S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 1223--A

                       2015-2016 Regular Sessions

                            I N  S E N A T E

                             January 9, 2015
                               ___________

Introduced  by  Sens.  CARLUCCI,  KLEIN, AVELLA, SAVINO, VALESKY -- read
  twice and ordered printed, and when printed to  be  committed  to  the
  Committee on Higher Education -- recommitted to the Committee on High-
  er  Education  in  accordance  with Senate Rule 6, sec. 8 -- committee
  discharged, bill amended, ordered reprinted as amended and recommitted
  to said committee

AN ACT to amend the education law, the  state  finance  law,  the  civil
  practice  law  and  rules and the tax law, in relation to establishing
  the New York state pre-paid tuition plan

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1. The education law is amended by adding a new section 355-d
to read as follows:
  S 355-D. "NEW YORK STATE PRE-PAID TUITION PLAN". 1. DEFINITIONS.   FOR
THE PURPOSES OF THIS SECTION, THE FOLLOWING TERMS SHALL HAVE THE FOLLOW-
ING MEANINGS:
  A.  "ACCOUNT"  OR  "PRE-PAID TUITION ACCOUNT" SHALL MEAN AN INDIVIDUAL
PRE-PAID TUITION ACCOUNT ESTABLISHED IN ACCORDANCE WITH  THE  PROVISIONS
OF THIS SECTION.
  B.  "ACCOUNT  OWNER"  SHALL  MEAN  A PERSON WHO ENTERS INTO A PRE-PAID
TUITION AGREEMENT PURSUANT TO THE PROVISIONS OF THIS ARTICLE,  INCLUDING
A  PERSON  WHO  ENTERS INTO SUCH AN AGREEMENT AS A FIDUCIARY OR AGENT ON
BEHALF OF A TRUST, ESTATE, PARTNERSHIP, ASSOCIATION, COMPANY  OR  CORPO-
RATION.  THE ACCOUNT OWNER MAY ALSO BE THE DESIGNATED BENEFICIARY OF THE
ACCOUNT.
  C. "CITY UNIVERSITY" SHALL MEAN THE CITY UNIVERSITY OF NEW YORK.
  D. "COMPTROLLER" SHALL MEAN THE STATE COMPTROLLER.
  E. "DESIGNATED BENEFICIARY" SHALL MEAN, WITH RESPECT TO AN ACCOUNT  OR
ACCOUNTS,  THE  INDIVIDUAL  DESIGNATED  AS  THE INDIVIDUAL WHOSE TUITION
EXPENSES ARE EXPECTED TO BE PAID FROM THE ACCOUNT OR ACCOUNTS.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD03418-02-6

              

