§3096.  Education savings accounts; creation, terms, and conditions

A.(1)  An education savings account shall be established for an account owner who is determined by the authority to qualify under one of the following classifications:

(a)  A person or persons determined by the authority to be the parent, grandparent, or court-ordered custodian of the person being designated as beneficiary of the account or who claim the person being designated as beneficiary as a dependent on their federal income tax return, or an independent student and, at the time of the initiation of the agreement, the person or beneficiary is a resident of the state.

(b)  A person determined by the authority to be a member of the family of the beneficiary and, at the time of the initiation of the agreement, the person or the beneficiary is a resident of the state.

(c)  Any other person and, at the time of the initiation of the agreement, the beneficiary is a resident of the state.

(d)  Any other person who, at the time of the initiation of the agreement, is a resident of the state and the beneficiary is not a resident of the state.

(e)  Any other person or any government entity, and at the time of the initiation of the agreement:

(i)  The beneficiary is a resident of the state.

(ii)  The federal adjusted income of the beneficiary's family is less than thirty thousand dollars or the beneficiary must be eligible for a free lunch under the Richard B. Russell National School Act (42 USC 1751 et seq.).

(iii)  The beneficiary is not a member of the account owner's family nor a member of the family of any member or employee of the authority and the office of student financial assistance.

(iv)  The deposits to the account are an irrevocable donation by the owner.

(2)  The person completing the account owner's agreement for an education savings account shall be the "owner" of the account.

B.(1)  An education savings account may be established for a person who is an "independent student" as defined by the Higher Education Act of 1965 as amended or as hereafter amended, who files an individual federal income tax return in their name, and designates himself as the beneficiary of the education savings account.

(2)  Accounts established by the authority under this Subsection shall differ from other education savings accounts by the following:

(a)  The beneficiary of the account may not be changed or substituted unless the new beneficiary is "a member of the family" as that term is defined in 26 U.S.C. 529(e)(2) as amended.

(b)  An account established under this Subsection shall be fully funded as defined under Subsection D of this Section.

C.(1)(a)  An education savings account may have only one designated beneficiary.  The account owner shall designate the beneficiary, provided that an account owner meeting the classification requirements of R.S. 17:3096(A)(1)(e) may authorize the authority to designate the beneficiary.

(b)  The beneficiary designated by the authority shall meet the following minimum qualifications:

(i)  Be a resident of the state.

(ii)  The federal adjusted gross income of the beneficiary's family must be less than thirty thousand dollars or the beneficiary must be eligible for a free lunch under the Richard B. Russell National School Act (42 USC 1751 et seq.).

(iii)  Not a member of the account owner's family nor a member of the family of any member or employee of the authority and the office of student financial assistance.

(iv)  Demonstrate superior early academic preparation in the third grade by achieving a score on the Iowa Tests of Basic Skills, Stanford 9 Test or TerraNova Test that is in the top two quartiles.

(2)  Persons who are eligible to establish an education savings account for more than one beneficiary shall establish a separate account for each beneficiary.  The beneficiary of each account so established shall be eligible for earnings enhancements in accordance with Subsection E of this Section and the account shall be subject to all other terms, conditions, and fees applicable to an education savings account.

D.  Accounts which are fully funded are no longer eligible for state-appropriated earnings enhancements.  For purposes of this Chapter, fully funded shall mean that the redemption value is equal to or greater than the projected sum of five times the annual qualified higher education expenses at the highest cost Louisiana public college or university, projected to the scheduled date of the beneficiary's first enrollment into a college or university.  For purposes of this Chapter, the scheduled date of the beneficiary's first enrollment into an institution of postsecondary education shall be the expected date of enrollment as reported by the beneficiary.

E.(1)  Annually, the authority shall credit the beneficiary of an education savings account an earnings enhancement as calculated pursuant to this Paragraph.  An earnings enhancement shall be determined by adding the deposits made to the account by the owner during the calendar year and multiplying that sum by the rate appropriate to the owner as determined by Paragraph (3) of this Subsection. Earnings enhancements awarded in any year shall not exceed the balance in the Savings Enhancement Fund.  The authority shall reduce earnings enhancement rates, pro rata, so that the total of the earnings enhancements to be awarded in any year does not exceed the balance in the Savings Enhancement Fund.

(2)  For purposes of this Subsection, the deposits made to an account by the owner include all deposits of principal made to an education savings account during the calendar year ending December thirty-first of the year on which the earnings enhancement will be based, provided such amount is not more than the projected sum of five times the annual qualified higher education expenses at the highest cost Louisiana public college or university, projected to the scheduled date of the beneficiary's first enrollment into an institution of higher education.

(3)(a) Effective for calendar years beginning January 1, 2001, the earnings enhancement rate applicable to an account established by a person or persons identified in Subparagraph (A)(1)(a) or (b) of this Section shall be determined by the adjusted gross income reported by the owner of the account on his federal tax return for the taxable year immediately preceding the year in which the beneficiary of the account is being considered for an earnings enhancement, according to the following schedule:

Reported Federal

Adjusted Gross Income

Earnings Enhancement Rate

0 to $29,999

14%

$30,000 to $44,999

12%

$45,000 to $59,999

9%

$60,000 to $74,999

6%

$75,000 to $99,999

4%

$100,000 and above

2%

(b)  Effective for calendar years beginning January 1, 2001, the earnings enhancement rate applicable to an account established by a person or persons identified in Subparagraph (A)(1)(c) of this Section shall be fixed at the earnings enhancement rate for account owners who are members of the family of the beneficiary who report an adjusted gross income of one hundred thousand dollars and above.

(c) An account established by a person or persons identified in Subparagraph (A)(1)(d) of this Section shall not be eligible for an earnings enhancement.

(d)  The earnings enhancement rate for an account established by a person or persons identified in Subparagraph (A)(1)(e) of this Section shall be determined by the adjusted gross income reported by the family of the beneficiary of the account on its federal tax return for the taxable year immediately preceding the year in which the beneficiary of the account is being considered for an earnings enhancement, according to the schedule in Subparagraph (a) of this Paragraph.

F.  To be eligible in any given year for the crediting of an earnings enhancement to an education savings account on behalf of the beneficiary, the owner must authorize the authority to access the owner's prior year state tax return filed with the Louisiana Department of Revenue or provide the authority a copy of his federal income tax return filed for the prior year.

G.  The right of a beneficiary to the assets of an education savings account shall not be subject to and is expressly dispensed from collation, execution, garnishment, attachment, the operation of bankruptcy or the insolvency laws or other process of law.  Monies paid into or out of the assets and the income of any validly existing qualified tuition program authorized by Section 529 of the Internal Revenue Code of 1986 as amended, including but not limited to an education savings account as defined in R.S. 17:3092, shall not be liable to attachment, levy, garnishment, or legal process in the state in favor of any creditor of or claimant against any program participant, owner, or contributor, or program.

Acts 1995, No. 547, §1, eff. June 18, 1995; Acts 1997, No. 658, §2; Acts 1997, No. 1416, §1, eff. July 15, 1997; Acts 1999, No. 1282, §1, eff. July 12, 1999; Acts 2000, No. 45, §1, eff. July 1, 2000; Acts 2001, No. 332, §1, eff. June 6, 2001; Acts 2002, 1st Ex. Sess., No. 20, §1, eff. April 18, 2002; Acts 2003, No. 221, §2, eff. June 5, 2003; Acts 2010, No. 671, §1.