(REPRINTED WITH ADOPTED AMENDMENTS)
SECOND REPRINT A.B. 554
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.
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EXPLANATION
– Matter in bolded italics is new; matter
between brackets [omitted material] is material to be omitted.
Green numbers along left margin indicate location on the printed bill (e.g., 5-15 indicates page 5, line 15).
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 9. All contracts authorized by this section are subject to the
4-48 requirements of chapter 333 of NRS, except that:
5-1 (a) Notwithstanding the provisions of subsection 1 of NRS 333.165 to
5-2 the contrary, the board shall contract for all services regardless of the
5-3 estimated value of the services; and
5-4 (b) Notwithstanding the provisions of NRS 333.335 to the contrary,
5-5 each proposal received by the board concerning services must be
5-6 evaluated by the board at a public meeting and each contract for services
5-7 must be awarded by the board at a public meeting.
5-8 Sec. 12. Savings trust accounts and agreements entered into
5-9 pursuant to sections 6 to 13, inclusive, of this act are not guaranteed by
5-10 the full faith and credit of the State of Nevada.
5-11 Sec. 13. The board may delegate to the state treasurer any of its
5-12 administrative powers and duties specified in sections 6 to 13, inclusive,
5-13 of this act, if the board determines that such delegation is necessary for
5-14 the efficient and effective administration of the Nevada college savings
5-15 program and the trust fund.
5-16 Sec. 14. NRS 353B.010 is hereby amended to read as follows:
5-17 353B.010 As used in [this chapter,] NRS 353B.010 to 353B.810,
5-18 inclusive, unless the context otherwise requires, the words and terms
5-19 defined in NRS [353B.020] 353B.030 to 353B.070, inclusive, have the
5-20 meanings ascribed to them in those sections.
5-21 Sec. 15. NRS 353B.070 is hereby amended to read as follows:
5-22 353B.070 “Trust fund” means the Nevada higher education prepaid
5-23 tuition trust fund created pursuant to NRS 353B.140.
5-24 Sec. 16. NRS 353B.090 is hereby amended to read as follows:
5-25 353B.090 1. The board shall develop [a] the Nevada higher
5-26 education prepaid tuition program for the prepayment of tuition at a
5-27 guaranteed rate which is established based on the annual actuarial study
5-28 required pursuant to NRS 353B.190 for undergraduate studies at a
5-29 university or community college that is a member of the system.
5-30 2. The board shall [establish rules] adopt regulations for the
5-31 implementation of the program, including, without limitation, [rules]
5-32 regulations setting forth requirements for residency, a limit on the number
5-33 of qualified beneficiaries, the termination, withdrawal and transfer of
5-34 money paid into the trust fund, the time within which the money paid into
5-35 the trust fund must be used, and payment schedules.
5-36 Sec. 17. NRS 353B.140 is hereby amended to read as follows:
5-37 353B.140 1. The Nevada higher education prepaid tuition trust fund
5-38 is hereby created within the state treasury to allow the cost of tuition to be
5-39 paid in advance of enrollment at an institution of higher education.
5-40 2. The trust fund consists of payments received pursuant to:
5-41 (a) A prepaid tuition contract;
5-42 (b) A bequest, endowment or grant from the Federal Government; or
5-43 (c) Any other public or private source of money.
5-44 3. Money in the trust fund that is not expended during any biennium
5-45 does not revert to the state general fund at any time.
5-46 Sec. 18. NRS 353B.150 is hereby amended to read as follows:
5-47 353B.150 1. The state treasurer shall administer the trust fund.
