING  PROPOSALS  SHALL
DESCRIBE  THE  INVESTMENT INSTRUMENT WHICH WILL BE HELD IN ACCOUNTS. THE
BOARD SHALL SELECT AS PROGRAM DEPOSITORIES AND  MANAGERS  THE  FINANCIAL
ORGANIZATION, FROM AMONG THE BIDDING FINANCIAL ORGANIZATIONS THAT DEMON-
STRATES  THE  MOST  ADVANTAGEOUS  COMBINATION, BOTH TO POTENTIAL PROGRAM
PARTICIPANTS AND THIS STATE, OF THE FOLLOWING FACTORS:
  A. FINANCIAL STABILITY AND INTEGRITY OF THE FINANCIAL ORGANIZATION;
  B. THE SAFETY OF THE INVESTMENT INSTRUMENT BEING OFFERED;
  C. THE ABILITY OF THE INVESTMENT INSTRUMENT TO TRACK INCREASING  COSTS
OF HIGHER EDUCATION;
  D.  THE ABILITY OF THE FINANCIAL ORGANIZATION TO SATISFY RECORDKEEPING
AND REPORTING REQUIREMENTS;
  E. THE FINANCIAL ORGANIZATION'S PLAN FOR PROMOTING THE  PLAN  AND  THE
INVESTMENT IT IS WILLING TO MAKE TO PROMOTE THE PLAN;
  F.  THE  FEES,  IF  ANY, PROPOSED TO BE CHARGED TO PERSONS FOR OPENING
ACCOUNTS;
  G. THE MINIMUM INITIAL DEPOSIT  AND  MINIMUM  CONTRIBUTIONS  THAT  THE
FINANCIAL ORGANIZATION WILL REQUIRE;
  H.  THE  ABILITY  OF  BANKING ORGANIZATIONS TO ACCEPT ELECTRONIC WITH-
DRAWALS, INCLUDING PAYROLL DEDUCTION PLANS; AND
  I. OTHER BENEFITS TO THE  STATE  OR  ITS  RESIDENTS  INCLUDED  IN  THE
PROPOSAL, INCLUDING FEES PAYABLE TO THE STATE TO COVER EXPENSES OF OPER-
ATION OF THE PROGRAM.
  2.  THE BOARD MAY ENTER INTO A CONTRACT WITH A FINANCIAL ORGANIZATION.
SUCH FINANCIAL ORGANIZATION MANAGEMENT MAY PROVIDE ONE OR MORE TYPES  OF
INVESTMENT INSTRUMENT.
  3.  THE  BOARD MAY SELECT MORE THAN ONE FINANCIAL ORGANIZATION FOR THE
PLAN.
  4. A MANAGEMENT CONTRACT SHALL INCLUDE, AT A MINIMUM, TERMS  REQUIRING
THE FINANCIAL ORGANIZATION TO:
  A.  TAKE  ANY  ACTION  REQUIRED  TO  KEEP  THE PLAN IN COMPLIANCE WITH
REQUIREMENTS OF THIS ARTICLE;
  B. KEEP ADEQUATE RECORDS OF EACH ACCOUNT, KEEP EACH ACCOUNT SEGREGATED
FROM EACH OTHER ACCOUNT, AND PROVIDE  THE  BOARD  WITH  THE  INFORMATION
NECESSARY TO PREPARE THE STATEMENTS REQUIRED BY THIS ARTICLE;
  C.  PROVIDE THE COMPTROLLER OR HIS OR HER DESIGNEE ACCESS TO THE BOOKS
AND RECORDS OF THE PLAN  MANAGER  TO  THE  EXTENT  NEEDED  TO  DETERMINE
COMPLIANCE WITH THE CONTRACT;

S. 6698                             7

  D. HOLD ALL ACCOUNTS FOR THE BENEFIT OF THE ACCOUNT OWNER;
  E. BE AUDITED AT LEAST ANNUALLY BY A FIRM OF CERTIFIED PUBLIC ACCOUNT-
ANTS  SELECTED  BY THE COMPTROLLER AND THAT THE RESULTS OF SUCH AUDIT BE
PROVIDED TO THE BOARD AND THE COMPTROLLER;
  F. PROVIDE THE BOARD AND THE COMPTROLLER WITH COPIES OF ALL REGULATORY
