2007 Minnesota Statutes

CHAPTER 136G. MINNESOTA COLLEGE SAVINGS PLAN

136G.01 PLAN ESTABLISHED.
A college savings plan known as the Minnesota college savings plan is established. In
establishing this plan, the legislature seeks to encourage individuals to save for postsecondary
education by:
(1) providing a qualified tuition plan under federal tax law;
(2) providing matching grants for contributions to the program by low- and middle-income
families; and
(3) encouraging individuals, foundations, and businesses to provide additional grants to
participating students.
History: 1997 c 183 art 2 s 12; 1Sp2001 c 1 art 3 s 2,23; 2003 c 133 art 3 s 4

136G.03 DEFINITIONS.
    Subdivision 1. General. For purposes of sections 136G.01 to 136G.13, the following terms
have the meanings given.
    Subd. 2. Account. "Account" means the formal record of transactions relating to a Minnesota
college savings plan beneficiary.
    Subd. 3. Account owner. "Account owner" means a person who enters into a participation
agreement and is entitled to conduct transactions on the account, including selecting and changing
the beneficiary of an account and receiving distributions from the account.
    Subd. 4. Adjusted gross income. "Adjusted gross income" means adjusted gross income as
defined in section 62 of the Internal Revenue Code.
    Subd. 4a. Application. "Application" means the form executed by a prospective account
owner to enter into a participation agreement and open an account in the plan. The application
incorporates by reference the participation agreement.
    Subd. 5. Beneficiary. "Beneficiary" means the designated beneficiary for the account, as
defined in section 529(e)(1) of the Internal Revenue Code.
    Subd. 6. Board. "Board" means the State Board of Investment.
    Subd. 7. Contingent account owner. "Contingent account owner" means the individual
designated as the account owner, either in the participation agreement or pursuant to a separate
Minnesota college savings plan form, in the event of the death of the account owner.
    Subd. 8. Contribution. "Contribution" means a payment directly allocated to an account for
the benefit of a beneficiary. For a rollover distribution, only the portion of the rollover amount that
constitutes investment in the account is treated as a contribution to the account.
    Subd. 9. Director. "Director" means the director of the Minnesota Office of Higher
Education.
    Subd. 10. Distribution. "Distribution" means a disbursement from an account to the
account owner, the beneficiary, or the beneficiary's estate or to an eligible educational institution.
Distribution does not include a change of beneficiary to a member of the family of the prior
beneficiary or a rollover distribution.
    Subd. 11. Dormant account. "Dormant account" means an account that has not received
contributions for at least three consecutive years and the account statements mailed to the account
owner have been returned as undeliverable.
    Subd. 12. Earnings. "Earnings" means the total account balance minus the investment
in the account.
    Subd. 13. Eligible educational institution. "Eligible educational institution" means an
institution as defined in section 529(e)(5) of the Internal Revenue Code.
    Subd. 14. Inactive account with a matching grant account. "Inactive account with a
matching grant account" means an account in which the beneficiary:
(1) is not the account owner, the beneficiary has reached 28 years of age, and the beneficiary
has not informed the plan administrator that the beneficiary is enrolled in an eligible educational
institution;
(2) is the account owner, the beneficiary was over the age of 18 when the account was opened,
and the beneficiary has not informed the program administrator that the beneficiary is enrolled in
an eligible educational institution within ten years of the date of opening the account; or
(3) is the account owner, the beneficiary was a minor when the account was opened, the
account becomes inactive when the beneficiary turns 28 years of age, and the beneficiary has not
informed the program administrator that the beneficiary is enrolled in an eligible educational
institution.
    Subd. 15. Executive director. "Executive director" means the executive director of the
State Board of Investment.
    Subd. 16. Internal Revenue Code. "Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended.
    Subd. 17. Investment in the account. "Investment in the account" means the sum of all
contributions made to an account by a particular date minus the aggregate amount of contributions
included in distributions or rollover distributions, if any, made from the account as of that date.
    Subd. 18. Matching grant. "Matching grant" means an amount added to a matching grant
account under section 136G.11.
    Subd. 19. Matching grant account. "Matching grant account" means an account owned by
the state that contains matching grants and earnings.
