No. 28062 (Repeal): R765-685. Utah Educational Savings Plan Trust

DAR File No.: 28062
Filed: 07/01/2005, 10:12
Received by: NL

 

RULE ANALYSIS

Purpose of the rule or reason for the change:

This rule is being repealed because it conflicts with Title 53B, Chapter 8a, of the Utah Code, which was updated with the passage of H.B. 102 in the 2005 General Session. In addition, because the policies for the Utah Educational Savings Plan (UESP) are directed to account owners who have signed a contractual agreement with UESP such policies are not appropriate to be in an administrative rule. (DAR NOTE: H.B. 102 is found at UT L 2005 Ch 109, and was effective 03/16/2005.)

 

Summary of the rule or change:

This rule is repealed in its entirety.

 

State statutory or constitutional authorization for this rule:

Title 53B, Chapter 8a

 

Anticipated cost or savings to:

the state budget:

The changes to this rule will have no fiscal impact on the department's or the state's budget. UESP is a trust fund containing investments of account owners. No state funds are involved. The program is operated using the fees charged to account owners that voluntarily enroll.

 

local governments:

The changes to this rule will have no fiscal impact on local government. UESP is a trust fund containing investments of account owners. No local government funds are involved. The program is operated using the fees charged to account owners that voluntarily enroll.

 

other persons:

The changes to this rule will have no fiscal impact on other persons. UESP is a trust fund containing investments of account owners. The program is operated using the fees charged to account owners that voluntarily enroll.

 

Compliance costs for affected persons:

The only costs would be those incurred by an interested party in accessing UESP information. There should be limited costs because the information is available in multiple ways.

 

Comments by the department head on the fiscal impact the rule may have on businesses:

The only costs would be those incurred by an interested party in accessing UESP information. There should be limited costs because the information is available in multiple ways. Richard Kendall, Commission Chair

 

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Regents (Board Of)
Administration
BOARD OF REGENTS BUILDING, THE GATEWAY
60 SOUTH 400 WEST
SALT LAKE CITY UT 84101-1284

 

Direct questions regarding this rule to:

Becky Lang at the above address, by phone at 801-366-8447, by FAX at 801-321-7299, or by Internet E-mail at [e-mail]

 

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

08/15/2005

 

This rule may become effective on:

08/16/2005

 

Authorized by:

Richard E. Kendell, Commissioner

 

 

RULE TEXT

R765. Regents (Board of), Administration.

[R765-685. Utah Educational Savings Plan Trust.

R765-685-1. Purpose.

To provide rules for the administration and operation of the Utah Educational Savings Plan Trust established by Title 53B, Chapter 8a, of the Utah Code Annotated 1953.

 

R765-685-2. References.

2.1. Title 53B, Chapter 8a, Utah Code Annotated 1953

2.2. Title 67, Chapter 16, Utah Code Annotated 1953

2.3. Title 51, Chapter 7, Utah Code Annotated 1953

 

R765-685-3. Definitions.

Many terms used in this rule are defined in Section 53B-8a-102. In addition, the following terms are defined by this rule.

3.1. The term "academic period" shall mean one semester or one quarter or an equivalent period for a vocational technical institution.

3.2. The word "account" shall denote the account in the program fund established and maintained under the trust for a beneficiary.

3.3. The term "account balance" shall mean the fair market value of an account as of the accounting date.

3.4. The term "accounting date" shall mean the date, not later than the last business day of each quarter as determined by the program administrator.

3.5. The term "administrative fee or charge" shall mean a fee charged by the trust authorized by 53B-8a-103(k), consisting of (i) an annual account maintenance fee payable to the administrative fund, deducted from the account assets held under the participation agreements of participants (but not deducted from the account assets of participants selecting option 1), not to exceed $50 annually; and (ii) a daily charge deducted from the assets of participants (but not charged to accounts of participants selecting option 1) in the program fund at a rate equivalent to an annual effective rate of not more than 0.50% ,no more than 0.25% of which shall be payable to the administrative fund, and no more than 0.25% of which shall be payable to the investment advisor for the trust.

