15 CSR 50-4.020 - Missouri Education Program
PURPOSE: This amendment updates the name of the Missouri Education Program.
(1) Incorporation by Reference. The
provisions of section 529 of the Internal Revenue Code and the
Treasury regulations (or proposed regulations) promulgated thereunder are
incorporated herein by reference with the same effect as if fully set forth
herein. Section 529 of the Internal Revenue Code as amended by H.R. 5771,
Division B. section 105, is located within Title 26 of the United States Code,
Section 529, as published by the United States Government Printing Office, 732
North Capitol Street, NW, Washington, DC 20401-0001, effective December 31,
2014. This rule does not incorporate any later amendments or additions. The
proposed regulations promulgated by the Department of the Treasury are located
in 26 CFR Part 1, 63 FR 45019, as published by the United States Government
Printing Office, 732 North Capitol Street, NW, Washington, DC 20401-0001,
effective August 24, 1998. This rule does not incorporate any later amendments
or additions.
(2) Definitions.
(A) Existing Missouri Definitions. The
following terms, as used in this rule, are defined in section
166.410, RSMo:
benefits, board, eligible educational institution, Internal Revenue Code,
participation agreement, qualified higher education expenses, qualified
education expenses, program.
(B)
Existing Federal Definitions. The following terms, as used in this rule, are
defined in section 529 of the Internal Revenue Code or the
Treasury regulations (or proposed regulations) promulgated thereunder:
contribution, distributee, distribution, earnings, investment in the account,
member of the family, qualified state tuition program.
(C) Additional Definitions. The following
definitions shall also apply to the following terms as they are used in this
rule:
1. "501(c)(3) organization" means an
organization described in section 501(c)(3) of the Internal Revenue Code and
exempt from taxation under section 501(a) of the Internal Revenue
Code;
2. "Account" means the
account in the program established by a participant and maintained for a
beneficiary;
3. "Account balance"
means the fair market value of an account on a particular date;
4. "Account owner" means-
a) a participant or
b) the transferee of an account pursuant to
subsection (5)(H) below;
5. "Beneficiary" means a designated
beneficiary as defined in section 529 of the Internal Revenue Code and the
Treasury regulations (or proposed regulations) promulgated
thereunder;
6. "Cash" shall
include, but not be limited to, checks drawn on a banking institution located
in the continental United States in U.S. dollars (other than cashiers checks,
travelers checks, or third-party checks exceeding ten thousand dollars
($10,000)), money orders, payroll deduction, and electronic funds transfers.
Cash does not include property;
7.
"Disability" means, with respect to a beneficiary, any disability of such
beneficiary that has been certified pursuant to paragraph (6)(B)2.
below;
8. "Member of the family"
means an individual who is related to the beneficiary as listed in
subparagraphs (2)(C)8.A. through (2)(C)8.I. of this definition, together with
such changes to such list as may be included, from time-to-time, in the
definition of "member of the family" pursuant to section 529 of the Internal
Revenue Code or the Treasury regulations (or proposed regulations) thereunder:
A. A son or daughter, or a descendant of
either;
B. A stepson or
stepdaughter;
C. A brother, sister,
stepbrother, or stepsister;
D. The
father or mother, or an ancestor of either;
E. A stepfather or stepmother;
F. A son or daughter of a brother or
sister;
G. A brother or sister of
the father or mother;
H. A
son-in-law, daughter-in-law, father-in-law, mother-inlaw, brother-in-law, or
sister-in-law; or
I. The spouse of
the designated beneficiary or the spouse of any individual de-scribed in
subparagraphs (2)(C)8.A. through (2)(C)8.H. of this definition.
For purposes of determining who is a member of the family hereunder, a legally adopted child of an individual shall be treated as the child of such individual by blood, and the terms brother and sister include a brother or sister by the halfblood;
9. "Non-qualified withdrawal" means a
distribution from an account other than a qualified withdrawal, a withdrawal
due to death, disability or scholarship of beneficiary, a rollover
distribution, or a distribution from an account that is made after amounts are
held in such account for the minimum length of time, if at all, permitted by
section 529 of the Internal Revenue Code without the
imposition of a penalty;
10.
"Participant" means a person who has entered into a participation agreement
pursuant to the statute and this rule for the payment of qualified education
expenses on behalf of a beneficiary;
11. "Person" means any individual, estate,
association, trust, partnership, limited liability company, corporation, the
state of Missouri or any department thereof, or any political subdivision of
the state of Missouri;
12.
