SENATE BILL NO. 1229
A bill to establish an investment and development savings program for the purpose of expanding access to higher education through savings; to provide for state contributions toward higher education savings for certain children in this state; and to provide for the powers and duties of certain state governmental officers and entities.
the people of the state of michigan enact:
Sec. 1. This act may be cited as the "Michigan kids investment and development savings (KIDS) program act".
(a) "Account" means an education savings account established under the Michigan education savings program act, 2000 PA 161, MCL 390.1471 to 390.1486.
(b) "Beneficiary" means an eligible child receiving funds under the program.
(c) "Department" means the department of treasury.
(d) "Eligible educational institution", "internal revenue code", and "qualified higher education expenses", mean those terms as defined in section 2 of the Michigan education savings program act, 2000 PA 161, MCL 390.1472.
(e) "Enhanced deposit" means an initial or supplemental contribution into a KIDS Account or another plan option determined by the department under section 10.
(f) "Foster child" means a child receiving foster care as that term is defined in section 2 of the foster care and adoption services act, 1994 PA 203, MCL 722.952.
(g) "Fund" means the Michigan kids investment and development savings program fund created in section 6.
(h) "KIDS Account" means an account in which designated funding for eligible children is held.
(i) "Low-income households" means households with a total annual adjusted gross income less than $75,000.00 or households identified by the department by other means as low-income for purposes of the program.
(j) "Participant" means 1 of the following:
(i) A parent or legal guardian of an eligible child.
(ii) A parent or legal guardian of a child described in section 4(9).
(iii) Any private individual or entity who contributes money to the program.
(k) "Program" means the Michigan kids investment and development savings program established under this act.
(l) "Public school" means that term as defined in section 5 of the revised school code, 1976 PA 451, MCL 380.5.
(m) "Pupil membership count day" means that term as used in section 6 of the school aid act of 1979, 1979 PA 94, MCL 388.1606, and includes any supplemental or alternate pupil membership count days as may be provided in article I of the school aid act of 1979, 1979 PA 94, MCL 388.1601 to 388.1772.
(n) "Seed deposit" means an initial contribution into a KIDS Account for a child born on or after a date determined by the department.
Sec. 3. The Michigan kids investment and development savings program is established in the department. The department shall administer the program for the purpose of expanding access to higher education through savings.
Sec. 4. (1) Each child born on or after a date determined by the department under subsection (2) who is a resident of this state at the time of birth is eligible for the program.
(2) The date designated by the department for which eligibility commences must be no later than October 1, 2023.
(3) No later than 90 days after a birth certificate is registered for a child described in subsection (1), pursuant to section 2821 of the public health code, 1978 PA 368, MCL 333.2821, the department of health and human services shall provide the department with identifiable birth data for the child in a file format as defined by the department. The birth data must include the child's name and birth date and the name and contact information of each parent or legal guardian of the child, including the parent's or legal guardian's street address and, if provided to the department of health and human services, the parent's or legal guardian's mobile telephone number and email address. The department of health and human services may provide additional identifiable birth data to the department, upon request, as may be necessary for the department's administration of the program. The birth data is confidential and must not be disclosed except as necessary for the program. No more than 90 days after receiving the birth data from the department of health and human services, the department shall notify at least 1 parent or legal guardian of each eligible child about the program. The notification must include information on all of the following:
(a) How the parent or legal guardian may opt out of the program.
(b) The KIDS Account opened for the child under subsection (6).
(c) How the parent or legal guardian may establish a separate account under the Michigan education savings program act, 2000 PA 161, MCL 390.1471 to 390.1486.
(4) The department shall make a child's designated balance in a KIDS Account viewable by the child's parent or legal guardian through a secured internet link.
(5) The department shall establish rules and regulations for a program recipient child, and the child's parents or legal guardians, to be notified of the money deposited and accrued in the child's KIDS Account, and rules and regulations regarding the establishment and operation of program components, including, but not limited to, the claims process, necessary documentation, deadlines for the claims, an appeals procedure, and any forfeiture procedures. A KIDS Account recipient child and each of the child's parents or legal guardians must be informed of the establishment of the child's KIDS Account and provided information on how the parent or legal guardian may establish a separate account under the Michigan education savings program act, 2000 PA 161, MCL 390.1471 to 390.1486.
(6) Upon appropriation by the legislature, the department shall establish 1 or more accounts and shall make the following separately accounted-for deposits from the fund into a KIDS Account established within an account:
(a) A seed deposit in an amount determined by the department. Each seed deposit must be at least $25.00 and must be designated for a particular child for whom the department receives birth data under subsection (3), if no parent or legal guardian has opted that child out of the program.
