TITLE 5 POST-SECONDARY
EDUCATION
CHAPTER 7 TUITION AND FINANCIAL AID
PART 30 PROCEDURES, STANDARDS AND
ELIGIBILITY REQUIREMENTS FOR
PARTICIPATION IN THE NEW MEXICO
EDUCATION TRUST
5.7.30.1 ISSUING
AGENCY: EDUCATION TRUST BOARD, State of New Mexico, C/O
Higher Education Department.
[5.7.30.1 NMAC - N,
6/29/2001; A, 11/15/2001; A, 7/31/2005]
5.7.30.2 SCOPE: The provisions
of 5.7.30 NMAC apply to persons who may enter into or be beneficiaries of
college investment agreements with the education trust board.
[5.7.30.2 NMAC - N,
6/29/2001]
5.7.30.3 STATUTORY
AUTHORITY: Sections 21-21K-1 through 21-21K-7 NMSA 1978
[5.7.30.3 NMAC - N,
6/29/2001]
5.7.30.4 DURATION: Permanent
[5.7.30.4 NMAC - N,
6/29/2001]
5.7.30.5 EFFECTIVE
DATE:
June 29, 2001
[5.7.30.5 NMAC - N,
6/29/2001]
5.7.30.6 OBJECTIVE: The purpose of
the Education Trust Act is to encourage persons to save and invest funds to be
used by individual beneficiaries to pay the costs of attendance at eligible
institutions of higher education and to establish a qualified tuition program
pursuant to section 529 of the Internal Revenue Code of 1986, as amended and
regulations promulgated thereunder.
[5.7.30.6 NMAC - N,
6/29/2001]
5.7.30.7 DEFINITIONS: The following
terms shall have the following meanings in this rule
A. “Account”
means the formal record of transactions relating to a particular designated beneficiary
established for purposes of the plan.
B. “Account
owner” means any person who has entered into a customer agreement pursuant to
this rule.
C. “Act”
means N. M. Stat. Ann. Section 21-21K-3 et seq.
D. “Beneficiary”
means any person who: (i) is designated by a customer agreement to benefit from
payments for qualified higher education expenses at an eligible higher educational
institution or else is eligible to receive benefits pursuant to such customer agreement
in accordance with plan procedures and guidelines; and (ii) constitutes a
designated beneficiary for purposes of the federal requirements.
E. “Benefits”
means the payment of qualified higher education expenses on behalf of a beneficiary
by the board during the beneficiary's attendance at an eligible higher educational
institution.
F. “Board”
means the education trust board of the state of New Mexico.
G. “Chair”
means the chair of the board or any person acting under the delegated authority
and supervision of the chair.
H. “Contributions”
means amounts deposited by an account owner to an account within the plan.
I. “Customer
agreement” means an agreement between an account owner and the board providing
for the establishment by the account owner of one or more accounts within the plan
fund and for the administration of those accounts for the benefit of the account
owner and of one or more beneficiaries.
J. [Reserved]
K. “Eligible
higher educational institution” or “institution” means an institution which is
described in section 481 of the Higher Education Act, and which is eligible to
participate in a program under Title IV of such act. Such institutions
generally are accredited post-secondary educational institutions offering
credit toward the attainment of associate, baccalaureate, graduate level or
professional degrees or another recognized post-secondary credential. The
institution must be eligible to participate in United States department of education
student aid programs.
L. “Eligible
scholarship” means any allowance or payment described in section 135(d) (1) (B)
or (C) of the Internal Revenue Code or any scholarship.
M. “Federal
requirements” means the provisions of the Internal Revenue Code, as amended
from time to time, addressing qualified state tuition programs, any regulations
promulgated or, if so determined by the chair, proposed thereunder and any
rulings thereunder addressed, or in the opinion of counsel, applicable to the board.
N. “Financial
institution” means a credit union or financial institution that meets standards
established by the board.
O. “Internal
Revenue Code” means the Internal Revenue Code of 1986, as amended
P. “Higher
Education Act” means the Higher Education Act of 1965, as amended.
Q. “Members”
means the members of the education trust board of the state of New Mexico.
R. “Plan”
means programs as described in and governed by the act, and this rule.
S. “Plan
procedures and guidelines” means such operating procedures and guidelines for plan
administration, consistent with the act, this rule and federal requirements, as
may be established by the board.
T. “Qualified
higher education expenses” means:
(1) the certified costs of tuition, fees,
books, supplies and equipment required for the enrollment or attendance of a beneficiary
at an eligible higher educational institution; and
(2) to the extent allowable in accordance with
plan procedures and guidelines, the reasonable costs of room and board of a beneficiary
incurred while attending an eligible higher educational Institution and
enrolled at least half-time, provided that the costs of room and board shall
not exceed the maximum room and board allowance set forth in federal requirements.
