ASSEMBLY, No. 2372

 

STATE OF NEW JERSEY

 

INTRODUCED SEPTEMBER 26, 1996

 

 

By Assemblymen HOLZAPFEL and WOLFE

 

 

An Act establishing a Prepaid Higher Education Expense Program and supplementing Title 18A of the New Jersey Statutes.

 

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

    1. This act shall be known and may be cited as the "New Jersey Prepaid Higher Education Expense Program Act of 1996."

 

    2. The Legislature finds and declares: that educational opportunity at the college and university level is a critical State interest which is linked to the needs of the State to ensure a well-educated work force; that educational opportunity is best ensured through the provision of institutions of higher education which are geographically and financially accessible; that it is in the best interests of this State to adopt and foster mechanisms which will encourage its citizens to engage in the timely financial planning which is necessary to guarantee that students will have the financial resources necessary to pursue a higher education given the annually escalating level of resources which such attendance requires; and that one such mechanism which has proven successful in some other states is the establishment of a program through which many of the costs associated with attendance at institutions of higher education may be paid in advance and fixed at a guaranteed level for the duration of undergraduate enrollment.

 

    3. As used in this act:

    "Advance payment contract" means a contract entered into by the board and a purchaser pursuant to the provisions of this act;

    "Board" means the Prepaid Higher Education Expense Board established pursuant to section 7 of this act.

    "Fund" means the Prepaid Higher Education Expense Trust Fund established pursuant to section 5 of this act.

    "Independent institution of higher education" means those institutions of higher education incorporated and located in this State, which, by virtue of law or character or license, are nonprofit educational institutions empowered to grant academic degrees and which provide a level of education which is equivalent to the education provided by the State's public institutions of higher education as attested by the receipt of and continuation of regional accreditation by the Middle States Association of Colleges and Schools, and which are eligible to receive State aid under the provisions of the Constitution of the United States and the Constitution of the State of New Jersey. "Independent institution of higher education" does not include any educational institution dedicated primarily to the preparation or training of ministers, priests, rabbis, or other professional persons in the field of religion.

    "Purchaser" means a person who makes or is obligated to make payments in accordance with an advance payment contract.

    "Qualified beneficiary" means:

    a. a resident of this State at the time a purchaser enters into an advance payment contract on behalf of the resident; or

    b. a nonresident who is the child of a noncustodial parent who is a resident of the State at the time that the parent enters into an advance payment contract on behalf of the child.

     "Public institution of higher education" means Rutgers, The State University, the State colleges or universities established pursuant to chapter 64 of Title 18A of the New Jersey Statutes, the New Jersey Institute of Technology, the University of Medicine and Dentistry of New Jersey, the county colleges and any other public university or college now or hereafter established or authorized by State law.

    "Program" means the New Jersey Prepaid Higher Education Expense Program established pursuant to section 4 of this act.

    "Registration fees" means any fees imposed by an institution of higher education, in addition to tuition, required for matriculation at the institution.

 

    4. There is established the New Jersey Prepaid Higher Education Expense Program to provide a mechanism through which the cost of tuition, registration fees, and dormitory residence may be paid in advance of enrollment in a public institution of higher education at a rate lower than the projected corresponding cost at the time of actual enrollment. Under the program, moneys remitted in accordance with advance payment contracts shall be combined and invested in a manner that yields, at a minimum, sufficient interest to generate the difference between the prepaid amount and the cost of tuition, registration fees, and dormitory residence at the time of actual enrollment. A student who enrolls in a public institution of higher education pursuant to this act shall not be charged any fees in excess of the terms set forth in the advance payment contract.

 

    5. There is created within the Department of the Treasury the Prepaid Higher Education Expense Trust Fund. The fund shall consist of State appropriations, moneys acquired from other governmental or private sources, and moneys remitted in accordance with advance payment contracts. Dividends, interest, and gains accruing to the fund shall increase the total funds available for the program. Any funds associated with contracts terminated pursuant to section 15 of this act or with canceled contracts for which refunds have not been claimed shall increase the total funds available for the program. However, the board shall establish procedures for notifying purchasers who cancel a contract of any unclaimed refund and shall establish a time period after which a refund may not be claimed.

    Any balance contained in the fund at the end of a fiscal year shall remain therein and shall be available for carrying out the purposes of the program.

