Assembly Bill No. 554–Committee on Government Affairs

 

(On Behalf of Office of the State Treasurer)

 

March 26, 2001

____________

 

Referred to Committee on Government Affairs

 

SUMMARY—Provides for establishment of Nevada college savings program as authorized by federal law. (BDR 31‑357)

 

FISCAL NOTE:    Effect on Local Government: No.

                                 Effect on the State: Executive Budget.

 

~

 

EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

AN ACT relating to higher education; requiring the state treasurer to adopt regulations to establish and carry out the Nevada college savings program as authorized by federal law; creating the Nevada college savings trust fund and providing for its administration; eliminating the prospective expiration of various provisions governing the program for the prepayment of tuition at an institution of higher education; and providing other matters properly relating thereto.

 

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN

SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

 

1-1    Section 1. Chapter 353B of NRS is hereby amended by adding thereto

1-2  the provisions set forth as sections 2 to 13, inclusive, of this act.

1-3    Sec. 2.  As used in this chapter, unless the context otherwise

1-4  requires, “board” means the board of trustees of the college savings

1-5  plans of Nevada created by section 3 of this act.

1-6    Sec. 3. 1.  There is hereby created a board of trustees of the college

1-7  savings plans of Nevada.

1-8    2.  The board consists of five members composed of:

1-9    (a) The state treasurer, who may name a designee to serve on the

1-10  board on his behalf.

1-11    (b) The director of the department of administration, who may name a

1-12  designee to serve on the board on his behalf.

1-13    (c) The chancellor of the system, who may name a designee to serve

1-14  on the board on his behalf.

1-15    (d) Two members appointed by the governor. A member who is

1-16  appointed by the governor must possess knowledge, skill and experience

1-17  in the field of:

2-1       (1) Accounting;

2-2       (2) Finance;

2-3       (3) Investment management; or

2-4       (4) Marketing.

2-5    3.  A member of the board who is appointed by the governor:

2-6    (a) Serves for a term of 4 years;

2-7    (b) Except as otherwise provided in paragraph (c), may be reappointed

2-8  by the governor; and

2-9    (c) Except as otherwise provided in this paragraph, may serve for only

2-10  two terms. A member who is appointed to fill a vacancy in an unexpired

2-11  term that is not longer than 3 years may serve two terms in addition to

2-12  the unexpired term.

2-13    4.  The state treasurer or his designee shall serve as the chairman of

2-14  the board.

2-15    5.  Each member of the board serves without compensation, except

2-16  that each member is entitled to receive:

2-17    (a) The per diem allowance and travel expenses provided for state

2-18  officers and employees generally; and

2-19    (b) Reimbursement for any other actual and reasonable expense

2-20  incurred while performing his duties.

2-21    6.  As used in this section, the term “college savings plans of Nevada”

2-22  includes the Nevada higher education prepaid tuition program set forth

2-23  in NRS 353B.010 to 353B.810, inclusive, and the Nevada college savings

2-24  program set forth in sections 6 to 13, inclusive, of this act.

2-25    Sec. 4.  Notwithstanding the provisions of any specific statute to the

2-26  contrary, no money on deposit in a prepaid tuition contract pursuant to

2-27  NRS 353B.010 to 353B.810, inclusive, or a savings trust account

2-28  pursuant to sections 6 to 13, inclusive, of this act may be considered an

2-29  asset of a parent, guardian or student for the purpose of determining the

2-30  eligibility of a person for a grant, scholarship or work opportunity that is

2-31  based on need and offered or administered by a state agency, except as

2-32  otherwise required by the source of the funding of the grant, scholarship

2-33  or work opportunity.

2-34    Sec. 5.  The board may endorse insurance coverage written

2-35  exclusively to protect prepaid tuition contracts, and purchasers and

2-36  beneficiaries of prepaid tuition contracts pursuant to NRS 353B.010 to

2-37  353B.810, inclusive, and the regulations adopted pursuant thereto, and

2-38  savings trust accounts and account owners, and beneficiaries of savings

2-39  trust accounts pursuant to sections 6 to 13, inclusive, of this act, and the

2-40  regulations adopted pursuant thereto, which may be issued in the form of

2-41  a group life policy. The provisions of Title 57 of NRS are not applicable

2-42  to the board in carrying out the provisions of this section.