S. 1223--A                          2

  F. "ELIGIBLE EDUCATIONAL INSTITUTION" SHALL MEAN  ANY  INSTITUTION  OF
HIGHER  EDUCATION  DEFINED  AS  AN  ELIGIBLE  EDUCATIONAL INSTITUTION IN
SECTION 529(E)(5) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
  G.  "FINANCIAL  ORGANIZATION" SHALL MEAN AN ORGANIZATION AUTHORIZED TO
DO BUSINESS IN THE STATE AND (I) WHICH IS AN AUTHORIZED FIDUCIARY TO ACT
AS A TRUSTEE PURSUANT TO THE PROVISIONS OF AN ACT OF  CONGRESS  ENTITLED
"EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974" AS SUCH PROVISIONS MAY
BE  AMENDED  FROM TIME TO TIME, OR AN INSURANCE COMPANY; AND (II) (A) IS
LICENSED OR CHARTERED BY THE DEPARTMENT OF FINANCIAL  SERVICES,  (B)  IS
CHARTERED  BY AN AGENCY OF THE FEDERAL GOVERNMENT, (C) IS SUBJECT TO THE
JURISDICTION AND REGULATION OF THE SECURITIES AND EXCHANGE COMMISSION OF
THE FEDERAL GOVERNMENT, OR (D) IS ANY OTHER ENTITY OTHERWISE  AUTHORIZED
TO  ACT  IN THIS STATE AS A TRUSTEE PURSUANT TO THE PROVISIONS OF AN ACT
OF CONGRESS ENTITLED "EMPLOYEE RETIREMENT INCOME SECURITY ACT  OF  1974"
AS SUCH PROVISIONS MAY BE AMENDED FROM TIME TO TIME.
  H. "MEMBER OF FAMILY" SHALL MEAN A FAMILY MEMBER AS DEFINED IN SECTION
529 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
  I.  "NONQUALIFIED WITHDRAWAL" SHALL MEAN A WITHDRAWAL FROM AN ACCOUNT,
BUT SHALL NOT MEAN:
  (I) A QUALIFIED WITHDRAWAL; (II) A WITHDRAWAL MADE AS  THE  RESULT  OF
THE  DEATH OR DISABILITY OF THE DESIGNATED BENEFICIARY OF AN ACCOUNT; OR
(III) A WITHDRAWAL MADE ON THE ACCOUNT OF A SCHOLARSHIP.
  J. "PLAN" SHALL MEAN THE NEW YORK STATE PRE-PAID TUITION  PLAN  ESTAB-
LISHED PURSUANT TO THIS SECTION.
  K.  "PLAN MANAGER" SHALL MEAN A FINANCIAL ORGANIZATION SELECTED BY THE
COMPTROLLER TO ACT AS A DEPOSITORY AND MANAGER OF THE PLAN.
  L. "QUALIFIED WITHDRAWAL" SHALL MEAN A WITHDRAWAL FROM AN  ACCOUNT  TO
PAY THE QUALIFIED TUITION EXPENSES OF THE DESIGNATED BENEFICIARY.