 

    6. The assets of the fund shall be maintained, invested, and expended solely for the purposes of this act and shall not be loaned, transferred, or otherwise used by the State for any purpose other than the purposes of this act. This section shall not be construed to prohibit the board from investing in, by purchase or otherwise, bonds, notes, or other obligations of the State or an agency or instrumentality of the State. Unless otherwise specified by the board, assets of the fund shall be expended in the following order of priority:

    a. to make payments to institutions of higher education on behalf of qualified beneficiaries;

    b. to make refunds upon cancellation of advance payment contracts; and

    c. to pay the costs of program administration and operations.

 

    7. a. The program shall be administered by the Prepaid Higher Education Expense Board. The board is established as a body corporate and politic in the Executive Branch of State Government and for the purposes of complying with the provisions of Article V, Section IV, paragraph 1 of the New Jersey Constitution, the board is allocated in but not of the Department of the Treasury, but notwithstanding this allocation, the board shall be independent of any supervision or control by the department or by any board or officer thereof.

    b. The board shall consist of seven members including the State Treasurer, the chairman of the Commission on Higher Education, and five members appointed by the Governor with the advice and consent of the Senate without regard for political affiliation. Each member appointed by the Governor shall possess knowledge, skill, and experience in the areas of accounting, actuary, risk management, or investment management. The State Treasurer and the Chairman of the Commission on Higher Education may each appoint a designee to sit on the board; however, any designee named shall meet the qualifications required of gubernatorial appointees to the board. Members appointed by the Governor shall serve terms of three years except that in making the initial appointments, the Governor shall appoint one member to serve for one year, two members to serve for two years, and two members to serve for three years. Any member appointed to fill a vacancy on the board shall be appointed in a like manner and shall serve until a successor qualifies. Members of the board shall serve without compensation but shall be reimbursed for any necessary expenses incurred in the performance of their duties.

 

    8. The Governor shall appoint a member of the board to serve as the initial chair of the board. Thereafter, the board shall elect a chair annually. The board shall annually elect a board member to serve as vice-chair and shall designate a secretary-treasurer who need not be a member of the board. The secretary-treasurer shall keep a record of the proceedings of the board and shall be the custodian of all printed material filed with or by the board and of its official seal. Notwithstanding the existence of vacancies on the board, a majority of the members shall constitute a quorum. The board shall take no official action in the absence of a quorum. The board shall meet, at a minimum, on a quarterly basis at the call of the chair.

 

    9. The board shall have the powers necessary or proper to carry out the provisions of this act, including, but not limited to, the power to:

    a. appoint an executive director to serve as the chief administrative and operational officer of the board and to perform other duties assigned by the board;

    b. adopt an official seal and rules;

    c. sue and be sued;

    d. make and execute contracts and other necessary instruments;

    e. establish agreements or other transactions with federal, State, and local agencies, including public institutions of higher education;

    f. invest funds not required for immediate disbursement;

    g. appear in its own behalf before boards, commissions, or other governmental agencies;

    h. hold, buy, and sell any instruments, obligations, securities, and property determined appropriate by the board;

    i. require a reasonable length of State residence for qualified beneficiaries;

    j. restrict the number of participants in the county college plan, university plan, and dormitory residence plan, as those plans are defined in section 18 of this act. A person denied participation solely on the basis of this restriction shall be granted priority for participation during the succeeding year;

    k. segregate contributions and payments to the fund into various accounts;

    l. contract for necessary goods and services, employ necessary personnel, and engage the services of private consultants, actuaries, managers, legal counsel, and auditors for administrative or technical assistance;

    m. solicit and accept gifts, grants, loans, and other aids from any source or participate in any other way in any government program to carry out the purposes of this act;

    n. require and collect administrative fees and charges in connection with any transaction and impose reasonable penalties, including default, for delinquent payments or for entering into an advance payment contract on a fraudulent basis;

    o. procure insurance against any loss in connection with the property, assets, and activities of the fund or the board;

    p. impose reasonable time limits on use of the tuition benefits provided by the program. This limitation shall be specified within the advance payment contract;

    q. delineate the terms and conditions under which payments may be withdrawn from the fund and impose reasonable fees and charges for withdrawals. The terms and conditions shall be specified within the advance payment contract;

    r. provide for the receipt of contributions in lump sums or installment payments;

    s. establish other policies, procedures, and criteria to implement and administer the provisions of this act; and

    t. require that purchasers of advance payment contracts verify, under oath, any requests for contract conversions, substitutions, transfers, cancellations, refund requests, or contract changes of any nature.

