80R12678 CAS-D
	By: Morrison	H.B. No. 3900
	Substitute the following for H.B. No. 3900:
	By:  Brown of Brazos	C.S.H.B. No. 3900

	A BILL TO BE ENTITLED
	AN ACT
	relating to the Texas tomorrow fund II prepaid tuition unit
	undergraduate education program.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Chapter 54, Education Code, is amended by adding
	Subchapter H to read as follows:
	SUBCHAPTER H. PREPAID TUITION UNIT UNDERGRADUATE EDUCATION
	PROGRAM:  TEXAS TOMORROW FUND II
	Sec. 54.751.  DEFINITIONS. In this subchapter:
	(1)  "Accredited out-of-state institution of higher
	education" means a public or private institution of higher
	education that:
	(A)  is located outside this state; and
	(B)  is accredited by a recognized accrediting
	agency.
	(2)  "Beneficiary" means the person designated under a
	prepaid tuition contract as the person entitled to apply one or more
	tuition units purchased under the contract to the payment of the
	person's undergraduate tuition and required fees at a general
	academic teaching institution, two-year institution of higher
	education, private or independent institution of higher education,
	or accredited out-of-state institution of higher education.
	(3)  "Board" means the Prepaid Higher Education Tuition
	Board.
	(4)  "Fund" means the Texas tomorrow fund II.
	(5)  "General academic teaching institution" has the
	meaning assigned by Section 61.003, except that the term does not
	include a public state college.
	(6)  "Prepaid tuition contract" means a contract under
	which a person purchases from the board on behalf of a beneficiary
	one or more tuition units that the beneficiary is entitled to apply
	to the payment of the beneficiary's undergraduate tuition and
	required fees at a general academic teaching institution, two-year
	institution of higher education, private or independent
	institution of higher education, or accredited out-of-state
	institution of higher education.
	(7)  "Private or independent institution of higher
	education," "public junior college," "public state college,"
	"public technical institute," and "recognized accrediting agency"
	have the meanings assigned by Section 61.003.
	(8)  "Program" means the prepaid tuition unit
	undergraduate education program.
	(9)  "Purchaser" means a person who enters into a
	prepaid tuition contract with the board on behalf of a beneficiary
	for the purchase of one or more tuition units.
	(10)  "Required fee" means a fee, other than a
	laboratory fee for a specific course, that is charged by a public or
	private institution of higher education to all students at the
	institution who are not exempt from the fee. For purposes of this
	subdivision, a fee is a required fee only to the extent that the fee
	is considered a qualified higher education expense under Internal
	Revenue Code provisions applicable to the program.
	(11)  "Two-year institution of higher education" means
	a public junior college, a public state college, and a public
	technical institute.
	Sec. 54.752.  POWERS AND DUTIES OF BOARD CONCERNING PROGRAM.
	(a) In addition to carrying out duties assigned under Subchapters F
	and G, the Prepaid Higher Education Tuition Board shall administer
	the prepaid tuition unit undergraduate education program
	established under this subchapter. The board shall comply with
	federal and state law related to the program.
	(b)  In addition to the board's powers assigned under
	Subchapters F and G, the board has the powers necessary or proper to
	carry out this subchapter, including the power to:
	(1)  adopt rules to implement this subchapter;
	(2)  sue and be sued;
	(3)  enter into contracts and other necessary
	instruments;
	(4)  enter into agreements or other transactions with
	the United States, state agencies, general academic teaching
	institutions, two-year institutions of higher education, and local
	governments;
	(5)  appear on its own behalf before governmental
	agencies;
	(6)  contract for necessary goods and services,
	including specifying in the contract duties to be performed by the
	provider of a good or service that are a part of or are in addition
	to the person's primary duties under the contract;
	(7)  engage the services of private consultants,
	actuaries, trustees, records administrators, managers, legal
	counsel, and auditors for administrative or technical assistance;
	(8)  solicit and accept gifts, grants, loans, and other
	aid from any source or participate in any other way in any
	government program to carry out this subchapter;
	(9)  impose administrative fees;
	(10)  contract with a person to market the program;
	(11)  purchase liability insurance covering the board
	and employees and agents of the board; and
	(12)  establish other policies, procedures, and
	eligibility criteria to implement this subchapter.
