La. Admin. Code tit. 28 § VI-311

Current through Register Vol. 50, No. 11, November 20, 2024

Section VI-311 - Termination, Refund, and Rollovers of an Education Savings Account

A. Account Termination

1. The account owner who is a natural person, other than a natural person classified as an account owner under §303. A 6, may terminate an account at any time.

2. The LATTA may terminate an account in accordance with this Subsection, §309. A.6 and §311 E

3. The LATTA may terminate an account if no deposit of at least $10 has been made within 180 days from the date on the letter of notification of approval of the account.

4. The LATTA may terminate an account if the beneficiary dies and a new beneficiary is not named within 60 days of the death.

5. The LATTA may terminate an account if the beneficiary becomes disabled and a new beneficiary is not named by the time the beneficiary who has become disabled reaches age 25.

6. The account owner who is a legal entity or is classified under §303. A 6, may not terminate an account; however, the account owner who is a legal entity or is classified under §303. A.6 may designate a substitute beneficiary in accordance with §313. A.5 b

B. Refunds

1. A partial refund of an account may only be made as described in §311. E 3

2. All other requests for refund may result in the termination of the account and in the refund of:

a. the deposits invested in fixed earnings, if the account has been open for less than 12 months;

b. the redemption value, if the account has been open for 12 or more months;

c. the deposits to or the current value of an account invested in a variable earnings option, whichever is less, less earning enhancements allocated to the account and earnings thereon if the account has been open for less than 12 months. Any increase in the value of an account invested in a variable earnings option 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 12 months of the date the account was opened;

d. the current value (less earning enhancements allocated to the account and earnings thereon) of an account invested in variable earnings, if the account has been open for 12 or more months.

3. No refunds shall be made to an account owner who is a legal entity classified under §303. A.4 If an account owned by a legal entity classified as an account owner under §303. A.4 is terminated by the LATTA or by the account owner in accordance with §311. E or F, the refund will be made to the beneficiary or to the beneficiary's estate if no substitute beneficiary has been designated by the account owner.

4. No refunds shall be paid to account owner classified under §303. A.6 If such an account is terminated by the LATTA in accordance with §311 E, the beneficiary shall become the owner of the account, provided that, all the rights and restrictions provided in law and these rules regarding account owners classified under §303. A 6, including, but not limited to, use of the funds, refunds, terminations, designation of beneficiary, etc., shall be applicable to the beneficiary that becomes the owner of such an account. If an account owner classified under §303. A.6 dies or is dissolved and the beneficiary has died or failed to enroll in an eligible college or university by age 25, and no substitute beneficiary has been designated by the account owner, the authority shall designate a new beneficiary who must meet the requirements of §301. A.4 and §303. A 6

5. Refunds from investment options with variable earnings shall be assigned a trade date of one business day after the business day of receipt.

C. Designation of a Refund Recipient

1. In the owner's agreement, the account owner who is a natural person, except one who is classified under §303. A 6, may designate himself or the beneficiary to receive refunds from the account.

2. Refunds of interest earnings will be reported as income to the individual receiving the refund for both federal and state tax purposes.

3. In the event the beneficiary receives any refund of principal and earnings from the account, the tax consequences must be determined by the recipient.

4. The beneficiary of an account owned by a legal entity classified as an account owner under §5 is automatically designated as the refund recipient.

5. Funds in an account classified under §303. A.6 shall not be refunded.

D. Involuntary Termination of an Account with Penalty

1. The LATTA may terminate an owner's agreement if it finds that the account owner or beneficiary provided false or misleading information (see §107).

2. If the LATTA terminates an owner's agreement under this Section, all interest earnings on principal deposits may be withheld and forfeited, with only principal being refunded.

3. An individual who obtains program benefits by providing false or misleading information will be prosecuted to the full extent of the law.

E. Voluntary Termination of an Account

1. Refunds shall be equal to the redemption value of the ESA at the time of the refund, and shall be made to the person designated in the owner's agreement or by rule.

