§3095. Education savings accounts; types, use, limitations, and disclosures

            A.(1)(a) The Louisiana Tuition Trust Authority may enter into an account owner's agreement with any person who qualifies under R.S. 17:3096(A) for the creation of an education savings account on behalf of a beneficiary. When the number of available agreements is limited, preference shall be given to the establishment of account owner agreements with resident account owners who are establishing accounts for resident beneficiaries.

            (b) For tax years beginning on and after January 1, 2001, amounts which an account owner deposits into an education savings account shall be exempt from inclusion in the account owner's taxable income for the purposes of state income tax up to a maximum of two thousand four hundred dollars per account owned per taxable year for account owners filing single returns and up to a maximum of four thousand eight hundred dollars per beneficiary per taxable year for account owners filing joint returns, as provided in R.S. 47:293(9)(a)(vi). If an account owner deposits less than the maximum two thousand four hundred dollars per year in an owned account and files a single return or if married account owners deposit less than the maximum of four thousand eight hundred dollars per year in an account or accounts for a beneficiary and file a joint return, the difference between the total deposits and two thousand four hundred dollars or four thousand eight hundred dollars, respectively, shall roll over to subsequent years and shall be exempt from inclusion in the account owner's taxable income for the purposes of state income tax in addition to the two thousand four hundred dollars or four thousand eight hundred dollars in the year actually deposited, as provided in R.S. 47:293(9)(a)(vi).

            (c) For tax years beginning on and after January 1, 2005, twice the amount that an account owner donates into an education savings account classified under R.S. 17:3096(A)(1)(e) shall be exempt from inclusion in the account owner's taxable income for the purposes of state income tax, up to a maximum donation of two thousand four hundred dollars per account owned, per taxable year, if the beneficiary's family reported a federal adjusted gross income of less than thirty thousand dollars or the beneficiary was entitled to a free lunch under the Richard B. Russell National School Lunch Act, 42 U.S.C. 1751 et seq., as provided in R.S. 47:293(9)(a)(viii). If an account owner deposits less than the amount that would qualify for the maximum exclusion or two thousand four hundred dollars per year in an owned account, the difference between the total deposits and two thousand four hundred dollars shall roll over to subsequent years and shall increase the amount of deposits that qualify for the double exclusion from the account owner's taxable income for the purposes of state income tax in addition to the applicable exclusion for the year actually deposited, as provided in R.S. 47:293(9)(a)(vi).

            (2) The funds deposited in an education savings account shall be disbursed from the account to the account owner, beneficiary or institution of postsecondary education, as directed by the account owner, for the qualified higher education expenses of the beneficiary not to exceed the redemption value of the account.

            (3) Nothing in this Chapter, or in any education savings account owner's agreement entered into pursuant to this Chapter, shall be construed as a guarantee by the state, the authority, or any institution of postsecondary education that a beneficiary of an education savings account will be admitted to an institution of postsecondary education, or, upon admission to an institution of postsecondary education, will be permitted to continue to attend or will receive a degree, diploma, or any other affirmation of program completion from an institution of postsecondary education. Nothing in this Chapter or in any education savings account owner's agreement entered into pursuant to this Chapter shall be considered a guarantee that the beneficiary's cost of tuition at an institution of postsecondary education will be covered in full by the proceeds of the beneficiary's education savings account.

            (4) Subject to the limitation imposed by R.S. 17:3098(B), the authority shall guarantee payment of the redemption value of an education savings account in which the deposits and interest are invested in fixed earnings.

            (5) Nothing in this Chapter, or in any education savings account owner's agreement entered into pursuant to this Chapter, shall be construed as a guarantee of payment of the redemption value of an education savings account by the state, the authority, or any institution of postsecondary education for deposits and interest invested in variable earnings.

            B. Repealed by Acts 1999, No. 1282, §2, eff. July 12, 1999.

            C. The following information shall be disclosed in writing to each person completing an account owner's agreement for the purpose of opening an education savings account:

            (1) The terms and conditions for opening, maintaining, terminating, or redeeming an education savings account.

            (2) Any restrictions on the substitution of another individual for the original beneficiary.

            (3) The person entitled to terminate the account owner's agreement.

            (4) The terms and conditions under which the agreement may be terminated and the amount of the refund, if any, to which the person terminating the agreement, or that person's designee, is entitled upon termination.

            (5) The obligation of the authority to make payments to a beneficiary, or an institution of postsecondary education on behalf of a beneficiary, under Subsection A of this Section, based upon the redemption value accrued on behalf of the beneficiary.