	Sec. 54.753.  PREPAID TUITION UNITS: PURCHASE; ASSIGNED
	VALUE; TYPES; PRICE. (a) Under the program, a purchaser may prepay
	the costs of all or a portion of a beneficiary's undergraduate
	tuition and required fees at a general academic teaching
	institution, two-year institution of higher education, private or
	independent institution of higher education, or accredited
	out-of-state institution of higher education by entering into a
	prepaid tuition contract with the board to purchase one or more
	tuition units of a type described by this section at the applicable
	price established by the board for that type of unit for the year in
	which the unit is purchased. The portion of the beneficiary's
	undergraduate tuition and required fees for which a tuition unit
	may be redeemed at a particular general academic teaching
	institution or two-year institution of higher education is assigned
	to the tuition unit at the time of purchase, and the tuition unit
	may be redeemed to pay that portion of the tuition and fees at the
	general academic teaching institution or two-year institution of
	higher education in any academic year in which the unit is redeemed
	in accordance with this subchapter.  The purchaser may purchase one
	type of unit or a combination of two or three types of units.
	(b)  The assigned value of a tuition unit, purchased as
	provided by this section, when used to pay the cost of tuition and
	required fees at a general academic teaching institution or
	two-year institution of higher education, is equal to one percent
	of the amount necessary for the academic year in which the unit is
	redeemed to cover the applicable cost of undergraduate resident
	tuition and required fees for one academic year consisting of 30
	semester credit hours as follows:
	(1)  for a Type I tuition unit, the cost of
	undergraduate resident tuition and required fees charged by the
	general academic teaching institution with the highest such tuition
	and fee costs, determined as provided by Subsection (d);
	(2)  for a Type II tuition unit, the weighted average
	undergraduate resident tuition and required fees charged by general
	academic teaching institutions, determined as provided by
	Subsection (e); and
	(3)  for a Type III tuition unit, the weighted average
	undergraduate resident tuition and required fees of two-year
	institutions of higher education, determined as provided by
	Subsection (f).
	(c)  Each year, the board shall establish the price at which
	each type of tuition unit may be purchased during the next sales
	period and the percentage of the total cost of undergraduate
	resident tuition and required fees for one academic year consisting
	of 30 semester credit hours for which each type of tuition unit may
	be redeemed at each general academic teaching institution and
	two-year institution.  The percentage shall be based on the total
	cost of required tuition and fees at a particular general academic
	teaching institution or two-year institution of higher education in
	relation to the amount determined for the institution with the
	highest cost or weighted average cost, as applicable. The purchase
	price established for each type of unit must be equal to the
	applicable cost of tuition and required fees as determined under
	this section for the most recent academic year that began before the
	beginning of the sales period. The sales period to which those
	prices apply expires on the first anniversary of the date the units
	become available for purchase at the prices established for that
	year.
	(d)  The board shall base the purchase price of a Type I
	tuition unit on one percent of the cost of the undergraduate
	resident tuition and required fees for the applicable academic year
	at the general academic teaching institution with the highest such
	tuition and fee cost for that academic year.
	(e)  The board shall base the purchase price of a Type II
	tuition unit on one percent of the cost of the weighted average
	general academic teaching institution undergraduate resident
	tuition and required fees for the applicable academic year. That
	cost is determined by:
	(1)  for each general academic teaching institution,
	multiplying the average amount of the institution's undergraduate
	resident tuition and required fees for an academic year consisting
	of 30 semester credit hours by the number of full-time equivalent
	undergraduate resident students at that institution;
	(2)  adding together the products computed under
	Subdivision (1) for each institution; and
	(3)  dividing the sum determined under Subdivision (2)
	by the total number of full-time equivalent undergraduate resident
	students at all general academic teaching institutions.