FILINGS AND REPORTS MADE  BY  IT  DURING  THE  TERM  OF  THE  MANAGEMENT
CONTRACT  OR  WHILE  IT IS HOLDING ANY ACCOUNTS, OTHER THAN CONFIDENTIAL
FILINGS OR REPORTS THAT WILL NOT BECOME  PART  OF  THE  PLAN.  THE  PLAN
MANAGER  SHALL  MAKE AVAILABLE FOR REVIEW BY THE COMPTROLLER THE RESULTS
OF ANY PERIODIC EXAMINATION OF SUCH MANAGER  BY  ANY  STATE  OR  FEDERAL
BANKING,  INSURANCE  OR SECURITIES COMMISSION, EXCEPT TO THE EXTENT THAT
SUCH REPORT OR REPORTS MAY NOT BE DISCLOSED UNDER APPLICABLE LAW OR  THE
RULES OF SUCH COMMISSION; AND
  G.  ENSURE  THAT ANY DESCRIPTION OF THE PROGRAM, WHETHER IN WRITING OR
THROUGH THE USE OF ANY MEDIA, IS  CONSISTENT  WITH  THE  MARKETING  PLAN
DEVELOPED  IN THE MEMORANDUM OF UNDERSTANDING PURSUANT TO THE PROVISIONS
OF SECTION SIX HUNDRED NINETY-FIVE-C OF THIS ARTICLE.
  5. THE COMPTROLLER MAY PROVIDE THAT AN AUDIT SHALL BE CONDUCTED OF THE
OPERATIONS AND FINANCIAL POSITION OF THE PLAN DEPOSITORY AND MANAGER  AT
ANY  TIME IF THE BOARD OR THE COMPTROLLER HAS ANY REASON TO BE CONCERNED
ABOUT THE FINANCIAL POSITION, THE RECORDKEEPING PRACTICES, OR THE STATUS
OF ACCOUNTS OF SUCH PLAN DEPOSITORY AND MANAGER.
  6. DURING THE TERM OF ANY CONTRACT WITH  A  PLAN  MANAGER,  THE  COMP-
TROLLER SHALL CONDUCT AN EXAMINATION OF SUCH MANAGER AND ITS HANDLING OF
ACCOUNTS.  SUCH  EXAMINATION  SHALL  BE CONDUCTED AT LEAST BIENNIALLY IF
SUCH MANAGER IS NOT OTHERWISE SUBJECT TO  PERIODIC  EXAMINATION  BY  THE
SUPERINTENDENT  OF  FINANCIAL  SERVICES,  THE  FEDERAL DEPOSIT INSURANCE
CORPORATION OR OTHER SIMILAR ENTITY.
  7. A. IF SELECTION OF A FINANCIAL ORGANIZATION AS A  PLAN  MANAGER  OR
DEPOSITORY IS NOT RENEWED, AFTER THE END OF ITS TERM:
  (I) ACCOUNTS PREVIOUSLY ESTABLISHED AND HELD IN INVESTMENT INSTRUMENTS
AT SUCH FINANCIAL ORGANIZATION MAY BE TERMINATED;
  (II) ADDITIONAL CONTRIBUTIONS MAY BE MADE TO SUCH ACCOUNTS;
  (III)  NO NEW ACCOUNTS MAY BE PLACED WITH SUCH FINANCIAL ORGANIZATION;
AND
  (IV) EXISTING ACCOUNTS HELD BY SUCH DEPOSITORY SHALL REMAIN SUBJECT TO
ALL OVERSIGHT AND REPORTING REQUIREMENTS ESTABLISHED BY THE COMPTROLLER.
  B. IF THE COMPTROLLER TERMINATES A FINANCIAL ORGANIZATION  AS  A  PLAN
MANAGER  OR DEPOSITORY, HE OR SHE SHALL TAKE CUSTODY OF ACCOUNTS HELD BY
SUCH FINANCIAL ORGANIZATION AND SHALL SEEK  TO  PROMPTLY  TRANSFER  SUCH
ACCOUNTS  TO  ANOTHER  FINANCIAL ORGANIZATION THAT IS SELECTED AS A PLAN
MANAGER OR DEPOSITORY AND INTO INVESTMENT INSTRUMENTS AS SIMILAR TO  THE
ORIGINAL INSTRUMENTS AS POSSIBLE.
