Bill Text: IL SB3133 | 2023-2024 | 103rd General Assembly | Engrossed

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Bill Title: Amends the State Treasurer Act. In provisions concerning the College Savings Pool, provides that an account may be rolled over into a Roth IRA account, to the extent permitted by Section 529 of the Internal Revenue Code. In provisions concerning the Illinois Higher Education Savings Program, provides that the definition of "eligible child" includes a child born or adopted after December 31, 2022, to a parent who is a resident of Illinois at the time of the birth or adoption, as evidenced by documentation received by the Treasurer from a parent or legal guardian of the child. Makes conforming changes. Effective immediately.

Spectrum: Slight Partisan Bill (Democrat 6-2)

Status: (Engrossed) 2024-04-24 - Assigned to State Government Administration Committee [SB3133 Detail]

Download: Illinois-2023-SB3133-Engrossed.html

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AN ACT concerning State government.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The State Treasurer Act is amended by changing
Sections 16.5 and 16.8 as follows:
(15 ILCS 505/16.5)
Sec. 16.5. College Savings Pool.
(a) Definitions. As used in this Section:
"Account owner" means any person or entity who has opened
an account or to whom ownership of an account has been
transferred, as allowed by the Internal Revenue Code, and who
has authority to withdraw funds, direct withdrawal of funds,
change the designated beneficiary, or otherwise exercise
control over an account in the College Savings Pool.
"Donor" means any person or entity who makes contributions
to an account in the College Savings Pool.
"Designated beneficiary" means any individual designated
as the beneficiary of an account in the College Savings Pool by
an account owner. A designated beneficiary must have a valid
social security number or taxpayer identification number. In
the case of an account established as part of a scholarship
program permitted under Section 529 of the Internal Revenue
Code, the designated beneficiary is any individual receiving

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benefits accumulated in the account as a scholarship.
"Eligible educational institution" means public and
private colleges, junior colleges, graduate schools, and
certain vocational institutions that are described in Section
1001 of the Higher Education Resource and Student Assistance
Chapter of Title 20 of the United States Code (20 U.S.C. 1001)
and that are eligible to participate in Department of
Education student aid programs.
"Member of the family" has the same meaning ascribed to
that term under Section 529 of the Internal Revenue Code.
"Nonqualified withdrawal" means a distribution from an
account other than a distribution that (i) is used for the
qualified expenses of the designated beneficiary; (ii) results
from the beneficiary's death or disability; (iii) is a
rollover to another account in the College Savings Pool; or
(iv) is a rollover to an ABLE account, as defined in Section
16.6 of this Act, or any distribution that, within 60 days
after such distribution, is transferred to an ABLE account of
the designated beneficiary or a member of the family of the
designated beneficiary to the extent that the distribution,
when added to all other contributions made to the ABLE account
for the taxable year, does not exceed the limitation under
Section 529A(b) of the Internal Revenue Code; or (v) is a
rollover to a Roth IRA account to the extent permitted by
Section 529 of the Internal Revenue Code.
"Qualified expenses" means: (i) tuition, fees, and the

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costs of books, supplies, and equipment required for
enrollment or attendance at an eligible educational
institution; (ii) expenses for special needs services, in the
case of a special needs beneficiary, which are incurred in
connection with such enrollment or attendance; (iii) certain
expenses, to the extent they qualify as qualified higher
education expenses under Section 529 of the Internal Revenue
Code, for the purchase of computer or peripheral equipment or
Internet access and related services, if such equipment,
software, or services are to be used primarily by the
beneficiary during any of the years the beneficiary is
enrolled at an eligible educational institution, except that,
such expenses shall not include expenses for computer software
designed for sports, games, or hobbies, unless the software is
predominantly educational in nature; (iv) room and board
expenses incurred while attending an eligible educational
institution at least half-time; (v) expenses for fees, books,
supplies, and equipment required for the participation of a
designated beneficiary in an apprenticeship program registered
and certified with the Secretary of Labor under the National
Apprenticeship Act (29 U.S.C. 50); and (vi) amounts paid as
principal or interest on any qualified education loan of the
designated beneficiary or a sibling of the designated
beneficiary, as allowed under Section 529 of the Internal
Revenue Code. A student shall be considered to be enrolled at
least half-time if the student is enrolled for at least half