U. [Reserved.]
V. “Tuition”
means the charges imposed to attend an eligible higher educational institution
and required as a condition of enrollment.
[5.7.30.7 NMAC – N,
6/29/2001; A, 11/15/2001]
5.7.30.8 ACTION:
A. Trust.
The board shall establish a trust. The purpose of the trust is to create a
vehicle for the board to carry out the provisions of the act and this rule, to
protect the financial integrity of the “education trust fund” as defined in the
act, to preserve the plans integrity and to assure the appropriate use of tax
benefits. The board shall be the trustee of the trust so created.
B. Plan
implementation. The administration of the plan is delegated to the chair.
C. Opening
an account
(1)
Each applicant shall submit an application to the chair or any agent or
contractor designated by the chair on such forms and with such attachments as
the chair may require.
(2) The application shall contain the
following:
(a) the name of the proposed beneficiary; beneficiaries
may be changed to any eligible individual as permitted by the plan procedures
and guidelines then in effect, upon the receipt of a request of the account owner
in the form designated in the plan procedures and guidelines;
(b) any minimum investment required by the chair
to open an account;
(c) the birth date of the beneficiary;
(d)
the social security number of the beneficiary; distributions from accounts
that lack a valid social security number may be subject to penalties or the
withholding of taxes at the time of distribution;
(e) the estimated matriculation date of the beneficiary;
(f) the name, social security number, address,
phone number and, if available, the e-mail address of the account owner; and
(g) such other information as the board may
require including such factual representations as the board may reasonably
require to evidence compliance with the plan procedures and guidelines.
D. Customer
agreements
(1) The board will enter into a customer agreement
with each account owner.
(2) The customer agreement may include the
following:
(a) the name and address of the account owner
and the beneficiary;
(b) the tax identification numbers of the beneficiary
and the account owner;
(c) the maximum amount of funds which may be
contributed by the account owner annually or as a lump sum;
(d) any
obligations of the board, the account owner and the beneficiary;
(e) a summary of the fees and penalties which
may be assessed against the account, the account owner or the beneficiary;
(f) the manner in which funds may be withdrawn
and by which the ownership rights of the account may be transferred;
(g) provisions for periodic reporting of the
status of accounts;
(h) provisions
of this rule; and
(i) such other information as the board may
determine to be necessary or appropriate, including such factual
representations as the board may reasonably require to evidence compliance with
the plan procedures and guidelines.
(3) Customer agreements may be amended in
order to enable account owners to increase or decrease the amount contributed,
change the beneficiary and carry out similar matters. Changes that affect the ownership and
registration (e.g., mailing address, name of beneficiary) of the account must
be submitted by the account owner in the form set forth in the plan procedures
and guidelines.
(4) Applications and customer agreements may
be submitted, accepted and become binding contracts by electronic means
(including over the internet) as may be set forth in the plan procedures and guidelines.
E. Limitations
on contributions
(1) No account owner or beneficiary may
directly or indirectly direct the investment of any contributions or of any
other amounts held by the plan. Members of the board will not be deemed to be
directly or indirectly directing the investment of any account on which they
are the account owner. At the time an account owner opens an account, an account
owner may choose among any investment options offered by the board.
(2) An account owner may contribute to an account
by making cash contributions in the form of:
(a) lump sum payment;
(b) installments;
(c) electronic funds transfer from an existing
account of the account owner; and
(d) employer payroll deduction, if provided by
the employer.
(3) Contributions may be made at any time
subject to any minimum deposit requirements.
(4) Total contributions to an account may not
exceed the amount projected to be necessary to pay qualified higher education expenses
of the beneficiary as determined by the board in accordance with plan procedures
and guidelines and federal requirements. For the calendar year 2000 the amount
projected to be necessary to pay qualified higher education expenses is
$160,539. In subsequent years such amount will be based on the highest cost
private college in the United States of America, as published by the college board
or, if the college board discontinues publication of such data, by any other
similar organization selected by the chair. The board will prohibit additional
contributions to an account when the balance in the account reaches an amount
to be specified annually. The board may establish contribution limits which vary
based upon factors, which may include: the ages of the beneficiaries, their
expected year of enrollment, and the investment allocation of the plan.
F. Ownership
of contributions and earnings
(1) The account owner shall retain ownership
of all contributions made under any customer agreement and earnings on those
contributions up to the date of utilization for payment of qualified higher education
expenses for the beneficiary.
(2) In the event the customer agreement is
terminated by the account owner prior to payment of qualified higher education expenses
for the beneficiary, the account owner shall retain ownership of all
contributions made under the customer agreement and, if provided for under the customer
agreement, a right to receive earnings (less any applicable taxes and/or
penalties, administrative fees and investment losses) on all contributions to
the account.
