Bill Text: MI SB0361 | 2015-2016 | 98th Legislature | Introduced
Bill Title: Individual income tax; other; Michigan achieving a better life experience (ABLE) program; create. Creates new act. TIE BAR WITH: SB 0359'15, SB 0360'15, SB 0362'15
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2015-06-03 - Referred To Committee On Finance [SB0361 Detail]
Download: Michigan-2015-SB0361-Introduced.html
SENATE BILL No. 361
June 3, 2015, Introduced by Senators WARREN, BRANDENBURG, ANANICH, ROCCA and STAMAS and referred to the Committee on Finance.
A bill to create the Michigan achieving a better life
experience (ABLE) program; to provide for ABLE accounts; to
prescribe the powers and duties of certain state agencies, boards,
and departments; to allow certain tax credits or deductions; and to
provide for penalties and remedies.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"Michigan achieving a better life experience (ABLE) program act".
Sec. 2. As used in this act:
(a) "ABLE" means achieving a better life experience.
(b) "ABLE savings account" or "account" means an account
established under this act.
(c) "Account owner" means an individual who is a resident of
this state and who enters into a Michigan ABLE savings program
agreement and establishes an ABLE savings account. The account
owner shall be the designated beneficiary of the account unless the
designated beneficiary is a minor or lacks capacity to enter into
an agreement, then a trustee or guardian may be appointed as an
account owner.
(d) "Department" means the department of treasury.
(e) "Designated beneficiary" means an eligible individual
designated as the individual whose qualified disability expenses
are expected to be paid from the account. The designated
beneficiary must be an eligible individual at the time the account
is established. The designated beneficiary shall be the account
owner unless he or she is a minor or lacks capacity to enter into
an agreement. The account owner may change the designated
beneficiary as provided in this act.
(f) "Disability certification" means that term as defined in
section 529A of the internal revenue code.
(g) "Eligible individual" means that term as defined in
section 529A of the internal revenue code.
(h) "Internal revenue code" means the United States internal
revenue code of 1986 in effect on January 1, 2015 or at the option
of the taxpayer, in effect for the current year.
(i) "Management contract" means the contract executed between
the treasurer and a program manager.
(j) "Member of the family" means a family member as defined in
section 529A of the internal revenue code.
(k) "Michigan ABLE savings program agreement" means the
agreement between the program and an account owner that establishes
an ABLE savings account.
(l) "Program" means the Michigan ABLE savings program
established pursuant to this act.
(m) "Program manager" means an entity selected by the
treasurer to act as a manager of the program.
(n) "Qualified disability expenses" means that term as defined
in section 529A of the internal revenue code.
(o) "Qualified withdrawal" means a distribution that is not
subject to a penalty or an excise tax under section 529A of the
internal revenue code, a penalty under this act, or taxation under
the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.713, and
that meets any of the following:
(i) A withdrawal from an account to pay the qualified
disability expenses of the designated beneficiary incurred after
the account is established.
(ii) A withdrawal made as the result of the death or
disability of the designated beneficiary of an account.
(iii) A transfer of funds due to the termination of the
management contract as provided in section 5.
(iv) A transfer of funds as provided in section 8.
(p) "Savings plan" or "plan" means a plan that provides
different investment strategies and allows account distributions
for qualified disability expenses.
(q) "Treasurer" means the state treasurer.
Sec. 3. (1) The Michigan ABLE savings program is established
in the department of treasury. The program may consist of 1 or more
savings plans.
(2) The treasurer shall solicit proposals from entities to be
a program manager to provide the services described in subsection
(5).
(3) The purposes, powers, and duties of the Michigan ABLE
savings program are vested in and shall be exercised by the
treasurer or the designee of the treasurer.
(4) The state treasurer shall administer the Michigan ABLE
savings program and shall be the trustee for the funds of the
Michigan ABLE savings program.
(5) The treasurer may employ or contract with personnel and
contract for services necessary for the administration of each
savings plan under the program and the investment of the assets of
each savings plan under the program including, but not limited to,
managerial, professional, legal, clerical, technical, and
administrative personnel or services.
(6) When selecting a program manager, the treasurer shall give
preference to proposals from single entities that propose to
provide all of the functions described in subsection (5) and that
demonstrate the most advantageous combination, to both potential
participants and this state, of the following factors and the
management contract shall address these factors:
(a) Financial stability.
(b) The safety of the investment instruments being offered.