    Subd. 20. Maximum account balance limit. "Maximum account balance limit" means the
amount established by the office under section 136G.09, subdivision 8, paragraph (d).
    Subd. 21. Member of the family. "Member of the family" means an individual who is
related to the beneficiary as defined in section 529(e)(2) of the Internal Revenue Code.
    Subd. 21a. Minor trust account. "Minor trust account" means a Uniform Gift to Minors
Act account or a Uniform Transfers to Minors Act account created and operating under the
laws of Minnesota or another state.
    Subd. 22. Nonqualified distribution. "Nonqualified distribution" means a distribution made
from an account other than (1) a qualified distribution; or (2) a distribution due to the death or
disability of, or scholarship to, or attendance at a United States military academy by, a beneficiary.
    Subd. 23. Office. "Office" means the Minnesota Office of Higher Education.
    Subd. 24. Participation agreement. "Participation agreement" means an agreement to
participate in the Minnesota college savings plan between an account owner and the state, through
its agencies, the office, and the board.
    Subd. 25.[Repealed, 2003 c 133 art 3 s 28]
    Subd. 26. Person. "Person" means an individual, trust, estate, partnership, association,
company, corporation, or the state.
    Subd. 27. Plan. "Plan" refers to the plan established under sections 136G.01 to 136G.13.
    Subd. 28. Plan administrator. "Plan administrator" means the person selected by the office
and the board to administer the daily operations of the Minnesota college savings plan and to
provide marketing, record keeping, investment management, and other services for the program.
    Subd. 29. Qualified distribution. "Qualified distribution" means a distribution made from
an account for qualified higher education expenses of the beneficiary.
    Subd. 30. Qualified higher education expenses. "Qualified higher education expenses"
means expenses as defined in section 529(e)(3) of the Internal Revenue Code.
    Subd. 31. Rollover distribution. "Rollover distribution" means a transfer of funds made:
(1) from one account to another account within 60 days of a distribution;
(2) from another qualified state tuition program to an account within 60 days of the
distribution; or
(3) to another qualified state tuition program from an account within 60 days of a distribution.
When there is a change of beneficiary in a rollover distribution, the transfer of funds must be
made for the benefit of a new beneficiary who is a member of the family of the prior beneficiary.
A rollover distribution from one qualified tuition plan to another once every 12 months without a
change of beneficiary is permitted.
    Subd. 32. Scholarship. "Scholarship" means a scholarship or educational assistance
allowance.
    Subd. 33. State. "State" means the state of Minnesota and any Minnesota agency or political
subdivision of Minnesota.
    Subd. 34. Total account balance. "Total account balance" means the amount in an account
on a particular date or the fair market value of an account on a particular date.
History: 1997 c 183 art 2 s 13; 1Sp2001 c 1 art 3 s 3,23; 2002 c 220 art 5 s 8; 2002 c 379
art 1 s 48; 2003 c 133 art 3 s 5-7; 2005 c 107 art 2 s 33-36,60

136G.05 MINNESOTA OFFICE OF HIGHER EDUCATION.
    Subdivision 1. Responsibilities. (a) The director shall establish the rules, terms, and
conditions for the plan, subject to the requirements of sections 136G.01 to 136G.13.
(b) The director shall prescribe the application forms, procedures, and other requirements
that apply to the plan.
    Subd. 2. Accounts-type plan. The office must establish the plan and the plan must be
operated as an accounts-type plan that permits persons to save for qualified higher education
expenses incurred at any eligible educational institution, regardless of whether it is private
or public or whether it is located within or outside of the state. A separate account must be
maintained for each beneficiary for whom contributions are made.
    Subd. 3. Consultation with State Board of Investment. In designing and establishing
the plan's requirements and in negotiating or entering into contracts with third parties under
subdivision 8, the director shall consult with the executive director. The director and the executive
director shall establish an annual fee, equal to a percentage of the average daily net assets of the
plan, to be imposed on participants to recover the costs of administration, record keeping, and
investment management as provided in subdivision 9 and section 136G.07, subdivision 4.
    Subd. 4. Plan to comply with federal law. The director shall ensure that the plan meets
the requirements for a qualified tuition program under section 529(b)(1)(A)(ii) of the Internal
Revenue Code. The director may request a private letter ruling or rulings from the Internal
Revenue Service or take any other steps to ensure that the plan qualifies under section 529 of the
Internal Revenue Code or other relevant provisions of federal law.