  M. "STATE UNIVERSITY" SHALL MEAN THE STATE UNIVERSITY OF NEW YORK.
  N.  "TUITION"  SHALL MEAN ANY MANDATORY CHARGES IMPOSED BY AN ELIGIBLE
EDUCATIONAL INSTITUTION FOR ATTENDANCE FOR AN ACADEMIC YEAR AS A  CONDI-
TION  OF  ENROLLMENT.  SUCH TERM SHALL NOT INCLUDE LABORATORY FEES, ROOM
AND BOARD, OR OTHER SIMILAR FEES AND CHARGES.
  O. "TUITION SAVINGS AGREEMENT" SHALL MEAN  AN  AGREEMENT  BETWEEN  THE
COMPTROLLER OR A FINANCIAL ORGANIZATION AND AN ACCOUNT OWNER.
  2.  POWERS AND DUTIES OF THE COMPTROLLER. THE COMPTROLLER SHALL ADMIN-
ISTER THE PLAN AND SHALL DEVELOP AND IMPLEMENT PROGRAMS FOR THE  PREPAY-
MENT OF UNDERGRADUATE TUITION, AT A FIXED, GUARANTEED LEVEL FOR APPLICA-
TION  AT  ANY  TWO-YEAR OR FOUR-YEAR ELIGIBLE EDUCATIONAL INSTITUTION AS
DEFINED IN SECTION 529 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED,
OR OTHER APPLICABLE FEDERAL LAW. IN ADDITION, THE COMPTROLLER SHALL HAVE
THE POWER AND DUTY TO:
  A. DEVELOP AND IMPLEMENT THE PLAN IN  A  MANNER  CONSISTENT  WITH  THE
PROVISIONS  OF THIS SECTION THROUGH RULES AND REGULATIONS ESTABLISHED IN
ACCORDANCE WITH THE STATE ADMINISTRATIVE PROCEDURE ACT;
  B. MAKE ARRANGEMENTS WITH THE STATE UNIVERSITY,  CITY  UNIVERSITY  AND
ANY  ELIGIBLE  EDUCATIONAL  INSTITUTION  LOCATED  WITHIN THE STATE WHICH
CHOOSES TO PARTICIPATE, TO FULFILL  OBLIGATIONS  UNDER  PREPAID  TUITION
CONTRACTS  FOR TWO-YEAR OR FOUR-YEAR DEGREE PROGRAMS, INCLUDING, BUT NOT
LIMITED TO, PAYMENT FROM THE PLAN OF THE THEN ACTUAL IN-STATE UNDERGRAD-
UATE TUITION COST ON BEHALF OF A  QUALIFIED  BENEFICIARY  OF  A  PREPAID
TUITION  CONTRACT TO THE INSTITUTION IN WHICH SUCH BENEFICIARY IS ADMIT-
TED AND ENROLLED, AND APPLICATION OF SUCH BENEFITS TOWARDS GRADUATE-LEV-
EL TUITION AND TOWARDS TUITION COSTS AT SUCH ELIGIBLE EDUCATIONAL INSTI-
TUTIONS, AS THAT TERM IS DEFINED  IN  26  U.S.C.  S  529  OR  ANY  OTHER
APPLICABLE  SECTION OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AS