3.6. The term "dependent person" shall mean a person who is unable to meet all of the criteria listed in subsection 3.8 of this rule.

3.7. The term "domicile" shall mean a person's true, fixed and permanent home. It is the place where the person intends to remain, and to which the person expects to return without intending to establish a new domicile elsewhere.

3.8. The term "independent person" shall mean a person who meets all of the following criteria. An independent person is one:

3.8.1. whose parent has not claimed such person as a dependent on federal or state income tax returns for the tax year preceding the date of a request to establish a vested participation agreement;

3.8.2. who demonstrates no financial dependence upon parent(s); and

3.8.3. whose parents' income is not taken into account by any private or governmental agency furnishing educational financial assistance to the person, including scholarships, loans, and other assistance.

3.9. "Investment options" shall mean the investment options available for selection by a participant at the time of enrollment or change of option. Investment risk under the options ranges from conservative to most aggressive. There are no guarantees regarding moneys invested under any option, either as to earnings or as to return of principal. The value of each participant account depends on the performance of the investments selected by the trust. Each participant assumes the investment risks associated with the investment option selected. Once an investment option is selected, a participant may not change to another investment option unless authorized by the Internal Revenue Service or Treasury as being in compliance with Section 529 of the Internal Revenue Code.

3.10. "Notice to Delay Trust Benefits" shall mean the form which a participant submits to the program administrator of the trust to delay benefits under a participation agreement.

3.11. "Notice to Adjust Payments" shall mean the form which a participant submits to the program administrator of the trust to change the payment amount or payment schedule of the participation agreement.

3.12. "Request to Substitute Beneficiary" shall mean the form which a participant submits to the program administrator of the trust to request the substitution of a beneficiary.

3.13. "Notice to Terminate Agreement" shall mean the form which a participant submits to the program administrator of the trust to terminate a participation agreement under the trust.

3.14. "Notice to Use Trust Benefits" shall mean the form which a participant submits to the program administrator of the trust to notify the trust of the date benefits are to begin and level of benefits to be paid.

3.15. The term "parent" shall mean one of the following:

3.15.1. A person's father or mother; or

3.15.2. A court-appointed legal guardian. The term "parent" shall not apply if the guardianship has been established primarily for the purpose of conferring the status of resident on a person.

3.16. The word "payments" shall denote the money paid by the participant to the trust under the participation agreement.

3.17. The term "public treasurer" shall mean the Assistant Commissioner for Student Loan Finance who has the responsibility for the safekeeping and investment of all trust funds.

3.18. The term "qualified proprietary school approved by the board" shall mean a proprietary school which is fully accredited by a regional accrediting association or commission, the Accrediting Commission for Career Schools and Colleges of Technology, or the Accrediting Council for Independent Colleges and Schools, for which the student loan cohort default rate most recently published by the U.S. Department of Education is less than 20 percent, and which has not been placed on a reimbursement basis for financial aid programs by the U.S. Department of Education or under any limitation, suspension, or termination action or letter of credit requirement from the U.S. Department of Education or a guaranty agency under the Federal Family Education Loan Program.

 

R765-685-4. Participant Eligibility.

Purpose - Section 53B-8a-106 provides that the trust may enter into participation agreements with participants to effectuate the purposes, objectives and provisions of the trust. This rule establishes the eligibility criteria for a participant.

4.1. Participant Eligibility - A participant may be a resident of any state.

4.2. Participation Agreement - A participant shall execute a participation agreement with the program administrator that specifies the terms and conditions under which the participant shall participate in the trust.

4.3. Valid Social Security Number - A participant shall, on signing a participation agreement, provide the program administrator with his or her valid social security number.

 

R765-685-5. Beneficiary Eligibility.

Purpose - Section 53B-8a-106 provides that a beneficiary of a participation agreement must be designated from date of birth through age 18 for the participant to receive Utah income tax benefits. This rule establishes the eligibility criteria for a beneficiary.