	(f)  The board shall base the purchase price of a Type III
	tuition unit on one percent of the cost of the weighted average
	two-year institution of higher education undergraduate resident
	tuition and required fees for the applicable academic year,
	disregarding any portion of the tuition charged by a public junior
	college to a resident of this state who does not reside within the
	taxing jurisdiction of the junior college. That cost is determined
	by:
	(1)  for each two-year institution of higher education,
	multiplying the average amount of the institution's undergraduate
	resident tuition and required fees for an academic year consisting
	of 30 semester credit hours by the number of full-time equivalent
	undergraduate resident students at that institution;
	(2)  adding together the products computed under
	Subdivision (1) for each institution; and
	(3)  dividing the sum determined under Subdivision (2)
	by the total number of full-time equivalent undergraduate resident
	students at all two-year institutions of higher education.
	(g)  The total amount paid under a prepaid tuition contract
	on behalf of a single beneficiary may not exceed any limit
	established on the amount by Section 529, Internal Revenue Code of
	1986. The board shall establish, in compliance with Section 529,
	Internal Revenue Code of 1986, the minimum amount that the
	purchaser is required to pay under the contract on behalf of a
	single beneficiary.
	(h)  At the time of the establishment of the account to which
	a purchaser's prepaid tuition contract money is assigned, the board
	may impose an administrative fee not to exceed $25.  Money from that
	fee must be used directly in maintaining the actuarial soundness of
	the fund as required by Section 54.770.  The board may not impose
	any other fee or charge in connection with the sale of a tuition
	unit.
	Sec. 54.754.  REDEMPTION OF TUITION UNITS. (a) In
	accordance with this subchapter, when a beneficiary under a prepaid
	tuition contract redeems one or more tuition units to pay costs of
	tuition and required fees, the board shall apply money in the fund,
	in the amount provided by Section 54.765(c) or (d), as applicable,
	to pay all or the applicable portion of the costs of the
	beneficiary's tuition and required fees at the general academic
	teaching institution, two-year institution of higher education,
	private or independent institution of higher education, or
	accredited out-of-state institution of higher education in which
	the beneficiary enrolls. Subject to Subsection (b)(2) and the other
	provisions of this section, a beneficiary may redeem any type of
	tuition unit for attendance at an institution described by this
	section.  A general academic teaching institution or two-year
	institution of higher education shall accept the amount transferred
	to the institution under Section 54.765(c) when the unit or units
	are redeemed as payment for all or the applicable portion of the
	beneficiary's tuition and required fees.
	(b)  To pay for the entire cost of undergraduate resident
	tuition and required fees for an academic year consisting of 30
	semester credit hours, redemption of 100 Type I tuition units is
	required at the general academic teaching institution with the
	highest tuition and fee cost as described by Section 54.753(d),
	redemption of 100 Type II tuition units is required at a general
	academic teaching institution with the applicable tuition and fee
	cost at the weighted average as described by Subsection (e) of that
	section, and redemption of 100 Type III units is required at a
	two-year institution of higher education with the applicable
	tuition and fee cost at the weighted average as described by
	Subsection (f) of that section. The number of tuition units that
	must be redeemed to pay for the entire cost of tuition and required
	fees for an academic year at another general academic teaching
	institution or two-year institution of higher education may be
	higher or lower:
	(1)  in proportion to the amount that the cost of
	tuition and required fees at that institution is higher or lower
	than the amount determined for the institution with the highest
	cost or weighted average cost, as applicable; or
	(2)  if a more or less valuable type of tuition unit is
	redeemed.