S. 1223--A                          3

DETERMINED BY THE COMPTROLLER  IN  HIS  OR  HER  SOLE  DISCRETION.  SUCH
ARRANGEMENTS  MUST  INCLUDE  PLANS  THAT ALLOW AN ACCOUNT OWNER TO ENTER
INTO CONTRACTS IN WHICH HE OR SHE CAN PURCHASE TUITION  IN  INSTALLMENTS
EQUAL  TO  THE  COST  OF  SEMESTERS AS A FULL TIME STUDENT, BUT CAN ALSO
INCLUDE PLANS THAT WOULD ALLOW FOR THE PREPAYMENT OF TUITION FOR TUITION
CREDIT HOURS;
  C. ENGAGE THE SERVICES OF CONSULTANTS ON A CONTRACT BASIS FOR  RENDER-
ING PROFESSIONAL AND TECHNICAL ASSISTANCE AND ADVICE;
  D.  SEEK  RULINGS AND OTHER GUIDANCE FROM THE UNITED STATES DEPARTMENT
OF TREASURY AND THE INTERNAL REVENUE SERVICE RELATING TO THE PROGRAM;
  E. MAKE CHANGES TO THE PLAN REQUIRED FOR THE  PARTICIPANTS  TO  OBTAIN
THE  FEDERAL INCOME TAX BENEFITS OR TREATMENT PROVIDED BY SECTION 529 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR ANY SIMILAR  SUCCESSOR
LEGISLATION;
  F.  CHARGE, IMPOSE AND COLLECT ADMINISTRATIVE FEES AND SERVICE CHARGES
IN CONNECTION WITH ANY AGREEMENT, CONTRACT OR  TRANSACTION  RELATING  TO
THE PLAN;
  G. DEVELOP MARKETING PLANS AND PROMOTION MATERIAL;
  H.  ESTABLISH  THE METHODS BY WHICH THE FUNDS HELD IN SUCH ACCOUNTS BE
DISBURSED;
  I. ESTABLISH THE METHOD BY WHICH FUNDS SHALL BE ALLOCATED TO  PAY  FOR
ADMINISTRATIVE COSTS; AND
  J.  DO  ALL  THINGS  NECESSARY AND PROPER TO CARRY OUT THE PURPOSES OF
THIS SECTION.
  3. PLAN REQUIREMENTS. EVERY PRE-PAID TUITION ACCOUNT SHALL COMPLY WITH
THE PROVISIONS OF THIS SECTION.
  A. A PRE-PAID TUITION ACCOUNT MAY BE OPENED BY ANY PERSON WHO  DESIRES
TO  ENTER  INTO  A  CONTRACT  FOR  PRE-PAYMENT OF TUITION EXPENSES AT AN
INSTITUTION OF THE STATE UNIVERSITY, THE CITY UNIVERSITY OR ANY  PARTIC-
IPATING ELIGIBLE EDUCATIONAL INSTITUTION. AN ACCOUNT OWNER MAY DESIGNATE
ANOTHER  PERSON  AS  SUCCESSOR  OWNER OF THE ACCOUNT IN THE EVENT OF THE
DEATH OF THE ORIGINAL ACCOUNT OWNER. SUCH PERSON WHO OPENS AN ACCOUNT OR
ANY SUCCESSOR OWNER SHALL BE CONSIDERED THE ACCOUNT OWNER.
  B. AN APPLICATION FOR SUCH ACCOUNT SHALL BE IN THE FORM PRESCRIBED  BY
THE COMPTROLLER AND CONTAIN THE FOLLOWING:
  (I) THE NAME, ADDRESS AND SOCIAL SECURITY NUMBER OR EMPLOYER IDENTIFI-
CATION NUMBER OF THE ACCOUNT OWNER;
  (II) THE DESIGNATION OF A DESIGNATED BENEFICIARY;
  (III)  THE  NAME, ADDRESS AND SOCIAL SECURITY NUMBER OF THE DESIGNATED
BENEFICIARY; AND
  (IV) SUCH OTHER INFORMATION AS THE COMPTROLLER MAY REQUIRE.
  C. THE COMPTROLLER MAY ESTABLISH A NOMINAL FEE FOR SUCH APPLICATION.
  D. ANY PERSON, INCLUDING THE ACCOUNT OWNER, MAY MAKE CONTRIBUTIONS  TO
AN ACCOUNT AFTER THE ACCOUNT IS OPENED.
  E. CONTRIBUTIONS TO ACCOUNTS MAY BE MADE ONLY IN CASH.
  F.  FOUR  YEARS  MUST  ELAPSE  BETWEEN THE ESTABLISHMENT OF A PRE-PAID
TUITION ACCOUNT AND THE TIME THE FIRST QUALIFIED WITHDRAWAL IS MADE  FOR
THE PAYMENT OF TUITION EXPENSES.
  G.  AN  ACCOUNT  OWNER MAY WITHDRAW ALL OR PART OF THE BALANCE FROM AN
ACCOUNT ON SIXTY DAYS NOTICE OR SUCH SHORTER PERIOD AS MAY BE AUTHORIZED
UNDER RULES GOVERNING THE PLAN. SUCH RULES SHALL INCLUDE PROVISIONS THAT
WILL GENERALLY ENABLE THE DETERMINATION AS TO WHETHER A WITHDRAWAL IS  A
NONQUALIFIED WITHDRAWAL OR A QUALIFIED WITHDRAWAL.
  H.  AN  ACCOUNT  OWNER  MAY  CHANGE  THE  DESIGNATED BENEFICIARY OF AN
ACCOUNT TO AN INDIVIDUAL WHO IS A MEMBER OF  THE  FAMILY  OF  THE  PRIOR