5.1. Beneficiary Eligibility - A beneficiary may be a resident of any state and may be any age. However, for a participant to subtract allowable investments from federal taxable income on a Utah income tax return, on the day the participation agreement is executed, the beneficiary must be younger than 19 years of age.

5.2. Proof of Age - A participant shall, on signing a participation agreement, provide the program administrator with proof of the beneficiary's age, in the form of a birth certificate or such other form as the program administrator may require.

5.3. Valid Social Security Number - A participant shall, on signing a participation agreement, provide the program administrator a valid social security number of the beneficiary.

 

R765-685-6. Payments and Payment Schedules.

Purpose - Section 53B-8a-106 states that participant agreements shall require participants to agree to invest a specific amount of money in the trust for a specific period of time for the benefit of a specific beneficiary, not to exceed an amount determined by the board and not to exceed total estimated higher education costs as determined by the board. This rule provides for implementation of this provision.

6.1. Payment Schedule - A participant must specify a schedule for making payments according to a participation agreement. Acceptable payment schedules are, 1) weekly, 2) bi-weekly, 3) monthly, 4) annually, and 5) other.

6.2. Payment - A participant must specify a payment amount to be paid according to the payment schedule chosen by the participant. The specified payment amount must be at least twenty-five dollars.

6.3. Maximum Payments - The total of all payments made on behalf of a beneficiary into this trust and the supplemental trust enacted in Section 53B-8b may not exceed the cost of qualified higher education expenses for four years of undergraduate plus three years of graduate enrollment at the highest cost public or private institution authorized under the plan. Payments in excess of this maximum shall be returned to the participant. The maximum amount of investments that may be subtracted from federal taxable income under Subsection 59-10-114(2)(j) shall be $1,200 for each individual beneficiary for the 1996 calendar year and an amount adjusted annually thereafter to reflect increases in the Consumer Price Index.

6.4. Annual Adjustments - Annual adjustments to the maximum amount of payments allowable under a participation agreement in a given calendar year shall be published by the Trust program administrator prior to the beginning of that year.

6.5. Amendments - Payment amounts and payment schedules may be adjusted by submitting to the program administrator notice to adjust payments. No administrative fee may be charged to participants for such adjustments.

 

R765-685-7. Substitution of Beneficiary.

Purpose - Section 53B-8a-106 provides that beneficiaries may be changed subject to the rules and regulations of the board. This rule establishes the criteria for substituting one beneficiary for another.

7.1. Substitution - A participant may substitute a beneficiary at any time prior to the date of admission of any beneficiary of a participation agreement to an institution of higher education and may transfer funds to another beneficiary account at any time. The substitute beneficiary must be eligible for participation pursuant to section 5 of this rule, and be a member of the family of the beneficiary being substituted as defined in subsection 7.1.1 of this rule.

7.1.1. Member of Family - An individual shall be considered a member of a beneficiary's family only if such individual is:

7.1.1.1. an ancestor of such beneficiary

7.1.1.2. a spouse of such beneficiary

7.1.1.3. a lineal descendant of such beneficiary, of such beneficiary's spouse, or of a parent or grandparent of such beneficiary, or

7.1.1.4. the spouse of any lineal descendant described in subsection 7.1.1.3.

7.1.1.5. For purposes of the preceding sentence, a legal adoption shall be considered as though it establishes a blood relationship between an adopted child and parent.

7.2. Request - A participant may request that a beneficiary be substituted by submitting to the program administrator a request to substitute beneficiary. The request shall accompany evidence, as specified by the program administrator, that the proposed substitute beneficiary is a member of the family of the beneficiary.

 

R765-685-8. Cancellation and Payment of Refunds.

Purpose - Section 53B-8a-108 provides that any participant may cancel a participation agreement at will. This rule establishes the criteria for canceling participation agreements and providing refunds.

8.1. Cancellation - A participant may at any time cancel a participation agreement, without cause, by submitting to the program administrator notice to terminate agreement.

