1.1                          A bill for an act 
  1.2             relating to higher education; Minnesota college 
  1.3             savings plan; making a technical correction; amending 
  1.4             Minnesota Statutes 2001 Supplement, sections 136G.03, 
  1.5             subdivision 25; 136G.07, subdivision 1; 136G.09, 
  1.6             subdivision 8. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 2001 Supplement, section 
  1.9   136G.03, subdivision 25, is amended to read: 
  1.10     Subd. 25.  [PENALTY.] "Penalty" means the amount 
  1.11  established by the office that is applied against the earnings 
  1.12  portion of a nonqualified distribution.  The amount established 
  1.13  by the office must be the minimum required to be a more than de 
  1.14  minimis penalty under section 529 of the Internal Revenue Code.  
  1.15  The office must impose, collect, and apply penalties consistent 
  1.16  with section 529 of the Internal Revenue Code. 
  1.17     Sec. 2.  Minnesota Statutes 2001 Supplement, section 
  1.18  136G.07, subdivision 1, is amended to read: 
  1.19     Subdivision 1.  [STATE BOARD TO INVEST.] The state board of 
  1.20  investment shall invest the money deposited in accounts in the 
  1.21  plan and all investments are directed by the board.  Except as 
  1.22  permitted by the Internal Revenue Code, neither persons making 
  1.23  contributions to an account nor beneficiaries may direct the 
  1.24  investment of contributions to the plan or plan earnings.  
  1.25     Sec. 3.  Minnesota Statutes 2001 Supplement, section 
  1.26  136G.09, subdivision 8, is amended to read: 
  2.1      Subd. 8.  [MAXIMUM ACCOUNT BALANCE LIMIT.] (a) When a 
  2.2   contribution is made, the total account balance of all accounts 
  2.3   held for the same beneficiary, including matching grant 
  2.4   accounts, must not exceed the maximum account balance limit as 
  2.5   determined under this subdivision. 
  2.6      (b) The maximum account balance limit is reduced for 
  2.7   withdrawals from any account for the same beneficiary that are 
  2.8   qualified distributions, distributions due to the death or 
  2.9   disability of the beneficiary, or distributions due to the 
  2.10  beneficiary receiving a scholarship.  Subsequent contributions 
  2.11  must not be made to replenish an account if the contribution 
  2.12  results in the total account balance of all accounts held for 
  2.13  the beneficiary to exceed the reduced maximum account balance 
  2.14  limit.  Any subsequent contributions must be rejected.  A 
  2.15  subsequent contribution accepted in error must be returned to 
  2.16  the account owner plus any earnings on the contribution less any 
  2.17  applicable penalties. 
  2.18     (c) The maximum account balance limit is not reduced for a 
  2.19  nonqualified distribution or a rollover distribution.  When such 
  2.20  distributions are taken, subsequent contributions may be made to 
  2.21  replenish an account up to the maximum account balance limit. 
  2.22     (d) The office must establish a maximum account balance 
  2.23  limit.  The maximum account balance limit is four times the cost 
  2.24  of one year of qualified higher education expenses at the most 
  2.25  expensive eligible educational institution in Minnesota.  The 
  2.26  office must adjust the maximum account balance limit, as 
  2.27  necessary, or on January 1 of each year.  Qualified higher 
  2.28  education expenses for the academic year prior to January 1 of 
  2.29  each year must be used in calculating the maximum account 
  2.30  balance limit.  The maximum account balance limit must not 
  2.31  exceed the amount permitted for the plan to qualify as a 
  2.32  qualified state tuition program under section 529 of the 
  2.33  Internal Revenue Code.  For calendar years 2002 and 2003, the 
  2.34  maximum account balance is $235,000. 
  2.35     (e) If the total account balance of all accounts held for a 
  2.36  single beneficiary reaches the maximum account balance limit 
  3.1   prior to the end of that calendar year, the beneficiary may 
  3.2   receive an applicable matching grant for that calendar year.