S. 1223--A                          4

DESIGNATED  BENEFICIARY IN ACCORDANCE WITH PROCEDURES ESTABLISHED BY THE
COMPTROLLER.
  I.  AN  ACCOUNT  OWNER  MAY TRANSFER ALL OR A PORTION OF AN ACCOUNT TO
ANOTHER FAMILY TUITION ACCOUNT, THE SUBSEQUENT DESIGNATED BENEFICIARY OF
WHICH IS A MEMBER OF THE FAMILY AS DEFINED IN SECTION 529 OF THE  INTER-
NAL REVENUE CODE OF 1986, AS AMENDED.
  J.  THE  PLAN  SHALL  PROVIDE  SEPARATE ACCOUNTING FOR EACH DESIGNATED
BENEFICIARY.
  K. NO ACCOUNT OWNER OR DESIGNATED BENEFICIARY OF ANY ACCOUNT SHALL  BE
PERMITTED TO DIRECT THE INVESTMENT OF ANY CONTRIBUTIONS TO AN ACCOUNT OR
THE EARNINGS THEREON.
  L.  NEITHER AN ACCOUNT OWNER NOR A DESIGNATED BENEFICIARY SHALL USE AN
INTEREST IN AN ACCOUNT AS SECURITY FOR A LOAN. ANY PLEDGE OF AN INTEREST
IN AN ACCOUNT SHALL BE OF NO FORCE AND EFFECT.
  M. (I) IF THERE IS ANY DISTRIBUTION FROM AN ACCOUNT TO ANY  INDIVIDUAL
OR  FOR  THE  BENEFIT  OF  ANY  INDIVIDUAL  DURING A CALENDAR YEAR, SUCH
DISTRIBUTION SHALL BE REPORTED TO THE INTERNAL REVENUE SERVICE  AND  THE
ACCOUNT  OWNER,  THE  DESIGNATED  BENEFICIARY  OR THE DISTRIBUTEE TO THE
EXTENT REQUIRED BY FEDERAL LAW OR REGULATION.
  (II) STATEMENTS SHALL BE PROVIDED TO EACH ACCOUNT OWNER AT LEAST  ONCE
EACH  YEAR WITHIN SIXTY DAYS AFTER THE END OF THE TWELVE MONTH PERIOD TO
WHICH THEY RELATE. THE STATEMENT SHALL IDENTIFY THE  CONTRIBUTIONS  MADE
DURING  A PRECEDING TWELVE MONTH PERIOD, THE TOTAL CONTRIBUTIONS MADE TO
THE ACCOUNT THROUGH THE END OF THE PERIOD, THE VALUE OF THE  ACCOUNT  AT
THE  END  OF  SUCH PERIOD, DISTRIBUTIONS MADE DURING SUCH PERIOD AND ANY
OTHER INFORMATION THAT THE COMPTROLLER SHALL REQUIRE TO BE  REPORTED  TO
THE ACCOUNT OWNER.
  (III)  STATEMENTS  AND  INFORMATION  RELATING  TO  ACCOUNTS  SHALL  BE
PREPARED AND FILED TO THE EXTENT REQUIRED BY FEDERAL AND STATE TAX LAW.
  N. (I)  A  LOCAL  GOVERNMENT  OR  ORGANIZATION  DESCRIBED  IN  SECTION
501(C)(3) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, MAY OPEN AND
BECOME  THE ACCOUNT OWNER OF AN ACCOUNT TO FUND SCHOLARSHIPS FOR PERSONS
WHOSE IDENTITY WILL BE DETERMINED UPON DISBURSEMENT.
  (II) IN THE CASE OF ANY ACCOUNT OPENED PURSUANT TO PARAGRAPH A OF THIS
SUBDIVISION THE REQUIREMENT SET FORTH IN THIS SUBDIVISION THAT A  DESIG-
NATED  BENEFICIARY  BE  DESIGNATED  WHEN  AN ACCOUNT IS OPENED SHALL NOT
APPLY AND EACH INDIVIDUAL WHO RECEIVES AN INTEREST IN SUCH ACCOUNT AS  A
SCHOLARSHIP SHALL BE TREATED AS A DESIGNATED BENEFICIARY WITH RESPECT TO
SUCH INTEREST.
  O. AN ANNUAL FEE MAY BE IMPOSED UPON THE ACCOUNT OWNER FOR THE MAINTE-
NANCE OF THE ACCOUNT.
  P.  THE  PLAN  SHALL  DISCLOSE THE FOLLOWING INFORMATION IN WRITING TO
EACH ACCOUNT OWNER AND PROSPECTIVE ACCOUNT OWNER OF A  PRE-PAID  TUITION
ACCOUNT:
  (I)  THE  TERMS  AND  CONDITIONS  FOR  PURCHASING  A  PRE-PAID TUITION
ACCOUNT;
  (II) ANY RESTRICTIONS ON THE SUBSTITUTION OF BENEFICIARIES;
  (III) THE PERSON OR ENTITY ENTITLED TO TERMINATE THE TUITION  PRE-PAY-
MENT AGREEMENT;
  (IV)  THE  PERIOD OF TIME DURING WHICH A BENEFICIARY MAY RECEIVE BENE-
FITS UNDER THE TUITION PRE-PAYMENT AGREEMENT;
  (V) THE TERMS AND CONDITIONS  UNDER  WHICH  MONEY  MAY  BE  WHOLLY  OR
PARTIALLY  WITHDRAWN  FROM  THE PLAN, INCLUDING, BUT NOT LIMITED TO, ANY
REASONABLE CHARGES AND FEES THAT MAY BE IMPOSED FOR WITHDRAWAL;
  (VI) THE PROBABLE TAX CONSEQUENCES ASSOCIATED  WITH  CONTRIBUTIONS  TO
AND DISTRIBUTIONS FROM ACCOUNTS; AND