(c) The ability of the investment instruments to track the
increasing costs of disability expenses.
(d) The ability of the entity to satisfy the record-keeping
and reporting requirements of this act.
(e) The entity's plan for marketing the savings plan and the
investment it is willing to make to promote the savings plan.
(f) The fees, if any, proposed to be charged to persons for
opening or maintaining an account.
(g) The minimum initial deposit and minimum contributions that
the entity will require which, for the first year of the savings
plan, shall not be greater than $25.00 for a cash contribution or
$15.00 per pay period for payroll deduction plans.
(h) The ability of the entity to accept electronic
withdrawals, including payroll deduction plans.
(7) The treasurer shall enter into a contract with each
program manager which shall address the respective authority and
responsibility of the treasurer and the program manager to do all
of the following:
(a) Develop and implement the savings plan or plans offered
under the program.
(b) Invest the money received from account owners in 1 or more
investment instruments.
(c) Engage the services of consultants on a contractual basis
to provide professional and technical assistance and advice.
(d) Determine the use of financial organizations as account
depositories and financial managers.
(e) Charge, impose, and collect annual administrative fees and
service in connection with any agreements, contracts, and
transactions relating to individual accounts, exclusive of initial
sales charges, which shall not exceed 2.0% of the average daily net
assets of the account.
(f) Develop marketing plans and promotional material.
(g) Establish the methods by which funds are allocated to pay
for administrative costs.
(h) Provide criteria for terminating and not renewing the
management contract.
(i) Address the ability of the program manager to take any
action required to keep the savings plan or plans offered under the
program in compliance with requirements of this act and its
management contract and to manage the savings plan or plans offered
under the program to qualify as a qualified ABLE program under
section 529A of the internal revenue code.
(j) Keep adequate records of each account and provide the
treasurer with information that the treasurer requires related to
those records.
(k) Compile the information contained in statements required
to be prepared under this act and provide that compilation to the
treasurer in a timely manner.
(l) Hold all accounts for the benefit of the account owner.
(m) Provide for audits at least annually by a firm of
certified public accountants.
(n) Provide the treasurer with copies of all regulatory
filings and reports related to the savings plan or plans offered
under the program made during the term of the management contract
or while the program manager is holding any accounts, other than
confidential filings or reports except to the extent those filings
or reports are related to or are a part of the savings plan or
plans offered under the program. It is the responsibility of the
program manager to make available for review by the treasurer the
results of any periodic examination of the program manager by any
state or federal banking, insurance, or securities commission,
except to the extent that the report or reports are not required to
be disclosed under state or federal law.
(o) Ensure that any description of the savings plan or plans
offered under the program, whether in writing or through the use of
any media, is consistent with the marketing plan developed by the
program manager.
(p) Take any other necessary and proper activities to carry
out the purposes of this act.
Sec. 4. The treasurer shall be responsible for the ongoing
supervision of each management contract.
Sec. 5. (1) A management contract shall be for a term of years
specified in the management contract.
(2) The treasurer may terminate a management contract based on
the criteria specified in the management contract.
Sec. 6. The treasurer may enter into contracts that it
considers necessary and proper for the implementation of this
program.
Sec. 7. (1) Beginning January 1, 2016, ABLE savings accounts
may be established under this act.
(2) Any individual may open an ABLE savings account to save
money to pay the qualified disability expenses of the designated
beneficiary. An account owner shall open only 1 account for any 1
designated beneficiary. Each account opened under this act shall
have only 1 designated beneficiary.
(3) To open an ABLE savings account, the individual or a
trustee or guardian of a designated beneficiary who lacks capacity
to enter into a contract shall enter into a Michigan ABLE savings
program agreement with the program. The Michigan ABLE savings
program agreement shall be in the form prescribed by a program
manager and approved by the treasurer and contain all of the
following:
(a) The name, address, and social security number of the
account owner.
(b) A designated beneficiary. The name, address, and social
security number of the designated beneficiary, if the account owner
is the beneficiary's trustee or guardian.
(c) Any other information that the treasurer or program
manager considers necessary.
(4) Any person may make contributions to an account after the
account is opened, subject to the limitations imposed by section
529A of the internal revenue code or any rules and regulations
promulgated by the treasurer pursuant to this act.
(5) Contributions to accounts shall only be made in cash, by
check, by credit card, or by any similar method as approved by the
state treasurer but shall not be property.
(6) An account owner may withdraw all or part of the balance
from an account on 60 days' notice, or a shorter period as
authorized in the Michigan ABLE savings program agreement.