2-43    Sec. 6.  As used in sections 6 to 13, inclusive, of this act, unless the

2-44  context otherwise requires, “trust fund” means the Nevada college

2-45  savings trust fund created by section 8 of this act.

2-46    Sec. 7.  1.  The state treasurer shall adopt regulations to establish

2-47  and carry out the Nevada college savings program, which must comply

2-48  with the requirements of a qualified state tuition program pursuant to 26

2-49  U.S.C. § 529.

3-1    2.  The regulations must be consistent with the provisions of the

3-2  Internal Revenue Code set forth in Title 26 of the United States Code,

3-3  and the regulations adopted pursuant thereto, to ensure that the Nevada

3-4  college savings program meets all criteria for federal tax-deferred or tax-

3-5  exempt benefits, or both.

3-6    3.  The regulations must provide for the use of savings trust

3-7  agreements and savings trust accounts to apply distributions toward

3-8  qualified higher education expenses at eligible educational institutions in

3-9  accordance with 26 U.S.C. § 529.

3-10    4.  The regulations may include any other provisions not inconsistent

3-11  with federal law that the state treasurer determines are necessary for the

3-12  efficient and effective administration of the Nevada college savings

3-13  program and the trust fund.

3-14    Sec. 8.  1.  The Nevada college savings trust fund is hereby created.

3-15    2.  The trust fund is an instrumentality of this state, and its property

3-16  and income are exempt from all taxation by this state and any political

3-17  subdivision thereof.

3-18    3.  The trust fund consists of:

3-19    (a) All legislative appropriations made thereto;

3-20    (b) All money acquired by or for the use of the trust fund from:

3-21      (1) Any other governmental source, including, without limitation,

3-22  any grant from the Federal Government, or a state or local government;

3-23  or

3-24      (2) Any private source, including, without limitation, any gift,

3-25  bequest, devise or endowment;

3-26    (c) All money deposited in accordance with savings trust agreements;

3-27  and

3-28    (d) All earnings on the money in the trust fund.

3-29    4.  All money deposited in accordance with savings trust agreements

3-30  and all earnings on such money:

3-31    (a) Are not the property of this state, and this state has no claim to or

3-32  interest in such money; and

3-33    (b) Must not be commingled with money of this state.

3-34    5.  A savings trust agreement or any other contract entered into by or

3-35  on behalf of the trust fund does not constitute a debt or obligation of this

3-36  state, and no account owner is entitled to any money in the trust fund

3-37  except for that money on deposit in or accrued to his account.

3-38    6.  The money in the trust fund must be preserved, invested and

3-39  expended solely pursuant to and for the purposes authorized by sections

3-40  6 to 13, inclusive, of this act and must not be loaned or otherwise

3-41  transferred or used by this state for any other purpose.

3-42    Sec. 9.  1.  The trust fund must be administered by the state

3-43  treasurer.

3-44    2.  The state treasurer shall establish such accounts within the trust

3-45  fund as he determines necessary, including, without limitation, a

3-46  program account, an administrative account and an endowment account.

3-47    3.  The program account must be used for the receipt, investment and

3-48  disbursement of money pursuant to savings trust agreements.

4-1    4.  The administrative account must be used for the deposit and

4-2  disbursement of money to administer and market the Nevada college

4-3  savings program and to supplement the administration and marketing of

4-4  the Nevada higher education prepaid tuition program set forth in NRS

4-5  353B.010 to 353B.810, inclusive.

4-6    5.  The endowment account must be used for the deposit of any

4-7  money received by the trust fund that is not received pursuant to a

4-8  savings trust agreement and, in the determination of the state treasurer,

4-9  is not necessary for the use of the administrative account. The money in

4-10  the endowment account may be expended for any purpose related to the

4-11  Nevada college savings program or otherwise to assist the residents of

4-12  this state to attain post-secondary education.

4-13    Sec. 10.  The state treasurer may accept and expend on behalf of the

4-14  trust fund money provided by private entities for direct expenses or

4-15  marketing. Such money is not a part of the trust fund.