 

    10. The board shall administer the fund in a manner that is sufficiently actuarially sound to defray the obligations of the program. The board shall annually evaluate or cause to be evaluated the actuarial soundness of the fund. If the board determines a need for additional assets in order to preserve actuarial soundness, the board may adjust the terms of subsequent advance payment contracts to ensure soundness.

 

    11. a. The board, acting with the approval of the State Treasurer, shall establish a comprehensive investment plan for the purposes of this act. The comprehensive investment plan shall specify the investment policies to be utilized by the board in its administration of the fund. The board may place assets of the fund in savings accounts or use the funds to purchase fixed or variable life insurance or annuity contracts, securities, evidence of indebtedness, or other investment products, pursuant to the comprehensive investment plan and in such proportions as may be designated or approved under that plan. The insurance, annuity, savings, or investment products shall be underwritten and offered in compliance with the applicable federal and State laws and regulations and by persons who are duly authorized by applicable federal and State authorities. Within the comprehensive investment plan, the board may authorize investment vehicles, or products incident thereto, as may be available or offered by qualified companies or persons.

    b. The board may delegate responsibility for administration of the comprehensive investment plan required pursuant to subsection a. of this section to a person the board determines to be qualified. The person shall be compensated by the board. Directly or through that person, the board may contract with a private corporation or institution to provide such services as may be a part of the comprehensive investment plan or as may be deemed necessary or proper by the board or designated person, including, but not limited to, providing consolidated billing, individual and collective record keeping and accounting, and asset purchase, control, and safekeeping.

    c. The board shall annually prepare or cause to be prepared a report setting forth in appropriate detail an accounting of the fund and a description of the financial condition of the program at the close of each fiscal year. The report shall be submitted to the Governor, the President of the Senate, the Speaker of the General Assembly, the State Treasurer and members of the Commission on Higher Education on or before August 1 each year. In addition, the board shall make the report available to purchasers of advance payment contracts. The board shall provide to the Commission on Higher Education by August 1 each year complete advance payment contract sales information including projected higher education enrollments of qualified beneficiaries. The accounts of the funds shall be subject to annual audits by the State Auditor or his designee.

    d. The board shall solicit answers to applicable ruling requests from the federal Internal Revenue Service regarding the tax status of fees paid pursuant to an advance payment contract to the purchaser or qualified beneficiary and from the Securities and Exchange Commission regarding the application of federal securities laws to the fund. The board shall make the status of the requests known before entering into an advance payment contract.

    e. The board shall solicit proposals for the marketing of the program. The entity designated pursuant to this subsection shall serve as a centralized marketing agent for the program and shall be solely responsible for the marketing of the program. Materials produced for the purpose of marketing the program shall be submitted to the board for review and approval. Marketing materials shall not be made available or distributed to the public prior to the materials being approved by the board. An institution of higher education may distribute marketing materials produced for the program. The State and the board shall not be liable for misrepresentation of the program by a marketing agent.

    f. The board may make available insurance coverage written exclusively for the purpose of protecting advance payment contracts, and the purchasers or beneficiaries thereof, which may be issued in the form of a group term life policy to purchasers of advance payment contracts.

 

    12. The board shall develop advance payment contracts for tuition and registration fees and advance payment contracts for dormitory residence. Advance payment contracts shall be exempt from the provisions of Subtitle 3 of Title 17 of the Revised Statutes and Subtitle 3 of Title 17B of the New Jersey Statutes. The board may request assistance from the Office of the Attorney General in the development of the advance payment contracts. The contents of both types of contracts shall include, but not be limited to, the following:

    a. the amount of the payments and the number of payments required from a purchaser;

    b. the terms and conditions under which purchasers are required to remit payments, including, but not limited to, the date or dates upon which each payment is due;

    c. provisions for late payment charges and for default;

    d. provisions for penalty fees for withdrawals from the fund;

    e. the name and date of birth of the qualified beneficiary on whose behalf the contract is drawn and the terms and conditions under which another person may be substituted as the qualified beneficiary;

    f. the name of any person who may cancel the contract. The terms of the contract shall specify whether the contract may be canceled by the purchaser, the qualified beneficiary, a specific designated person, or any combination of these persons;

    g. the terms and conditions under which a contract may be canceled, the name of the person entitled to any refund due as a result of the cancellation, and the amount of refund, if any, due to the person named;

    h. the time limitations, if any, within which the qualified beneficiary is required to claim benefits through the program; and

    i. other terms and conditions deemed by the board to be necessary or proper.