S. 1223--A                          5

  (VII)  ALL  OTHER  RIGHT  AND OBLIGATIONS PURSUANT TO PRE-PAID TUITION
AGREEMENTS, AND ANY OTHER TERMS, CONDITIONS AND PROVISIONS DEEMED NECES-
SARY AND APPROPRIATE BY THE COMPTROLLER PURSUANT TO THIS SUBDIVISION.
  Q.  PRE-PAID  TUITION  SAVINGS  AGREEMENTS SHALL BE SUBJECT TO SECTION
FOURTEEN-C OF THE BANKING LAW  AND  THE  "TRUTH-IN-SAVINGS"  REGULATIONS
PROMULGATED THEREUNDER.
  R.  NOTHING  IN THIS ARTICLE OR IN ANY PRE-PAID TUITION SAVINGS AGREE-
MENT ENTERED INTO PURSUANT TO THIS ARTICLE SHALL BE CONSTRUED AS A GUAR-
ANTEE BY THE STATE OR ANY COLLEGE THAT A BENEFICIARY WILL BE ADMITTED TO
A COLLEGE OR UNIVERSITY, OR, UPON ADMISSION TO A COLLEGE WILL BE PERMIT-
TED TO CONTINUE TO ATTEND OR WILL RECEIVE A DEGREE  FROM  A  COLLEGE  OR
UNIVERSITY.
  4.  STATE  GUARANTEE. A. NOTHING IN THIS SECTION SHALL ESTABLISH OR BE
DEEMED TO ESTABLISH ANY OBLIGATION OF THE STATE, THE COMPTROLLER OR  ANY
AGENCY  OR INSTRUMENTALITY OF THE STATE TO GUARANTEE ANY BENEFITS TO ANY
ACCOUNT OWNER OR DESIGNATED BENEFICIARY.
  B. NOTWITHSTANDING THE PROVISIONS OF SUBDIVISION ONE OF THIS  SECTION,
IN  ORDER  TO  ENSURE THAT THE PLAN IS ABLE TO MEET ITS OBLIGATIONS, THE
GOVERNOR SHALL INCLUDE IN THE BUDGET SUBMITTED PURSUANT TO SECTION TWEN-
TY-TWO OF THE STATE FINANCE LAW, AN  APPROPRIATION  SUFFICIENT  FOR  THE
PURPOSE  OF  ENSURING  THAT  THE PLAN CAN MEET ITS OBLIGATIONS. ANY SUMS
APPROPRIATED FOR SUCH PURPOSE SHALL BE  TRANSFERRED  TO  THE  PLAN.  ALL
AMOUNTS PAID INTO THE PLAN PURSUANT TO THIS SUBDIVISION SHALL CONSTITUTE
AND  BE  ACCOUNTED FOR AS ADVANCES BY THE STATE TO THE PLAN AND, SUBJECT
TO THE RIGHTS OF THE PLAN'S CONTRACT HOLDERS, SHALL  BE  REPAID  TO  THE
STATE  WITHOUT  INTEREST FROM AVAILABLE OPERATING REVENUE OF THE PLAN IN
EXCESS OF AMOUNTS REQUIRED FOR THE PAYMENT OF  THE  OBLIGATIONS  OF  THE
PLAN.  AS  USED IN THIS SECTION, "OBLIGATIONS OF THE PLAN" MEANS AMOUNTS
REQUIRED FOR THE PAYMENT OF CONTRACT BENEFITS OR  OTHER  OBLIGATIONS  OF
THE  PLAN,  THE  MAINTENANCE OF THE PLAN, AND OPERATING EXPENSES FOR THE
CURRENT FISCAL YEAR.
  S 2. The state finance law is amended by adding a new section 78-c  to
read as follows:
  S  78-C. NEW YORK STATE PRE-PAID TUITION PLAN FUND. 1. THERE IS HEREBY
ESTABLISHED IN THE SOLE CUSTODY OF THE STATE COMPTROLLER A SPECIAL  FUND
TO  BE  KNOWN  AS  THE  NEW  YORK  STATE PRE-PAID TUITION PLAN FUND. ALL
PAYMENTS FROM SUCH FUND SHALL BE MADE IN ACCORDANCE WITH  SECTION  THREE
HUNDRED FIFTY-FIVE-D OF THE EDUCATION LAW.
  2.  (A) THE COMPTROLLER SHALL INVEST THE ASSETS OF THE FUND IN INVEST-
MENTS AUTHORIZED BY ARTICLE FOUR-A OF THE RETIREMENT AND SOCIAL SECURITY
LAW, PROVIDED HOWEVER, THAT:
  (I) THE PROVISIONS OF PARAGRAPH (A) OF SUBDIVISION TWO OF SECTION  ONE
HUNDRED  SEVENTY-SEVEN  OF  THE RETIREMENT AND SOCIAL SECURITY LAW SHALL
NOT APPLY EXCEPT FOR SUBPARAGRAPH  (II)  OF  SUCH  PARAGRAPH;  AND  (II)
NOTWITHSTANDING  THE  PROVISIONS  OF  SUBDIVISION  SEVEN  OF SECTION ONE
HUNDRED SEVENTY-SEVEN OF THE RETIREMENT AND SOCIAL SECURITY LAW  OR  ANY
OTHER LAW TO THE CONTRARY, THE ASSETS OF THE FUND MAY BE INVESTED IN ANY
FUNDING  AGREEMENT  ISSUED IN ACCORDANCE WITH SECTION THREE THOUSAND TWO
HUNDRED TWENTY-TWO OF THE INSURANCE LAW BY  A  DOMESTIC  LIFE  INSURANCE
COMPANY  OR  A  FOREIGN  LIFE  INSURANCE  COMPANY DOING BUSINESS IN THIS
STATE, SUBJECT TO THE FOLLOWING:
  (1) SUCH A FUNDING AGREEMENT MAY PROVIDE FOR A GUARANTEED MINIMUM RATE
OF RETURN;
  (2) SUCH A FUNDING AGREEMENT MAY BE ALLOCATED  AS  EITHER  A  SEPARATE
ACCOUNT  OR  A  GENERAL  ACCOUNT  OF  THE ISSUER, AS THE COMPTROLLER MAY
DECIDE;