    Subd. 5. Nonqualified distributions and matching grants. There cannot be a nonqualified
withdrawal of matching grant funds and any refund of matching grants must be returned to the
plan.
    Subd. 6. Three-year period for withdrawal of grants. A matching grant deposited in the
account under section 136G.11 may not be withdrawn within three years of the establishment
of the account of the beneficiary. In calculating the three-year period, the period held in another
account is included, if the account includes a rollover from another account under section
529(c)(3)(C) of the Internal Revenue Code.
    Subd. 7. Marketing. The director shall make parents and other interested individuals aware
of the availability and advantages of the program as a way to save for higher education costs. The
cost of these promotional efforts may not be funded with fees imposed on participants.
    Subd. 8. Administration. The director shall administer the program, including accepting and
processing applications, maintaining account records, making payments, making matching grants
under section 136G.11, and undertaking any other necessary tasks to administer the program. The
office may contract with one or more third parties to carry out some or all of these administrative
duties, including providing incentives and marketing the program. The office and the board may
jointly contract with third-party providers, if the office and board determine that it is desirable to
contract with the same entity or entities for administration and investment management.
    Subd. 9. Authority to impose fees. The office may impose annual fees, as provided in
subdivision 3, on participants in the plan to recover the costs of administration. The office must
use its best efforts to keep these fees as low as possible, consistent with efficient administration,
so that the returns on savings invested in the plan will be as high as possible.
    Subd. 10. Data. Account owner data, account data, and data on beneficiaries of accounts are
private data on individuals or nonpublic data as defined in section 13.02, except that the names
and addresses of the beneficiaries of accounts that receive matching grants are public.
History: 1997 c 183 art 2 s 14; 1999 c 214 art 2 s 8; 2001 c 202 s 9; 1Sp2001 c 1 art 3 s
4-9,23; 2003 c 133 art 3 s 8-10; 2005 c 107 art 2 s 37,60

136G.07 INVESTMENT OF ACCOUNTS.
    Subdivision 1. State board to invest. The State Board of Investment shall invest the
money deposited in accounts in the plan. Except as permitted by the Internal Revenue Code,
neither persons making contributions to an account nor beneficiaries may direct the investment
of contributions to the plan or plan earnings.
    Subd. 2. Permitted investments. The board may invest the accounts in any permitted
investment under section 11A.24, except that the accounts may be invested without limit
in investment options from open-ended investment companies registered under the federal
Investment Company Act of 1940, United States Code, title 15, sections 80a-1 to 80a-64.
    Subd. 3. Contracting authority. The board may contract with one or more third parties for
investment management, record keeping, or other services in connection with investing the
accounts. The board and office may jointly contract with third-party providers, if the office and
board determine that it is desirable to contract with the same entity or entities for administration
and investment management.
    Subd. 4. Fees. The board may impose annual fees, as provided in section 136G.05,
subdivision 3 , on participants in the plan to recover the cost of investment management and
related tasks for the plan. The board must use its best efforts to keep these fees as low as possible,
consistent with high quality investment management, so that the returns on savings invested in
the plan will be as high as possible.
History: 1997 c 183 art 2 s 15; 1999 c 214 art 2 s 9; 1Sp2001 c 1 art 3 s 10,11,23; 2002
c 220 art 5 s 9

136G.09 PLAN ACCOUNTS; GENERALLY.
    Subdivision 1. Contributions to an account. A person may make contributions to an
account on behalf of a beneficiary. Contributions to an account made by persons other than
the account owner become the property of the account owner. A person does not acquire an
interest in an account by making contributions to an account. Contributions to an account must
be made by check or other commercially acceptable means as permitted by the United States
Internal Revenue Service and other applicable federal and state law and approved by the plan
administrator in cooperation with the office and the board.
    Subd. 2. Authority of account owner. Except as provided for minor trust accounts in section
136G.14, an account owner is the only person entitled to:
(1) select or change a beneficiary or a contingent account owner; or
(2) request distributions or rollover distributions from an account.
    Subd. 3. Security for loans. An interest in an account or matching grant account must
not be used as security for a loan.