  S  696-G.  STATE GUARANTEE. 1. NOTHING IN THIS ARTICLE SHALL ESTABLISH
OR BE DEEMED TO ESTABLISH ANY OBLIGATION OF THE STATE,  THE  COMPTROLLER
OR  ANY AGENCY OR INSTRUMENTALITY OF THE STATE TO GUARANTEE ANY BENEFITS
TO ANY ACCOUNT OWNER OR DESIGNATED BENEFICIARY.
  2. NOTWITHSTANDING THE PROVISIONS OF SUBDIVISION ONE OF THIS  SECTION,
IN  ORDER  TO  ENSURE THAT THE PLAN IS ABLE TO MEET ITS OBLIGATIONS, THE
GOVERNOR SHALL INCLUDE IN THE BUDGET SUBMITTED PURSUANT TO SECTION TWEN-
TY-TWO OF THE STATE FINANCE LAW, AN  APPROPRIATION  SUFFICIENT  FOR  THE
PURPOSE  OF  ENSURING  THAT THE PLAN CAN MEET ITS OBLIGATIONS.  ANY SUMS
APPROPRIATED FOR SUCH PURPOSE SHALL BE  TRANSFERRED  TO  THE  PLAN.  ALL
AMOUNTS PAID INTO THE PLAN PURSUANT TO THIS SUBDIVISION SHALL CONSTITUTE
AND  BE  ACCOUNTED FOR AS ADVANCES BY THE STATE TO THE PLAN AND, SUBJECT
TO THE RIGHTS OF THE PLAN'S CONTRACT HOLDERS, SHALL  BE  REPAID  TO  THE

S. 6698                             8

STATE  WITHOUT  INTEREST FROM AVAILABLE OPERATING REVENUE OF THE PLAN IN
EXCESS OF AMOUNTS REQUIRED FOR THE PAYMENT OF  THE  OBLIGATIONS  OF  THE
PLAN.  AS  USED IN THIS SECTION, "OBLIGATIONS OF THE PLAN" MEANS AMOUNTS
REQUIRED  FOR  THE  PAYMENT OF CONTRACT BENEFITS OR OTHER OBLIGATIONS OF
THE PLAN, THE MAINTENANCE OF THE PLAN, AND OPERATING  EXPENSES  FOR  THE
CURRENT FISCAL YEAR.
  S  2. The state finance law is amended by adding a new section 78-c to
read as follows:
  S 78-C. NEW YORK STATE PRE-PAID TUITION PLAN FUND.  1. THERE IS HEREBY
ESTABLISHED IN THE SOLE CUSTODY OF THE STATE COMPTROLLER A SPECIAL  FUND
TO  BE  KNOWN  AS  THE  NEW  YORK  STATE PRE-PAID TUITION PLAN FUND. ALL
PAYMENTS FROM SUCH FUND SHALL BE MADE IN ACCORDANCE WITH  ARTICLE  FOUR-
TEEN-B OF THE EDUCATION LAW.