(3) The eligible higher educational institution
shall own payments made to it for qualified higher education expenses at the
time each is made to the institution.
G. Withdrawals
for the payment of qualified higher education expenses
(1) To withdraw funds from an account for the
payment of qualified higher education expenses, the board must first be advised
in accordance with plan procedures and guidelines of the institution the beneficiary
will attend and the date of anticipated enrollment. The board requires evidence
confirming the beneficiary's enrollment at the eligible higher educational institution.
(2) Upon receipt of documentation required in
accordance with plan procedures and guidelines (including copies of invoices
and/or proof of disbursement), the board will make distributions to the
specified institution for the benefit of the beneficiary, will make
distributions to the specified institution and the beneficiary on a copayment
basis or, if consistent with plan procedures and guidelines, to another party
as expressly authorized in writing. Distribution of benefits will begin within
thirty (30) days after receipt by the board from the account owner of a notice
to use account assets and shall continue, as authorized pursuant to
documentation satisfactory to the board, throughout the beneficiary's period of
enrollment at an eligible higher educational Institution or until the account
balance has been exhausted, whichever comes first.
(3) To make withdrawals from an account for
the payment of off campus room and board, and other allowed qualified higher education
expenses, the board requires satisfactory documentation reflecting the expenses
being submitted for payment in a form acceptable to the board. If a beneficiary
resides off campus, the board will pay, consistent with plan procedures and guidelines,
whomever is designated by the account owner, in addition to the amounts paid to
the institution, an amount, not in excess of that permitted by federal requirements
with respect to the cost of lodging and meals for an academic period.
(4) The board may make distributions to a beneficiary
prior to the expenditure if the beneficiary certifies prior to the distribution
that the distribution will be expended for qualified higher education expenses
of the beneficiary within a reasonable time after the distribution and within
30 days of the distribution the beneficiary provides substantiation
satisfactory to the board that the amounts disbursed were used for the payment
of qualified higher education expenses. Distributions made pursuant to this
section may be made only to the extent the board retains a sufficient amount in
the beneficiary's account to pay any state or federal taxes or penalty which
may accrue if the beneficiary fails to provide timely valid substantiation of
the qualified higher education expense.
(5) All distributions made during a tax year
may be treated as one distribution when necessary to comply with federal requirements.
H. Participating
financial institutions
(1) The board may enter into agreements with financial
institutions which agree to:
(a) permit deposits to be made into accounts
by payroll deposit or other electronic funds transfer on a periodic or lump sum
basis;
(b) participate in such marketing and public
awareness programs as requested by the chair; or
(c) such other terms and conditions as the chair
deems appropriate.
(2) Any financial institution is eligible to
participate in the plan.
I. Administration
agreements. The board may enter agreements for assistance with the
implementation and administration of the plan, including terms and conditions
the chair determines to be necessary or appropriate.
J. Fees
and penalties
(1) Each customer agreement may provide for an
annual administrative fee based on amounts in the plan fund accrued daily at an
annualized rate not to exceed 1.5%. Such fees may be used only for the cost of
administration of the plan. In determining such fees, the board shall at least
consider: (1) the amount and estimated rate of increase of tuition and fees at
institutions of higher education; (2) estimated investment returns; (3)
estimated administrative costs; and (4) the period between the date the
contract is entered into and the date the beneficiary is projected to graduate
from high school.
(2) Customary and usual investment costs
(including fees and expenses of any fund in which plan assets are invested) and
distribution costs may be deducted from the plan fund in connection with the
investment thereof and are not included in the administrative fees. Customary and usual account maintenance fees
may be deducted from individual accounts opened and held by account owners who
are not New Mexico residents, unless it is opened and held on behalf of a beneficiary
who is a New Mexico resident.
(3) [Reserved.]
(4) If the board determines that the account owner
or the beneficiary have made any material misrepresentations on the application
form, in requests for disbursements or in any other communications with the board
or any plan manager, acting pursuant to an agreement with the board, the account
may be involuntarily liquidated by the board. If the board liquidates any
account pursuant to this provision, the account owner will be entitled to a
refund subject to any penalty as the board may determine in accordance with the
plan procedures and guidelines and federal requirements.
(5) All amounts attributable to refund
penalties remain the property of the board, and may be used for purposes of the
plan.
(6) When a penalty is assessed, the chair may
(i) require that the amount of the penalty be set off from any funds remaining
in the account or (ii) will collect penalties by retaining a sufficient balance
in an account to pay the amount of the penalty.
(7) All penalties are in addition to all state
and federal taxes which may be due on the distribution. The board may withhold
an amount equal to any such taxes from a distribution.
K. Withdrawals
for purposes other than qualified higher education expenses
(1) An account owner may withdraw funds from
an account, subject to any penalties assessed by the plan. Any investment losses will be deducted from
the principal amount of contributions. In addition, a fee may be levied by the board
to reasonably compensate the board its costs incident to the account owner's
account.