8.2. Payment of Refund - If the participation agreement is canceled, the participant is entitled to a refund. The refund shall be mailed or otherwise sent to the participant within sixty days after receipt by the program administrator of notice to terminate the participation agreement. The amount of the refund shall be the total of all contributions made plus actual investment income (including capital appreciation or depreciation) on the contributions, up to the current account balance as adjusted for any market change.

8.3. Death or Disability of the Beneficiary, Receipt of a Scholarship, or Rollover Distribution - The participant is entitled to a refund of one-hundred percent of all payments made under the participation agreement plus all investment income which has been credited to the participant's account less any market loss and any amount paid by the trust for educational expenses of the beneficiary upon the occurrence of, 1) death of the beneficiary, 2) permanent disability or mental incapacity of the beneficiary, 3) receipt of a scholarship (or allowance or payment described in section 135(d)(1)(B) or (C) of the Internal Revenue Code) by the designated beneficiary to the extent the amount of the distribution does not exceed the amount of the scholarship, allowance, or payment, or 4) a rollover distribution to another program or account qualifying under Section 529 of the Internal Revenue Code. Under such circumstances, no administrative fee shall be charged.

8.3.1. Before a cancellation and refund due to the death of a beneficiary is made, a participant must provide the trust a copy of the beneficiary's death certificate or other proof of death acceptable under state law.

8.3.2. Before a cancellation and refund due to the disability or mental incapacity of a beneficiary is made, a participant must provide to the trust written certification from a qualified and licensed physician that the beneficiary cannot reasonably attend school.

8.3.3. Before a cancellation and refund due to the receipt of a scholarship, allowance or payment, a participant must provide to the trust written proof of the receipt by the beneficiary of a scholarship, allowance or payment and the amount thereof.

8.4. Refunds Reported - Funds that are refunded to a participant pursuant to this section shall be reported to the appropriate taxing authorities for the tax year in which such refund is made.

 

R765-685-9. Vested Participation Agreement.

Purpose - Section 53B-8a-106 provides that the beneficiary of a vested participation agreement shall be considered a Utah resident for tuition purposes. This rule establishes the criteria for determining whether a participation agreement has vested.

9.1. Residency Requirement - An individual who has at any time been a resident of the State of Utah for at least eight continuous years and was designated as a beneficiary under a participation agreement for that entire eight year period, shall be deemed to have a vested participation agreement, even if the beneficiary leaves the state prior to enrollment in an institution of higher education.

9.2. Proof of Residency - At any time following the expiration of the period of eight years of continuous residency by the beneficiary, either the participant or the beneficiary may submit to the program administrator evidence of the residency for the purpose of establishing the vested participation agreement.

9.2.1. Evidence submitted on behalf of a dependent person shall pertain to the domicile of either parent during the claimed period of residency. Evidence submitted on behalf of an independent person shall pertain to the domicile of such person during the claimed period of residency.

9.2.2. The determination of residency shall be based upon verifiable circumstances or actions. No single fact is paramount, and each situation shall be evaluated to identify those facts which are essential to the determination of domicile.

9.2.3. The following facts, although not conclusive shall have probative value in support of a claim for resident classification.

9.2.3.1. Full-time employment in Utah or transfer to an employer in contiguous area while maintaining domicile in Utah.

9.2.3.2. Filing of Utah resident income tax return for each applicable calendar year of claimed residency status.

9.2.3.3. Attendance as a full-time, nonresident student at an out-of-state institution of higher education while determined to be a resident of Utah.

9.2.3.4. Abandonment of a former domicile and establishing domicile in Utah with attendance at an institution of higher education following and only incidental to such change in domicile.

9.2.3.5. Payment of occupational taxes in Utah.

9.2.3.6. Payment of real property taxes in Utah.

9.2.3.7. Payment of intangible personal property taxes in Utah.

9.2.3.8. Ownership of real property in Utah, if the property was used as a residence during the claimed period of residency.