5-48 2. As administrator of the trust fund, the state treasurer:
5-49 (a) Shall maintain the financial records of the trust fund;
6-1 (b) Shall invest the property in the trust fund pursuant to the policies for
6-2 investment established by the board pursuant to NRS 353B.160;
6-3 (c) Shall manage any account associated with the trust fund;
6-4 (d) Shall maintain any instruments that evidence investments made with
6-5 property from the trust fund;
6-6 (e) May contract with vendors for any good or service that is necessary
6-7 to carry out the provisions of [this chapter;] NRS 353B.010 to 353B.810,
6-8 inclusive;
6-9 (f) May hire such employees as are necessary to carry out the provisions
6-10 of [this chapter,] NRS 353B.010 to 353B.810, inclusive, who must be paid
6-11 out of the assets of the trust fund; and
6-12 (g) May perform any other duties necessary to administer the trust fund.
6-13 Sec. 19. NRS 353B.160 is hereby amended to read as follows:
6-14 353B.160 1. The board shall create a comprehensive plan that
6-15 specifies the policies for investment which the state treasurer shall follow
6-16 in his administration of the trust fund.
6-17 2. The board may authorize the state treasurer to invest the property of
6-18 the trust fund in:
6-19 (a) A bond, note, certificate or other general obligation of the State of
6-20 Nevada, or of a county, city, general improvement district or school district
6-21 of the State of Nevada.
6-22 (b) A corporate bond of a corporation created by or existing under the
6-23 laws of the United States or of a state, district or territory of the United
6-24 States with a rating not lower than “A” or its equivalent by a nationally
6-25 recognized rating service. The total amount invested in such bonds must
6-26 not exceed 50 percent of the book value of the total fixed income
6-27 investments of the trust fund.
6-28 (c) Commercial paper of a corporation created by or existing under the
6-29 laws of the United States or of a state, district or territory of the United
6-30 States or of a wholly owned subsidiary of such a corporation with a rating
6-31 not lower than A-3 or P-3 by a nationally recognized rating service.
6-32 (d) A bond, note, debenture or other valid obligation that is issued by
6-33 the Treasury of the United States.
6-34 (e) A bond, note, debenture or other security that is issued by an agency
6-35 or instrumentality of the United States or that is fully guaranteed by the
6-36 United States in:
6-37 (1) The Federal Farm Credit Bank;
6-38 (2) The Federal National Mortgage Association;
6-39 (3) The Federal Home Loan Bank;
6-40 (4) The Federal Home Loan Mortgage Corporation; or
6-41 (5) The Government National Mortgage Association.
6-42 (f) A bond, note, debenture or other security in the Student Loan
6-43 Marketing Association, regardless of whether it is guaranteed by the
6-44 United States.
6-45 (g) Collateralized mortgage obligations that are rated “AAA” or its
6-46 equivalent by a nationally recognized rating service.
6-47 (h) Asset-backed securities that are rated “AAA” or its equivalent by a
6-48 nationally recognized rating service.
6-49 (i) Money market mutual funds that:
7-1 (1) Are registered with the Securities and Exchange Commission;
7-2 (2) Are rated by a nationally recognized rating service as “A” or its
7-3 equivalent, or better; and
7-4 (3) Invest only in securities issued by the Federal Government or
7-5 agencies of the Federal Government or in repurchase agreements fully
7-6 collateralized by such securities.
7-7 The total dollar amount invested in such mutual funds must not exceed 20
7-8 percent of the total dollar amount of the trust fund that is invested.
7-9 (j) Common or preferred stock of a corporation created by or existing
7-10 under the laws of the United States or of a state, district or territory of the
7-11 United States, if:
7-12 (1) The stock of the corporation is:
7-13 (I) Listed on a national stock exchange; or
7-14 (II) Traded in the over-the-counter market, if the price quotations
7-15 for the over-the-counter stock are quoted by the National Association of
7-16 Securities Dealers Automated Quotations System [(NASDAQ);] ,
7-17 NASDAQ;
7-18 (2) The outstanding shares of the corporation have a total market
7-19 value of not less than $50,000,000;
7-20 (3) The maximum investment in stock is not greater than 60 percent
7-21 of the book value of the total investments of the trust fund;
7-22 (4) Except for investments made pursuant to paragraph (m), the
7-23 amount of an investment in a single corporation is not greater than 3
7-24 percent of the book value of the assets of the trust fund; and
7-25 (5) Except for investments made pursuant to paragraph (m), the total
7-26 amount of shares owned by the trust fund is not greater than 5 percent of
7-27 the outstanding stock of a single corporation.