4-16    Sec. 11.  1.  The board shall establish a comprehensive investment

4-17  plan for the money in the trust fund.

4-18    2.  Notwithstanding the provisions of any specific statute to the

4-19  contrary, the board may invest or cause to be invested any money in the

4-20  trust fund, including, without limitation, the money in the program

4-21  account, in any manner reasonable and appropriate to achieve the

4-22  objectives of the Nevada college savings program, exercising the

4-23  discretion and care of a prudent person in similar circumstances with

4-24  similar objectives. The board shall consider the risk, expected rate of

4-25  return, term or maturity, diversification of total investments, liquidity and

4-26  anticipated investments in and withdrawals from the trust fund.

4-27    3.  The board may establish criteria and select investment managers,

4-28  mutual funds or other such entities to act as investment managers for the

4-29  Nevada college savings program.

4-30    4.  The board may employ or contract with investment managers,

4-31  evaluation services or other services as determined by the board to be

4-32  necessary for the effective and efficient operation of the Nevada college

4-33  savings program.

4-34    5.  The board may employ personnel and contract for goods and

4-35  services necessary for the effective and efficient operation of the Nevada

4-36  college savings program.

4-37    6.  The marketing plan and materials for the Nevada college savings

4-38  program must be approved by the board.

4-39    7.  The board may prescribe terms and conditions of savings trust

4-40  agreements.

4-41    8.  The board may contract with one or more qualified entities for the

4-42  day-to-day operations of the Nevada college savings program as the

4-43  program administrator for the management of the marketing of the

4-44  program, the administration of the comprehensive investment plan and

4-45  trust fund, the selection of investment managers for the Nevada college

4-46  savings program, and the performance of similar activities.

4-47    Sec. 12.  Savings trust accounts and agreements entered into

4-48  pursuant to sections 6 to 13, inclusive, of this act are not guaranteed by

4-49  the full faith and credit of the State of Nevada.

5-1    Sec. 13.  The board may delegate to the state treasurer any of its

5-2  powers and duties specified in sections 6 to 13, inclusive, of this act, if the

5-3  board determines that such delegation is necessary for the efficient and

5-4  effective administration of the Nevada college savings program and the

5-5  trust fund.

5-6    Sec. 14.  NRS 353B.010 is hereby amended to read as follows:

5-7    353B.010  As used in [this chapter,] NRS 353B.010 to 353B.810,

5-8  inclusive, unless the context otherwise requires, the words and terms

5-9  defined in NRS [353B.020] 353B.030 to 353B.070, inclusive, have the

5-10  meanings ascribed to them in those sections.

5-11    Sec. 15.  NRS 353B.070 is hereby amended to read as follows:

5-12    353B.070  “Trust fund” means the Nevada higher education prepaid

5-13  tuition trust fund created pursuant to NRS 353B.140.

5-14    Sec. 16.  NRS 353B.090 is hereby amended to read as follows:

5-15    353B.090  1.  The board shall develop [a] the Nevada higher

5-16  education prepaid tuition program for the prepayment of tuition at a

5-17  guaranteed rate which is established based on the annual actuarial study

5-18  required pursuant to NRS 353B.190 for undergraduate studies at a

5-19  university or community college that is a member of the system.

5-20    2.  The board shall [establish rules] adopt regulations for the

5-21  implementation of the program, including, without limitation, [rules]

5-22  regulations setting forth requirements for residency, a limit on the number

5-23  of qualified beneficiaries, the termination, withdrawal and transfer of

5-24  money paid into the trust fund, the time within which the money paid into

5-25  the trust fund must be used, and payment schedules.

5-26    Sec. 17.  NRS 353B.140 is hereby amended to read as follows:

5-27    353B.140  1.  The Nevada higher education prepaid tuition trust fund

5-28  is hereby created within the state treasury to allow the cost of tuition to be

5-29  paid in advance of enrollment at an institution of higher education.

5-30    2.  The trust fund consists of payments received pursuant to:

5-31    (a) A prepaid tuition contract;

5-32    (b) A bequest, endowment or grant from the Federal Government; or

5-33    (c) Any other public or private source of money.