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the full-time academic workload for the course of study the
student is pursuing as determined under the standards of the
institution at which the student is enrolled.
(b) Establishment of the Pool. The State Treasurer may
establish and administer the College Savings Pool as a
qualified tuition program under Section 529 of the Internal
Revenue Code. The Pool may consist of one or more college
savings programs. The State Treasurer, in administering the
College Savings Pool, may: (1) receive, hold, and invest
moneys paid into the Pool; and (2) perform any other action he
or she deems necessary to administer the Pool, including any
other actions necessary to ensure that the Pool operates as a
qualified tuition program in accordance with Section 529 of
the Internal Revenue Code.
(c) Administration of the College Savings Pool. The State
Treasurer may delegate duties related to the College Savings
Pool to one or more contractors. The contributions deposited
in the Pool, and any earnings thereon, shall not constitute
property of the State or be commingled with State funds and the
State shall have no claim to or against, or interest in, such
funds; provided that the fees collected by the State Treasurer
in accordance with this Act, scholarship programs administered
by the State Treasurer, and seed funds deposited by the State
Treasurer under Section 16.8 of the Act are State funds.
(c-5) College Savings Pool Account Summaries. The State
Treasurer shall provide a separate accounting for each

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designated beneficiary. The separate accounting shall be
provided to the account owner of the account for the
designated beneficiary at least annually and shall show the
account balance, the investment in the account, the investment
earnings, and the distributions from the account.
(d) Availability of the College Savings Pool. The State
Treasurer may permit persons, including trustees of trusts and
custodians under a Uniform Transfers to Minors Act or Uniform
Gifts to Minors Act account, and certain legal entities to be
account owners, including as part of a scholarship program,
provided that: (1) an individual, trustee or custodian must
have a valid social security number or taxpayer identification
number, be at least 18 years of age, and have a valid United
States street address; and (2) a legal entity must have a valid
taxpayer identification number and a valid United States
street address. In-state and out-of-state persons, trustees,
custodians, and legal entities may be account owners and
donors, and both in-state and out-of-state individuals may be
designated beneficiaries in the College Savings Pool.
(e) Fees. Any fees, costs, and expenses, including
investment fees and expenses and payments to third parties,
related to the College Savings Pool, shall be paid from the
assets of the College Savings Pool. The State Treasurer shall
establish fees to be imposed on accounts to cover such fees,
costs, and expenses, to the extent not paid directly out of the
investments of the College Savings Pool, and to maintain an

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adequate reserve fund in line with industry standards for
government operated funds. The Treasurer must use his or her
best efforts to keep these fees as low as possible and
consistent with administration of high quality competitive
college savings programs.
(f) Investments in the State. To enhance the safety and
liquidity of the College Savings Pool, to ensure the
diversification of the investment portfolio of the College
Savings Pool, and in an effort to keep investment dollars in
the State of Illinois, the State Treasurer may make a
percentage of each account available for investment in
participating financial institutions doing business in the
State.
(g) Investment policy. The Treasurer shall develop,
publish, and implement an investment policy covering the
investment of the moneys in each of the programs in the College
Savings Pool. The policy shall be published each year as part
of the audit of the College Savings Pool by the Auditor
General, which shall be distributed to all account owners in
such program. The Treasurer shall notify all account owners in
such program in writing, and the Treasurer shall publish in a
newspaper of general circulation in both Chicago and
Springfield, any changes to the previously published
investment policy at least 30 calendar days before
implementing the policy. Any investment policy adopted by the
Treasurer shall be reviewed and updated if necessary within 90

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days following the date that the State Treasurer takes office.
(h) Investment restrictions. An account owner may,
directly or indirectly, direct the investment of his or her
account only as provided in Section 529(b)(4) of the Internal
Revenue Code. Donors and designated beneficiaries, in those
capacities, may not, directly or indirectly, direct the
investment of an account.
(i) Distributions. Distributions from an account in the
College Savings Pool may be used for the designated
beneficiary's qualified expenses, and if not used in that
manner, may be considered a nonqualified withdrawal. Funds
contained in a College Savings Pool account may be rolled over
into:
(1) an eligible ABLE account, as defined in Section
16.6 of this Act to the extent permitted by Section 529 of
the Internal Revenue Code; , or
(2) another qualified tuition program, to the extent
permitted by Section 529 of the Internal Revenue Code; or
(3) a Roth IRA account, to the extent permitted by
Section 529 of the Internal Revenue Code.
Distributions made from the College Savings Pool may be
made directly to the eligible educational institution,
directly to a vendor, in the form of a check payable to both
the designated beneficiary and the institution or vendor,
directly to the designated beneficiary or account owner, or in
any other manner that is permissible under Section 529 of the