 

    13. In addition to the provisions of section 12 of this act, an advance payment contract for tuition and registration fees shall include, but not be limited to, the following:

    a. the number of semester credit hours contracted by the purchaser;

    b. whether the contracted credit hours are to be applied toward a four-year public institution of higher education or a county college;

    c. the assumption of a contractual obligation by the board to the qualified beneficiary to provide for a specified number of semester credit hours of undergraduate instruction at a public institution of higher education, not to exceed the average number of credit hours required for the conference of the degree that corresponds to the plan purchased on behalf of the qualified beneficiary.

 

    14. In addition to the provisions of section 12 of this act, an advance payment contract for dormitory residence shall include, but not be limited to, the following:

    a. the number of semesters of dormitory residence contracted by the purchaser; and

    b. the assumption of a contractual obligation by the board to the qualified beneficiary to provide for a specified number of semesters of dormitory residence at a public institution of higher education, not to exceed the maximum number of semesters of full-time enrollment required for the conference of a baccalaureate degree.

 

    15. An advance payment contract may provide that a contract which has not been canceled and under which benefits have not been exercised within a specified period of time, shall be considered terminated. Time expended by a qualified beneficiary as an active duty member of any of the armed services of the United States shall be added to the period of time permitted to exercise the benefits under the advance payment contract. A purchaser or qualified beneficiary whose advance payment contract is terminated pursuant to this section shall not be entitled to a refund. The board shall retain any moneys paid by the purchaser for an advance payment contract that has been terminated in accordance with this section. The moneys retained by the board shall be used by the board to further the purposes of this act.

 

    16. A refund provided pursuant to of subsection g. of section 12 of this act, shall not exceed the amount paid into the fund by the purchaser, except as provided in this section. Refunds may exceed the amount paid into the fund in the following circumstances:

    a. if the qualified beneficiary is awarded a scholarship, the terms of which cover the benefits included in the advance payment contracts, moneys paid for the purchase of the advance payment contracts shall be returned to the purchaser in semester installments coinciding with the matriculation by the qualified beneficiary in amounts of either the original purchase price plus 5% compounded interest, or the current rates at public institutions of higher education, whichever is less;

    b. in the event of the death or total disability of the qualified beneficiary, moneys paid for the purchase of advance payment contracts shall be returned to the purchaser together with 5% compounded interest, or the current rates at public institutions of higher education, whichever is less; and

    c. if an advance payment contract is converted from a university plan to a county college plan, the amount refunded shall be the value of the original advance payment contract minus the value of the contract after the conversion.

 

    17. A refund shall not be authorized through an advance payment contract for any school year partially attended but not completed. For purposes of this section, a school year partially attended but not completed means any one semester whereby the student is still enrolled at the conclusion of the official drop-add period, but withdraws before the end of the semester. If a qualified beneficiary does not complete a county college plan or university plan, as those terms are defined pursuant to section 18 of this act, for reasons other than specified in section 16 of this act, the purchaser shall receive a refund of the amount paid into the fund for the remaining unattended years of the advance payment contract pursuant to rules promulgated by the board.

 

    18. At a minimum, the board shall make advance payment contracts available for three independent plans to be known as the county college plan, the university plan, and the dormitory residence plan.

    a. Through the county college plan, the advance payment contract shall provide prepaid tuition and registration fees for a specified number of undergraduate semester credit hours not to exceed the average number of hours required for the conference of an associate degree. The cost of participation in the county college plan shall be based primarily on the average current and projected tuition and registration fees within the county college system and the number of years expected to elapse between the purchase of the plan on behalf of a qualified beneficiary and the exercise of the benefits provided in the plan by the qualified beneficiary. Qualified beneficiaries shall bear the cost of any laboratory fees associated with enrollment in specific courses. Each qualified beneficiary shall be classified as a resident for tuition purposes regardless of his actual legal residence.