(b) In addition to a seed deposit under subdivision (a), an additional deposit as determined by the department to provide additional financial incentives for the parent or legal guardian to engage with the KIDS Account by verifying receipt of information provided under subsection (3)(b), establishing a separate account under the Michigan education savings program act, 2000 PA 161, MCL 390.1471 to 390.1486, or engaging with the KIDS Account by other means approved by the department. An additional deposit under this subdivision must be at least $25.00 if the parent or legal guardian engages with the KIDS Account as described in this subdivision, or $50.00 if the parent or legal guardian establishes a separate account that is linked with the child's KIDS Account in a manner prescribed by the department.
(7) Money in a KIDS Account designated for a child, including any investment earnings attributed to deposits to the child's designated KIDS Account under subsection (6) or (8) or section 10, as calculated by the department, must be used for the purpose of providing awards for qualified higher education expenses associated with the attendance of the child at an eligible educational institution. Upon the student self-certifying enrollment at an eligible educational institution and residency in this state for at least 1 year immediately preceding the payment of qualified higher education expenses on the student's behalf, the department shall make a payment to that institution in an amount determined by the student or the student's parent or legal guardian, which may include the total or a partial amount of the seed deposit and any additional financial incentives designated for the child under subsections (6) or (8), any enhanced deposit under section 10, and any investment earnings attributed to those amounts as calculated by the department, for qualified higher education expenses associated with the child's attendance at that institution.
(8) Subject to available money in the fund, the department may provide additional incentives from the fund for children participating in the program, including, but not limited to, incentives targeting low-income households.
(9) A child who was not a resident of this state at the time of birth may be enrolled in the program, subject to available funding, if the child's parent or legal guardian, residing in this state, applies to the department for that enrollment in a manner prescribed by the department. Enrollment under this subsection is available only to a child who currently resides in this state, is under 6 years of age, and was born on or after the date designated by the department for which eligibility commences. An enrollee under this subsection is not eligible for a seed deposit but, subject to available funding, is eligible for any incentives described in subsection (8), as applicable, including a deposit of at least $50.00 if the enrollee's parent or legal guardian establishes a separate account that is linked with the enrollee's KIDS Account in a manner prescribed by the department.
(10) A KIDS Account established under this act, and its investment earnings, remain assets of, and owned by, this state until used for the payment of qualified higher education expenses at an eligible educational institution, and funds must remain invested until they are used for the purposes authorized by this act or until the recipient achieves 26 years of age, whichever occurs first. If a beneficiary does not use any portion, or all, of the money intended for the beneficiary in a KIDS Account for a qualified higher education expense for any reason, including the death or disability of the beneficiary, before the beneficiary turns 26 years of age, all contributions made for the beneficiary into the KIDS Account and any earnings from that money must be forfeited and deposited into the fund for the program.
(11) Notwithstanding subsection (10), subject to available funding, the department may establish an appeal process to allow a beneficiary to use the money designated for the beneficiary in a KIDS Account after the beneficiary turns 26 years of age.
(12) Money, less applicable penalties, collected under section 529 of the internal revenue code not used within the time period described in subsection (10) must revert to the fund.
(13) All contributions made into a KIDS Account for a child who has opted out of the program under subsection (3), including any investment earnings attributed to the amount of the child's seed deposit since the date of the deposit as calculated by the department, must be forfeited and deposited into the fund for the program in a timely manner.
(14) The department shall encourage each parent and legal guardian of a beneficiary, including each parent and legal guardian of a child who applies to enroll the child into the program as a beneficiary under subsection (9), to establish a separate account under the Michigan education savings program act, 2000 PA 161, MCL 390.1471 to 390.1486. The department shall provide assistance on how to establish the separate account.
(15) Unless otherwise provided, the department may use up to 5% of any state appropriation provided for purposes of the program for administrative costs.
Sec. 5. The department has the power and authority to do all of the following:
(a) Sue and be sued.
(b) Make and enter into contracts necessary for the implementation and administration of the program.
(c) Cause money in the fund to be held and invested and reinvested.
(d) Enter into agreements with any eligible educational institution or any federal or state agency or other entity as required for the effectuation of its rights and duties.
(e) Accept any grants, gifts, appropriations, and other money from any unit of federal, state, or local government or any other person, firm, partnership, or corporation for deposit to the fund.
(f) Make payments to eligible educational institutions on behalf of beneficiaries.
(g) Make provisions for the payment of costs of administration and operation of the program.
(h) Carry out the duties and obligations of the program pursuant to this act and have all other powers as may be necessary for the effectuation of the purposes, objectives, and provisions of this act.
(i) Carry out studies and projections to advise participants regarding present and estimated future higher education expenses.
(j) Contract for goods and services and engage personnel, including consultants, actuaries, managers, counsel, and auditors, as necessary for the purpose of rendering professional, managerial, and technical assistance and advice.