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Internal Revenue Code.
(j) Contributions. Contributions to the College Savings
Pool shall be as follows:
(1) Contributions to an account in the College Savings
Pool may be made only in cash.
(2) The Treasurer shall limit the contributions that
may be made to the College Savings Pool on behalf of a
designated beneficiary, as required under Section 529 of
the Internal Revenue Code, to prevent contributions for
the benefit of a designated beneficiary in excess of those
necessary to provide for the qualified expenses of the
designated beneficiary. The Pool shall not permit any
additional contributions to an account as soon as the sum
of (i) the aggregate balance in all accounts in the Pool
for the designated beneficiary and (ii) the aggregate
contributions in the Illinois Prepaid Tuition Program for
the designated beneficiary reaches the specified balance
limit established from time to time by the Treasurer.
(k) Illinois Student Assistance Commission. The Treasurer
and the Illinois Student Assistance Commission shall each
cooperate in providing each other with account information, as
necessary, to prevent contributions in excess of those
necessary to provide for the qualified expenses of the
designated beneficiary, as described in subsection (j).
The Treasurer shall work with the Illinois Student
Assistance Commission to coordinate the marketing of the

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College Savings Pool and the Illinois Prepaid Tuition Program
when considered beneficial by the Treasurer and the Director
of the Illinois Student Assistance Commission.
(l) Prohibition; exemption. No interest in the program, or
any portion thereof, may be used as security for a loan. Moneys
held in an account invested in the College Savings Pool shall
be exempt from all claims of the creditors of the account
owner, donor, or designated beneficiary of that account,
except for the non-exempt College Savings Pool transfers to or
from the account as defined under subsection (j) of Section
12-1001 of the Code of Civil Procedure.
(m) Taxation. The assets of the College Savings Pool and
its income and operation shall be exempt from all taxation by
the State of Illinois and any of its subdivisions. The accrued
earnings on investments in the Pool once disbursed on behalf
of a designated beneficiary shall be similarly exempt from all
taxation by the State of Illinois and its subdivisions, so
long as they are used for qualified expenses. Contributions to
a College Savings Pool account during the taxable year may be
deducted from adjusted gross income as provided in Section 203
of the Illinois Income Tax Act. The provisions of this
paragraph are exempt from Section 250 of the Illinois Income
Tax Act.
(n) Rules. The Treasurer shall adopt rules he or she
considers necessary for the efficient administration of the
College Savings Pool. The rules shall provide whatever

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additional parameters and restrictions are necessary to ensure
that the College Savings Pool meets all the requirements for a
qualified tuition program under Section 529 of the Internal
Revenue Code.
Notice of any proposed amendments to the rules and
regulations shall be provided to all account owners prior to
adoption.
(o) Bond. The State Treasurer shall give bond with at
least one surety, payable to and for the benefit of the account
owners in the College Savings Pool, in the penal sum of
$10,000,000, conditioned upon the faithful discharge of his or
her duties in relation to the College Savings Pool.
(p) The changes made to subsections (c) and (e) of this
Section by Public Act 101-26 are intended to be a restatement
and clarification of existing law.
(Source: P.A. 101-26, eff. 6-21-19; 101-81, eff. 7-12-19;
102-186, eff. 7-30-21.)
(15 ILCS 505/16.8)
Sec. 16.8. Illinois Higher Education Savings Program.
(a) Definitions. As used in this Section:
"Beneficiary" means an eligible child named as a recipient
of seed funds.
"Eligible child" means a child born or adopted after
December 31, 2022, to a parent who is a resident of Illinois at
the time of the birth or adoption, as evidenced by

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documentation received by the Treasurer from the Department of
Revenue, the Department of Public Health, or another State or
local government agency, or a parent or legal guardian of the
child.
"Eligible educational institution" means institutions that
are described in Section 1001 of the federal Higher Education
Act of 1965 that are eligible to participate in Department of
Education student aid programs.
"Fund" means the Illinois Higher Education Savings Program
Fund.
"Omnibus account" means the pooled collection of seed
funds owned and managed by the State Treasurer in the College
Savings Pool under this Act.
"Program" means the Illinois Higher Education Savings
Program.
"Qualified higher education expense" means the following:
(i) tuition, fees, and the costs of books, supplies, and
equipment required for enrollment or attendance at an eligible
educational institution; (ii) expenses for special needs
services, in the case of a special needs beneficiary, which
are incurred in connection with such enrollment or attendance;
(iii) certain expenses for the purchase of computer or
peripheral equipment, computer software, or Internet access
and related services as defined under Section 529 of the
Internal Revenue Code; (iv) room and board expenses incurred
while attending an eligible educational institution at least