9.2.3.9. Long-term lease of housing during the claimed period of residency.

9.2.3.10. Utah automobile registration during the claimed period of residency.

9.2.3.11. Utah driver's license during the claimed period of residency.

9.2.3.12. Registration as a Utah voter during the claimed period of residency.

9.2.3.13. Corroborating affidavit of a non relative.

9.2.4. The determination of residency shall be based upon verifiable circumstances or actions and authenticated copies of relevant documentation. The program administrator may request additional documentation to clarify circumstances and formulate a decision that considers all relevant facts.

9.3. Non transferability - Although the participant may freely substitute beneficiaries under a participation agreement, the residency status acquired by a beneficiary of a vested participation agreement shall not be used to confer such status on a substitute beneficiary, nor shall the residency of one beneficiary be taken into account in the establishment of a vestment period of substitute beneficiary.

 

R765-685-10. Payment of Benefits.

Purpose - Section 53B-8a-106 provides that payment of benefits provided under participation agreements must begin not later than the first full academic quarter or semester at an institution of higher education following the beneficiary's 22nd birthday or high school graduation, which ever is later, unless the participant notifies the program administrator to the contrary. This rule establishes the procedures for the payment of benefits.

10.1. Distribution of Benefits - For payment of benefits from the trust to begin, the participant shall submit a notice to use trust benefits.

10.2. Delay of Distribution - For payment of benefits to be delayed beyond four months after the beneficiary's 22nd birthday, the participant must submit a notice to delay trust benefits unless the beneficiary was over the age of 18 when the account was established. If no such notice is submitted, the program administrator shall refund money held by the trust on behalf of the participant according to section 8 of this rule.

10.3. Limit on Delay of Distribution - Participants may delay the distribution of trust benefits until the beneficiary's 27th birthday or for ten years from the date the account was established if the beneficiary was over the age of 18 at the date of establishment. If the participant does not submit a notice to use trust benefits on or before beneficiary's 27th birthday or ten years from the date of account establishment and the participant does not elect to roll the funds into another family member account or to substitute a beneficiary, the program administrator shall refund money held by the trust on behalf of the participant according to section 8 of this rule.

10.3.1. The program administrator may waive the age or time limit identified in subsection 10.3 of this rule if, in the judgement of the program administrator, the probability that the beneficiary will attend a higher education institution in the near future is significant.

10.4. Payout Schedule - Upon submission of a notice to use trust benefits, the participant shall specify the level of benefits to be paid. The participant may elect distribution of an allotment of the account balance, calculated by dividing the account balance by the number of academic periods in the beneficiary's program of study, or a higher amount, which shall not exceed the beneficiary's higher education costs for each academic period. The participant may adjust the level of benefits paid in any academic period by notifying the program administrator in writing.

10.5. Duration of Payout - Distribution of benefits shall begin after receipt by the program administrator of notice to use trust benefits and shall continue throughout the beneficiary's period of enrollment at an institution of higher education or until the account balance has been exhausted, whichever occurs first.

10.6. Interruption in Attendance - If following the submission of a notice to use trust benefits, the beneficiary interrupts his or her attendance at an institution of higher education, the participant shall submit a notice to delay trust benefits specifying the period for which trust benefits shall be delayed.

10.7. Unused Benefits - If the beneficiary graduates from an institution of higher education, and a balance remains in the beneficiary's account, the program administrator shall refund the balance of the payments and the earnings from the investments in the program fund remaining in the account to the participant. The program administrator shall make the payment from the program fund within sixty days from the date of the beneficiary's graduation. The refund shall be made unless the beneficiary plans to continue at a higher education institution and the participant submits a completed notice to delay benefits or notice to use trust benefits.

10.8. Refunds Reported - Funds that are refunded to a participant pursuant to this section shall be reported to the appropriate taxing authorities for the tax year in which such refund is made.

 

R765-685-11. Higher Education Costs.

Purpose - Section 53B-8a-101 authorizes the establishment of the Utah Educational Savings Plan Trust to encourage individuals to save for future higher education costs. This rule established the definition of higher education costs.

11.1. Definition - The term "higher education costs" shall mean charges for tuition, fees, books, supplies and equipment required for enrollment or attendance of a designated beneficiary at an institution of higher education.