7-28 (k) A covered call or put option on securities that are traded on one or
7-29 more of the regulated exchanges in the United States.
7-30 (l) A pooled or commingled real estate fund or a real estate security that
7-31 is managed by a corporate trustee or by an investment advisory firm that is
7-32 registered with the Securities and Exchange Commission, either of which
7-33 may be retained by the board as an investment manager. The shares and the
7-34 pooled or commingled fund must be held in trust. The total book value of
7-35 an investment made under this paragraph must not at any time be greater
7-36 than 5 percent of the total book value of all investments of the trust fund.
7-37 (m) Mutual funds or common trust funds that consist of any
7-38 combination of the investments listed in paragraphs (a) to (l), inclusive.
7-39 3. The state treasurer shall exercise the standard of care in investing
7-40 the property of the fund that a person of prudence, discretion and
7-41 intelligence would exercise in the management of his own affairs, given the
7-42 prevailing circumstances, not in regard to speculation but rather to the
7-43 permanent disposition of the property, considering the potential income
7-44 from and the probable safety of his capital.
7-45 4. Subject to the terms, conditions, limitations and restrictions set forth
7-46 in this section, the state treasurer may sell, assign, transfer or dispose of the
7-47 property and investments of the trust fund upon the approval of a majority
7-48 of the board.
8-1 5. The assets of the trust fund:
8-2 (a) Must be maintained, invested and expended solely for the purposes
8-3 of [this chapter;] NRS 353B.010 to 353B.810, inclusive; and
8-4 (b) Must not be loaned, transferred or otherwise used for a purpose
8-5 other than the purposes of [this chapter.] NRS 353B.010 to 353B.810,
8-6 inclusive.
8-7 6. The state treasurer shall credit any income derived from an
8-8 investment or a gain from a sale or exchange of an investment to the trust
8-9 fund.
8-10 7. The state treasurer shall acquire each investment for the trust fund at
8-11 a price not to exceed the prevailing market value for such an investment.
8-12 8. Each investment in the trust fund must be clearly marked to indicate
8-13 ownership by the trust fund.
8-14 9. The state treasurer, an employee of the state treasurer, or a member
8-15 or employee of the board shall not:
8-16 (a) Have a direct or indirect interest in the income, gain or profit of an
8-17 investment that the state treasurer makes;
8-18 (b) Receive pay or emolument for his services in connection with an
8-19 investment that the state treasurer makes; or
8-20 (c) Become an endorser, surety or obligor for money that is borrowed
8-21 from the trust fund.
8-22 10. If the annual actuarial study performed pursuant to NRS 353B.190
8-23 reveals that there is insufficient money to ensure the actuarial soundness of
8-24 the trust fund, the board shall modify the terms of subsequent prepaid
8-25 tuition contracts.
8-26 11. The terms, conditions, limitations and restrictions regarding
8-27 investments of the trust fund listed in this section apply only at the time an
8-28 investment is originally acquired and must not be construed to require the
8-29 liquidation of an investment at any time.
8-30 Sec. 20. NRS 353B.810 is hereby amended to read as follows:
8-31 353B.810 The provisions of [this chapter] NRS 353B.010 to
8-32 353B.810, inclusive, must not be construed as a promise or guarantee that
8-33 a qualified beneficiary:
8-34 1. Will be admitted to, allowed to continue enrollment at or graduated
8-35 from a community college or university; or
8-36 2. Will have the full cost of his tuition paid at a community college,
8-37 college or university that is not a member of the system.