5-34    3.  Money in the trust fund that is not expended during any biennium

5-35  does not revert to the state general fund at any time.

5-36    Sec. 18.  NRS 353B.150 is hereby amended to read as follows:

5-37    353B.150  1.  The state treasurer shall administer the trust fund.

5-38    2.  As administrator of the trust fund, the state treasurer:

5-39    (a) Shall maintain the financial records of the trust fund;

5-40    (b) Shall invest the property in the trust fund pursuant to the policies for

5-41  investment established by the board pursuant to NRS 353B.160;

5-42    (c) Shall manage any account associated with the trust fund;

5-43    (d) Shall maintain any instruments that evidence investments made with

5-44  property from the trust fund;

5-45    (e) May contract with vendors for any good or service that is necessary

5-46  to carry out the provisions of [this chapter;] NRS 353B.010 to 353B.810,

5-47  inclusive;

6-1    (f) May hire such employees as are necessary to carry out the provisions

6-2  of [this chapter,] NRS 353B.010 to 353B.810, inclusive, who must be paid

6-3  out of the assets of the trust fund; and

6-4    (g) May perform any other duties necessary to administer the trust fund.

6-5    Sec. 19.  NRS 353B.160 is hereby amended to read as follows:

6-6    353B.160  1.  The board shall create a comprehensive plan that

6-7  specifies the policies for investment which the state treasurer shall follow

6-8  in his administration of the trust fund.

6-9    2.  The board may authorize the state treasurer to invest the property of

6-10  the trust fund in:

6-11    (a) A bond, note, certificate or other general obligation of the State of

6-12  Nevada, or of a county, city, general improvement district or school district

6-13  of the State of Nevada.

6-14    (b) A corporate bond of a corporation created by or existing under the

6-15  laws of the United States or of a state, district or territory of the United

6-16  States with a rating not lower than “A” or its equivalent by a nationally

6-17  recognized rating service. The total amount invested in such bonds must

6-18  not exceed 50 percent of the book value of the total fixed income

6-19  investments of the trust fund.

6-20    (c) Commercial paper of a corporation created by or existing under the

6-21  laws of the United States or of a state, district or territory of the United

6-22  States or of a wholly owned subsidiary of such a corporation with a rating

6-23  not lower than A-3 or P-3 by a nationally recognized rating service.

6-24    (d) A bond, note, debenture or other valid obligation that is issued by

6-25  the Treasury of the United States.

6-26    (e) A bond, note, debenture or other security that is issued by an agency

6-27  or instrumentality of the United States or that is fully guaranteed by the

6-28  United States in:

6-29      (1) The Federal Farm Credit Bank;

6-30      (2) The Federal National Mortgage Association;

6-31      (3) The Federal Home Loan Bank;

6-32      (4) The Federal Home Loan Mortgage Corporation; or

6-33      (5) The Government National Mortgage Association.

6-34    (f) A bond, note, debenture or other security in the Student Loan

6-35  Marketing Association, regardless of whether it is guaranteed by the

6-36  United States.

6-37    (g) Collateralized mortgage obligations that are rated “AAA” or its

6-38  equivalent by a nationally recognized rating service.

6-39    (h) Asset-backed securities that are rated “AAA” or its equivalent by a

6-40  nationally recognized rating service.

6-41    (i) Money market mutual funds that:

6-42      (1) Are registered with the Securities and Exchange Commission;

6-43      (2) Are rated by a nationally recognized rating service as “A” or its

6-44  equivalent, or better; and

6-45      (3) Invest only in securities issued by the Federal Government or

6-46  agencies of the Federal Government or in repurchase agreements fully

6-47  collateralized by such securities.

6-48  The total dollar amount invested in such mutual funds must not exceed 20

6-49  percent of the total dollar amount of the trust fund that is invested.