S. 1223--A                          6

  (3) TOTAL INVESTMENTS OF THE FUND PURSUANT TO THIS  PARAGRAPH  IN  ANY
FUNDING  AGREEMENTS  ISSUED BY A SINGLE LIFE INSURANCE COMPANY WHICH ARE
ALLOCATED AS A GENERAL ACCOUNT OF THE ISSUER SHALL NOT,  IN  THE  AGGRE-
GATE, EXCEED THREE HUNDRED FIFTY MILLION DOLLARS; AND
  (4) NO ASSETS OF THE FUND SHALL BE INVESTED IN ANY SUCH FUNDING AGREE-
MENT  UNLESS, AT THE TIME OF SUCH INVESTMENT, THE GENERAL OBLIGATIONS OR
FINANCIAL STRENGTH OF THE ISSUER HAVE RECEIVED  EITHER  THE  HIGHEST  OR
SECOND HIGHEST RATING BY TWO NATIONALLY RECOGNIZED RATING SERVICES OR BY
ONE NATIONALLY RECOGNIZED RATING SERVICE IN THE EVENT THAT ONLY ONE SUCH
SERVICE RATES SUCH OBLIGATIONS.
  (B)  FUND  ASSETS  SHALL  BE KEPT SEPARATE AND SHALL NOT BE COMMINGLED
WITH OTHER ASSETS. THE COMPTROLLER MAY ENTER INTO CONTRACTS  TO  PROVIDE
FOR  INVESTMENT  ADVICE  AND  MANAGEMENT,  CUSTODIAL  SERVICES AND OTHER
PROFESSIONAL SERVICES FOR THE ADMINISTRATION AND INVESTMENT OF THE PLAN.
ADMINISTRATIVE FEES, COSTS AND EXPENSES, INCLUDING INVESTMENT  FEES  AND
EXPENSES, SHALL BE PAID FROM THE ASSETS OF THE FUND.
  3.  THE  COMPTROLLER SHALL PROVIDE FOR THE ADMINISTRATION OF THE TRUST
FUND,  INCLUDING  MAINTAINING  PARTICIPANT  RECORDS  AND  ACCOUNTS,  AND
PROVIDING  ANNUAL  AUDITED  REPORTS.  THE  COMPTROLLER  MAY  ENTER  INTO
CONTRACTS TO PROVIDE ADMINISTRATIVE SERVICES AND REPORTING.
  S 3. Section 5205 of the civil practice law and rules  is  amended  by
adding a new subdivision (p) to read as follows:
  (P) EXEMPTION FOR NEW YORK STATE PRE-PAID TUITION PLAN MONIES.  MONIES
IN  AN ACCOUNT CREATED PURSUANT TO SECTION THREE HUNDRED FIFTY-FIVE-D OF
THE EDUCATION LAW ARE EXEMPT FROM APPLICATION TO THE SATISFACTION  OF  A
MONEY JUDGMENT AS FOLLOWS:
  1.  ONE  HUNDRED  PERCENT OF MONIES IN AN ACCOUNT IN CONNECTION WITH A
PRE-PAID TUITION PLAN ESTABLISHED PURSUANT TO SUCH  ARTICLE  IS  EXEMPT;
AND
  2.  ONE  HUNDRED  PERCENT  OF MONIES IN AN ACCOUNT IS EXEMPT WHERE THE
JUDGMENT DEBTOR IS THE ACCOUNT OWNER OR DESIGNATED BENEFICIARY  OF  SUCH
ACCOUNT.
  FOR  THE  PURPOSES  OF THIS SUBDIVISION, THE TERMS "ACCOUNT OWNER" AND
"DESIGNATED BENEFICIARY" SHALL HAVE THE MEANINGS  ASCRIBED  TO  THEM  IN
ARTICLE FOURTEEN-A OF THE EDUCATION LAW.
  S  4. Paragraph 34 of subsection (b) of section 612 of the tax law, as
amended by chapter 535 of the laws of 2000, subparagraph (B) as  amended
by chapter 593 of the laws of 2003, is amended to read as follows:
  (34)  (A)  Excess  distributions received during the taxable year by a
distributee of a family tuition account established under the  New  York
state  college choice tuition savings program provided for under article
fourteen-A of the education law, OR OF A PRE-PAID TUITION ACCOUNT ESTAB-
LISHED PURSUANT TO SECTION THREE HUNDRED FIFTY-FIVE-D OF  THE  EDUCATION
LAW,  to the extent such excess distributions are deemed attributable to
deductible contributions under paragraph thirty-two of subsection (c) of
this section.
  (B) (i) The term "excess distributions" means distributions which  are
not
  (I)  qualified  withdrawals  within the meaning of subdivision nine of
section six hundred ninety-five-b OR PARAGRAPH L OF SUBDIVISION  ONE  OF
SECTION THREE HUNDRED FIFTY-FIVE-D of the education law;
  (II)  withdrawals  made  as a result of the death or disability of the
designated beneficiary within the meaning of subdivision ten of  section
six  hundred  ninety-five-b OR PARAGRAPH I OF SUBDIVISION ONE OF SECTION
THREE HUNDRED FIFTY-FIVE-D of such law; or