            (6) The method by which withdrawals from the education savings account shall be applied toward payment of qualified higher education expenses.

            (7) The period of time during which the beneficiary may receive benefits under the agreement.

            (8) The terms and conditions under which money may be wholly or partially withdrawn from the program.

            (9) A clear statement that the act of establishing an education savings account pursuant to this Chapter does not guarantee full payment of tuition on behalf of the beneficiary.

            (10) A clear statement of fees that may be imposed and collected and an estimate of the amount of such fees for the two years following the establishment of an agreement.

            (11) All other rights and obligations of the purchaser and the authority and any other terms, conditions, and provisions the authority considers necessary and appropriate.

            D. An education savings account depositor's agreement may provide that the authority shall pay directly to the institution of postsecondary education in which the beneficiary is enrolled the amount represented by the qualified higher education expenses incurred that term.

            E.(1) On or before the first day of July following the year in which the program is implemented, and each year thereafter, the authority shall project five years' qualified higher education expenses at the institution of postsecondary education designated by the beneficiary, to the date of the beneficiary's first scheduled enrollment in that institution, and advise the owner of an education savings account of the owner's progress in saving to meet those costs.

            (2) Prior to the close of the calendar year in which the program is implemented and each year thereafter on a date specified by the authority, the state treasurer shall determine and report to the authority the total earnings and the rate of return achieved on deposits in the Louisiana Education Tuition and Savings Fund. Based upon the fund's reported earnings, the authority shall establish the rate of interest to be applied to the accumulated principal and interest in education savings accounts of record, subject to approval by the state treasurer. The authority shall calculate and credit the appropriate amount of interest earnings to each such account prior to the close of the calendar year.

            F. If the redemption value of an education savings account is in excess of the maximum allowed to be saved pursuant to the provisions of 26 U.S.C. 529 as amended for qualified higher education expenses, the excess value shall be treated in accordance with R.S. 17:3098.

            G. Neither education savings accounts nor any reversion of the savings into cash payments for the purpose of paying the qualified higher education expenses of a beneficiary pursuant to this Chapter shall be taxable for state income tax purposes. Interest credited to an education savings account which is refunded to the holder by the authority shall be taxable for state income tax purposes and shall be reported by the authority to the holder in January of the year following the year the refund was made, in accordance with applicable tax codes.

            H.(1) Checks and electronic funds transfers through the Automated Clearing House Network, or its successor, received for deposit in a variable earnings option shall be invested by the state treasurer in fixed earnings prior to the trade date. All earnings from such investments from the beginning of the program shall be the property of the state and shall be deposited in the Variable Earnings Transaction Fund.

            (2) Any increase in the value of an account over the amount deposited shall be forfeited by the account owner and deposited in the Variable Earnings Transaction Fund if the deposit was used to purchase units in a variable earnings option and made by check or Automated Clearing House Network a transfer that, subsequent to the trade date, was not honored by the financial institution on which it was drawn.

            (3) Any increase in the value of an account over the amount deposited shall be forfeited by the account owner and deposited in the Variable Earnings Transaction Fund if the account was invested in a variable earnings option and terminated within twelve months of the date the account was opened.

            (4) The monies in the Variable Earnings Transaction Fund shall be used by the authority to pay a financial institution's charges and any loss in value between the purchase and redemption of units in a variable earnings option resulting from a check deposit or Automated Clearing House Network transfer that, subsequent to the trade date, is not honored by the financial institution on which it was drawn.

            (5) Monies in the Variable Earnings Transaction Fund declared surplus by the authority shall be appropriated to the Savings Enhancement Fund to be used as earnings enhancements.

            I. Funds deposited in an education savings account established in accordance with this Chapter may be disbursed in 2020 to pay tuition, as defined in R.S. 17:3100.2, at an elementary or secondary school, as defined in R.S. 17:3100.2. These disbursements shall not include any earnings enhancements or interest thereon that may have accrued to the account. The total amount of disbursements from all such accounts established for a beneficiary shall not exceed ten thousand dollars.

            Acts 1995, No. 547, §1, eff. June 18, 1995; Acts 1997, No. 1416, §1, eff. July 15, 1997; Acts 1999, No. 1282, §§1, 2, 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 2004, No. 329, §2, eff. June 18, 2004; Acts 2005, No. 292, §1; Acts 2006, No. 279, §1, eff. June 8, 2006; Acts 2015, No. 297, §1; Acts 2017, No. 97, §1; Acts 2020, No. 56, §1.

NOTE: See Acts 2018, No. 687, §6, relative to the authorized distribution of funds deposited prior to Jan. 1, 2018, to an education savings account.