"Qualified withdrawal" means a distribution from an account established under
the program used exclusively to pay qualified education expenses of the
beneficiary;
13. "Rollover
distribution" means a distribution or transfer from an account for a
beneficiary that is transferred or deposited within sixty (60) days of the
distribution into an account for another beneficiary who is a member of the
family of the current beneficiary, in each case to the extent permitted as a
rollover distribution, as defined in section 529(c)(3)(C)(i) of the Internal
Revenue Code and the Treasury regulations (or proposed regulations) promulgated
thereunder. A distribution is not a rollover distribution unless there is a
change of beneficiary. The account for such other beneficiary may be an account
established under the program or an account established under a qualified state
tuition program in another state;
14. "Scholarship" means any scholarship and
any allowance or payment described in section 135(d)(1)(B) or (C) of the
Internal Revenue Code;
15. "Scholarship account" means an account in
the program established by a participant that is a scholarship sponsor and
maintained for the benefit of one (1) or more current and/or future
beneficiaries;
16. "Scholarship
sponsor" means the state of Missouri, an instrumentality of the state of
Missouri, a political subdivision of the state of Missouri, or an organization
described in section 501(c)(3) of the Internal Revenue Code,
in each case who establishes one (1) or more accounts as part of a scholarship
program;
17. "Statute" means
sections
166.400 to
166.456,
RSMo, as amended from time-to-time; and
18. "Withdrawal due to death, disability, or
scholarship of beneficiary" means a distribution from an account established
under the program-
a) made because of death or
disability of the beneficiary, or
b) made because of the receipt of a scholarship by the beneficiary
to the extent that such distribution does not exceed the amount of such
scholarship.
(3) Purposes. The purposes of the program
are-a) to encourage savings to enable students to continue their education by
attending eligible educational institutions, and b) to enable participants and
beneficiaries to avail themselves of tax benefits provided for qualified state
tuition programs under the Internal Revenue Code.
(4) Program Administration and Management.
The program shall be administered and managed in compliance with the provisions
of the Internal Revenue Code (including section 529, other applicable sections
and implementing regulations and guidelines), the statute and this rule.
Procedures and forms for use in the administration and management of the
program shall be subject to the approval of the board. If the board designates
a third party to assist or act for the board with respect to the administration
and management of the program, the references herein to the board shall govern
such a designee of the board.
(5)
Program Participation and Participation Agreements.
(A) Beneficiary Eligibility. A beneficiary
may be any individual designated as such in a participation
agreement.
(B) Participant
Eligibility. A participant may be any person-a) who submits to the board a
completed participation agreement, and an address for each participant and
beneficiary in the United States, and b) who otherwise meets the qualifications
set forth in federal law, Missouri law, and regulations governing the program.
A participant that establishes a scholarship account shall provide the valid
Social Security numbers or taxpayer identification numbers and addresses in the
United States of each beneficiary of the applicable scholarship account prior
to or in connection with a request for a distribution.
(C) Participation Agreements. To participate
in the program, a prospective participant must submit a completed participation
agreement with either an initial contribution or a selection of electronic
funds transfer or payroll deduction as the method of initial contribution. The
participation agreement will provide that the participant (and any successor
account owner) will retain ownership of payments made under the program through
the opening of an account in the name of the participant and for the benefit of
the beneficiary designated by such participant (or the successor account
owner). Only one (1) account owner and one (1) beneficiary is permitted per
account, except that scholarship accounts may be established for the benefit of
one (1) or more present or future beneficiaries. One (1) or more participants
may establish accounts for a single beneficiary. Each participant agreement
shall impose a penalty on the early distribution of funds in accordance with
section
166.430,
RSMo. Each participation agreement shall provide that the participation
agreement may be canceled upon the terms and conditions set forth therein,
subject to subsection (5)(I) below.
(D) Contributions. All contributions to
accounts shall be in cash. The maximum amount which may be contributed annually
by a participant with respect to a beneficiary shall be established by the
board, from time-to-time, but in no event shall be more than the total
contribution limit described in the succeeding sentence. The total
contributions that may be held in an account shall be the amount established by
the board from time-to-time, but in no event shall be more than the maximum
amount permitted for the program to qualify as a "qualified state tuition
program" pursuant to section 529 of the Internal Revenue Code.