11.2. Payment of Benefits - The payment of benefits pursuant to subsection 10 of this rule may be made only for higher education costs as defined in subsection 11.1.

 

R765-685-12. Investment Policy.

Purpose - This rule is applicable to all investments by the Utah Educational Savings Plan Trust and to Trustees for funds covered by Trust agreements.

12.1. Investment Objectives - The primary objectives, in priority order, of investment activities shall be:

12.1.1. to provide compliance with the State Money Management Act and related Rules.

12.1.2. to provide adequate liquidity levels to meet Trust obligations.

12.1.3. to provide guidelines as to the types and maturities of investments while considering: (a) the availability of funds to cover current needs; (b) maximum yields on investments of funds, and (c) minimum exposure to risk of loss.

12.1.4. All fixed income investments will be suitable to be held to maturity; however, sale prior to maturity may be necessary and warranted in some cases. The Trust's investment portfolio will not be used for speculative purposes.

12.1.5. The public treasurer will consider and meet the following objectives when investing Trust funds:

12.1.5.1. safety of principal;

12.1.5.2. need for liquidity;

12.1.5.3. yield on investments;

12.1.5.4. recognition of the different investment objectives of Program, Endowment and Administrative Funds; and

12.1.5.5. maturity of investments, so that the maturity date of the investment does not exceed the anticipated date of the expenditure of funds.

12.2. Standards of Care - Standards of care include:

12.2.1. Prudence - Selection of investments as authorized by this policy shall be made with the exercise of that degree of judgment and care, under circumstances then prevailing, which a person of prudence, discretion, and intelligence would exercise in the management of his or her own affairs, not for speculation but for investment, considering the probable safety of capital, as well as the probable benefits to be derived and the probable duration for which such investment may be made, and considering the investment objectives specified in this policy.

12.2.2. Ethics and Conflicts of Interest - Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose any personal financial or investment positions that could be related to the performance of the investment in accordance with Utah Code Annotated 67-16-1, Utah Public Officer's and Employees' Ethics Act.

12.2.3. Delegation of Authority - Authority to manage the investment program is granted to the Trust's public treasurer who is responsible for the operation of the investment program and who shall carry out established written procedures and internal controls for the operation of the investment program consistent with this investment policy.

12.3. Safekeeping and Custody - Standards of safekeeping and custody shall include:

12.3.1. Internal Controls - The public treasurer is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the Trust are protected from loss, theft or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met.

12.3.1.1. Accordingly, the public treasurer shall establish a process for an annual independent review as provided by the state auditor to assure compliance with policies and procedures.

12.3.2. Custody -

12.3.2.1. The public treasurer shall have custody of all securities purchased or held and all evidence of deposits and investments of all funds. All securities shall be delivered versus payment to the public treasurer or to the treasurer's safekeeping bank.

12.3.2.2. The public treasurer may deposit any of these securities with a bank or trust company to be held in safekeeping by that custodian.

12.3.2.3. The provisions of this subsection apply to any book-entry-only security the ownership records of which are maintained with a securities depository, in the Federal Book Entry system authorized by the U.S. Department of Treasury, or in the book-entry records of the issuer, as follows:

12.3.2.3.1. the direct ownership of the security by the public treasurer shall be reflected in the book-entry records and represented by a receipt, confirmation, or statement issued to the public treasurer by the custodian of the book-entry system; or

12.3.2.3.2. the ownership of the security held by the public treasurer's custodial bank or trust company shall be reflected in the book-entry records and the public treasurer's ownership shall be represented by a receipt, confirmation, or statement issued by the custodial bank or trust company.

12.3.3. All investments shall be approved by the State Treasurer.

12.4. Authorized Investments - Investment transactions may be conducted only through qualified depositories, certified dealers, or directly with the issuers of the investment securities. The remaining term to maturity of investments may not exceed the period of availability of the funds to be invested. Deposits into the Trust's Administrative Fund and Program Fund may be invested only in assets that meet the Trust's investment objectives and criteria and the requirements of the State Money Management Act as amended, including the State Public Treasurer's Investment Fund, equity securities, such as common and preferred stock issued by corporations listed on a major securities exchange and mutual funds or such equity securities, and bonds or other fixed-income securities issued by domestic corporations rated A or higher or by the United States, the State of Utah, or a political subdivision thereof.

