Section 1.
General
The Arkansas Achieving A Better Life Experience (ABLE) Program
(the "Program"), is established pursuant to the Arkansas ABLE Act, Chapter
3 of Title 20 of the Arkansas
Code, as amended, codified as Ark. Code Ann. §
20-3-104,
et seq. (the "Act"). The Program is designed to satisfy the requirements of
Section 529 A of the Internal Revenue
Code of 1986, as amended, and any regulations, rulings, announcements and other
guidance issued thereunder (collectively referred to as "Section
529 "). In accordance with the
Act, the Section Arkansas ABLE committee (the "Committee") has established the
following rules and regulations governing the operation of the Program. To the
extent these rules and regulations are interpreted to be inconsistent with
provisions of Section
529 A, the provisions of Section
529 A shall prevail. The Program
may be affected by subsequent changes in federal and state legislation. The
Committee shall have the right to modify these rules and regulations from time
to time to comply with then current federal law and regulations applicable to
the Program and for other purposes. Capitalized terms not defined herein shall
have the meaning ascribed to them in the Act.
Section 2.
Definitions
ABLE means the federal Achieving a
Better Life Experience Act of 2014 (
26 USC
529A, as amended) that creates state-level
tax-advantaged savings programs to assist persons with blindness or
disability.
ABLE Program or Program means the
Arkansas ABLE Account Program administered by the State Treasurer.
ABLE Program Committee or Committee means the committee created
pursuant to §
20-3-104,
or any successor provision thereto.
Account Application Form means an
application substantially in the form approved by the Committee from time to
time.
Account means an individual investment
account established and maintained in the ABLE Program.
Account Administrator means the person
selected by the ABLE Committee to administer the daily operations of the ABLE
account plan and provide marketing, recordkeeping, investment management, and
other services for the plan.
Account Beneficiary means the account
owner whose qualified expenses are expected to be paid from an account.
Administrative Expenses means all
expenses associated with the implementation and administration of the ABLE
Program, including fees payable to third parties providing services related to
the plan.
Age-Based Option means a Portfolio the
assets of which are invested in a combination of Underlying Investments,
currently based on the ages of Designated beneficiaries specified for such
Portfolio.
American Arbitration Association means a
non-profit provider of alternative dispute resolution services.
Approved Allocation means the allocation
of assets for a Portfolio as approved by the Committee as may be set forth in
the Program Management Agreement.
Approved Allocation Effective Date means
the annual date (July 1) by which the Approved Allocation for a Portfolio is
approved, as may be set forth in the Program Management Agreement.
Arkansas Administration Fee means any
fee paid out of a Plan's assets to the Committee pursuant to a Program
Management Agreement.
Business Day means each day on which the
New York Stock Exchange is open for trading.
Cash means U.S. dollars, checks or
electronic funds transfers, or any other method deemed appropriate by the
Committee.
Code means the Internal Revenue Code of
1986, as amended (
26
USC 1 et seq.).
Contracting State means a state without
a qualified ABLE program that has entered into a contract with Arkansas to
provide residents of the contracting state access to a qualified ABLE
program.
County Public Guardian means a
designated representative authorized by the State to act as a designated
representative for an account beneficiary that may not have a designated
representative.
Designated Representative means a person
who is authorized to act on behalf of an account beneficiary.
Disability Certification means the
certification described in Section 529A of the Code, Section
01130.740 of the Social Security
Administration's Program Operations Manual System, or IRS Notice
2015-81.
Contribution Maximum means the maximum
amount that an Account owner can contribute to an all Program Accounts for the
same Designated beneficiary, as determined from time to time by the Committee
in accordance with the Achieving a Better Life Experience Program as provided
under the Tax Increase Prevention Act of 2014,
Pub. L. No.
113-295
Designated Beneficiary Change Form means
a change of a Designated beneficiary substantially in the form approved by the
committee, from time to time.
Earnings means the aggregate total of
all dividends and interest income received by the ABLE savings account plan at
any time following the plan's commencement. The aggregate total of dividends
and interest income shall be reduced by the aggregate total of administrative
expenses paid out of the pool at any time following the commencement of the
plan. Earnings shall be determined without regard to realized or unrealized
capital gains and losses incurred by the plan.
Eligible Individual has the meaning
given to that term under Section
529 A of the Code.
Eligible Participant means an individual
as defined in AR Code Title
20-3-103(4)
FDIC means the Federal Deposit Insurance
Corporation.
