Rule 10. An actuarial review of a plan shall be made on an
annual basis. If a determination is made for the trust by a nationally
recognized actuary that the plan is not actuarially sound and if the trust
determines there are insufficient numbers of new purchasers to insure the
actuarial soundness of the plan, the trust shall terminate all contracts in the
plan. Upon termination pursuant to the provisions of this rule, the trust shall
cease all payments from the plan and pay refunds to the persons specified in
the contracts to receive refunds upon termination if the refunds are not
directed to a higher education institution. The amount of the refunds shall be
as follows:
(a) If funds are being
held in an escrow account, funds in the escrow account will be transferred to
the third-party lender in an amount necessary to repay the principal and
accrued, but unpaid, interest due on the secured loan. Any funds remaining in
the escrow account after this transfer will be transferred into the tuition
account.
(b) The trust will then
calculate the asset value for each contract in the same plan by adding the
application fee, any contract processing fee paid to or authorized by the
trust, and 1 of the following, less the value of any educational benefits or
refunds previously received:
(i) The amount
transferred to the tuition account pursuant to the provisions of subdivision
(a) of this rule.
(ii) The prepaid
tuition amount plus any investment income for a contract purchased without a
secured loan.
(iii) The prepaid
tuition amount and any investment income for a contract where a secured loan
has been previously paid and the money has been transferred to the tuition
account pursuant to the contract.
(c) The person entitled to a refund under
this rule will receive a refund which is a percentage of the amount of the
total plan assets after liquidating all of the plan investments. The percentage
is determined by dividing the asset value of a contract by the asset value of
all contracts within the same plan.
(d) The refund under this rule shall, at the
option of the person entitled to receive the refund, either be applied toward
the purposes of the contract for the respective beneficiary or paid to the
person entitled to receive the refund upon termination.