7-1    (j) Common or preferred stock of a corporation created by or existing

7-2  under the laws of the United States or of a state, district or territory of the

7-3  United States, if:

7-4       (1) The stock of the corporation is:

7-5          (I) Listed on a national stock exchange; or

7-6          (II) Traded in the over-the-counter market, if the price quotations

7-7  for the over-the-counter stock are quoted by the National Association of

7-8  Securities Dealers Automated Quotations System [(NASDAQ);] ,

7-9  NASDAQ;

7-10      (2) The outstanding shares of the corporation have a total market

7-11  value of not less than $50,000,000;

7-12      (3) The maximum investment in stock is not greater than 60 percent

7-13  of the book value of the total investments of the trust fund;

7-14      (4) Except for investments made pursuant to paragraph (m), the

7-15  amount of an investment in a single corporation is not greater than 3

7-16  percent of the book value of the assets of the trust fund; and

7-17      (5) Except for investments made pursuant to paragraph (m), the total

7-18  amount of shares owned by the trust fund is not greater than 5 percent of

7-19  the outstanding stock of a single corporation.

7-20    (k) A covered call or put option on securities that are traded on one or

7-21  more of the regulated exchanges in the United States.

7-22    (l) A pooled or commingled real estate fund or a real estate security that

7-23  is managed by a corporate trustee or by an investment advisory firm that is

7-24  registered with the Securities and Exchange Commission, either of which

7-25  may be retained by the board as an investment manager. The shares and the

7-26  pooled or commingled fund must be held in trust. The total book value of

7-27  an investment made under this paragraph must not at any time be greater

7-28  than 5 percent of the total book value of all investments of the trust fund.

7-29    (m) Mutual funds or common trust funds that consist of any

7-30  combination of the investments listed in paragraphs (a) to (l), inclusive.

7-31    3.  The state treasurer shall exercise the standard of care in investing

7-32  the property of the fund that a person of prudence, discretion and

7-33  intelligence would exercise in the management of his own affairs, given the

7-34  prevailing circumstances, not in regard to speculation but rather to the

7-35  permanent disposition of the property, considering the potential income

7-36  from and the probable safety of his capital.

7-37    4.  Subject to the terms, conditions, limitations and restrictions set forth

7-38  in this section, the state treasurer may sell, assign, transfer or dispose of the

7-39  property and investments of the trust fund upon the approval of a majority

7-40  of the board.

7-41    5.  The assets of the trust fund:

7-42    (a) Must be maintained, invested and expended solely for the purposes

7-43  of [this chapter;] NRS 353B.010 to 353B.810, inclusive; and

7-44    (b) Must not be loaned, transferred or otherwise used for a purpose

7-45  other than the purposes of [this chapter.] NRS 353B.010 to 353B.810,

7-46  inclusive.

7-47    6.  The state treasurer shall credit any income derived from an

7-48  investment or a gain from a sale or exchange of an investment to the trust

7-49  fund.

8-1    7.  The state treasurer shall acquire each investment for the trust fund at

8-2  a price not to exceed the prevailing market value for such an investment.

8-3    8.  Each investment in the trust fund must be clearly marked to indicate

8-4  ownership by the trust fund.

8-5    9.  The state treasurer, an employee of the state treasurer, or a member

8-6  or employee of the board shall not:

8-7    (a) Have a direct or indirect interest in the income, gain or profit of an

8-8  investment that the state treasurer makes;

8-9    (b) Receive pay or emolument for his services in connection with an

8-10  investment that the state treasurer makes; or

8-11    (c) Become an endorser, surety or obligor for money that is borrowed

8-12  from the trust fund.

8-13    10.  If the annual actuarial study performed pursuant to NRS 353B.190

8-14  reveals that there is insufficient money to ensure the actuarial soundness of

8-15  the trust fund, the board shall modify the terms of subsequent prepaid

8-16  tuition contracts.

8-17    11.  The terms, conditions, limitations and restrictions regarding

8-18  investments of the trust fund listed in this section apply only at the time an

8-19  investment is originally acquired and must not be construed to require the

8-20  liquidation of an investment at any time.

8-21    Sec. 20.  NRS 353B.810 is hereby amended to read as follows:

8-22    353B.810  The provisions of [this chapter] NRS 353B.010 to

8-23  353B.810, inclusive, must not be construed as a promise or guarantee that

8-24  a qualified beneficiary:

8-25    1.  Will be admitted to, allowed to continue enrollment at or graduated

8-26  from a community college or university; or

8-27    2.  Will have the full cost of his tuition paid at a community college,

8-28  college or university that is not a member of the system.

