(c) The board shall adopt such rules and regulations as it deems necessary and
proper to administer this subchapter and to ensure the program's compliance with Section 529 of Title 26 of the United States Code, or successor section.
(d) The board shall publish an annual report to the Governor and General Assembly detailing its activities on or before September 30 of each year.
(e) The terms of the public members shall be staggered. The first appointed public member shall serve for a term of 1 year and the second appointed public member shall serve for a term of 2 years. Thereafter, public members shall serve for a term of 3 years. Public members shall be eligible for reappointment.
§ 3485. Definitions. As used in this subchapter:
(a) 'Account' means an individual trust account or savings account established in accordance with this subchapter.
(b) 'Account Owner' means the individual or individuals other than the designated beneficiary identified at the time the account is opened as having the right to withdraw funds from the account.
(c) 'Designated Beneficiary' means, except as provided in Section 3490 of this subchapter, the individual designated at the time the account is opened as having the right to receive a qualified withdrawal for the payment of qualified higher education expenses, or if such designated beneficiary is replaced in accordance with Section 3490 of this subsection, such replacement.
(d) 'Financial Institution' means a bank, a commercial bank, a national bank, a savings bank, a savings and loan, a thrift institution, a credit union, an insurance company, a trust company, a mutual fund, an investment firm, or other similar entity authorized to do business in this State.
(e) 'Higher Education Institution' means an eligible education institution as defined in Section 135(c)(3) of Title 26 of the United States Code.
(f) 'Member of the Family' shall have the same meaning as contained in Section 529(e) of Title 26 of the United States Code, or successor section.
(g) 'Nonqualified Withdrawal' means a withdrawal from an account that is not:
(1) a qualified withdrawal; or
(2) a withdrawal made as the result of the death or disability of the designated beneficiary; or
(3) a withdrawal made as the result of a scholarship (or allowance or payment described in section 135(d)(1)(B) or (C) of Title 26 of the United States Code) received by the designated beneficiary, but only to the extent of the amount of such scholarship, allowance, or payment; or
(4) a rollover or change in the designated beneficiary described in Section 3490 of this subchapter.
(h) 'Program' means the Delaware Qualified Tuition Savings Program established by this Act.
(i) 'Qualified Higher Education Expenses' means tuition and other permitted expenses as presently set forth in Section 529(e) of Title 26 of the United States Code, or as hereafter permitted by such successor or amended section, for the enrollment or attendance of a designated beneficiary at a higher education institution.
(j) "Qualified Withdrawal" means a withdrawal from an account to pay the qualified higher education expenses of the designated beneficiary, but only if the withdrawal is made in accordance with the requirements of the program.
§ 3486. Powers Of The Board.
The board shall have the following powers, duties, and functions:
(1) To establish, develop, implement, and maintain the program in a manner consistent with the provisions of this subchapter and Section 529 of Title 26 of the United States Code, or such successor section, to obtain the benefits provided by such section for the program and its participants;
(2) To adopt rules and regulations for the general administration of the program;
(3) To maintain, invest, and reinvest the funds contributed into the program consistent with the investment restrictions established by the board. The investment restrictions shall be consistent with the objectives of the program and the board shall exercise the judgment and care then prevailing which men and women of prudence, discretion and intelligence exercise in the management of their own affairs with due regard to the probable income and level of risk from investments of money belonging to the State in accordance with the policies established by the board. The board may consult with the Investment Subcommittee of the Board of Pension Trustees in the development of investment alternatives.
(4) To make and enter into any and all contracts, agreements, or arrangements, and to retain, employ and contract for the services of private and public financial institutions, depositories, consultants, investment advisors or managers, third party plan administrators, research and technical and other services, necessary or desirable for carrying out the purposes of this subchapter,
§ 3487. The Program.
(1) An account owner may establish an account by making an initial contribution to the program in the name of the designated beneficiary. At the time of the initial contribution, either the account owner or designated beneficiary must be a resident of the State as defined by the board. Once a contribution is made it becomes part of the program and subject to the provisions of this subchapter.
(2) Any person may make a contribution to an account once an account is opened.
(3) Contributions to an account shall be made only in cash.