Federal Guidelines means official
guidance from federal agencies with jurisdiction over ABLE, specifically the
SSA's Program Operations Manual System (SI 01130.740) (2016) and IRS Notice
2015-81, "Guidance Under Section
529 A: Qualified ABLE Programs"
(80 FR 35602) (2015 ). These incorporations by
reference refer to the guidelines on the date specified and do not include any
editions or amendments subsequently to the date specified.
Investment Fund means the portion of a
Plan's assets invested in underlying Investments (i.e., that portion of the
Plan's assets not held in the Operating Fund).
Investment Manager means the entity
employed by the Program Manager to manage the assets of the Portfolios.
IRS means the Internal Revenue
Service.
Management Fee means any fee paid out of
a Plan's assets to the Program Manager pursuant to a written agreement approved
by the Committee.
MSRB means Municipal Securities
Rulemaking Board and any duly established entity which succeeds to the
functions thereof.
Net Asset Value means:
(1) the net asset value per share of the
Underlying Investments as of the market close on that Business Day;
(2) adjustments, if any, to the net asset
value per share of any Underlying Investments made after the market
close;
(3) net purchase orders and
net redemption orders received by the Investment Manager from the Program
Manager each Business Day;
(4) the
deduction and payment of fees and expenses from the Portfolios by the Program
Manager, or by the Investment Manager; and
(5) the Investment Manager's reinvestment,
into any Underlying Investment it or its affiliate offers and manages, of any
income, dividends and/or capital gain distributions paid by underlying funds.
NYSE means the New York Stock
Exchange.
Operating Account means the account
established for the purpose of holding the Arkansas Administration Fee.
Operating Fund means that portion of a
Plan's assets not held in the Investment Fund.
Participation Agreement means an
agreement to participate in the ABLE account plan between an account owner and
the State, through its agencies and the State Treasurer.
Plan means the ABLE savings account plan
authorized by the Act.
Portfolio means one of the Plan
Portfolios established within the Investment Fund to which Contributions may be
allocated, and that are invested in Underlying Investments.
Program Description means the complete
disclosure document or set of documents describing a Plan, including any
supplement(s) thereto, each as amended from time-to-time, constituting an
"official statement" within the meaning of Rule 15c2-12 under the Securities
Exchange Act of 1934, as amended, and the rules of the MSRB and any successor
to the applicable functions thereof.
Program Distributor means the program
distributor employed by the Committee pursuant to Ark. Code Ann. §
20-3-104,
or any successor provision thereto, and designated as such in the then current
Program Description.
Program Management Agreement means a
written agreement among the Trust, the Committee and the Program
Manager.
Program Manager means both the program
manager and the recordkeeping and servicing agent employed by the Committee
pursuant to Ark. Code Ann. §
20-3-104,
or any successor provision thereto, and designated as such in a Program
Management Agreement.
Qualified Beneficiary means an
individual who is entitled to benefits based on blindness or disability under
title II or XVI of the Social Security Act, or who has a "disability
certification" filed with the Secretary and was disabled before age 26.
Qualified Disability Expenses means
expenses that are qualified under Section
529 A of the Code.
Qualified Withdrawal or "Qualified
Distribution" means a withdrawal from an ABLE account to pay the qualified
disability expenses of the beneficiary of the account.
Rollover Contribution means a
Contribution to an Account which is transferred to or deposited in the Account
from another program operating as a "qualified ABLE program" within the meaning
of Section
529, or any successor provision
thereto, of the Code.
Rollover Distribution means a
distribution or transfer from an Account which is transferred to or deposited
in another program operating as a "qualified ABLE program" within the meaning
of Section
529, or any successor provision
thereto, of the Code.
Secretary means the U.S. Secretary of
the Treasury.
SSA means the Social Security
Administration.
SSI Limit means the Supplemental
Security Income limit.
Series means a class of units of a
Portfolio.
State means the State of Arkansas,
acting through its executive, administrative, legislative and judicial
branches.
Treasurer means the duly elected
Treasurer of the State of Arkansas or his or her designee or designees, which
may include one or more third party service providers.
Underlying Investments means ETF's,
securities, separate accounts, registered mutual funds or other investments in
which assets of a Portfolio are invested.
Withdrawal means a Qualified withdrawal
or a Nonqualified withdrawal.
Withdrawal Request means a request by an
Account owner to effect a Withdrawal substantially in the form or other process
approved by the Committee, from time to time.
Year-of-Enrollment Portfolio means a
Portfolio the assets of which are invested in a combination of Underlying
Investments based upon the designated beneficiaries participated year of
enrollment as determined by the Account owner.
Section 3.