	(c)  To assist purchasers in determining the number of
	tuition units a beneficiary must redeem to cover the costs of
	tuition and required fees at general academic teaching institutions
	and two-year institutions of higher education, each year the board
	shall prepare a tuition unit redemption chart and shall post the
	chart on an Internet website. The chart must show for each general
	academic teaching institution and for each two-year institution of
	higher education the number of each type of units purchased that
	year that would be required to cover the cost of tuition and
	required fees, based on an academic year consisting of 30 semester
	credit hours.
	(d)  If a beneficiary redeems fewer tuition units of the type
	or combination of types necessary to pay the total cost of the
	beneficiary's tuition and required fees at the general academic
	teaching institution, two-year institution of higher education,
	private or independent institution of higher education, or
	accredited out-of-state institution of higher education at which
	the beneficiary enrolls, the beneficiary is responsible for paying
	the amount of the difference between the amount of tuition and
	required fees for which the beneficiary pays through the redemption
	of one or more tuition units and the total cost of the beneficiary's
	tuition and required fees at the institution.
	(e)  If the beneficiary redeems fewer tuition units to pay
	the cost of tuition and required fees than the number of units
	purchased on behalf of the beneficiary under a prepaid tuition
	contract, other than to defer redemption as permitted in accordance
	with Section 54.758, the purchaser may:
	(1)  redeem for cash the amount of the purchase price of
	the excess units, plus annual interest earned on that money,
	accrued at a rate set by the board not to exceed five percent
	annually; or
	(2)  transfer the remaining units to another
	beneficiary in accordance with this subchapter.
	(f)  A beneficiary or purchaser may not redeem a tuition unit
	earlier than the third anniversary of the date the unit was
	purchased.
	Sec. 54.755.  PREPAID TUITION CONTRACT.  (a)  The board shall
	adopt a form for a prepaid tuition contract to be used by the board
	and purchasers.
	(b)  A prepaid tuition contract must:
	(1)  specify the terms under which the purchaser must
	pay any amounts owed under the contract;
	(2)  specify the consequences of default;
	(3)  specify the name and date of birth of the
	beneficiary under the contract and the terms under which another
	person may be substituted as the beneficiary;
	(4)  specify the date the beneficiary is projected to
	graduate from high school; and
	(5)  contain any other provisions the board considers
	necessary or appropriate.
	(c)  A prepaid tuition contract may provide for the purchase
	of additional tuition units in subsequent years at the then-current
	price of the additional units.
	Sec. 54.756.  PURCHASER; BENEFICIARY.  (a)  A purchaser may
	be any person who is permitted to be a purchaser under Section 529,
	Internal Revenue Code of 1986.  The purchaser is not required to be
	a resident of this state, except as provided by Subsection (c)(2).
	(b)  In accordance with applicable provisions of Section
	529, Internal Revenue Code of 1986, a purchaser is the owner of the
	account to which the purchaser's prepaid tuition contract money is
	assigned.
	(c)  At the time the purchaser enters into a prepaid tuition
	contract, the beneficiary of the contract must be:
	(1)  a resident of this state at the time the purchaser
	enters into the contract; or
	(2)  a nonresident who is the child of a parent who is a
	resident of this state at the time that parent enters into the
	contract.
	(d)  For purposes of Subsection (c), the board may require a
	reasonable period of residence in this state for a beneficiary or
	the parent of a beneficiary.
	(e)  Notwithstanding any provision of Subchapter B, the
	tuition and required fees charged by a general academic teaching
	institution or two-year institution of higher education that are
	paid for with tuition units shall be determined as if the
	beneficiary of that contract were a resident student.
	Sec. 54.757.  CONTRACT PAYMENT. (a) The board may provide
	for the receipt of payment under prepaid tuition contracts in lump
	sums or installment payments. If the board allows payments under a
	contract to be made in installments over a period longer than one
	year, the board must provide for a plan that permits those payments
	to be made in single annual installments in addition to any other
	permitted installment plans.