    Subd. 4. Separate accounting. The plan must provide a separate account for each beneficiary
for whom contributions are made. Each account must have a single account owner and a single
beneficiary. An account owner must not open more than one account for the same beneficiary, but
several account owners may open accounts for the same beneficiary.
    Subd. 5. Naming of beneficiary. The account owner must designate the beneficiary of
an account when the account is established, except for accounts established under section
529(e)(1)(C) of the Internal Revenue Code, which do not require a designated beneficiary until a
distribution is made.
    Subd. 6. Change of beneficiary. Except as provided for minor trust accounts in section
136G.14, an account owner may change the beneficiary of an account to a member of the family
of the current beneficiary, at any time without penalty, if the change will not cause the total
account balance of all accounts held for the new beneficiary to exceed the maximum account
balance limit as provided in subdivision 8. A change of beneficiary other than as permitted in this
subdivision is treated as a nonqualified distribution under section 136G.13, subdivision 3.
    Subd. 7. Change of account ownership. Except as provided for minor trust accounts in
section 136G.14, an account owner may transfer ownership of an account to another person
eligible to be an account owner. All transfers of ownership are absolute and irrevocable.
    Subd. 8. Maximum account balance limit. (a) When a contribution is made, the total
account balance of all accounts held for the same beneficiary, including matching grant accounts,
must not exceed the maximum account balance limit as determined under this subdivision.
(b) The office must establish a maximum account balance limit. The office must adjust the
maximum account balance limit, as necessary, or on January 1 of each year. The maximum
account balance limit must not exceed the amount permitted for the plan to qualify as a qualified
tuition program under section 529 of the Internal Revenue Code. For calendar years 2004 and
2005, the maximum account balance limit is $235,000.
(c) If the total account balance of all accounts held for a single beneficiary reaches the
maximum account balance limit prior to the end of that calendar year, the beneficiary may receive
an applicable matching grant for that calendar year.
    Subd. 9. Excess contributions and balances. A contribution to any account for a beneficiary
must be rejected if the contribution would cause the total account balance of all accounts held
for the same beneficiary, including the matching grant account, to exceed the maximum account
balance limit under section 529 of the Internal Revenue Code as established by the office.
    Subd. 10. Dormant accounts. (a) The plan administrator shall attempt to locate the account
owner or the beneficiary, or both, to determine the disposition of a dormant account. A fee of five
percent of the total account balance of the dormant account, not to exceed $100, plus allowable
costs, may be charged for this service. Costs will not exceed $100 or five percent of the total
account balance in the dormant account, whichever is less.
(b) If the account owner, or the account owner's legal heirs, are not found after three attempts
by the plan administrator, the remaining funds in the dormant account must be turned over to the
office. The funds are treated as unclaimed property for purposes of sections 345.31 to 345.60, and
the office shall turn all remaining dormant account funds over to the commissioner of commerce.
If the dormant account has a matching grant account, all amounts in the beneficiary's matching
grant account, if any, must be returned to the office.
    Subd. 11. Effect of plan changes on participation agreement. Amendments to sections
136G.01 to 136G.13 automatically amend the participation agreement. Any amendments to
the operating procedures and policies of the plan shall automatically amend the participation
agreement after adoption by the office or the board.
    Subd. 12. Special account to hold plan assets in trust. All assets of the plan, including
contributions to accounts and matching grant accounts and earnings, are held in trust for the
exclusive benefit of account owners and beneficiaries. Assets must be held in a separate account
in the state treasury to be known as the Minnesota college savings plan account or in accounts
with the third-party provider selected pursuant to section 136G.05, subdivision 8. Plan assets are
not subject to claims by creditors of the state, are not part of the general fund, and are not subject
to appropriation by the state. Payments from the Minnesota college savings plan account shall
be made under sections 136G.01 to 136G.13.
History: 1Sp2001 c 1 art 3 s 12,23; 2002 c 220 art 5 s 10; 2003 c 133 art 3 s 11-16; 2005
c 107 art 2 s 38,39

136G.11 MATCHING GRANTS.