Interstate Agreement or
Compact
The Treasurer may enter into an interstate agreement for joint
ABLE-related services, in order to achieve better programming and higher
economies of scale in investment options.
Section 4.
Program Structure
A.
The Trust. The
Trust is comprised of an Investment Fund and an Operating Fund.
1.
Investment Fund.
The Investment Fund initially receives all Contributions to Accounts made by
Account owners pursuant to Participation Agreements. The Investment Fund is
invested in underlying investments.
2.
Operating Fund.
The Operating Fund is comprised of the Operating Account and such sub-accounts
as may be established by the Committee from time to time.
B.
Portfolios.
1.
General.
a. The Investment Fund may be divided into
one or more Portfolios and/or Series of Portfolios. Each Portfolio will
represent a separate, segregated portfolio of underlying Investments held in
the Investment Fund.
b.
Contributions made to an Account on behalf of a Designated beneficiary are
invested in units of one or more Series of one or more Portfolios based on an
election on the Account Application Form (or other appropriate form) made by an
Account owner. If an Account owner is awarded a matching grant, the matching
grant will be invested according to the Portfolios(s) allocation instructions
on file for the account owner's Account. The terms, expenses and sales charges,
if any, as well as the availability of different Portfolios (or Series thereof)
shall be as described in the then current Program Description.
c. The assets of each Portfolio will be
rebalanced periodically on an as needed basis to conform each Portfolio to the
Approved allocation.
d. The
Arkansas ABLE Account Program or the Program Manager has the right to alter the
basis of assigning Accounts to Age-Based Options and, subject to receipt of
reasonably satisfactory assurance that such reassignment would not disqualify
the affected Accounts or the Program from treatment, for federal tax purposes,
as described in the then current Program Description and/or Supplement, or any
supplements thereto, to reassign existing Accounts for any reason it deems
appropriate.
2.
Change of Designated Beneficiary.
a. An Account owner shall have the right to
name the designated beneficiary of an account and at any time to change the
designated beneficiary of an account to an eligible individual who is a member
of the family of the former designated beneficiary.
b. At the direction of an account owner, all
or a portion of an account may be transferred to another account of which the
designated beneficiary is a member of the family of the designated beneficiary
of the transferee account if the transferee account was created by this chapter
or in accordance with the Achieving a Better Life Experience Program as
provided under the Tax Increase Prevention Act of 2014,
Pub. L. No.
113-295
3.
Subsequent Portfolios and
Series. The Committee shall have the authority to increase or
decrease the number of Age-Based Options or Custom Portfolio Options and/or the
number of Series of each such Portfolio and to create or terminate any
additional Portfolios or Series the terms of which shall be as set forth in the
then current Program Description provided.
C.
Net Asset Value.
The Program Manager, or its delegate, will calculate a Net Asset Value for each
Portfolio (or Series thereof) of the Investment Fund as described in the then
current Program Description.
Section
4.
Program Distribution and Participation
A.
Program
Distribution.
1. Except as
otherwise indicated in this chapter, interest, dividends, and capital gains
from funds invested in the Achieving a Better Life Experience Program are
exempt from Arkansas income taxes.
2. A qualified distribution from a disability
savings account established under the program is exempt from Arkansas income
tax with respect to the designated beneficiary's income.
3. Nonqualified distributions from a
disability savings account established under the program are subject to
Arkansas income tax. The nonqualified distribution is taxable to the party,
account owner, or designated beneficiary who actually makes the withdrawal.
a. Earnings on a contribution that are
included in a refund are subject to Arkansas income tax if an account owner
receives a refund of contributions to a disability savings account established
under the program 21 because of either:
(1)
The death or disability of the designated beneficiary; or
(2) A scholarship, allowance, or payment
described in
26
U.S.C. §
135(d)(1)(B) or
(d)(1)(C) as in effect on January 1, 2014,
received by the designated beneficiary.
B.
Program
Participation.
1.
Opening an Account. An Eligible Participant must
complete an Account Application Form and any other documents required by the
Committee or, the Program Manager, these rules and regulations, or applicable
federal and state law or regulation and submit such documents to the Program
Manager along with the initial minimum account contribution as set forth in the
then current Program Description. The acceptance by the Program Manager for
processing an Account Application Form and an initial contribution does not
constitute the agreement of the Program Manager to open an account. The Program
Manager has the right, but not the obligation to reject an Account Application
Form that does not contain all information requested on the Account Application
Form. There shall be no restrictions on the age of the Designated beneficiary
(except as may be deemed necessary to comply with applicable law) or any
required relationship between the Account owner and Designated
beneficiary.
2.