    b. Through the university plan, the advance payment contract shall provide prepaid tuition and registration fees for a specified number of undergraduate semester credit hours not to exceed the average number of hours required for the conference of a baccalaureate degree. The cost of participation in the university plan shall be based primarily on the current and projected tuition and registration fees of the four-year public institutions of higher education and the number of years expected to elapse between the purchase of the plan on behalf of a qualified beneficiary and the exercise of the benefits provided in the plan by the beneficiary. Qualified beneficiaries shall bear the cost of any laboratory fees associated with enrollment in specific courses. In the event that a qualified beneficiary fails to be admitted to a four-year public institution of higher education or chooses to attend a county college, the qualified beneficiary may convert the average number of semester credit hours required for the conference of an associate degree from a university plan to a county college plan and may retain the remaining semester credit hours in the university plan or may request a refund for prepaid credit hours in excess of the average number of semester credit hours required for the conference of an associate degree pursuant to section 16 of this act. Each qualified beneficiary shall be classified as a resident for tuition purposes regardless of his actual legal residence.

    c. Through the dormitory residence plan, the advance payment contract shall provide prepaid housing fees for a maximum of 10 semesters of full-time undergraduate enrollment in a four-year public institution of higher education. Dormitory residence plans are optional and may be purchased only in conjunction with a university plan. Dormitory residence plans shall be purchased in increments of two semesters. The cost of participation in the dormitory residence plan shall be based primarily on the average current and projected housing fees of four-year public institutions of higher education and the number of years expected to elapse between the purchase of the plan on behalf of a qualified beneficiary and the exercise of the benefits provided in the plan by the qualified beneficiary. Qualified beneficiaries shall bear the cost of any additional elective charges such as laundry service or long-distance telephone service. Each four-year public institution of higher education may specify the residence halls eligible for inclusion in the plan. In addition, a four-year public institution of higher education may request immediate termination of a dormitory residence contract based on a violation or multiple violations of rules of the residence hall. Qualified beneficiaries shall have the highest priority in the assignment of housing within residence halls. In the event that sufficient housing is not available for all qualified beneficiaries, the board shall refund the purchaser or qualified beneficiary an amount equal to the fees charged for dormitory residence during that semester.

    d. In addition to the plans required pursuant to this section, the board may make advance payments contacts available for other plans, such as the community college plus university plan whereby the advance payment contract would provide tuition and registration fees that would allow a qualified beneficiary to attend a community college for an associate degree and then attend a four-year public institution of higher education for a baccalaureate degree.

    e. A qualified beneficiary may apply a county college plan, university plan, or dormitory residence plan toward any eligible independent institution of higher education. The board shall transfer or cause to have transferred to the eligible independent institution of higher education designated by the qualified beneficiary an amount not to exceed the redemption value of the advance payment contract within a public institution of higher education. In the event that the cost of tuition and registration fees or housing fees at the independent institution of higher education are less than the corresponding fees at a public institution of higher education, the amount transferred shall not exceed the actual cost of tuition and registration fees or housing fees. A transfer authorized pursuant to this subsection shall not exceed the number of semester credit hours or semesters of dormitory residence contracted on behalf of a qualified beneficiary.

    f. A qualified beneficiary may apply the benefits of an advance payment contract toward an eligible out-of-state public college or university. An out-of-state public college or university which is not for profit, is accredited by a regional accrediting association, and which confers baccalaureate degrees shall be eligible for such application. The board shall transfer, or cause to have transferred, an amount not to exceed the redemption value of the advance payment contract or the original purchase price plus 5% compounded interest, whichever is less, after assessment of a reasonable transfer fee. In the event that the cost of registration or housing fees charged the qualified beneficiary at the eligible out-of-state college or university is less than this calculated amount, the amount transferred shall not exceed the actual cost of tuition and registration fees or housing fees. Any remaining amount shall be transferred in subsequent semesters until the transfer value is depleted. A transfer authorized pursuant to this subsection shall not exceed the number of semester credit hours or semesters of dormitory residence contracted on behalf of a qualified beneficiary.