    Subdivision 1. Matching grant qualification. By June 30 of each year, a state matching grant
must be added to each account established under the program if the following conditions are met:
(1) the contributor applies, in writing in a form prescribed by the director, for a matching
grant;
(2) a minimum contribution of $200 was made during the preceding calendar year;
(3) the beneficiary's family meets Minnesota college savings plan residency requirements;
and
(4) the family income of the beneficiary did not exceed $80,000.
    Subd. 2. Family income. (a) For purposes of this section, "family income" means:
(1) if the beneficiary is under age 25, the combined adjusted gross income of the beneficiary's
parents or legal guardians as reported on the federal tax return or returns for the calendar year in
which contributions were made. If the beneficiary's parents or legal guardians are divorced, the
income of the parent claiming the beneficiary as a dependent on the federal individual income tax
return and the income of that parent's spouse, if any, is used to determine family income; or
(2) if the beneficiary is age 25 or older, the combined adjusted gross income of the
beneficiary and spouse, if any.
(b) For a parent or legal guardian of beneficiaries under age 25 and for beneficiaries age 25
or older who resided in Minnesota and filed a federal individual income tax return, the matching
grant must be based on family income from the calendar year in which contributions were made.
    Subd. 3. Residency requirement. (a) If the beneficiary is under age 25, the beneficiary's
parents or legal guardians must be Minnesota residents to qualify for a matching grant. If the
beneficiary is age 25 or older, the beneficiary must be a Minnesota resident to qualify for a
matching grant.
(b) To meet the residency requirements, the parent or legal guardian of beneficiaries under
age 25 must have filed a Minnesota individual income tax return as a Minnesota resident and
claimed the beneficiary as a dependent on the parent or legal guardian's federal tax return for the
calendar year in which contributions were made. If the beneficiary's parents are divorced, the
parent or legal guardian claiming the beneficiary as a dependent on the federal individual income
tax return must be a Minnesota resident. For beneficiaries age 25 or older, the beneficiary, and
a spouse, if any, must have filed a Minnesota and a federal individual income tax return as a
Minnesota resident for the calendar year in which contributions were made.
(c) A parent of beneficiaries under age 25 and beneficiaries age 25 or older who did not
reside in Minnesota in the calendar year in which contributions were made are not eligible for a
matching grant.
    Subd. 4. Age and date of birth determination of beneficiary. In determining the age of
the beneficiary for purposes of a matching grant, the plan administrator shall use the age of the
beneficiary as reported on the participation agreement on December 31 of the year in which the
request for a matching grant is made.
    Subd. 5. Amount of matching grant. The amount of the matching grant for a beneficiary
equals:
    (1) if the beneficiary's family income is $50,000 or less, 15 percent of the sum of the
contributions made to the beneficiary's account during the calendar year, not to exceed $400; and
    (2) if the beneficiary's family income is more than $50,000 but not more than $80,000, ten
percent of the sum of the contributions made to the beneficiary's account during the calendar
year, not to exceed $400.
    Subd. 6. Budget limit. If the total amount of matching grants determined under subdivision
3 exceeds the amount of the appropriation for the fiscal year, the director shall proportionately
reduce each grant so that the total equals the available appropriation. The director must reduce
matching grants so that the amount of the matching grant assigned to a beneficiary's account
equals:
(1) the ratio of state appropriations for the matching grant divided by the total dollar amount
of matching grants for all beneficiaries; multiplied by
(2) the dollar amount of the matching grant for each eligible beneficiary.
    Subd. 7. Coordination with Department of Revenue. In administering matching grants,
the director may require that applicants submit sufficient information to determine whether
the beneficiary qualifies for a grant, including the Social Security numbers, family income
information, and any other information the director determines necessary. The applicant or
applicants may authorize the director to request information from the commissioner of revenue to
verify eligibility for a grant from tax information on file with the commissioner or obtained from
the Internal Revenue Service. If this method is used and the taxpayer has authorized a release of
the information to the director, the commissioner of revenue may verify that the beneficiary is
eligible for a grant at a specified rate and maximum and disclose that information to the director,
notwithstanding the provisions of chapter 270B.
    Subd. 8. Private contributions. (a) The office may solicit and accept contributions from
private corporations, other businesses, foundations, employers, or individuals to provide:
(1) matching grants under this section in addition to those funded with direct appropriations;
(2) grants to students who withdraw money from accounts established under the program; or
(3) contributions to an account on behalf of a beneficiary.