(k) Participate in any federal, state, or local governmental program for the benefit of the program.
(l) Procure insurance against any loss in connection with the property, assets, or activities of the program.
(m) Administer the funds of the program.
(n) Adopt regulations for the implementation and administration of the program.
Sec. 6. (1) The Michigan kids investment and development savings program fund is created in the state treasury.
(2) The state treasurer shall deposit money and other assets received from any source in the fund, including all appropriations, gifts, or other financial assets received in connection with operation of the program. The state treasurer shall direct the investment of money in the fund and credit interest and earnings from the investments to the fund.
(3) The department is the administrator of the fund for audits of the fund.
(4) The department shall expend money from the fund on appropriation only for the purposes stated in this act. It is the intent of the legislature that money in the fund will be continuously appropriated, without regard to fiscal years, to the department for the program.
Sec. 7. (1) Subject to available funding, the program must be implemented on or before October 1, 2023. The department may establish an implementation timeline for the program based on available funding. If the department does not secure adequate funds to implement the program before October 1, 2023, program implementation may be delayed while the department makes good-faith efforts to secure necessary funding. The department may accept gifts, grants, awards, matching contributions, interest income, and appropriations from individuals, businesses, state and local governmental entities, and third-party sources for the program on terms the department deems advisable.
(2) Before the program is implemented and throughout the program's operation, the department may authorize a county, city, township, nonprofit organization, or any other entity operating a local child savings account program to provide input to the program established under this act. The input may include, but is not limited to, information on any of the following:
(a) Infrastructure and systems development.
(b) Outreach and coordination with local child savings account programs.
(c) Program incentives to promote equity.
(d) Administrative fees and caps.
(e) Contribution strategies.
(f) Program accessibility, including language, identification, and banking access.
(3) On or before October 1, 2023, and annually thereafter, the department shall report to the senate and house appropriations subcommittees on higher education, the senate and house fiscal agencies, and the state budget director information pertaining to the program's implementation. The report must include, at a minimum, all of the following:
(a) Detailed program expenditure information, including the amount of funds expended to establish KIDS Accounts under this act in the previous 5 fiscal years.
(b) The number of KIDS Accounts opened and state and nonstate contributions made to KIDS Accounts.
(c) Information about how parents and legal guardians were notified under section 4(3).
(d) The number of parents or legal guardians who engage with KIDS Accounts by verifying receipt of information provided to them under section 4(3)(b), establishing separate accounts under the Michigan education savings program act, 2000 PA 161, MCL 390.1471 to 390.1486, or engaging with KIDS Accounts by other means approved by the department.
(e) A description of the department's marketing of the program.
(f) The rate of investment return earned by the money authorized by this act in the previous 5 fiscal years.
(g) To the extent that information is available and can be disclosed without providing any opportunity to associate the information with particular individuals, information on the ethnicity, gender, and family income of account recipients.
(h) Recommendations for improving the program.
Sec. 8. (1) All assets of the fund and money allocated to individual KIDS Accounts must be considered to be owned by this state until used for the payment of qualified higher education expenses at an eligible educational institution.
(2) Deposits made to the fund or disbursements from the fund allocated to individual participant KIDS Accounts must be invested through an education savings account established under the Michigan education savings program act, 2000 PA 161, MCL 390.1471 to 390.1486, or through another investment plan determined by the department.
(3) This act must not be construed to prevent any child from seeking private or other funding sources to supplement the amount of funds deposited in the child's KIDS Account.
(4) It is the intent of the legislature that funds deposited and investment returns accrued in a KIDS Account established under this act will be treated as augmenting and not supplanting student financial aid from other public sources, and will not be considered when calculating eligibility for student financial aid.
(5) Notwithstanding any other law, funds deposited and investment returns accrued in a KIDS Account established under this act and claimed by a recipient under this act are exempt from state income tax liability, as provided in section 30 of the income tax act of 1967, 1967 PA 281, MCL 206.30.
(6) To the extent permissible under federal law, funds deposited and investment returns accrued in a KIDS Account established under this act must not be considered in the federal needs analysis for student financial aid, as they must be considered an asset of this state until used for the payment of qualified higher education expenses at an eligible educational institution.
Sec. 9. (1) The department may establish rules and regulations to ensure that money in a KIDS Account established under this act is disbursed directly to the eligible educational institution indicated on the award recipient's claim form. These rules and regulations, if established, must ensure that the program meets all applicable criteria for federal tax-deferral benefits, federal tax-exempt benefits, or both.
(2) Money in the fund or in KIDS Accounts authorized under this act is nontransferable to any person or entity other than the award recipient or the eligible educational institution indicated on the award recipient's claim form, and may be used only for the purposes stated in this act. Money in the fund or in KIDS Accounts authorized by this act must not be pledged as collateral for any loan.