12.5. Reporting - The public treasurer will prepare monthly and quarterly investment reports with appropriate assertions which will be submitted to the Utah State Board of Regents Student Finance Subcommittee for review and approval. The Subcommittee will determine the format and information to be reported.

 

R765-685-13. Earnings in Program Fund.

Purpose - Section 53B-8a-107 provides the Trust with authority to invest, via the program fund, payments made by a participant under a participation agreement. This rule establishes the terms for the payment of interest, dividends, and market adjustments to individual participant accounts within the program fund.

13.1. Quarterly Crediting - The trust shall credit interest or dividend earnings and make positive or negative market adjustments from the program fund to individual participant accounts at least on a quarterly basis.

13.2. Pro-rata Share - A pro-rata share of interest or dividends earned by the program fund during a given quarter shall be credited to each participant account at the end of the quarter. The pro-rata amount posted to each individual account shall be based on the average daily balance of the individual account compared to the average daily balance of the program fund during the quarter.

13.3. Transfers to Administrative Fund - Upon approval of the board, up to .5 percentage points of interest earned annually in the program fund may be transferred to the administrative fund for administrative purposes.

13.4. Quarterly Statement - At the close of each quarter, the Trust shall provide for each participant a statement listing the beginning balance, interest or dividends earned, positive or negative adjustments to market value, and closing balance of the participant's account held in the program fund.

 

R765-685-14. Earnings in Endowment Fund.

Purpose - Section 53B-8a-107 provides that each beneficiary for whom funds are saved under a participation agreement shall receive an interest in a portion of the investment income of the endowment fund of the Trust. This rule provides for implementation of this provision.

14.1. Transfers to Administrative Fund - Upon approval of the board, up to two percentage points of interest earned annually in the endowment fund may be transferred to the administrative fund for administrative purposes.

14.2. Earmarking of Endowment Interest - A portion of the interest earned by the endowment fund that is not transferred to the administrative fund shall be earmarked for use by the beneficiary of each participation agreement.

14.3. Pro-rata Share - Each quarter, a pro-rata amount of endowment fund interest shall be earmarked to each participant account eligible under any restrictions imposed by a donor on contributions to the Endowment Fund. The pro-rata amount shall be based on the average daily balance of the eligible account held on behalf of a beneficiary in the program fund compared to the average daily balance of all eligible accounts in the entire program fund during the quarter, up to an amount equal to .25 percent of the amount saved on behalf of the beneficiary in such account.

14.4. The earmarking of endowment interest for use by a beneficiary shall not constitute ownership of such interest on the part of any beneficiary or participant. Upon cancellation of a participation agreement, endowment interest earmarked to an account shall revert back to the endowment fund.

14.5. Reinvestment of Endowment Interest - Endowment Interest that is not either transferred to the administrative fund or earmarked for use by a beneficiary under a program agreement shall be reinvested in the endowment fund.

14.6. Quarterly Disclosure - The quarterly statement provided to each participant by the Trust shall disclose both the quarterly and cumulative amounts of endowment interest that have been earmarked for use by a beneficiary under a participation agreement.

14.7. Payment of Benefits - When payment of benefits for the beneficiary begin under a participation agreement, interest from the endowment fund that has been earmarked for use by the beneficiary shall be made available for higher education costs, and shall be disbursed with the principal and interest held on behalf of the beneficiary in the program fund according to section 10 of this rule.

 

R765-685-15. No Pledging of Trust Funds as Security.

15.1. Funds held by the Utah Educational Savings Plan Trust may not be used by a participant or a beneficiary under a participation agreement as security for a loan.

 

KEY: higher education, educational savings trust

August 1, 2003

Notice of Continuation November 30, 2001

53B-8a]