(2) Except as otherwise specifically provided
herein, only the account owner for each account may close an account or receive
a refund of amounts contributed (and earnings).
(3) Refunds will not be made to anyone other
than the account owner for each account, unless the account owner directs the board
in writing in accordance with plan procedures and guidelines to provide the
refund to another person.
(4) When the beneficiary receives an eligible scholarship,
as determined pursuant to the Internal Revenue Code, refund payments in an
amount equal to the eligible scholarship may be issued to the account owner
each academic term as long as the eligible scholarship is effective or the
benefits may be transferred to another beneficiary. Proof of the eligible scholarship
must be submitted in a form acceptable to the board in accordance with plan procedures
and guidelines. Refund payments may be subject to a processing fee.
(5) If the beneficiary dies or becomes
disabled, the amount of savings remaining available in the account may be
refunded or the benefits may be transferred to another beneficiary. If a change
of beneficiary is not requested, a lump sum refund will be made to the account owner,
provided proof of death or disability is submitted in a form acceptable to the board
consistent with plan procedures and guidelines. Refund payments may be subject
to a processing fee.
(6) The board may notify the account owner of
any account in which a balance remains: (i) upon graduation of the beneficiary
from an eligible higher educational institution; (ii) upon the lack of any
withdrawals for any ten-year period, subsequent to the expected initial
withdrawal, during which period no withdrawal has been made; (iii) upon the
completion of the last period of beneficiary usage projected upon account
establishment; (iv) upon determination by the board that no eligible beneficiary
exists; or (v) if the account balance has fallen below $250; of the amount of
such balance and may request directions from the account owner as to the application
of such balance, consistent with plan procedures and guidelines. If the account
owner fails to provide such direction with respect to all or part of such
balance within 90 days, the board may conclusively deem the account to be
overfunded in an amount equivalent to the portions of such balance for which no
direction has been received and issue a refund for such amounts less penalties,
fees and state and federal taxes.
L. Transfer
of ownership. The account owner may transfer ownership rights of an account to
another eligible account owner, provided the transfer is accomplished without
consideration in accordance with plan procedures and guidelines. All requests
for substitution of an account owner must include:
(1) the account number;
(2) the name, address, social security number
and telephone of the successor account owner;
(3) the reason for the transfer of ownership;
(4) such evidence of verification, including
without limitation the guaranteed signature of the account owner, as may be
required or allowed by the plan procedures and guidelines; and
(5) such other information as the board may
require;
(6) if an individual becomes ineligible to be
a beneficiary, the account owner may designate another beneficiary in
accordance with plan procedures and guideline;
(7) neither the account owner nor the beneficiary
may use any rights to or interest in the account as security for a loan,
including as security for a loan to purchase such interest in the plan.
M. Prepaid
tuition contracts. Prepaid tuition contracts, once paid, will cover all tuition
and required fees of state public institution of higher education.
N. Gifts
and bequests. Gifts or bequests may be made to the education trust fund as
defined in the act either on behalf of a beneficiary or to the fund generally.
O. Benefits
excluded. Benefits under prepaid tuition contracts and college investment
agreements are excluded from any calculation of a beneficiary’s eligibility for
financial aid from the state.
P. Waiver
of rule. The chair may waive any requirement of this rule, except to the extent
that the requirement is mandated by the act, in cases where the deviation from
the rule is insubstantial and is not contrary to the purposes of the plan.
Q. Conflict
of interest. No member of the board may vote on any matter in which the member
or any organization the member works for has a conflict of interest or which
may be perceived as a conflict of interest.
[5.7.30.8 NMAC - N,
6/29/2001; A, 11/15/2001]
5.7.30.9 RECISIONS: None
[5.7.30.9 NMAC - N,
6/29/2001]
5.7.30.10 CONTACT
ENTITY INQUIRIES REGARDING THIS ISSUANCE SHOULD BE ADDRESSED TO: Education trust
board, state of New Mexico, c/o higher education department, attention:
secretary of higher education
[5.7.30.10 NMAC - N,
6/29/2001; A, 7/31/2005]
5.7.30.11 DISTRIBUTION: WDB and PIC chairpersons,
SDA/SA administrative entities, SAE subrecipients, NMSDA/NMSA subrecipients,
USDOL federal, representative, SAE/NMSDA/NMSA EO office, SAE/NMSDA/NMSA legal counsel,
SPPTA bureau, SOPC bureau, NM state records center, and archives (SRCA)
[5.7.30.11 NMAC - N,
6/29/2001]
5.7.30.12 EXHIBITS: [Reserved.]
[5.7.30.12 NMAC - N,
6/29/2001]
HISTORY OF 5.7.30 NMAC: [RESERVED]
