September 12, 2017, Introduced by Senators COLBECK, PAVLOV and GREEN and referred to the Committee on Education.



     A bill to amend 2000 PA 161, entitled


"Michigan education savings program act,"


(MCL 390.1471 to 390.1486) by amending the title and by adding part








     An act to create the Michigan education savings program; to


create an enhanced Michigan education savings program; to provide


for education savings accounts; to prescribe the powers and duties


of certain state agencies, boards, and departments; to create a


fund; to make appropriations; to allow certain tax credits or


deductions; and to provide for penalties and remedies.




     Sec. 17. This part shall be known and may be cited as the


"enhanced Michigan education savings program act".

     Sec. 18. As used in this part:


     (a) "Account" or "enhanced Michigan education savings account"


means an account established under this part.


     (b) "Account owner" means the parent of the student or the


student if he or she is 18 years of age or older.


     (c) "Department" means the department of treasury.


     (d) "Dependent" means an individual for whom the account owner


may claim a dependency exemption on his or her federal income tax


return pursuant to the internal revenue code of 1986, 26 USC 1 to




     (e) "Eligible services" means any instructional services,


supplemental services, and back office services offered to students


by a public school that the department of education determines


pursuant to this part are qualified for payment from an account.


Eligible services may include extracurricular services offered by a


public school.


     (f) "Enhanced Michigan education savings program agreement" or


"program agreement" means the agreement between the program and the


account owner who establishes an account.


     (g) "Enhanced Michigan education savings program fund" or


"fund" means the fund created in section 19.


     (h) "Management contract" means the contract executed between


the treasurer and a program manager.


     (i) "Parent" means a resident of this state who is a


biological or adoptive parent, legal guardian, legal custodian, or


other person with authority to act on behalf of the student.


     (j) "Program" means the enhanced Michigan education savings

program established pursuant to this part.


     (k) "Program manager" means an entity selected by the


treasurer to act as a manager of 1 or more of the savings plans


offered under the program.


     (l) "Public school" means that term as defined in the revised


school code, 1976 PA 451, MCL 380.1 to 380.1852.


     (m) "Qualified withdrawal" means a distribution that is not


subject to a penalty under this part or taxation under the income


tax act of 1967, 1967 PA 281, MCL 206.1 to 206.713, and that meets


any of the following:


     (i) A withdrawal from an account to pay for eligible services


provided by a public school to the student to pay for postsecondary


education expenses incurred after the account is established.


     (ii) A transfer of funds due to the termination of the


management contract as provided in section 20.


     (iii) A transfer of funds as provided in section 24.


     (n) "Savings plan" or "plans" means a plan or plans that


provide different investment strategies and allows account


distributions for eligible services.


     (o) "Student" means a pupil enrolled in at least 1 course in a


public school.


     (p) "Treasurer" means the state treasurer.


     Sec. 19. (1) The enhanced Michigan education savings program


fund is established in the department. The department shall


establish an enhanced Michigan education savings program, and the


program may consist of 1 or more savings plans.


     (2) The treasurer shall solicit proposals from entities to be

a program manager to provide the services described in subsection




     (3) The purposes, powers, and duties of the program are vested


in and shall be exercised by the treasurer or the designee of the




     (4) The state treasurer shall administer the fund and shall be


the trustee for the fund. Subject to appropriation, the treasurer


may use program revenues in the fund to maintain or enhance the


state's education programs.


     (5) The treasurer may employ or contract with personnel and


contract for services necessary for the administration of each


savings plan under the program and the investment of the assets of


each savings plan and the fund under the program, including, but


not limited to, managerial, professional, legal, clerical,


technical, and administrative personnel or services.


     (6) When selecting a program manager, the treasurer shall give


preference to proposals from single entities that propose to


provide all of the functions described in subsection (5) and that


demonstrate the most advantageous combination, to both potential


participants and this state, of the following factors and the


management contract shall address these factors:


     (a) Financial stability.


     (b) The safety of the investment instruments being offered.


     (c) The ability of the investment instruments to track the


increasing costs of higher education.


     (d) The ability of the entity to satisfy the record-keeping


and reporting requirements of this part.

     (e) The entity's plan for marketing the savings plan and the


investment it is willing to make to promote the savings plan.


     (f) The fees, if any, proposed to be charged to persons for


opening or maintaining an account.


     (g) The ability of the entity to accept electronic


withdrawals, including payroll deduction plans.


     (7) The treasurer shall enter into a contract with each


program manager, which shall address the respective authority and


responsibility of the treasurer and the program manager to do all


of the following:


     (a) Develop and implement the savings plan or plans offered


under the program.


     (b) Invest the money received in 1 or more investment




     (c) Engage the services of consultants on a contractual basis


to provide professional and technical assistance and advice.


     (d) Determine the use of financial organizations as account


depositories and financial managers.