(7) Distributions from an account shall be requested on a form
approved by the treasurer. A program manager may retain from the
distribution the amount necessary to comply with federal and state
tax laws. Distributions may be made in the following manner:
(a) In the form of a check payable to the designated
beneficiary or account holder.
(b) In the form of an electronic funds transfer to an account
specified by the designated beneficiary or account holder.
(c) Directly to a provider of goods and services that are
qualified disability expenses, if purchased for a designated
beneficiary.
(8) For a distribution made after December 31, 2015 that is
not a qualified withdrawal, if an excise tax or penalty is imposed
under section 529A of the internal revenue code, a penalty shall
not be imposed under this subsection for that distribution. If a
distribution that is not a qualified withdrawal is made after
December 31, 2015 and an excise tax or penalty is not imposed under
section 529A of the internal revenue code on that distribution, a
program manager shall withhold an amount equal to 10% of the
accumulated earnings attributable to that distribution amount as a
penalty and pay that amount to the department for deposit into the
general fund. The penalty under this subsection may be increased or
decreased if the treasurer and the program manager determine that
it is necessary to increase or decrease the penalty to comply with
section 529A of the internal revenue code.
(9) Each savings plan under the program shall provide separate
accounting for each designated beneficiary.
Sec. 8. (1) If the account owner is a trustee or guardian of
the designated beneficiary, then that account owner may designate
another individual as a successor owner of the account in the event
of his or her death.
(2) An account owner may change the designated beneficiary of
an account to another eligible individual as long as that eligible
individual is a member of the family of the previously designated
beneficiary as provided in the management contract or as otherwise
provided in this act.
(3) An account owner may transfer ownership of all or a
portion of an account to an individual who is eligible to be an
account owner under this act.
(4) An account owner may transfer all or a portion of an
account to another ABLE savings account. The designated beneficiary
of the account to which the transfer is made must be a member of
the family.
(5) An account owner may transfer all or a portion of an
account to an account in an ABLE program under section 529A of the
internal revenue code, other than the program under this act, once
every 12 months, without a change in designated beneficiary.
(6) Changes in designated beneficiaries and transfers under
this section are not permitted to the extent that the change or
transfer would constitute excess contributions or unauthorized
investment choices.
Sec. 9. (1) Except as otherwise provided in this section, an
account owner or a designated beneficiary of any account shall not
direct the investment of any contributions to an account or the
earnings on an account.
(2) An account owner may select among different investment
strategies designed by a program manager in all of the following
circumstances to the extent allowed under section 529A of the
internal revenue code:
(a) At the time any contribution is made to an account with
respect to the amount of that contribution.
(b) Once each calendar year with respect to the accumulated
account balance.
(c) When an account owner makes a change in designated
beneficiary of an account.
(3) The program may allow employees of the program, or the
employees of a contractor hired by the program to perform
administrative services, to make contributions to an account.
(4) An interest in an account shall not be used by an account
owner or a designated beneficiary as security for a loan. Any
pledge of an interest in an account has no force or effect.
Sec. 10. (1) The maximum account balance limit for an ABLE
account shall not exceed the maximum amount allowed for an
education savings account pursuant to section 10 of the Michigan
education savings program act, 2000 PA 161, MCL 390.1480.
(2) The program shall reject a contribution to any account for
a designated beneficiary if, at the time of the contribution, the
total balance of the account for that designated beneficiary has
reached the maximum account balance limit under subsection (1) or
the contribution is in excess of the limits established pursuant to
section 7(4). An account may continue to accrue earnings if the
total balance of the account for that beneficiary has reached the
maximum account balance limit and shall not be considered to have
exceeded the maximum account balance limit under subsection (1).
Sec. 11. (1) Each program manager shall report distributions
from an account to any individual or for the benefit of any
individual during a tax year to the internal revenue service and
the account owner or, to the extent required by federal law or
regulation, to the distributee.
(2) Each program manager shall provide statements that
identify the individual contributions made during the tax year, the
total contributions made to the account for the tax year, the value
of the account at the end of the tax year, distributions made
during the tax year, and any other information that the treasurer
requires to each account owner on or before the January 31
following the end of each calendar year.
Sec. 12. Each program manager shall disclose the following
information in writing to each account owner of an ABLE savings
account and any other person who requests information about an ABLE
savings account:
(a) The terms and conditions for establishing an ABLE savings
account.
