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HF 203

as introduced - 86th Legislature (2009 - 2010) Posted on 02/09/2010 01:34am

KEY: stricken = removed, old language.
underscored = added, new language.

Bill Text Versions

Engrossments
Introduction Posted on 01/21/2009

Current Version - as introduced

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A bill for an act
relating to early childhood education; establishing a Minnesota child savings
account initiative; appropriating money.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1. new text beginCHILD SAVINGS ACCOUNTS.
new text end

new text begin Subdivision 1. new text end

new text begin Establishment. new text end

new text begin The Minnesota child savings account pilot initiative
is established to provide a onetime savings deposit for low-income children to accrue
assets for postsecondary education, career technical education, or training purposes.
new text end

new text begin Subd. 2. new text end

new text begin Definitions. new text end

new text begin (a) The definitions in this subdivision apply to this section.
new text end

new text begin (b) "Child savings account" means an interest-bearing savings account opened by
the parent or guardian of a child participating in the Minnesota child savings account
pilot initiative.
new text end

new text begin (c) "Fiduciary organization" means the Department of Education.
new text end

new text begin (d) "Financial institution" means a bank, bank and trust, savings bank, savings
association, or credit union, the deposits of which are insured by the Federal Deposit
Insurance Corporation or the National Credit Union Administration.
new text end

new text begin (e) "Permissible use" means:
new text end

new text begin (1) postsecondary educational, career technical educational, or training expenses
at an accredited public postsecondary institution located in Minnesota, including books,
supplies, and equipment required for courses of instruction; or
new text end

new text begin (2) individual retirement account deposits, including a qualified voluntary employee
contribution; simplified employee pension plan; self-employed retirement plan; cash or
deferred arrangement plan under section 401(k) of the Internal Revenue Code; or deferred
compensation plan under section 457 of the Internal Revenue Code.
new text end

new text begin Subd. 3. new text end

new text begin Program eligibility; application. new text end

new text begin The commissioner of education
shall allocate funds to provide child savings accounts through participating Head Start
programs located in an area with a local family assets for independence program. Head
Start programs must apply to the commissioner to participate in the child savings account
initiative according to the timelines and on the forms provided by the commissioner and
agree to partner with a local family assets for independence program in administering the
child savings account initiative. The commissioner shall review applications and choose
four programs representing rural, urban, suburban, and tribal Head Start to participate in
the child savings account initiative.
new text end

new text begin Subd. 4. new text end

new text begin Duties. new text end

new text begin A participating Head Start program must:
new text end

new text begin (1) provide separate accounts for the immediate deposit of program funds;
new text end

new text begin (2) establish a process to recruit or select participants and describe any priorities for
participation;
new text end

new text begin (3) enter into a child savings account agreement with the parent or guardian of each
participating child to establish the terms of participation;
new text end

new text begin (4) provide families with 12 hours of financial literacy education;
new text end

new text begin (5) provide families with information on early childhood family education; and
new text end

new text begin (6) establish a process to appeal and mediate disputes.
new text end

new text begin Subd. 5. new text end

new text begin Child eligibility; participation. new text end

new text begin To be eligible for funds in the child
savings account initiative, a family must meet the eligibility requirements of the federal
Improving Head Start for School Readiness Act, Public Law 110-134. Each participating
family must sign a child savings account agreement. A participating family must agree to
complete a 12-hour financial literacy training program. The child for whom the account is
established must graduate from high school prior to age 21 in order to access the funds in
the child savings account under this section.
new text end

new text begin Subd. 6. new text end

new text begin Withdrawal; permissible uses. new text end

new text begin (a) Participating families shall receive
a onetime deposit of $750 from the child savings account initiative. The family must
provide a $250 match at the time the account is opened.
new text end

new text begin (b) Families may contribute money to the child savings account according to
subdivision 5.
new text end

new text begin (c) A child may not use funds from the savings account until proof of high school
graduation has been shown.
new text end

new text begin (d) Funds may only be used for the permissible uses listed under subdivision 2,
paragraph (e).
new text end

new text begin Subd. 7. new text end

new text begin Tax exemption. new text end

new text begin A child savings account under this section shall be exempt
from taxation under section ....
new text end

new text begin Subd. 8. new text end

new text begin Eligibility for other benefits. new text end

new text begin Notwithstanding any other provision of law,
the funds in a child savings account under this section shall not be taken into account for
purposes of determining eligibility of an individual or family for a state or federal program
intended to provide assistance to low-income individuals or families.
new text end

new text begin Subd. 9. new text end

new text begin Penalty for early or unauthorized withdrawal. new text end

new text begin In the case of any early
withdrawal or distribution of funds from a child savings account that is not spent on a
permissible use under subdivision 2, paragraph (d), both of the following apply:
new text end

new text begin (1) any earning in the account shall be included in the gross income of the account
holder for the taxable year in which the distribution was made, and shall be subject to a
ten percent penalty; and
new text end

new text begin (2) an amount equal to the amount of initial deposit made by the state to the account,
as provided under subdivision 6, paragraph (a), shall be paid to the state by the account
holder for the taxable year in which the nonpermissible distribution occurred.
new text end

new text begin Subd. 10. new text end

new text begin Program reporting. new text end

new text begin Participating Head Start programs must report
quarterly to the commissioner of education identifying the participants with accounts, the
amount of savings for each participant's account, as well as any other information that
may be required for the commissioner to administer the program.
new text end

new text begin Subd. 11. new text end

new text begin Sunset. new text end

new text begin The Minnesota child savings account initiative sunsets on June
30, 2011.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2010.
new text end

Sec. 2. new text beginCHILD SAVINGS ACCOUNTS; APPROPRIATION.
new text end

new text begin $....... is appropriated from the general fund to the commissioner of education in
fiscal year 2011 for the Minnesota child savings account initiative. Of this amount, up to
$....... may be used for administrative costs.
new text end