  2.  (A) THE COMPTROLLER, WITH THE CONSENT OF THE PRE-PAID TUITION PLAN
BOARD, SHALL INVEST THE ASSETS OF THE FUND IN INVESTMENTS AUTHORIZED  BY
ARTICLE  FOUR-A  OF  THE  RETIREMENT  AND  SOCIAL SECURITY LAW, PROVIDED
HOWEVER, THAT:
  (I) THE PROVISIONS OF PARAGRAPH (A) OF SUBDIVISION TWO OF SECTION  ONE
HUNDRED  SEVENTY-SEVEN  OF  THE RETIREMENT AND SOCIAL SECURITY LAW SHALL
NOT APPLY EXCEPT FOR THE FIRST CLAUSE OF SUBPARAGRAPH (II) OF SUCH PARA-
GRAPH; AND
  (II) NOTWITHSTANDING THE PROVISIONS OF SUBDIVISION  SEVEN  OF  SECTION
ONE  HUNDRED  SEVENTY-SEVEN OF THE RETIREMENT AND SOCIAL SECURITY LAW OR
ANY OTHER LAW TO THE CONTRARY, THE ASSETS OF THE FUND MAY BE INVESTED IN
ANY FUNDING AGREEMENT ISSUED IN ACCORDANCE WITH SECTION  THREE  THOUSAND
TWO HUNDRED TWENTY-TWO OF THE INSURANCE LAW BY A DOMESTIC LIFE INSURANCE
COMPANY  OR  A  FOREIGN  LIFE  INSURANCE  COMPANY DOING BUSINESS IN THIS
STATE, SUBJECT TO THE FOLLOWING:
  (1) SUCH A FUNDING AGREEMENT MAY PROVIDE FOR A GUARANTEED MINIMUM RATE
OF RETURN;
  (2) SUCH A FUNDING AGREEMENT MAY BE ALLOCATED  AS  EITHER  A  SEPARATE
ACCOUNT  OR  A  GENERAL  ACCOUNT  OF  THE ISSUER, AS THE COMPTROLLER MAY
DECIDE;
  (3) TOTAL INVESTMENTS OF THE FUND PURSUANT TO THIS  PARAGRAPH  IN  ANY
FUNDING  AGREEMENTS  ISSUED BY A SINGLE LIFE INSURANCE COMPANY WHICH ARE
ALLOCATED AS A GENERAL ACCOUNT OF THE ISSUER SHALL NOT,  IN  THE  AGGRE-
GATE, EXCEED THREE HUNDRED FIFTY MILLION DOLLARS; AND
  (4) NO ASSETS OF THE FUND SHALL BE INVESTED IN ANY SUCH FUNDING AGREE-
MENT  UNLESS, AT THE TIME OF SUCH INVESTMENT, THE GENERAL OBLIGATIONS OR
FINANCIAL STRENGTH OF THE ISSUER HAVE RECEIVED  EITHER  THE  HIGHEST  OR
SECOND HIGHEST RATING BY TWO NATIONALLY RECOGNIZED RATING SERVICES OR BY
ONE NATIONALLY RECOGNIZED RATING SERVICE IN THE EVENT THAT ONLY ONE SUCH
SERVICE RATES SUCH OBLIGATIONS.
  (B)  FUND  ASSETS  SHALL  BE KEPT SEPARATE AND SHALL NOT BE COMMINGLED
WITH OTHER ASSETS. THE  PRE-PAID  TUITION  PLAN  BOARD  MAY  ENTER  INTO
CONTRACTS  TO  PROVIDE  FOR  INVESTMENT ADVICE AND MANAGEMENT, CUSTODIAL
SERVICES AND OTHER PROFESSIONAL  SERVICES  FOR  THE  ADMINISTRATION  AND
INVESTMENT OF THE PLAN. ADMINISTRATIVE FEES, COSTS AND EXPENSES, INCLUD-
ING  INVESTMENT  FEES AND EXPENSES, SHALL BE PAID FROM THE ASSETS OF THE
FUND.
  3. THE COMPTROLLER SHALL PROVIDE FOR THE ADMINISTRATION OF  THE  TRUST
FUND,  INCLUDING  MAINTAINING  PARTICIPANT  RECORDS  AND  ACCOUNTS,  AND
PROVIDING  ANNUAL  AUDITED  REPORTS.  THE  COMPTROLLER  MAY  ENTER  INTO
CONTRACTS TO PROVIDE ADMINISTRATIVE SERVICES AND REPORTING.
  S  3.  Section  5205 of the civil practice law and rules is amended by
adding a new subdivision (p) to read as follows:

S. 6698                             9

  (P) EXEMPTION FOR NEW YORK STATE PRE-PAID TUITION PLAN MONIES.  MONIES
IN AN ACCOUNT CREATED PURSUANT TO ARTICLE FOURTEEN-B  OF  THE  EDUCATION
LAW  ARE EXEMPT FROM APPLICATION TO THE SATISFACTION OF A MONEY JUDGMENT
AS FOLLOWS:
  1.  ONE  HUNDRED  PERCENT OF MONIES IN AN ACCOUNT IN CONNECTION WITH A
PRE-PAID TUITION PLAN ESTABLISHED PURSUANT TO SUCH  ARTICLE  IS  EXEMPT;
AND
  2.  ONE  HUNDRED  PERCENT  OF MONIES IN AN ACCOUNT IS EXEMPT WHERE THE
JUDGMENT DEBTOR IS THE ACCOUNT OWNER OR DESIGNATED BENEFICIARY  OF  SUCH
ACCOUNT.