	(b)  A purchaser may make payments under a prepaid tuition
	contract by an electronic funds transfer.
	(c)  An employee of this state or a political subdivision of
	this state may make payments under a prepaid tuition contract by
	payroll deductions made by the appropriate officer of the state or
	political subdivision.  The board shall implement procedures to
	facilitate payments under this subsection.
	(d)  The board may impose a fee for a late payment under a
	prepaid tuition contract.
	Sec. 54.758.  DEFERRED USE OF PREPAID CREDIT HOURS. (a)  A
	prepaid tuition contract must permit the beneficiary to elect to
	pay from a source other than tuition units purchased under the
	contract the beneficiary's tuition and required fees for some or
	all of the tuition and required fees to which the beneficiary is
	entitled to payment under the contract, and to defer to a subsequent
	semester or other academic term the right to payment of the
	beneficiary's tuition and required fees by using tuition units
	remaining under the contract.
	(b)  This section does not affect the date on which a prepaid
	tuition contract terminates under this subchapter and does not give
	the beneficiary the right to a payment under the contract after
	termination of the contract.
	Sec. 54.759.  CHANGE OF BENEFICIARY. (a)  The purchaser of a
	prepaid tuition contract may designate a different beneficiary in
	place of the original beneficiary if the new beneficiary meets the
	requirements of a beneficiary on the date the designation is
	changed. The new beneficiary must meet the requirements of Section
	529, Internal Revenue Code of 1986, to prevent the change of
	beneficiary from being treated as a distribution under that law.
	(b)  The board may adjust the terms of the contract so that
	the purchaser is required to pay the amount the purchaser would have
	been required to pay had the purchaser originally designated the
	new beneficiary as the beneficiary, taking into account any
	payments made before the date the designation is changed.
	(c)  The board may not impose a fee in connection with the
	designation of a new beneficiary.
	(d)  The purchaser of a prepaid tuition contract may not sell
	the contract.
	Sec. 54.760.  VERIFICATION UNDER OATH. The board may
	require a purchaser to verify under oath a request to:
	(1)  change a beneficiary; or
	(2)  terminate a contract.
	Sec. 54.761.  PROMISE OR GUARANTEE OF ADMISSION. This
	subchapter is not a promise or guarantee that a beneficiary will be:
	(1)  admitted to any public or private institution of
	higher education;
	(2)  admitted to a particular public or private
	institution of higher education;
	(3)  allowed to continue enrollment at a public or
	private institution of higher education; or
	(4)  graduated from a public or private institution of
	higher education.
	Sec. 54.762.  CONTRACT TERMINATION. (a)  A prepaid tuition
	contract shall specify:
	(1)  the name of any person who may terminate the
	contract; and
	(2)  the terms under which the contract may be
	terminated.
	(b)  A prepaid tuition contract terminates on the 10th
	anniversary of the date the beneficiary is projected to graduate
	from high school, not counting time spent by the beneficiary as an
	active duty member of the United States armed services.
	Sec. 54.763.  REFUND. (a)  A prepaid tuition contract shall
	specify:
	(1)  the name of the person entitled to any refund if
	the contract is terminated;
	(2)  the terms under which a person is entitled to a
	refund; and
	(3)  the method by which the amount of the refund is
	computed.
	(b)  The person named in the contract is entitled to a refund
	following termination of a prepaid tuition contract.
	(c)  The board shall determine the method by which the amount
	of the refund is computed.
	Sec. 54.764.  FUND. (a)  The Texas tomorrow fund II prepaid
	tuition unit undergraduate education program fund is established as
	a trust fund outside of the state treasury.
	(b)  The board shall:
	(1)  deposit in the fund money paid under prepaid
	tuition contracts; and
	(2)  credit to the fund income earned on that money.
	(c)  The board shall provide for administering the assets of
	the fund and establishing and administering the accounts of
	purchasers under prepaid tuition contracts.