 

    19. The board shall solicit proposals for the operation of the program through which the board shall contract for the services of a records administrator, a trustee services firm, and one or more product providers.

    a. The records administrator shall be the entity designated by the board to conduct the daily operations of the program on behalf of the board. The goals of the board in selecting a records administrator shall be to provide purchasers with the most secure, well-diversified, and beneficially administered higher education expense plan possible, to allow all qualified firms interested in providing the services equal consideration, and to provide the services to the State at no cost and to the purchasers at the lowest cost possible. Evaluations of proposals submitted pursuant to this subsection shall include, but not be limited to, the following criteria:

    (1) fees and other costs charged to purchasers that affect account values or operational costs related to the program;

    (2) past experience in records administration and current ability to provide timely and accurate service in the areas of records administration, audit and reconciliation, plan communication, participant service, and complaint resolution;

    (3) sufficient staff and computer capability for the scope and level of service expected by the board; and

    (4) financial history and current financial strength and capital adequacy to provide administrative services required by the board.

    b. The trustee services firm shall be the entity designated by the board to select and supervise investment programs on behalf of the board. The goals of the board in selecting a trustee services firm shall be to obtain the highest standards of professional trustee services, to allow all qualified firms interested in providing services equal consideration, and to provide services to the State at no cost and to the purchasers at the lowest cost possible. The trustee services firm shall agree to meet the obligations of the board to qualified beneficiaries if moneys in the fund fail to offset the obligations of the board as a result of imprudent selection or supervision of investment programs by the firm. Evaluations of proposals submitted pursuant to this subsection shall include, but not be limited to the following criteria:

    (1) adequacy of trustee services for supervision and management of the program, including current operations and staff organization and commitment of management to the proposal;

    (2) capability to execute program responsibilities within time and regulatory constraints;

    (3) past experience in trustee services and current ability to maintain regular and continuous interactions with the board, records administrator, and product provider;

    (4) the minimum purchaser participation assumed within the proposal and any additional requirements of purchasers;

    (5) adequacy of technical assistance and services proposed for staff;

    (6) adequacy of a management system for evaluating and improving overall trustee services to the program;

    (7) adequacy of facilities, equipment, and electronic data processing services; and

    (8) detailed projections of administrative costs, including the amount and type of insurance coverage, and detailed projections of total costs.

 

    20. Moneys paid into or out of the fund by or on behalf of a purchaser or qualified beneficiary of an advance payment contract made under this act, which contract has not been terminated or canceled, are exempt for all claims of creditors of the purchaser or the beneficiary.


    21. The State or any State agency, county, municipality, or other political subdivision may, by contract or collective bargaining agreement, agree with any employee to remit payments toward advance payment contracts through payroll deductions made by the appropriate officer or officers of the State, State agency, county, municipality, or political subdivision. The payments shall be held and administered in accordance with this act.

 

    22. Nothing in this act shall be construed as a promise or guarantee that a qualified beneficiary shall be admitted to a public institution of higher education or to a particular public institution of higher education, shall be allowed to continue enrollment at a public institution of higher education after admission, or shall be graduated from a public institution of higher education.

 

    23. In the event that the State Treasurer determines the program to be financially infeasible, the State may discontinue the provision of the program. A qualified beneficiary who has been accepted by and is enrolled or is within five years of enrollment in an independent institution of higher education or public institution of higher education shall be entitled to exercise the benefits for which he has contracted. All other contract holders shall receive a refund of the amount paid into the fund, plus interest at the prevailing rate.

    24. This act shall take effect immediately.

 

 

STATEMENT

                         

    This bill is entitled the "New Jersey Prepaid Higher Education Expense Program Act of 1996." It establishes the New Jersey Prepaid Higher Education Expense Program, to provide a mechanism through which the cost of tuition, registration fees, and dormitory residence may be paid in advance of enrollment in a public institution of higher education at a rate lower than the cost at the time of actual enrollment.     The bill provides for the creation of the Prepaid Higher Education Expense Board, in but not of, the Department of the Treasury. The board will consist of the Treasurer, the chairman of the Commission on Higher Education, or their designees, and five members appointed by the Governor who will possess knowledge, skill and experience in the areas of accounting, actuary, risk management, or investment management. The board will be responsible for administering the New Jersey Prepaid Higher Education Expense Program.

