An Act relating to the Alaska Higher Education Savings Trust; and providing for an effective date.

Posted: February 15, 2000
Contact: Representative Lisa Murkowski at (907) 465-3783

Alaska, through its student loan program and the Advance College Tuition program has traditionally offered its residents seeking a higher education, solid financial options. HB 268 continues this trend and will allow residents and non-residents alike the ability to put money into a trust fund that may be used for higher education expenses. HB 268 will ensure that Alaskans will continue to have flexible and powerful financial options to utilize for their higher education.

Under IRS code 26 USC 529 commonly known as "Section 529," states are allowed to create "qualified State tuition programs." Section 529 defines "qualified State tuition program" as a program established and maintained by a State or an agency under which a person may either purchase tuition credits or certificates on behalf of a designated beneficiary which entitle the beneficiary to the waiver or payment of qualified higher education expense of the beneficiary; or, may make contributions to an account which is established for the purpose of meeting the qualified higher education expenses of the designated beneficiary.

Under Section 529, individuals are permitted to front load large sums of money, in some states in excess of $100,000, gift-tax free either in one lump sum or over a 5 - year period. Quite a contrast to the $500 annual limit on the Education IRA. Furthermore, the participant may change the beneficiary at any time and may even choose him or herself to be the beneficiary. Section 529 provides unprecedented flexibility and savings power.

As approximately forty other states have done, House Bill 268 establishes a qualified State tuition program. The program will be administered by the University of Alaska and will be known as the "Alaska Higher Education Savings Trust." The bill also changes the structure of the current Advance College Tuition program by updating its structure to conform to new IRS codes and changing the name of the program to the Advance College Tuition Savings Fund. In order to keep the overhead, record keeping and marketing costs to a minimum, HB 268 places both programs under one administrative head.

It is vital that this education savings program be flexible and designed to maximize returns for the investor with minimal tax consequences. Not only is this important so that Alaskans are able to have meaningful savings options for their higher education, but, with a strong program, it should entice non-residents as well to invest their savings dollars in Alaska.

I urge your support of HB 268. Thank you for your consideration.