(b) Amounts contributed may only be used for those purposes. Amounts contributed are
appropriated to the director for the purposes of this subdivision.
(c) Contributors may designate a specific field of study, geographic area, or other criteria that
govern use of the grants funded with their contributions, but may not discriminate on the basis of
race, ethnicity, or gender. The office may refuse contributions that are subject, in the judgment of
the director, to unacceptable conditions on their use.
    Subd. 9. Annual application. An account owner must submit an application form for a
matching grant on an annual basis. The application must be postmarked by May 1 of the year in
which the matching grant would be awarded if the applicant qualifies for a matching grant.
    Subd. 10. Single beneficiaries with multiple accounts. (a) A matching grant will first be
computed on an account owned by a parent or legal guardian of the beneficiary, or an account
owner who is also the beneficiary. If there are multiple accounts for a single beneficiary, any
matching grant, up to the annual maximum, will be proportionately awarded to the beneficiary
named in accounts owned by the parents or guardians.
(b) If the account owned by a parent or a guardian or an account owner who is also the
beneficiary does not qualify for the maximum annual matching grant, any remaining matching
grant funds are proportionately distributed to the beneficiary to an account or accounts owned by
someone other than the parent or guardian.
(c) If the account for a beneficiary is not owned by a parent or a legal guardian, or an account
owner who is also the beneficiary, then the matching grant will be proportionately distributed to
the beneficiary to accounts owned by others.
    Subd. 11. Ownership of matching grant funds. The state retains ownership of all matching
grants and earnings on matching grants until a qualified distribution is made to a beneficiary or
an eligible educational institution.
    Subd. 12. Inactive accounts with matching grants. (a) The plan administrator will attempt
to locate the account owner or the beneficiary of an inactive account with a matching grant to
determine the disposition of the account. No fee will be charged for this service. The matching
grants and matching grant earnings in the account must be returned to the office, unless the
account owner applies for a deferment or the beneficiary begins attending an eligible educational
institution within one year of the date of notification.
(b) The account owner may apply to the plan administrator for a deferment of inactive
account time limits. Upon application, the plan administrator shall grant a onetime deferment of
two years. In addition, the plan administrator shall grant a deferment for the beneficiary's initial
enlistment for active duty in the armed forces of the United States, or for the period of active
military duty required as part of the beneficiary's obligation as a member in a reserve military
unit of the armed forces of the United States.
    Subd. 13. Forfeiture of matching grants. (a) Matching grants are forfeited if:
(1) the account owner transfers the total account balance of an account to another account or
to another qualified tuition program;
(2) the beneficiary receives a full tuition scholarship or is attending a United States service
academy;
(3) the beneficiary dies or becomes disabled;
(4) the account owner changes the beneficiary of the account; or
(5) the account owner closes the account with a nonqualified withdrawal.
(b) Matching grants must be proportionally forfeited if:
(1) the account owner transfers a portion of an account to another account or to another
qualified tuition program;
(2) the beneficiary receives a scholarship covering a portion of qualified higher education
expenses; or
(3) the account owner makes a partial nonqualified withdrawal.
(c) If the account owner makes a misrepresentation in a participation agreement or an
application for a matching grant that results in a matching grant, the matching grant associated
with the misrepresentation is forfeited. The office and the board must instruct the plan
administrator as to the amount to be forfeited from the matching grant account. The office and
the board must withdraw the matching grant or the proportion of the matching grant that is
related to the misrepresentation.
History: 1997 c 183 art 2 s 16; 1999 c 214 art 2 s 10; 1Sp2001 c 1 art 3 s 13-21,23; 2003 c
133 art 3 s 17-21; 2005 c 107 art 2 s 40-43; 2007 c 144 art 2 s 43

136G.13 ACCOUNT DISTRIBUTIONS.
    Subdivision 1. Qualified distribution methods. (a) Qualified distributions may be made:
(1) directly to participating eligible educational institutions on behalf of the beneficiary;
(2) in the form of a check payable to both the beneficiary and the eligible educational
institution; or
(3) directly to the account owner or beneficiary if the account owner or beneficiary has
already paid qualified higher education expenses.