    The board, pursuant to the bill, will develop two types of advance payment contracts, one for tuition and registration fees and the other for dormitory residence. The bill sets forth provisions that must be included in both types of advance payment contracts. These provisions include: 

     - the amount of the payment and the number of payments required;

    - the terms and conditions under which a purchaser will remit payments, including, but not limited to, the dates upon which each payment will be due;

    - provisions for late payment charges and for default;

    - provisions for penalty fees for withdrawals from the fund;

    - the name and date of birth of the qualified beneficiary on whose behalf the contract is drawn and the terms and conditions under which another person may be substituted as the qualified beneficiary;

    - the name of any person who may cancel the contract;

    - the terms and conditions under which a contract may be canceled, the name of the person entitled to any refund due as a result of the cancellation, and the amount of refund, if any, due to the person named;

    - the time limitations, if any, within which the qualified beneficiary must claim benefits through the program; and

    - other terms and conditions deemed by the board to be necessary or proper.

    In addition to these general provisions, the bill also requires that each type of advance payment contract include specific provisions. The advance payment contract for tuition and registration fees, for example, will have to include the number of semester credit hours contracted by the purchaser and whether the credit hours will be applied toward a four- year public institution of higher education or a county college. This type of advance payment contract will also include a provision obligating the board to provide to the qualified beneficiary the specified number of semester credit hours, not to exceed the average number of credit hours required for the conference of the degree that corresponds to the plan purchased on behalf of the qualified beneficiary.

    An advance payment contract for dormitory residence will have to include the number of semesters of dormitory residence contracted by the purchaser. This advance payment contract, similar to the advance payment contract for tuition and registration fees, will have to include a provision obligating the board to provide to a qualified beneficiary the specified number of semesters of dormitory residence, not to exceed the maximum number of semesters of full-time enrollment required for the conference of a baccalaureate degree.

    Under the bill, the board will be required to make advance payment contracts available for three independent plans, to be known as the county college plan, the university plan, and the dormitory residence plan. Through a county college plan, the advance payment contract will provide prepaid tuition and registration fees for a specified number of undergraduate semester credit hours not to exceed the average number of hours required for the conference of an associate degree. Through a university plan, the advance payment contract will provide prepaid tuition and registration fees for a specified number of undergraduate semester credit hours not to exceed the average number of hours required for the conference of a baccalaureate degree. The cost of participating in each of these plans will be based primarily on the average current and projected tuition and registration fees within the county college system or the four-year public institutions of higher education, respectively, and the number of years expected to elapse between the purchase of the plan and the exercise of the benefits by the qualified beneficiary.

    Through the dormitory plans, the advance payment contract will provide prepaid housing fees for a maximum of 10 semesters of full-time undergraduate enrollment in a four-year public institution of higher education. These plans are optional, and may be purchased only in conjunction with a university plan. As with the university plan, costs of participation will be based primarily on the average current and projected housing fees within the four-year public institutions of higher education and the number of years expected to elapse between the purchase of the plan and the exercise of the benefits by the qualified beneficiary.

    The bill permits any of these plans to be applied toward any independent institution of higher education located within the State. Under these circumstances, the board will transfer to these institutions an amount not to exceed the redemption value of the advance payment contract within a public institution of higher education. If the costs at the independent institution of higher education is less than the corresponding costs at a public institution of higher education, then the amount transferred may not exceed the actual cost of tuition and registration fees or housing fees.

    The bill also permits the benefits of an advance payment contract to be applied toward an out-of-state public college or university. To be eligible, these institutions must be not for profit, accredited by a regional accrediting association and confer baccalaureate degrees. Under these circumstances, the board will transfer to these institutions an amount not to exceed the redemption value of the advance payment contract or the original purchase price plus 5% compounded interest, whichever is less, after assessment of a reasonable transfer fees. If the costs at the out-of-state public college or university are less than the calculated amount, then the amount transferred may not exceed the actual cost of tuition and registration fees or housing fees.

     The bill states that it should not be construed as providing or guaranteeing that a qualified beneficiary of an advance payment contract will be admitted to a public institution of higher education or to a particular one of these institutions, will be allowed to continue


enrollment at one of these institutions after admission or will be graduated from one of these institutions.

    The bill provides that if the State Treasurer determines that the program is financially infeasible, the State may discontinue the program. A qualified beneficiary who has been accepted by and is enrolled or is within five years of enrollment in an independent institution of higher education or public institution of higher education will be entitled to exercise the benefits for which he has contracted. Other contract holders will receive a refund of the amount paid into the fund plus interest at the prevailing rate.

 

 

                             

 

Establishes New Jersey Prepaid Higher Education Expense Program.