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half-time; (v) expenses for fees, books, supplies, and
equipment required for the participation of a designated
beneficiary in an apprenticeship program registered and
certified with the Secretary of Labor under the National
Apprenticeship Act (29 U.S.C. 50); and (vi) amounts paid as
principal or interest on any qualified education loan of the
designated beneficiary or a sibling of the designated
beneficiary, as allowed under Section 529 of the Internal
Revenue Code.
"Seed funds" means the deposit made by the State Treasurer
into the Omnibus Accounts for Program beneficiaries.
(b) Program established. The State Treasurer shall
establish the Illinois Higher Education Savings Program as a
part of the College Savings Pool under Section 16.5 of this
Act, subject to appropriation by the General Assembly. The
State Treasurer shall administer the Program for the purposes
of expanding access to higher education through savings.
(c) Program enrollment. The State Treasurer shall enroll
all eligible children in the Program beginning in 2023, after
receiving records of recent births, adoptions, or dependents
from the Department of Revenue, the Department of Public
Health, or another State or local government agency designated
by the Treasurer, or documentation as may be required by the
Treasurer from a parent or legal guardian of the eligible
child. Notwithstanding any court order which would otherwise
prevent the release of information, the Department of Public

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Health is authorized to release the information specified
under this subsection (c) to the State Treasurer for the
purposes of the Program established under this Section.
(1) Beginning in 2021, the Department of Public Health
shall provide the State Treasurer with information on
recent Illinois births and adoptions including, but not
limited to: the full name, residential address, birth
date, and birth record number of the child and the full
name and residential address of the child's parent or
legal guardian for the purpose of enrolling eligible
children in the Program. This data shall be provided to
the State Treasurer by the Department of Public Health on
a quarterly basis, no later than 30 days after the end of
each quarter, or some other date and frequency as mutually
agreed to by the State Treasurer and the Department of
Public Health.
(1.5) Beginning in 2021, the Department of Revenue
shall provide the State Treasurer with information on tax
filers claiming dependents or the adoption tax credit
including, but not limited to: the full name, residential
address, email address, phone number, birth date, and
social security number or taxpayer identification number
of the dependent child and of the child's parent or legal
guardian for the purpose of enrolling eligible children in
the Program. This data shall be provided to the State
Treasurer by the Department of Revenue on at least an

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annual basis, by July 1 of each year or another date
jointly determined by the State Treasurer and the
Department of Revenue. Notwithstanding anything to the
contrary contained within this paragraph (2), the
Department of Revenue shall not be required to share any
information that would be contrary to federal law,
regulation, or Internal Revenue Service Publication 1075.
(2) The State Treasurer shall ensure the security and
confidentiality of the information provided by the
Department of Revenue, the Department of Public Health, or
another State or local government agency, and it shall not
be subject to release under the Freedom of Information
Act.
(3) Information provided under this Section shall only
be used by the State Treasurer for the Program and shall
not be used for any other purpose.
(4) The State Treasurer and any vendors working on the
Program shall maintain strict confidentiality of any
information provided under this Section, and shall
promptly provide written or electronic notice to the
providing agency of any security breach. The providing
State or local government agency shall remain the sole and
exclusive owner of information provided under this
Section.
(d) Seed funds. After receiving information on recent
births, adoptions, or dependents from the Department of

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Revenue, the Department of Public Health, or another State or
local government agency, or documentation as may be required
by the State Treasurer from a parent or legal guardian of the
eligible child, the State Treasurer shall make deposits into
an omnibus account on behalf of eligible children. The State
Treasurer shall be the owner of the omnibus accounts.
(1) Deposit amount. The seed fund deposit for each
eligible child shall be in the amount of $50. This amount
may be increased by the State Treasurer by rule. The State
Treasurer may use or deposit funds appropriated by the
General Assembly together with moneys received as gifts,
grants, or contributions into the Fund. If insufficient
funds are available in the Fund, the State Treasurer may
reduce the deposit amount or forego deposits.
(2) Use of seed funds. Seed funds, including any
interest, dividends, and other earnings accrued, will be
eligible for use by a beneficiary for qualified higher
education expenses if:
(A) the parent or guardian of the eligible child
claimed the seed funds for the beneficiary by the
beneficiary's 10th birthday;
(B) the beneficiary has completed secondary
education or has reached the age of 18; and
(C) the beneficiary is currently a resident of the
State of Illinois. Non-residents are not eligible to
claim or use seed funds.