	(d)  The board shall provide for assigning payments to the
	fund to separate accounts for purchasers and may provide for
	assigning payments to other general accounts as otherwise
	considered appropriate by the board.
	(e)  The board may provide for acquiring, holding, managing,
	purchasing, selling, assigning, trading, transferring, or
	disposing of any security, evidence of indebtedness, or other
	investment in which the fund's assets may be invested.
	Sec. 54.765.  COMPTROLLER. (a)  Except as provided by
	Subsection (e), the comptroller is the custodian of the assets of
	the fund.
	(b)  The comptroller shall pay money from the fund on a
	warrant drawn by the comptroller supported only on a voucher signed
	by the comptroller or the comptroller's authorized representative.
	(c)  When a beneficiary enrolls at a general academic
	teaching institution or two-year institution of higher education,
	on written authorization from the purchaser of the tuition unit or
	units for that beneficiary, the comptroller shall transfer to the
	institution an amount equal to the total purchase price of the
	tuition unit or units the beneficiary redeems for the semester or
	other academic term plus the portion of the total return on all
	investment assets of the fund attributable to that amount.
	(d)  When a beneficiary enrolls at a private or independent
	institution of higher education or accredited out-of-state
	institution of higher education, on written authorization from the
	purchaser of the tuition unit or units for that beneficiary, the
	comptroller shall transfer to the institution the lesser of:
	(1)  an amount equal to the current cost of the tuition
	and required fees that would be covered by redemption of the number
	and type of tuition units the beneficiary is redeeming if the
	beneficiary were redeeming the unit or units at a general academic
	teaching institution or two-year institution of higher education as
	follows:
	(A)  for a Type I unit, at the general academic
	teaching institution that, in the sales year in which the unit was
	purchased, had the highest tuition and required fee cost;
	(B)  for a Type II unit, at a general academic
	teaching institution that, in the sales year in which the unit was
	purchased, had tuition and required fee cost at the weighted
	average; and
	(C)  for a Type III unit, at a two-year
	institution of higher education that, in the sales year in which the
	unit was purchased, had tuition and required fee cost at the
	weighted average; or
	(2)  an amount equal to the total purchase price of the
	tuition unit or units the beneficiary redeems for the semester or
	other academic term plus the portion of the total return on assets
	of the fund attributable to that amount.
	(e)  The comptroller annually shall provide to the board a
	sworn statement of the amount of the fund's assets in the
	comptroller's custody.
	(f)  The board may select one or more commercial banks,
	depository trust companies, or other entities to serve as custodian
	of all or part of the fund's assets.
	Sec. 54.766.  INVESTMENT OF FUND ASSETS. (a)  The board
	shall provide for investing the assets of the fund. In investing the
	fund, the board has the same investment authority as that provided
	by Section 11b, Article VII, Texas Constitution, or other law, to
	the board of regents of The University of Texas System with respect
	to the investment of the Permanent University Fund.
	(b)  The board shall contract with one or more private
	professional investment managers to serve as plan manager and to
	invest the assets of the fund on behalf of the board. In selecting a
	manager, the board must comply with Section 54.704. In monitoring
	the manager's investments, the board shall ensure that investments
	are made according to the standard of investment provided by this
	section. The plan manager has the same duties imposed on a plan
	manager by Section 54.705. The board shall pay the plan manager a
	fund management fee in an amount determined by the board, not to
	exceed an annual amount equal to one-half of one percent of the
	average value of the fund during the year.
	(c)  The board shall develop written objectives concerning
	the investment of the assets of the fund. The objectives may
	address desired rates of return, risks involved, investment time
	frames, and any other relevant considerations.
	(d)  The board may specify in a contract under this section
	that the plan manager is required to establish and maintain an
	Internet website through which a purchaser may monitor the account
	to which the purchaser's prepaid tuition contract money is
	assigned.