(b) Restrictions on the substitutions of designated
beneficiaries and transfer of account funds.
(c) The person entitled to terminate a Michigan ABLE savings
program agreement.
(d) The period of time during which a designated beneficiary
may receive benefits under the Michigan ABLE savings program
agreement.
(e) The terms and conditions under which money may be wholly
or partially withdrawn from an account or the program, including,
but not limited to, any reasonable charges and fees and penalties
that may be imposed for withdrawal.
(f) The potential tax consequences associated with
contributions to and distributions and withdrawals from accounts.
(g) Investment history and potential growth of account funds
and a projection of the impact of the growth of the account funds
on the maximum amount allowable in an account.
(h) All other rights and obligations under Michigan ABLE
savings program agreements and any other terms, conditions, and
provisions of a contract or an agreement entered into under this
act.
Sec. 13. This act and any agreement under this act shall not
be construed or interpreted to do any of the following:
(a) Give any designated beneficiary any rights or legal
interest with respect to an account unless the designated
beneficiary is the account owner.
(b) Give residency status to an individual merely because the
individual is a designated beneficiary.
Sec. 14. (1) This act does not create and shall not be
construed to create any obligation upon this state or any agency or
instrumentality of this state to guarantee for the benefit of an
account owner or designated beneficiary any of the following:
(a) The rate of interest or other return on an account.
(b) The payment of interest or other return on an account.
(2) The contracts, applications, deposit slips, and other
similar documents used in connection with a contribution to an
account shall clearly indicate that the account is not insured by
this state and that the money deposited into and investment return
earned on an account are not guaranteed by this state.
Sec. 15. Each program manager shall file an annual report with
the treasurer that includes all of the following:
(a) The names and identification numbers of account owners and
designated beneficiaries. The information reported pursuant to this
subdivision is not subject to the freedom of information act, 1976
PA 442, MCL 15.231 to 15.246.
(b) The total amount contributed to all accounts during the
year.
(c) All distributions from all accounts and whether or not
each distribution was a qualified withdrawal.
(d) Any information that the program manager or treasurer may
require regarding the taxation of amounts contributed to or
withdrawn from accounts.
Sec. 16. (1) Contributions to and interest earned on an ABLE
savings account are exempt from taxation as provided in section 30
of the income tax act of 1967, 1967 PA 281, MCL 206.30.
(2) Withdrawals made from ABLE savings accounts are taxable as
provided in section 30 of the income tax act of 1967, 1967 PA 281,
MCL 206.30.
Sec. 17. (1) Notwithstanding any other provision of law that
requires consideration of 1 or more financial circumstances of an
individual, for the purpose of determining eligibility to receive,
or the amount of, any assistance or benefit authorized by that
provision to be provided to or for the benefit of an individual,
any amount and interest earned on an ABLE savings account for the
individual, any contributions to the ABLE savings account of the
individual, and any distribution for qualified disability expenses
shall be disregarded as provided in section 10g of the social
welfare act, 1939 PA 280, MCL 400.10g, with respect to any period
during which the individual maintains, makes contributions to, or
receives distributions from his or her ABLE savings account, except
that, in the case of the supplemental security income program under
title XVI of the social security act, 42 USC 1381 to 1383f, a
distribution for housing expenses shall not be disregarded and any
amount and interest earned on that account shall be considered a
resource of the designated beneficiary to the extent that the
amount exceeds $100,000.00.
(2) The benefits of an individual under the supplemental
security income program under title XVI of the social security act,
42 USC 1381 to 1383f, shall not be terminated, but shall be
suspended, for excess resources of the individual attributable to
the amount in his or her ABLE savings account that is not
disregarded under subsection (1). An individual who would be
receiving payment of supplemental security income benefits but for
the application of this subsection shall be treated for purposes of
title XIX of the social security act, 42 USC 1396 to 1396w-5, as if
the individual continued to be receiving payment of those benefits.
(3) Upon the death of the designated beneficiary, all amounts
remaining in his or her ABLE savings account shall be distributed
pursuant to section 529a(f) of the internal revenue code. Section
7(8) does not apply to a distribution under this subsection.
Enacting section 1. This act takes effect 90 days after the
date it is enacted into law.
Enacting section 2. This act does not take effect unless all
of the following bills of the 98th Legislature are enacted into
law:
(a) Senate Bill No. 362.
(b) Senate Bill No. 359.
(c) Senate Bill No. 360.