     (e) Charge, impose, and collect annual administrative fees and


service in connection with any agreements, contracts, and


transactions relating to individual accounts, exclusive of initial


sales charges, which shall not exceed 2.0% of the average daily net


assets of the account.


     (f) Develop marketing plans and promotional material.


     (g) Establish the methods by which funds are allocated to pay


for administrative costs.


     (h) Provide criteria for terminating and not renewing the

management contract.


     (i) Address the ability of the program manager to take any


action required to keep the savings plan or plans offered under the


program in compliance with requirements of this part and its


management contract.


     (j) Keep adequate records of each account and provide the


treasurer with information that the treasurer requires related to


those records.


     (k) Compile the information contained in statements required


to be prepared under this part and provide that compilation to the


treasurer in a timely manner.


     (l) Hold all accounts for the benefit of the account owner.


     (m) Provide for audits at least annually by a firm of


certified public accountants.


     (n) Provide the treasurer with copies of all regulatory


filings and reports related to the savings plan or plans offered


under the program made during the term of the management contract


or while the program manager is holding any accounts, other than


confidential filings or reports except to the extent those filings


or reports are related to or are a part of the savings plan or


plans offered under the program. The program manager shall make


available for review by the treasurer the results of any periodic


examination of the program manager by any state or federal banking,


insurance, or securities commission, except to the extent that the


report or reports are not required to be disclosed under state or


federal law.


     (o) Ensure that any description of the savings plan or plans

offered under the program, whether in writing or through the use of


any media, is consistent with the marketing plan developed by the


program manager.


     (p) Take any other necessary and proper actions to carry out


the purposes of this part.


     Sec. 20. (1) The treasurer shall be responsible for the


ongoing supervision of each management contract.


     (2) A management contract shall be for a term of years


specified in the management contract.


     (3) The treasurer may terminate a management contract based on


the criteria specified in the management contract.


     (4) The treasurer may enter into contracts that it considers


necessary and proper for the implementation of this program.


     Sec. 26. (1) Each program manager shall report distributions


from an account to a public school for the benefit of the student


and distributions from an account for postsecondary education


expenses during a tax year to the Internal Revenue Service and the


account owner or, to the extent required by federal law or


regulation, to the distributee.


     (2) Each program manager shall provide statements that


identify the contributions made during the tax year, the total


contributions made to the account for the tax year, the value of


the account at the end of the tax year, distributions made during


the tax year, and any other information that the treasurer requires


to each account owner on or before the January 31 following the end


of each calendar year.


     (3) Each program manager shall disclose the following

information in writing to each account owner of an enhanced


Michigan education savings account and any other person who


requests information about an account:


     (a) The terms and conditions for establishing an account.


     (b) Restrictions on the substitutions of students and transfer


of account funds.


     (c) The person entitled to terminate a program agreement.


     (d) The period of time during which a student may receive


benefits under the program agreement.


     (e) The terms and conditions under which money may be


withdrawn from an account or the program, including, but not


limited to, any reasonable charges and fees and penalties that may


be imposed for withdrawal.


     (f) The potential tax consequences associated with


contributions to and distributions and withdrawals from accounts.


     (g) Investment history and potential growth of account funds


and a projection of the impact of the growth of the account funds


on the maximum amount allowable in an account.


     (h) All other rights and obligations under program agreements


and any other terms, conditions, and provisions of a contract or an


agreement entered into under this part.


     Sec. 27. (1) This part and any agreement under this part shall


not be construed or interpreted to do any of the following:


     (a) Guarantee that a student will be admitted to a public


school of his or her choice or, upon admission to a public school,


will be permitted to continue to attend or will receive a degree


from the public school.

     (b) Guarantee that amounts contributed to an account will be


sufficient to cover the eligible services of a student.


     (2) This part does not create and shall not be construed to


create any obligation upon this state or any agency or


instrumentality of this state to guarantee for the benefit of an


account owner or student any of the following:


     (a) The rate of interest or other return on an account.


     (b) The payment of interest or other return on an account.


     (3) The contracts, applications, deposit slips, and other


similar documents used in connection with a contribution to an


account shall clearly indicate that the account is not insured by


this state and that the money deposited into and investment return


earned on an account are not guaranteed by this state.


     Sec. 28. Each program manager shall file an annual report with


the treasurer and the board that includes all of the following:


     (a) The names and identification numbers of account owners and


students. The information reported pursuant to this subdivision is


not subject to the freedom of information act, 1976 PA 442, MCL


15.231 to 15.246.


     (b) The total amount contributed to all accounts during the




     (c) All distributions from all accounts.


     (d) Any information that the program manager or treasurer may


require regarding the taxation of amounts contributed to or


withdrawn from accounts.


     Sec. 29. (1) Contributions to and interest earned on an


account are exempt from taxation as provided in section 30 of the

income tax act of 1967, 1967 PA 281, MCL 206.30.


     (2) Withdrawals made from an account are exempt from taxation


as provided in section 30 of the income tax act of 1967, 1967 PA


281, MCL 206.30.