8-38 Sec. 21. Section 25 of chapter 687, Statutes of Nevada 1997, at page
8-39 3489, is hereby amended to read as follows:
8-40 Sec. 25. [1.] This act becomes effective on October 1, 1997 . [,
8-41 and, except as otherwise provided in subsection 2, expires by
8-42 limitation when the board notifies the governor pursuant to subsection
8-43 1 of section 24 of this act that it has performed all duties and
8-44 obligations pursuant to any prepaid tuition contract entered into before
8-45 July 1, 2001.
8-46 2. Sections 12, 13 and 14 of this act expire by limitation on
8-47 July 1, 2001.]
9-1 Sec. 22. Section 5 of chapter 141, Statutes of Nevada 1999, at page
9-2 803, is hereby amended to read as follows:
9-3 Sec. 5. [1.] This act becomes effective upon passage and
9-4 approval.
9-5 [2. The amendatory provisions of section 1 of this act expire by
9-6 limitation when the board notifies the governor pursuant to subsection
9-7 1 of section 24 of chapter 687, Statutes of Nevada 1997, that it has
9-8 performed all duties and obligations pursuant to any prepaid tuition
9-9 contract entered into before July 1, 2001.]
9-10 Sec. 23. 1. NRS 353B.020 and 353B.080 are hereby repealed.
9-11 2. Section 24 of chapter 687, Statutes of Nevada 1997, at page 3489, is
9-12 hereby repealed.
9-13 Sec. 24. This act becomes effective upon passage and approval.
9-14 TEXT OF REPEALED SECTIONS
9-15 353B.020 “Board” defined. “Board” means the board of trustees
9-16 created pursuant to NRS 353B.080.
9-17 353B.080 Creation; membership; chairman; compensation.
9-18 1. There is hereby created a board of trustees.
9-19 2. The board consists of five members composed of:
9-20 (a) The state treasurer, who may name a designee to serve on the board
9-21 on his behalf.
9-22 (b) The director of the department of administration, who may name a
9-23 designee to serve on the board on his behalf.
9-24 (c) The chancellor of the system, who may name a designee to serve on
9-25 the board on his behalf.
9-26 (d) Two members appointed by the governor. A member who is
9-27 appointed by the governor must possess knowledge, skill and experience in
9-28 the field of:
9-29 (1) Accounting;
9-30 (2) Finance;
9-31 (3) Investment management; or
9-32 (4) Marketing.
9-33 3. A member of the board who is appointed by the governor:
9-34 (a) Serves for a term of 4 years;
9-35 (b) Except as otherwise provided in paragraph (c), may be reappointed
9-36 by the governor; and
9-37 (c) Except as otherwise provided in this paragraph, may serve for only
9-38 two terms. A member who is appointed to fill a vacancy in an unexpired
9-39 term that is not longer than 3 years may serve two terms in addition to the
9-40 unexpired term.
9-41 4. The governor shall designate a member of the board to serve as the
9-42 initial chairman of the board. Thereafter, the board shall annually elect a
9-43 chairman from its members.
9-44 5. Each member of the board serves without compensation, except that
9-45 each member is entitled to receive:
10-1 (a) The per diem allowance and travel expenses provided for state
10-2 officers and employees generally; and
10-3 (b) Reimbursement for any other actual and reasonable expense
10-4 incurred while performing his duties.
10-5 Section 24 of chapter 687, Statutes of Nevada 1997:
10-6 Sec. 24. 1. The board shall notify the governor when it has
10-7 performed all duties and obligations pursuant to any prepaid tuition
10-8 contract entered into before July 1, 2001.
10-9 2. Notwithstanding the provisions of subsection 3 of section 9 of
10-10 this act, when the board notifies the governor pursuant to subsection 1
10-11 that it has performed all duties and obligations pursuant to any prepaid
10-12 tuition contract entered into before July 1, 2001, all assets of the trust
10-13 fund revert to the state general fund.
10-14 H