(E) Excess Contributions and
Balances. Contributions for any beneficiary shall be rejected (or, if accepted
in error or resulting from a change of beneficiary, returned to the account
owner with any earnings thereon and less any penalties applicable thereto) if
the amount of the contributions in the account together with the contributions
in other accounts established under the program for the benefit of the same
beneficiary would cause the aggregate amount held for such beneficiary to
exceed the maximum amount established by the board from time-to-time, but in no
event more than the amount permitted under section 529 of the Internal
Revenue Code. Any payment of such excess balances to the account owner
shall be a non-qualified withdrawal subject to the penalties set forth in
subsection (6)(D) below or such lesser amount as may be permitted by section
529 of the Internal Revenue Code.
(F) Changes to Beneficiary. An account owner
may change the beneficiary designated for an account to any member of the
family of the current beneficiary at any time, without penalty, by submitting a
completed change of beneficiary form to the board in such form as the board may
specify from time-to-time. Any change of beneficiary by an account owner other
than as permitted in the foregoing sentence shall be a non-qualified withdrawal
subject to the penalties set forth in subsection (6)(D) below.
(G) Rollover Distributions. An account owner
may transfer, in a rollover distribution, all or part of the account balance to
an account for another beneficiary who is a member of the family of the current
beneficiary by submitting a completed request for transfer of account funds in
such form as the board may specify from time-to-time.
(H) Changes of Account Ownership. An account
owner may transfer ownership of an account to another person eligible to be a
participant under the provisions of the statute and this rule, and upon receipt
of a request for change of account owner that satisfies the criteria set forth
in this subsection, the transferee shall be considered the account owner for
all purposes related to the program, regardless of the source of subsequent
contributions.
1. General rule. Any such
change of account ownership shall be effective provided that the transfer-a) is
irrevocable, b) transfers all ownership, reversionary rights, and powers of
appointments (i.e., power to change beneficiaries and to direct distributions
from the account), and c) is submitted to the board on a change of account
owner form in such form as the board may specify from time-to-time and
completed by the account owner (or, in the event of the death of the account
owner, by the personal representative of his or her estate).
2. Designation of contingent account owners.
Any account owner that is an individual person may designate a contingent
account owner for its account, to become the owner of the account automatically
upon the death of such account owner. Upon the death of an account owner who
has made such a designation of contingent account owner, the assets of the
account shall not be deemed assets of such person's estate for any reason.
Prior to the initial action taken by the contingent account owner following the
death of the deceased account owner, the contingent account owner shall provide
a certified copy of a death certificate sufficiently identifying said deceased
account owner by name and Social Security number or taxpayer identification
number, or such other proof of death as is recognized under applicable
law.
(I) Cancellation. A
participant may cancel a participation agreement at any time by submitting to
the board's designee a notice to terminate the participation agreement in such
form as the board may specify from time-to-time. Except as provided in section
166.430
of the statute, any non-qualified withdrawal distributed as a result of such
cancellation shall be subject to the penalty as provided in subsection (6)(D)
below.
(J) Copy of Agreement to
Account Owner. Upon request by an account owner, the board shall provide the
account owner with a copy of the participation agreement executed by the
account owner, or inform the account owner that the board does not have a copy
thereof, mailed within ten (10) business days of receipt of the account owner's
request.
(K) Separate Accounting.
The board shall provide separate accounting (as provided in section 529 of the
Internal Revenue Code) for each beneficiary for each
account.
(6) Payment of
Benefits; Withdrawals.
(A) Qualified
Withdrawals. An account owner may request a qualified withdrawal from its
account by submitting a completed request for qualified withdrawal to the board
in such form as the board may specify from time-to-time.