(4) Total contributions to all accounts shall not exceed those reasonably necessary, considering the return on contributions, the age and circumstances of the designated beneficiary, to provide for the qualified higher education expenses of the beneficiary. The board shall establish maximum contribution limits applicable to program accounts and shall require such information from the account owner and the designated beneficiary to establish the limit as it relates to such account.
(5) Separate records and accounting shall be required by the program for each account and reports shall be made no less frequently than annually to the account owner and the designated beneficiary.
(6) The program shall be permitted to collect application, account, or administrative fees to defray the costs of the program. The application, account or administrative fees must be approved by the board.
§ 3488. Investment Direction.
(1) Except as permitted in Section 529 of Title 26 of the United States Code and regulations thereunder, no person shall have the right to direct the investment of any contributions to or earnings from the program.
(2) Neither the program, the board and each of its members, nor the State shall insure any account or guarantee any rate of return, or any interest rate on any contribution; nor shall they or any one of them be liable for any loss incurred by any person as a result of participating in the program.
(3) The board and each of its members shall be entitled to the immunities set forth in chapter 40, title 10 of this code, and in addition, no member of the board shall be liable for any act or omission made during his tenure on the board, or for any loss incurred by any person as a result of the participation by any board member in the program. Further, the State shall indemnify each board member who is a party to, or is threatened to be made a party to, any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, arising by reason of such member's participation in the program, against any expenses (including attorney's fees if the Attorney General shall determine that such board member is not entitled to representation by the State), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding, if he or she acted in good faith and in a manner he or she reasonably believed to be in the best interest of the State, and with respect to any criminal action or proceeding, so long as he or she had no reasonable cause to believe that his or her conduct was unlawful. Any expenses incurred by such board member in defending a civil, administrative or investigative action, suit or proceeding shall be paid by the State in advance of the final disposition of such action, suit or proceeding upon authorization by a majority of the members of the board, and by the Governor of the State.
(4) The board in the exercise of its sole discretion and without liability is specifically authorized to remove the program's funds from any financial institution and to reinvest the funds in a similar or different investment alternative at another financial institution at any time.
§ 3489. Prohibitions.
(1) No account nor any interest in an account shall be assignable or pledged, or otherwise used to secure, or obtain a loan or other advancement.
(2) No refund of a qualified educational expense payment may be paid by a higher education institution directly to the designated beneficiary, or to the account owner. Any refund of qualified tuition expenses owed by a higher education institution on account of an overpayment of educational expenses must be refunded to the program for credit to the designated beneficiary's account.
(3) A qualified withdrawal that is used to pay for qualified education expenses must be paid jointly to the designated beneficiary and the higher education institution or directly to the higher education institution. A payment of qualified education expenses may not be made directly to the beneficiary.
(4) Total contributions to all accounts established on behalf of a particular beneficiary in excess of those reasonably necessary to meet the designated beneficiary's qualified higher education expenses are prohibited.
§ 3490. Designated Beneficiary.
(1) An account owner shall have the right at any time to change the designated beneficiary of an account to another individual who is a member of the family of the former designated beneficiary.
(2) An account owner shall have the right at any time to direct that all or a portion of an account be transferred to the account of another beneficiary if the designated beneficiaries are members of the same family.
(3) The right to change the designated beneficiary or to transfer between accounts contained in subsections (1) and (2) above may be denied if, under regulations adopted by the board, the exercise of the right would result in either excess contributions to an account or the exercise of impermissible investment direction by the account owner.
§ 3491. Account Withdrawals, Penalties.
(1) Withdrawal from an account may be made on 30 days' written notice tothe board, or on such shorter notice as the board may by regulation provide. A withdrawal shall be designated as a qualified withdrawal or a nonqualified withdrawal, and the application shall provide such information and be made on such forms as the board shall find are necessary to enable the board to determine the nature of the withdrawal.
(2) An account withdrawal paid to or for the benefit of any person during any calendar year shall be reported to the person and the Internal Revenue Service. The report shall be made at the time and contain such information as required by law.
(3) The board shall establish a more than de minimis penalty, at the minimum amount necessary to satisfy the requirements of Section 529 of Title 26 of the United States Code, or successor section, for a nonqualified withdrawal on the portion of the withdrawal that constitutes income under Section 529 of Title 26 of the United States Code, or successor section.
(4) Penalties collected under this section may be used to defray the costs of the program.
Approved June 24, 1997