(b) Qualified distributions must be withdrawn proportionally from contributions and
earnings in an account owner's account on the date of distribution as provided in section 529 of
the Internal Revenue Code.
    Subd. 2. Matching grant accounts. Qualified distributions are based on the total account
balances in an account owner's account and matching grant account, if any, on the date of
distribution. Qualified distributions must be withdrawn proportionally from each account based on
the relative total account balance of each account to the total account balance for both accounts.
Amounts for matching grants and matching grant earnings must only be distributed for qualified
higher education expenses.
    Subd. 3. Nonqualified distribution. An account owner may request a nonqualified
distribution from an account at any time. Nonqualified distributions are based on the total account
balances in an account owner's account and must be withdrawn proportionally from contributions
and earnings as provided in section 529 of the Internal Revenue Code. The earnings portion of a
nonqualified distribution is subject to a federal additional tax pursuant to section 529 of the
Internal Revenue Code. For purposes of this subdivision, "earnings portion" means the ratio of
the earnings in the account to the total account balance, immediately prior to the distribution,
multiplied by the distribution.
    Subd. 4. Nonqualified distributions from matching grant accounts. (a) If an account
owner requests a nonqualified distribution from an account that has a matching grant account, the
total account balance of the matching grant account, if any, is reduced.
(b) After the nonqualified distribution is withdrawn from the account including any penalty
as provided in subdivision 3, the account owner forfeits matching grant amounts in the same
proportion as the nonqualified distribution is to the total account balance of the account.
    Subd. 5. Distributions due to death or disability of, or scholarship to, or attendance at a
United States military academy by, a beneficiary. An account owner may request a distribution
due to the death or disability of, or scholarship to, or attendance at a United States military
academy by, a beneficiary from an account by submitting a completed request to the plan. Prior to
distribution, the account owner shall certify the reason for the distribution and provide written
confirmation from a third party that the beneficiary has died, become disabled, or received a
scholarship for attendance at an eligible educational institution, or is attending a United States
military academy. The plan must not consider a request to make a distribution until a third-party
written confirmation is received by the plan. For purposes of this subdivision, a third-party written
confirmation consists of the following:
(1) for death of the beneficiary, a certified copy of the beneficiary's death record;
(2) for disability of the beneficiary, a certification by a physician who is a doctor of medicine
or osteopathy stating that the doctor is legally authorized to practice in a state of the United
States and that the beneficiary is unable to attend any eligible educational institution because of
an injury or illness that is expected to continue indefinitely or result in death. Certification must
be on a form approved by the plan;
(3) for a scholarship award to the beneficiary, a letter from the grantor of the scholarship or
from the eligible educational institution receiving or administering the scholarship, that identifies
the beneficiary by name and Social Security number or taxpayer identification number as the
recipient of the scholarship and states the amount of the scholarship, the period of time or number
of credits or units to which it applies, the date of the scholarship, and, if applicable, the eligible
educational institution to which the scholarship is to be applied; or
(4) for attendance by the beneficiary at a United States military academy, a letter from the
military academy indicating the beneficiary's enrollment and attendance.
History: 1Sp2001 c 1 art 3 s 22,23; 1Sp2001 c 9 art 15 s 32; 2003 c 133 art 3 s 22,23; 2005
c 107 art 2 s 44,45

136G.14 MINOR TRUST ACCOUNTS.
(a) This section applies to a plan account in which funds of a minor trust account are invested.
(b) The account owner may not be changed to any person other than a successor custodian
or the beneficiary unless a court order directing the change of ownership is provided to the plan
administrator. The custodian must sign all forms and requests submitted to the plan administrator
in the custodian's representative capacity. The custodian must notify the plan administrator in
writing when the beneficiary becomes legally entitled to be the account owner. An account owner
under this section may not select a contingent account owner.
(c) The beneficiary of an account under this section may not be changed. If the beneficiary
dies, assets in a plan account become the property of the beneficiary's estate. Funds in an account
must not be transferred or rolled over to another account owner or to an account for another
beneficiary. A nonqualified distribution from an account, or a distribution due to the disability
or scholarship award to the beneficiary, or made on account of the beneficiary's attendance at a
United States military academy, must be used for the benefit of the beneficiary.
History: 2003 c 133 art 3 s 24; 2005 c 107 art 2 s 46