Entering into a Participation Agreement. Subsequent to
or concurrently with opening an Account, an Eligible Participant must provide
the information required by and agree by virtue of opening an Account to be
bound by a Participation Agreement for each Designated beneficiary on whose
behalf the Account owner intends to make Contributions.
3.
Assigning Accounts to
Portfolios and Series. The Program Manager will assign each
Account to a Portfolio(s) based upon information submitted by the Account
owner.
4.
Contributions
to an Account.
a.
Form of Contribution. Contributions must be made in
Cash only. As used in this section, "Cash" includes checks or electronic funds
transfers. Contributions may be made:
(i) by
lump sum payment;
(ii) by
electronic funds transfer from an existing account of the Account owner
pursuant to an automated investment plan;
(iii) by employer payroll deduction;
or
(iv) by such other method as set
forth in the then current Program Description. The term does not include money
orders, travelers checks, foreign checks not in U.S. dollars, checks dated over
90 days, post-dated checks, checks with unclear instructions, securities,
non-cash assets, charges on debit, credit cards or any other payment method
prohibited by the then current Program Description. In order for an Account
owner to make Contributions by employer payroll deduction, the Account owner's
employer must be able to meet the Program Manager's operational and
administrative requirements for Qualified tuition program payroll
Contributions.
b.
Amount of Contribution. The minimum initial and
minimum subsequent Contribution amount by check is as set forth in the then
current Program Description, and may, from time to time, be revised subject to
the approval of the Committee. The minimum initial and minimum subsequent
Contribution amount by automatic investment plan are as set forth in the then
current Program Description. The Contribution Maximum for all Accounts for a
Designated beneficiary is as set forth in the then current Program
Description.
c.
Crediting of Contributions. The Program Manager
generally shall credit Contributions to an Account as of the same Business Day
as received in good order as determined by the Program Manager, provided such
Contributions are delivered to and accepted by the Program Manager by 4:00 p.m.
Eastern time on such Business Day, or upon such other Business Day as may be
set forth in the then current Program Description. The Program Manager
generally shall credit Contributions made by electronic fund transfer to an
Account generally the next Business Day after the transfer is received in good
order as determined by the Program Manager, provided such Contributions are
delivered to and accepted by the Program Manager by 10:00 p.m. Eastern Time on
such Business Day, or upon such Business Day, or upon such other Business Day
as may be set forth in the then current Program Description.
d.
Accounting of
Contributions. On the Business Day of the investment of a
Contribution by the Program Manager, units (or additional units) of the
applicable Portfolo(s) will generally be reflected in the records of the
Program for the applicable Account. Contributions made by check, which are
received in good order, will generally be considered received by the Program in
a given year if received on or before December 31st of the same year, provided
the checks are subsequently paid. Contributions made pursuant to an electronic
funds transfer will generally be considered received by the Program in a given
year if initiated by the Account owner on or before 10:00 p.m. Eastern Time on
December 31st of such year, provided the funds are
subsequently withdrawn from an Account owner's checking or savings account at
another financial institution. Contributions made pursuant to an automatic
investment plan will generally be considered received by the Program in the
year the automatic investment debit has been deducted from an Account owner's
checking or savings account at another financial institution.
e.
Investment of
Contributions. A Contribution to an Account is generally invested
in units of the Portfolio(s) designated by the Account owner or assigned by the
Program Manager and/or the Committee on the same Business Day as the crediting
of the Contribution to an Account, or upon such other Business Day as may be
set forth in the then current Program Description.
f.
Accounting for
Contribution. On the Business Day following the investment of a
Contribution by the Program Manager, units (or additional units) of the
applicable Portfolio(s) will generally be reflected in the records of the
Program for the applicable Account.
g.
Overfunding an
Account. Any Contribution made by an Account owner will generally
be returned to the Account owner in the event the Contribution exceeds the
Contribution Maximum for the Designated beneficiary. All Accounts within the
Program for the same Designated beneficiary will be aggregated for purposes of
determining whether the Contribution Maximum has been exceeded. At the Program
Manager's discretion, a penalty may be imposed on Contributions which exceed
the Contribution Maximum. The Program Manager may refuse Contributions, which
it determines, in its sole discretion, appear to constitute an abuse of the
Program.
h.