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(3) Notice of seed fund availability. The State
Treasurer shall make a good faith effort to notify
beneficiaries and their parents or legal guardians of the
seed funds' availability and the deadline to claim such
funds.
(4) Unclaimed seed funds. Seed funds and any interest
earnings that are unclaimed by the beneficiary's 10th
birthday or unused by the beneficiary's 26th birthday will
be considered forfeited. Unclaimed and unused seed funds
and any interest earnings will remain in the omnibus
account for future beneficiaries.
(e) Financial education. The State Treasurer may develop
educational materials that support the financial literacy of
beneficiaries and their legal guardians, and may do so in
collaboration with State and federal agencies, including, but
not limited to, the Illinois State Board of Education and
existing nonprofit agencies with expertise in financial
literacy and education.
(f) Supplementary deposits and partnerships. The State
Treasurer may make supplementary deposits to children in
financially insecure households if sufficient funds are
available. Furthermore, the State Treasurer may develop
partnerships with private, nonprofit, or governmental
organizations to provide additional savings incentives,
including conditional cash transfers or matching contributions
that provide a savings incentive based on specific actions

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taken or other criteria.
(g) Illinois Higher Education Savings Program Fund. The
Illinois Higher Education Savings Program Fund is hereby
established as a special fund in the State treasury. The Fund
shall be the official repository of all contributions,
appropriated funds, interest, and dividend payments, gifts, or
other financial assets received by the State Treasurer in
connection with the operation of the Program or related
partnerships. All such moneys shall be deposited into the Fund
and held by the State Treasurer as custodian thereof. The
State Treasurer may accept gifts, grants, awards, matching
contributions, interest income, and appropriated funds from
individuals, businesses, governments, and other third-party
sources to implement the Program on terms that the Treasurer
deems advisable. All interest or other earnings accruing or
received on amounts in the Illinois Higher Education Savings
Program Fund shall be credited to and retained by the Fund and
used for the benefit of the Program. Assets of the Fund must at
all times be preserved, invested, and expended only for the
purposes of the Program and must be held for the benefit of the
beneficiaries. Assets may not be transferred or used by the
State or the State Treasurer for any purposes other than the
purposes of the Program. In addition, no moneys, interest, or
other earnings paid into the Fund shall be used, temporarily
or otherwise, for inter-fund borrowing or be otherwise used or
appropriated except as expressly authorized by this Act.

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Notwithstanding the requirements of this subsection (g),
amounts in the Fund may be used by the State Treasurer to pay
the administrative costs of the Program.
(g-5) Fund deposits and payments. On July 15 of each year,
beginning July 15, 2023, or as soon thereafter as practical,
the State Comptroller shall direct and the State Treasurer
shall transfer the sum of $2,500,000, or the amount that is
appropriated annually by the General Assembly, whichever is
greater, from the General Revenue Fund to the Illinois Higher
Education Savings Program Fund to be used for the
administration and operation of the Program.
(h) Audits and reports. The State Treasurer shall include
the Illinois Higher Education Savings Program as part of the
audit of the College Savings Pool described in Section 16.5.
The State Treasurer shall annually prepare a report that
includes a summary of the Program operations for the preceding
fiscal year, including the number of children enrolled in the
Program, the total amount of seed fund deposits, the rate of
seed deposits claimed, and, to the extent data is reported and
available, the racial, ethnic, socioeconomic, and geographic
data of beneficiaries and of children in financially insecure
households who may receive automatic bonus deposits. Such
other information that is relevant to make a full disclosure
of the operations of the Program and Fund may also be reported.
The report shall be made available on the Treasurer's website
by January 31 each year, starting in January of 2024. The State

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Treasurer may include the Program in other reports as
warranted.
(i) Rules. The State Treasurer may adopt rules necessary
to implement this Section.
(Source: P.A. 102-129, eff. 7-23-21; 102-558, eff. 8-20-21;
102-1047, eff. 1-1-23; 103-8, eff. 6-7-23.)