	Sec. 54.767.  USE OF FUND ASSETS. The assets of the fund may
	be used only to:
	(1)  pay the costs of program administration and
	operations;
	(2)  make payments to general academic teaching
	institutions, two-year institutions of higher education, private
	or independent institutions of higher education, and accredited
	out-of-state institutions of higher education on behalf of
	beneficiaries; and
	(3)  make refunds under prepaid tuition contracts.
	Sec. 54.768.  EXEMPTION FROM SECURITIES LAWS. The
	registration requirements of The Securities Act (Article 581-1 et
	seq., Vernon's Texas Civil Statutes) do not apply to the sale of a
	prepaid tuition contract by the board or by a registered securities
	dealer or registered investment adviser.
	Sec. 54.769.  EXEMPTION FROM CREDITORS' CLAIMS. (a)  Money
	in the fund is exempt from claims of creditors, including claims of
	creditors of a purchaser, a beneficiary, or a successor in interest
	of a purchaser or beneficiary.
	(b)  The rights of a purchaser, beneficiary, or successor in
	interest of a purchaser or beneficiary in and under a prepaid
	tuition contract and the payment of tuition and required fees for a
	beneficiary under a prepaid tuition contract to a general academic
	teaching institution, two-year institution of higher education,
	private or independent institution of higher education, or
	accredited out-of-state institution of higher education under this
	chapter are exempt from attachment, levy, garnishment, execution,
	and seizure for the satisfaction of any debt, judgment, or claim
	against a purchaser, beneficiary, or successor in interest of a
	purchaser or beneficiary.
	(c)  A claim or judgment against a purchaser, beneficiary, or
	successor in interest of a purchaser or beneficiary does not impair
	or entitle the claim or judgment holder to assert or enforce a lien
	against:
	(1)  the rights of a purchaser, beneficiary, or
	successor in interest of a purchaser or beneficiary in and under a
	prepaid tuition contract; or
	(2)  the right of a beneficiary to the payment of
	tuition and required fees to a general academic teaching
	institution, two-year institution of higher education, private or
	independent institution of higher education, or accredited
	out-of-state institution of higher education under a prepaid
	tuition contract.
	Sec. 54.770.  ACTUARIAL SOUNDNESS OF FUND. (a)  The board
	shall administer the fund in a manner that is sufficiently
	actuarially sound to pay the costs of program administration and
	operations and to meet the obligations of the program.
	(b)  The board shall annually evaluate the actuarial
	soundness of the fund.
	(c)  The board may adjust the terms of subsequent prepaid
	tuition contracts as necessary to ensure the actuarial soundness of
	the fund.
	Sec. 54.771.  COMPLIANCE WITH LIMITS ON CONTRIBUTIONS AND
	WITHDRAWALS. The board shall monitor contributions to and
	withdrawals from the fund and any account within the fund to ensure
	that any applicable limits on contributions or withdrawals are not
	exceeded.
	Sec. 54.772.  TAX EXEMPT STATUS REQUIREMENTS. (a)  This
	section is intended to meet the requirements of Section 529,
	Internal Revenue Code of 1986.
	(b)  A payment of an amount due to the fund for a prepaid
	tuition contract must be made in cash or cash equivalent. A person
	may not make a payment to the fund in excess of the amounts required
	to be paid under a prepaid tuition contract.
	(c)  The board shall maintain a separate accounting for each
	beneficiary.
	(d)  The purchaser under a prepaid tuition contract and the
	beneficiary under the contract may not:
	(1)  control or direct the investment of payments under
	the contract or any earnings of the fund; or
	(2)  use any interest in the contract as security for a
	loan or other obligation.
	(e)  The board shall make reports required by the secretary
	of the United States Treasury.
	Sec. 54.773.  SUSPENSION OF NEW ENROLLMENT; PROGRAM
	MODIFICATION OR TERMINATION. (a) On the request of the comptroller
	as the comptroller considers necessary to ensure the actuarial
	soundness of the fund, the board may temporarily suspend new
	enrollment in the program.