8-29    Sec. 21.  Section 25 of chapter 687, Statutes of Nevada 1997, at page

8-30  3489, is hereby amended to read as follows:

8-31    Sec. 25.  [1.] This act becomes effective on October 1, 1997 . [,

8-32  and, except as otherwise provided in subsection 2, expires by

8-33  limitation when the board notifies the governor pursuant to subsection

8-34  1 of section 24 of this act that it has performed all duties and

8-35  obligations pursuant to any prepaid tuition contract entered into before

8-36  July 1, 2001.

8-37    2.  Sections 12, 13 and 14 of this act expire by limitation on July

8-38  1, 2001.]

8-39    Sec. 22.  Section 5 of chapter 141, Statutes of Nevada 1999, at page

8-40  803, is hereby amended to read as follows:

8-41    Sec. 5.  [1.]  This act becomes effective upon passage and

8-42  approval.

8-43    [2.  The amendatory provisions of section 1 of this act expire by

8-44  limitation when the board notifies the governor pursuant to subsection

8-45  1 of section 24 of chapter 687, Statutes of Nevada 1997, that it has

8-46  performed all duties and obligations pursuant to any prepaid tuition

8-47  contract entered into before July 1, 2001.]

 

 

9-1    Sec. 23.  1.  NRS 353B.020 and 353B.080 are hereby repealed.

9-2    2.  Section 24 of chapter 687, Statutes of Nevada 1997, at page 3489, is

9-3  hereby repealed.

9-4    Sec. 24.  This act becomes effective upon passage and approval.

 

9-5  TEXT OF REPEALED SECTIONS

 

9-6    353B.020  “Board” defined.  “Board” means the board of trustees

9-7   created pursuant to NRS 353B.080.

9-8    353B.080  Creation; membership; chairman; compensation.

9-9    1.  There is hereby created a board of trustees.

9-10    2.  The board consists of five members composed of:

9-11    (a) The state treasurer, who may name a designee to serve on the board

9-12   on his behalf.

9-13    (b) The director of the department of administration, who may name a

9-14   designee to serve on the board on his behalf.

9-15    (c) The chancellor of the system, who may name a designee to serve on

9-16   the board on his behalf.

9-17    (d) Two members appointed by the governor. A member who is

9-18   appointed by the governor must possess knowledge, skill and experience

9-19   in the field of:

9-20      (1) Accounting;

9-21      (2) Finance;

9-22      (3) Investment management; or

9-23      (4) Marketing.

9-24    3.  A member of the board who is appointed by the governor:

9-25    (a) Serves for a term of 4 years;

9-26    (b) Except as otherwise provided in paragraph (c), may be reappointed

9-27   by the governor; and

9-28    (c) Except as otherwise provided in this paragraph, may serve for only

9-29   two terms. A member who is appointed to fill a vacancy in an unexpired

9-30   term that is not longer than 3 years may serve two terms in addition to the

9-31   unexpired term.

9-32    4.  The governor shall designate a member of the board to serve as the

9-33   initial chairman of the board. Thereafter, the board shall annually elect a

9-34   chairman from its members.

9-35    5.  Each member of the board serves without compensation, except that

9-36   each member is entitled to receive:

9-37    (a) The per diem allowance and travel expenses provided for state

9-38   officers and employees generally; and

9-39    (b) Reimbursement for any other actual and reasonable expense

9-40   incurred while performing his duties.

9-41    Section 24 of chapter 687, Statutes of Nevada 1997:

9-42    Sec. 24.  1.  The board shall notify the governor when it has

9-43   performed all duties and obligations pursuant to any prepaid tuition

9-44   contract entered into before July 1, 2001.

10-1    2.  Notwithstanding the provisions of subsection 3 of section 9 of

10-2  this act, when the board notifies the governor pursuant to subsection 1

10-3   that it has performed all duties and obligations pursuant to any

10-4   prepaid tuition contract entered into before July 1, 2001, all assets of

10-5   the trust fund revert to the state general fund.

 

10-6  H