Rollover
Contributions. Rollover Contributions to an Account must be
accompanied by an incoming rollover form (or such other form as approved by the
Committee) executed by the Account owner and submitted in good order as
determined by the Program Manager. An incoming rollover form (or other approved
form) must include all information the Program Manager and/or Committee may
require in order to process the Rollover Contribution in accordance with all
requirements of the Program, including those specified in these rules and
regulations, the Program Description, and applicable federal and state law or
regulation. The Program Manager has the right, but not the obligation to reject
an applicable form that does not contain all information requested. The Program
Manager may record the entire amount of the Contribution as earnings unless the
incoming rollover form (or other approved form) is accompanied by a statement
from the administrator or manager of the Section
529 Qualified ABLE program from
which the Rollover Contribution is made detailing the amount of the Rollover
Contribution that constitutes principal and the amount of the Rollover
Contribution that constitutes earnings, together with such other information as
the Committee and/or Program Manager may require. Rollover Contributions to an
Account may be subject to federal income tax and/or penalties as required by
then current federal law or regulation. Reporting and payment of any such
federal or state taxes or penalties shall be the obligation of the Account
owner.
5.
Changes to an Account.
a.
Change in Designated
Beneficiary. To change the Designated beneficiary of an Account,
the Account owner must complete a Designated Beneficiary Change Form or such
other form as the Committee shall approve (and any additional required
documentation) and submit it in good order as determined by the Program Manager
in accordance with all requirements of the Program, including those specified
in these rules and regulations, the Program Description, and applicable federal
or state law or regulation. The Program Manager has the right, but not the
obligation to reject an applicable form that does not contain all information
requested. If the Account owner's request is in good order (as determined by
the Program Manager), the Designated beneficiary on the Account will be changed
to the new Designated beneficiary on the records of the Program.
b.
Partial Transfer of Account
Assets to New Designated Beneficiary. To transfer some, but not
all, assets from one Account to another Account, the Account owner must provide
such information as is necessary for the Program Manager to process such
transaction in accordance with all requirements of the Program, including those
specified in these rules and regulations, the Program Description, and
applicable federal law or regulation. If the Account owner's request is in good
order as determined by the Program Manager the amount specified by the Account
owner for transfer from the Account will be transferred to on the records of
the Program to an Account for the benefit of the new Designated
beneficiary.
c.
Successor Account owner. An Account owner may name a
successor Account owner if permitted by the applicable form, and to the extent
permissible in accordance with the Program Description and applicable law. On
notification to the Program Manager of the death of the Account owner,
accompanied by a death certificate or other proof of death recognized under
applicable law and such other information as the Program Manager requires, the
Program Manager will change the Account owner for the Account on the records of
the Program. In the event a successor Account owner is not named on the Account
Application Form or the named successor Account owner does not accept the
Account, and the Account owner has not disposed of the Account otherwise in a
will, trust or other testamentary disposition, the surviving spouse of the
Account owner will become the Account owner for the Account. In the event there
is no surviving spouse and the Designated beneficiary is not a minor, the
Designated beneficiary will become the Account owner for the Account. If the
Designated beneficiary is a minor, the Designated beneficiary's custodial
parent will become the Account owner for the Account. If the Designated
beneficiary has more than one custodial parent the custodial parent whose
birthday is earlier in the calendar year will become the Account owner for the
Account. If a court of competent jurisdiction declares an Account owner legally
incompetent and appoints a successor Account owner, the Program Manager will
change the Account owner for the Account on the records of the
Program.
d.
Change in
Account Owner. The Account owner may transfer ownership of an
Account to another Eligible Participant, if the transfer is made without
consideration. The Account owner will be responsible for any adverse federal
and state tax consequences arising from such a change. A change of Account
owner must be accompanied by an account information change form or such other
form as approved by the Committee and submitted in good order as determined by
the Program Manager.
e.
Account Owner Direction of the Investment of
Contributions. Account owners cannot direct the investment of
Contributions (or the earnings on Contributions) once they have been used to
purchase units of the designated Portfolio(s). Account owners may change how
investments are allocated among the available Portfolio options in accordance
with the then current Program Description and applicable law or
regulation.
f.
General. The ability of Account owners to affect
changes in and the consequences to Account owners may be affected by subsequent
changes in federal and state legislation.
6.
Penalties for
Misrepresentations. In the event an Account owner makes any
material misrepresentation in any oral or written communication with the
Committee or the Program Manager, the Program Manager may terminate an Account
owner's Account and may charge a penalty of up to fifteen percent (15%) on the
investment earnings of the Account, and may seek to recover any losses incurred
by the Program, the Committee, or the Program Manager as a result of such
misrepresentation.
Section
5.
Federal Reporting Requirements
The Program will comply with all reporting responsibilities as
outlines in the federal guidelines. The Treasurer will compile or cause to be
compiled the needed information to complete any reports.
