34 Tex. Admin. Code § 7.103 - Tax Benefits and Securities Laws Exemptions

(a) Intent to satisfy tax exempt requirements. This subchapter, the savings plan, each savings trust agreement, and each savings trust account hereunder are intended to satisfy all requirements of:

(1) Internal Revenue Code, §529, and regulations thereunder; and

(2) federal securities laws.

(b) Media for making payments to savings trust accounts. Any payment of an amount due to a savings trust account under a savings trust agreement must be made in cash or by electronic funds transfer.

(c) Excess contributions prohibited.

(1) The maximum contribution limit for a savings trust account shall be determined and published annually and shall be equal to the lesser of seven times the cost of one year of undergraduate tuition, room, board, and required fees, as determined and published for financial aid purposes, at a U.S. eligible educational institution that the board determines to be among the highest cost U.S. undergraduate eligible educational institutions, with the sum so computed then being rounded down to the nearest $5,000 increment; or a lesser amount determined by the board. The amount of money that may be contributed to a savings trust account shall be subject to the limit imposed under Internal Revenue Code, §529, taking into account the aggregation described in paragraph (3) of this subsection. To the extent that a contribution exceeds the amount otherwise permitted by this section, such excess will be promptly refunded, without interest or earnings, to the account's owner. A savings trust account for a designated beneficiary that has reached the maximum contribution limit may continue to accrue investment earnings. In the event that the board does not determine the maximum contribution limit for any year, the maximum contribution limit in effect during the previous year will continue in effect.

(2) The plan manager shall monitor contributions to each savings trust account that is in the manager's custody, to ensure compliance with this subsection and any other applicable limits on contributions. The plan manager shall maintain records to ensure that the amounts paid or contributed on behalf of each designated beneficiary are not in excess of the funds required to meet the qualified higher education expenses of the beneficiary pursuant to Internal Revenue Code, §529(b)(6).

(3) In application of these rules, the plan manager shall determine whether the beneficiary of a savings trust account is the beneficiary of any other qualified tuition program under Internal Revenue Code, §529, that is maintained by the state, and shall enforce the foregoing limitation on contributions by aggregating, as appropriate, the contributions to all prepaid tuition contracts and the contributions to all savings trust accounts maintained by the state for the same designated beneficiary. For purposes of this paragraph, any qualified rollover under Internal Revenue Code, §529, from another qualified tuition program of this state into a savings trust account for the same designated beneficiary shall not be treated as a new contribution to the savings trust account.

(d) Separate accountings. A plan manager shall maintain a separate accounting for each savings trust account in the manager's custody.

(e) Investment and earnings control prohibited. Except as provided in § 7.106(f) of this title (relating to Plan Managers), neither the owner of a savings trust account nor the beneficiary of that account may control or direct the investment of:

(1) the principal of the account; or

(2) any earnings of the account.

(f) Pledge of interest as security prohibited. Neither the owner of a savings trust account nor the beneficiary of that account may:

(1) assign any interest in the account for the benefit of a creditor;

(2) use any interest in the account as security or collateral for a loan or other obligation; or

(3) otherwise alienate, sell, transfer, assign, pledge, encumber, or charge any interest in the account.

(g) Reports. A plan manager shall make reports that are required by:

(1) Internal Revenue Code, §529; and

(2) any other applicable tax law.

(h) Policies and procedures. Except where in conflict with Education Code, Chapter 54, Subchapter G, or this subchapter, the board may adopt any policy or procedure, and such policy or procedure automatically amends each outstanding savings trust agreement as necessary for:

(1) the savings plan to obtain or maintain qualification as a qualified tuition program under Internal Revenue Code, §529;

(2) owners and beneficiaries to obtain or maintain the federal income tax benefits or favorable treatment that is provided by Internal Revenue Code, §529; or

(3) the savings plan to obtain or maintain exemption from registration under federal securities laws.

Notes

34 Tex. Admin. Code § 7.103

The provisions of this §7.103 adopted to be effective July 14, 2002, 27 TexReg 6044; amended to be effective May 13, 2008, 33 TexReg 3775; Amended by Texas Register, Volume 47, Number 22, June 3, 2022, TexReg 3271, eff. 6/6/2022