  FOR  THE  PURPOSES  OF THIS SUBDIVISION, THE TERMS "ACCOUNT OWNER" AND
"DESIGNATED BENEFICIARY" SHALL HAVE THE MEANINGS  ASCRIBED  TO  THEM  IN
ARTICLE FOURTEEN-B OF THE EDUCATION LAW.
  S  4. Subparagraph (A) of paragraph 2 of subsection (t) of section 606
of the tax law, as amended by section 1 of part N of chapter 85  of  the
laws of 2002, is amended to read as follows:
  (A)  The  term  "allowable  college  tuition  expenses" shall mean the
amount of qualified college tuition expenses of eligible  students  paid
by  the  taxpayer during the taxable year, limited to [ten] TWENTY thou-
sand dollars for each such student;
  S 5. Paragraph 34 of subsection (b) of section 612 of the tax law,  as
amended  by chapter 535 of the laws of 2000, subparagraph (B) as amended
by chapter 593 of the laws of 2003, is amended to read as follows:
  (34) (A) Excess distributions received during the taxable  year  by  a
distributee  of  a family tuition account established under the New York
state college choice tuition savings program provided for under  article
fourteen-A of the education law, OR OF A PRE-PAID TUITION ACCOUNT ESTAB-
LISHED  PURSUANT  TO  ARTICLE  FOURTEEN-B  OF  THE EDUCATION LAW, to the
extent such excess distributions are deemed attributable  to  deductible
contributions  under  paragraph  thirty-two  of  subsection  (c) of this
section.
  (B) (i) The term "excess distributions" means distributions which  are
not
  (I)  qualified  withdrawals  within the meaning of subdivision nine of
section six hundred ninety-five-b OR SUBDIVISION FIFTEEN OF SECTION  SIX
HUNDRED NINETY-SIX-A of the education law;
  (II)  withdrawals  made  as a result of the death or disability of the
designated beneficiary within the meaning of subdivision ten of  section
six  hundred  ninety-five-b OR SUBDIVISION TWELVE OF SECTION SIX HUNDRED
NINETY-SIX-A of such law; or
  (III) transfers described in paragraph b of subdivision six of section
six hundred ninety-five-e of such law.
  (ii) Excess distributions shall be deemed attributable  to  deductible
contributions  to the extent the amount of any such excess distribution,
when added to  all  previous  excess  distributions  from  the  account,
exceeds the aggregate of all nondeductible contributions to the account.
  S  6. Paragraphs 32 and 33 of subsection (c) of section 612 of the tax
law, paragraph 32 as amended by chapter 81 of the laws of 2008 and para-
graph 33 as added by chapter 546 of the laws of  1997,  are  amended  to
read as follows:
  (32) Contributions made during the taxable year by an account owner to
one or more family tuition accounts established under the New York state
college  choice tuition savings program provided for under article four-
teen-A, OR TO A PRE-PAID TUITION ACCOUNT PURSUANT TO ARTICLE  FOURTEEN-B
of the education law, to the extent not deductible or eligible for cred-
it  for  federal  income  tax purposes, provided, however, the exclusion

S. 6698                            10

provided for in this paragraph shall  not  exceed  [five]  TEN  thousand
dollars  for an individual or head of household, and for married couples
who file joint tax returns,  shall  not  exceed  [ten]  TWENTY  thousand
dollars;  provided, further, that such exclusion shall be available only
to the account owner and not to any other person.
  (33) Distributions from a family tuition account established under the
New York state college choice tuition savings program provided for under
article fourteen-A, OR FROM A PRE-PAID TUITION ACCOUNT PURSUANT TO ARTI-
CLE FOURTEEN-B of the education law, to the extent includible  in  gross
income for federal income tax purposes.
  S 7. This act shall take effect immediately and shall apply to taxable
years commencing after December 31, 2014.