(B) Withdrawals Due to Death, Disability or
Scholarship of Beneficiary. An account owner may request a withdrawal due to
death, disability or scholarship of beneficiary from its account by submitting
a completed request for withdrawal due to death, disability or scholarship of
beneficiary to the board in such form as the board may specify from
time-to-time. Prior to a withdrawal due to death, disability or scholarship of
beneficiary from an account due to the death or disability of the beneficiary
of that account, or because the beneficiary has received a scholarship to be
applied toward attendance at an eligible educational institution, the account
owner shall certify the reason for the distribution and provide written
confirmation from a third-party that the beneficiary has in fact died, become
disabled with a disability, or received a scholarship for attendance at an
eligible educational institution. A request to make a distribution due to the
death or disability of, or a scholarship award to, the beneficiary shall not be
considered complete until such third-party written confirmation is received by
the board. For purposes of this subsection, third-party written confirmation
shall consist of the following documentation:
1. For death of the beneficiary, a certified
copy of a death certificate sufficiently identifying said beneficiary by name
and Social Security number or taxpayer identification number, or such other
proof of death as is recognized under applicable law;
2. For disability of the beneficiary, a
certification by a physician who is a doctor of medicine or osteopathy that
indicates that he or she is legally authorized to practice in a state of the
United States and that the beneficiary is unable to attend any eligible
educational institution because of an injury or illness that is expected to
continue indefinitely or result in death. Such certification shall be on a form
provided or approved by the board; and
3. For a scholarship award to the
beneficiary, a letter from the grantor of the scholarship or from the eligible
educational institution receiving or administering the scholarship, that
identifies the beneficiary by name and Social Security number or taxpayer
identification number as recipient of the scholarship and states the amount of
the scholarship, the period of time or number of credits or units to which it
applies, the date of the scholarship, and, if applicable, the eligible
educational institution to which the scholarship is to be applied.
(C) Other Withdrawals. An account
owner may request a distribution from an account that is made after amounts are
held in such account for the minimum length of time permitted if at all by
section 529 of the Internal Revenue Code without the
imposition of a penalty. Such account owner may request such distribution by
submitting a completed request for a distribution to the board in such form as
the board may specify from time-to-time.
(D) Non-Qualified Withdrawals; Penalties. An
account owner may request a non-qualified withdrawal by submitting a completed
non-qualified withdrawal request form to the board in such form as the board
may specify from time-to-time. Any such non-qualified withdrawal shall be
subject to the penalty described in this subsection (6)(D). A penalty shall be
withheld, and paid to the board from an account with respect to each
nonqualified withdrawal, in an amount equal to ten percent (10%) of the
earnings portion of such withdrawal. Such penalty amount is a more than
de minimis penalty for the purposes of section 529 of the
Internal Revenue Code. If required, such penalty amount shall
be increased to the minimum amount identified by the Internal Revenue Service
as a "safe harbor" in order for it to be more than de minimis
for the purposes of section 529 of the Internal Revenue Code.
Penalties shall be imposed, collected and applied in a manner consistent with
section 529 of the Internal Revenue Code.
(E) Distribution Limitations. No
distributions may be made within thirty (30) days of receipt by the board of a
completed change of account owner form or request to change the mailing address
of the account owner, unless the current account owner's signature is signature
guaranteed on the request.
(F)
Security. An account owner or beneficiary may not use any account or other
interest in the program or any portion thereof as security for a
loan.
(7) Investments.
(A) General (Investment Standards and
Objectives). The board shall invest the funds received from participants,
together with any income thereon, in such investments as the board shall
reasonably determine will achieve a long-term total return through a
combination of capital appreciation and current income. In exercising or
delegating its investment powers and authority, the board shall exercise
ordinary business care and prudence under the facts and circumstances
prevailing at the time of the action or decision. In accordance with the
standards established herein and in the statute, the board may invest, through
the board or any investment manager, funds received pursuant to the program.
Any such investment shall be made solely in the interest of the account owners
and beneficiaries and for the exclusive purposes of providing benefits to
beneficiaries and defraying reasonable expenses of administering the program.
An account owner or beneficiary may, directly or indirectly, direct the
investments of any contributions to the program (or any earnings thereon) no
more than two (2) times in any calendar year.
(B) Delegation of Investment Discretion. The
board may delegate to its duly appointed investment counselor authority to act
in place of board in the investment or reinvestment of all or part of the
funds, and may also delegate to such counselor the authority to act in place of
the board in the holding, purchasing, selling, assigning, transferring or
disposing of any or all of the securities and investments in which such funds
shall have been invested, as well as the proceeds of such investments and such
moneys. Such investment counselor shall be registered as an investment advisor
with the United States Securities and Exchange Commission.
(8) Costs of Administration. All costs of
administration of the program shall be borne by the account owners, from
amounts paid as penalties on account of non-qualified withdrawals or early
qualified withdrawals and from amounts on deposit in the accounts, as described
in more detail in the participation agreements.
(9) Severability. If any provision of this
rule, or the application of it to any person or circumstance, is determined to
be invalid by a court of competent jurisdiction, such invalidity shall not
affect other provisions of this regulation which can be given effect without
the invalid provision or application, and to that end, the provisions of this
regulation are severable.
Notes
*Original authority: 166.415, RSMo 1998.
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