	(b)  If the comptroller determines that the program is
	financially infeasible, the comptroller shall notify the governor
	and the legislature and recommend that the program be modified or
	terminated.
	Sec. 54.774.  EFFECT OF PROGRAM TERMINATION ON CONTRACT.
	(a)  A prepaid tuition contract remains in effect after the program
	is terminated if, when the program is terminated, the beneficiary:
	(1)  has been accepted by or is enrolled at a general
	academic teaching institution, two-year institution of higher
	education, private or independent institution of higher education,
	or accredited out-of-state institution of higher education; or
	(2)  is projected to graduate from high school not
	later than the third anniversary of the date the program is
	terminated.
	(b)  A prepaid tuition contract terminates when the program
	is terminated if the contract does not remain in effect under
	Subsection (a).
	Sec. 54.775.  CONFIDENTIALITY. (a)  Records in the custody
	of the board relating to the participation of specific purchasers
	and beneficiaries in the program are confidential.
	(b)  Notwithstanding Subsection (a), the board may release
	information described by that subsection to a general academic
	teaching institution, two-year institution of higher education,
	private or independent institution of higher education, or
	accredited out-of-state institution of higher education at which a
	beneficiary may enroll or is enrolled. The institution shall keep
	the information confidential.
	(c)  Notwithstanding any other provision of this subchapter,
	the board may release information to the Internal Revenue Service
	and to any state tax agencies as required by applicable tax law.
	Sec. 54.776.  STATEMENT REGARDING STATUS OF PREPAID TUITION
	CONTRACT. Not later than January 1 of each year, the board shall
	provide without charge to each purchaser a statement of:
	(1)  the amount paid by the purchaser under the prepaid
	tuition contract;
	(2)  the total number of each type of tuition unit
	covered by the contract at any one time;
	(3)  the number of each type of tuition unit remaining
	under the contract;
	(4)  the value of the purchasers' tuition units if
	redeemed at any general academic teaching institution or two-year
	institution of higher education designated for that year by the
	purchaser in the time and manner required by the board, not to
	exceed five institutions; and
	(5)  any other information the board determines by rule
	is necessary or appropriate.
	Sec. 54.777.  REPORTS. (a)  Not later than December 1 of
	each year, the board shall submit to the governor, lieutenant
	governor, speaker of the house of representatives, Legislative
	Budget Board, Legislative Audit Committee, state auditor, and Texas
	Higher Education Coordinating Board a report including:
	(1)  the fiscal transactions of the board and the plan
	manager under this subchapter during the preceding fiscal year;
	(2)  the market and book value of the fund as of the end
	of the preceding fiscal year;
	(3)  the asset allocations of the fund expressed in
	percentages of stocks, fixed income, cash, or other financial
	investments;
	(4)  the rate of return on the investment of the fund's
	assets during the preceding fiscal year; and
	(5)  an actuarial valuation of the assets and
	liabilities of the program, including the extent to which the
	program's liabilities are unfunded.
	(b)  The board shall make the report described by Subsection
	(a) available to purchasers of prepaid tuition contracts.
	(c)  Not later than December 1 of each year, the board shall
	provide to the coordinating board complete prepaid tuition contract
	sales information, including projected enrollments of
	beneficiaries at general academic teaching institutions and
	two-year institutions of higher education.
	SECTION 2.  Beginning September 1, 2008, the Prepaid Higher
	Education Tuition Board may enter into prepaid tuition contracts
	with purchasers and begin selling tuition units under those
	contracts in accordance with Subchapter H, Chapter 54, Education
	Code, as added by this Act.
	SECTION 3.  This Act takes effect immediately if it receives
	a vote of two-thirds of all the members elected to each house, as
	provided by Section 39, Article III, Texas Constitution.  If this
	Act does not receive the vote necessary for immediate effect, this
	Act takes effect September 1, 2007.