(3) The department shall request each KIDS Account recipient or the recipient's parent or legal guardian to voluntarily report personal information about the award recipient, including, but not limited to, ethnicity, gender, and family income. The department shall compile and retain that information in a confidential manner so that the personal information of any award recipient is not publicly disclosed in a manner that may be associated with a particular individual.
Sec. 10. (1) Subject to appropriation, for the 2023-2024 fiscal year, through the program, the department shall ensure that all of the following occur:
(a) Each pupil enrolled at a public school in grades 1 to 12, inclusive, on the pupil membership count day in the 2023-2024 fiscal year will have a KIDS Account established on the pupil's behalf, unless the pupil's KIDS Account has already been established under section 4. Both of the following apply to a pupil's KIDS Account established under this subdivision:
(i) The account must receive a seed deposit as described in section 4(6)(a).
(ii) If, before the pupil graduates from high school, it is determined that the pupil is a member of a low-income household, the account will receive a 1-time enhanced deposit in the amount of $500.00.
(b) In addition to the amount allocated under subdivision (a), the KIDS Account of each eligible pupil who, before graduation from high school, is determined to be a member of a low-income household and a foster child will receive an enhanced deposit of an additional $500.00.
(c) In addition to the amounts allocated under subdivisions (a) and (b), the KIDS Account of each eligible pupil who, before graduation from high school, is determined to be a member of a low-income household and homeless under the definition of "homeless children and youths" in 42 USC 11434a(2) will receive an enhanced deposit of an additional $500.00.
(2) Subject to appropriation, commencing with the 2024-2025 fiscal year and continuing each fiscal year thereafter, through the program, the department shall ensure that all of the following occur:
(a) Each pupil enrolled in first grade in a public school on the pupil membership count day in the applicable fiscal year will have a KIDS Account established on the pupil's behalf, unless the pupil's account has already been established under section 4. Both of the following apply to a pupil's KIDS Account established under this subdivision:
(i) The account must receive a seed deposit as described in section 4(6)(a).
(ii) If, before the pupil graduates from high school, it is determined that the pupil is a member of a low-income household, the account will receive a 1-time enhanced deposit in the amount of $500.00.
(b) In addition to the amount allocated under subdivision (a), the KIDS Account of each pupil who has a KIDS Account established under subdivision (a) and who, before graduation from high school, is determined to be a member of a low-income household and a foster child will receive an enhanced deposit of an additional $500.00.
(c) In addition to the amounts allocated under subdivisions (a) and (b), the KIDS Account of each pupil who has a KIDS Account established under subdivision (a) and who, before graduation from high school, is determined to be a member of a low-income household and homeless under the definition of "homeless children and youths" in 42 USC 11434a(2) will receive an enhanced deposit of an additional $500.00.
(d) For pupils for whom a KIDS Account has already been established under section 4 and who are also eligible for an enhanced deposit under this subsection, the enhanced deposit will be deposited in the KIDS Account in which funding for that pupil is currently held.
(3) A pupil who receives an enhanced deposit into the pupil's KIDS Account under subsection (1) or (2) may have only 1 enhanced deposit made into the pupil's existing or newly established KIDS Account under this act. A pupil must not have more than 1 KIDS Account established for the pupil under this act.
Sec. 11. (1) The department shall collaborate with the department of education or other relevant state or local departments or agencies to identify eligible pupils for the purpose of establishing KIDS Accounts or making an enhanced deposit into existing KIDS Accounts under this act. To the extent feasible, the department of education shall annually provide necessary data using pupil membership count day data in a secure manner for the department to fulfill its obligations under this act, including, but not necessarily limited to, eligible pupils' names, pupil identification, birth dates, grade levels, contact information of parents or legal guardians, and eligibility information. For purposes of this subsection, the information received by the department must be considered necessary to facilitate the establishment or enhancement of KIDS Accounts, or the establishment of a notification process for parents or legal guardians of eligible pupils.
(2) The department shall comply with federal and state laws to protect individual privacy, including, but not limited to, all of the following federal statutes:
(a) The family educational rights and privacy act of 1974, Public Law 93-380.
(b) The health insurance portability and accountability act of 1996, Public Law 104-191.
(c) The higher education act of 1965, Public Law 89-329.
(3) Notwithstanding any other law, individual records or source data associated with the establishment of a KIDS Account under this act are not subject to disclosure under the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246.
Sec. 12. The legislature finds and declares that undocumented individuals are eligible for KIDS Accounts within the meaning of 8 USC 1621(d).
Enacting section 1. This act does not take effect unless all of the following bills of the 101st Legislature are enacted into law:
(a) Senate Bill No. 1228.
(b) Senate Bill No. 1226.