S. 1223--A                          7

  (III) transfers described in paragraph b of subdivision six of section
six hundred ninety-five-e of such law.
  (ii)  Excess  distributions shall be deemed attributable to deductible
contributions to the extent the amount of any such excess  distribution,
when  added  to  all  previous  excess  distributions  from the account,
exceeds the aggregate of all nondeductible contributions to the account.
  S 5. Paragraphs 32 and 33 of subsection (c) of section 612 of the  tax
law, paragraph 32 as amended by chapter 81 of the laws of 2008 and para-
graph  33  as  added  by chapter 546 of the laws of 1997, are amended to
read as follows:
  (32) Contributions made during the taxable year by an account owner to
one or more family tuition accounts established under the New York state
college choice tuition savings program provided for under article  four-
teen-A,  OR  TO  A  PRE-PAID  TUITION  ACCOUNT PURSUANT TO SECTION THREE
HUNDRED FIFTY-FIVE-D of the education law, to the extent not  deductible
or eligible for credit for federal income tax purposes, provided, howev-
er, the exclusion provided for in this paragraph shall not exceed [five]
TEN  thousand  dollars  for  an individual or head of household, and for
married couples who file joint tax returns, shall not exceed [ten] TWEN-
TY thousand dollars; provided, further, that  such  exclusion  shall  be
available only to the account owner and not to any other person.
  (33) Distributions from a family tuition account established under the
New York state college choice tuition savings program provided for under
article  fourteen-A,  OR  FROM  A  PRE-PAID  TUITION ACCOUNT PURSUANT TO
SECTION THREE HUNDRED FIFTY-FIVE-D of the education law, to  the  extent
includible in gross income for federal income tax purposes.
  S 6. This act shall take effect immediately and shall apply to taxable
years commencing after December 31, 2016.