Bill Summary – FastDemocracy

Legislative Analysis
                                                                             Phone: (517) 373-8080
MICHIGAN EDUCATION TRUST ACT AND MICHIGAN
                                                                             http://www.house.mi.gov/hfa
EDUCATION SAVINGS PROGRAM ACT
                                                                             Analysis available at
House Bill 5782 as introduced                                                http://www.legislature.mi.gov
Sponsor: Rep. Sharon MacDonell
House Bill 5783 as introduced
Sponsor: Rep. Christine Morse
Committee: Higher Education
Complete to 6-11-24
SUMMARY:
       House Bill 5782 would amend the Michigan Education Trust Act to change when an advance
       tuition payment contract may be authorized for termination and then refunded. These contracts
       allow purchasers to secure, at a predetermined rate paid by the purchaser, a specified number
       of college credits at a public college or university in Michigan for the qualified beneficiary.
       The advance tuition payment contract may be terminated and refunded if one of the following
       occurs:
          • The qualified beneficiary dies.
          • The qualified beneficiary is not admitted to a state institution of higher education after
               making proper application.
          • The qualified beneficiary certifies to the Michigan Education Trust (MET) that they
               have been accepted to, and will attend, an independent, degree-granting institution of
               postsecondary education, located in Michigan, that has been recognized by the
               Michigan State Board of Education.
          • For a qualified beneficiary who has graduated high school or reached the age of
               majority and has decided not to attend a state institution of higher education, they may
               request in writing that they want to terminate the contract. This request must be made
               by July 15 in the year they wish to terminate the contract.
          • Other circumstances occur, as determined by MET and set forth in the advance tuition
               payment contract.
       The bill would amend the third provision above to also allow a qualified beneficiary who has
       decided to attend, and has been accepted into, an eligible educational institution, as defined in
       section 529 of the Internal Revenue Code, to terminate the contract.
               Section 529 of the Internal Revenue Code defines an eligible educational institution
               as meaning generally any college, university, vocational school, or other postsecondary
               educational institution eligible to participate in a student aid program administered by
               the U.S. Department of Education.
               The bill would define Internal Revenue Code as meaning the U.S. Internal Revenue
               Code of 1986 that was in effect on January 1, 2024, or, at the option of the taxpayer, in
House Fiscal Agency                                                                           Page 1 of 3
                   effect for the current year. (This would match the definition of the term used in the
                   Michigan Education Savings Program Act, which HB 5783 would amend.)
           Regarding refunds, the bill would allow MET to waive a contract provision denying refund for
           contract termination if the qualified beneficiary has completed more than half of the required
           credits for granting of a bachelor’s degree or allow such a provision to be amended by
           agreement of MET and the purchaser if the contract was entered into on or after January 1,
           1988. Presently, the act only allows a contract to provide that MET may deny refund payment
           if more than half of the credit hours have been completed by the beneficiary.
           Refunds would have to be issued in full by MET no later than August 15 of the year due, unless
           the board determines that full refund payments would violate the act’s requirements regarding
           actuarial soundness. In that instance, the MET would make refund payments in equal
           installments over four years. Presently, MET is required to issue refunds in equal payments
           over four years, not later than August 15 of each year.
           Once terminated, an advance tuition payment contract refund can be directed to an independent
           degree-granting college or university in Michigan or to a community or junior college in the
           state. The bill would also allow a contract to authorize, or be amended to authorize, a refund
           to be directed to any eligible educational institution in this state.
           MCL 390.1424 and 390.1428
           House Bill 5783 would amend the Michigan Education Savings Program Act to change the
           definition of qualified higher education expenses so that any reference to that term in the act
           includes both of the following:
               • Expenses for fees, books, supplies, and equipment required for participation of a
                   designated beneficiary in an apprenticeship program as provided in section 529(c)(8)
                   of the Internal Revenue Code. 1
               • Amounts paid as principal or interest on any qualified education loan as provided in
                   section 529(c)(9) of the Internal Revenue Code.
           The bill would also amend the definition of Internal Revenue Code to mean the code in effect
           on January 1, 2024, or at the option of the taxpayer, in effect for the current year. Presently,
           the definition means the code in effect on January 1, 2002, or at the option of the taxpayer, in
           effect for the current year .
           MCL 390.1472 and 390.1486
FISCAL IMPACT:
           House Bill 5782 would have a minimal fiscal impact on state and local government. There
           could be minimal expenses to update websites or public resources with the clarifications made
           on potential refunds given to advance tuition payment contract terminations. While the bill
           does add a full repayment specification for terminated contracts eligible for a full repayment
           option, the full payment could be converted into equal installments spread over four years if
1
    https://www.irs.gov/pub/irs-pdf/p5834.pdf
House Fiscal Agency                                            HBs 5782 and 5783 as introduced   Page 2 of 3
       the refund payments would have an actuarial soundness impact on the trust fund as determined
       by the board, which would minimize the potential fiscal impact on the trust fund.
       House Bill 5783 would have a minimal fiscal impact on state and local government. There
       could be minimal expenses to update websites or public resources with the clarifications on
       qualified higher education expenses.
                                                          Legislative Analyst: Josh Roesner
                                                               Fiscal Analyst: Perry Zielak
■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their
deliberations and does not constitute an official statement of legislative intent.
House Fiscal Agency                                         HBs 5782 and 5783 as introduced   Page 3 of 3
Statutes affected: 
House Introduced Bill: 390.1424, 390.1428