2. The person receiving the refund shall be responsible for any state or federal income tax that may be payable due to the refund.

3. Except for accounts classified in accordance with §711.A 6, accounts may be terminated and fully refunded for the following reasons:

a. the death of the beneficiary in which case the refund shall be equal to the redemption value of the account and shall be made to:

i. the account owner, if the account owner is a natural person; or

ii. the beneficiary's estate, if the account owner is a legal entity;

b. the disability of the beneficiary, in which case the refund shall be equal to the redemption value of the account and shall be made to:

i. the account owner or the beneficiary, as designated in the owner's agreement, if the account owner is a natural person; or

ii. the beneficiary, if the account owner is a legal entity;

c. the beneficiary receives a scholarship, waiver of tuition, or similar subvention that the LATTA determines cannot be converted into money by the beneficiary, to the extent the amount of the refund does not exceed the amount of the scholarship, waiver of tuition, or similar subvention awarded to the beneficiary. In such case, the refund shall be equal to the scholarship, waiver of tuition, or similar subvention that the LATTA determines cannot be converted into money by the beneficiary of the account, or the redemption value, whichever is less, and shall be made to:

i. the account owner or the beneficiary, as designated in the owner's agreement, if the account owner is a natural person; or

ii. the beneficiary, if the account owner is a legal entity.

4. For the 2018 calendar year only, an account owner may request a refund in order to pay the tuition expenses related to the beneficiarys enrollment in kindergarten through twelfth grade in the following circumstances:

a. the account was opened prior to December 31, 2017;

b. the amount requested to be refunded is less than or equal to the balance of the account as of December 31, 2017;

c. the amount requested to be refunded does not exceed $10,000.

5. For the 2020 calendar year only, and beginning on August 1, 2020, an account owner may request a refund in order to pay the tuition expenses related to the beneficiarys enrollment in kindergarten through twelfth grade as follows:

a. the amount requested to be refunded is less than or equal to the balance of the account;

b. the amount requested to be refunded does not exceed $10,000;

c. no earnings enhancements or interest thereon shall be included in such a refund.

6. Refunds made under §311.E.3 are currently exempt from additional federal taxes.

F. Effective Date of Account Termination. Account termination shall be effective at midnight on the business day on which the request for account termination and all supporting documents are received. Accounts will be credited with interest earned on principal deposits through the effective date of the closure of the account.

G. Refund Payments. Payment of refunds for voluntary termination under §311.E or partial refunds of accounts pursuant to §311.E.3 shall be made within 30 days of the date on which the account was terminated. The termination refund shall consist of the principal remaining in the account and interest remaining in the account accrued on the principal through the end of the calendar year preceding the year in which the request to terminate an account is made. Interest earned in excess of $10 during the calendar year of termination will be refunded within 45 days of the date the state treasurer announces the interest rate for the preceding calendar year. Interest earned of $10 or less during the calendar year of termination will be forfeited to the Louisiana Education and Tuition Savings Fund.

H. Rollovers

1. Rollovers among ESAs of the Same Account Owner

a. Beginning October 1, 2009, an account owner may rollover any part or all of the value of an ESA to another ESA if the beneficiary of the account receiving the funds is a member of the family of the beneficiary of the original account.

b. If the current value of an ESA is transferred, all EEs and earnings thereon shall be included in the transfer.

2. Rollover to another Qualified Tuition Program

a. An account owner may request a rollover of the current value of the account less EEs and earnings thereon to another qualified tuition program.

b. EEs and the earnings thereon allocated to an ESA that is rolled over to another qualified tuition program are forfeited.

3. Rollover to a Qualified ABLE Program Account

a. Beginning May 1, 2018, an account owner may rollover any part or all of the value of an ESA to a qualified ABLE program account if the beneficiary of the account receiving the funds is a member of the family of the beneficiary of the ESA.

b. EEs and the earnings thereon allocated to an ESA that is transferred to a qualified ABLE program are forfeited.

c. A rollover by a Louisiana resident to any Qualified Able Program Account will be subject to Louisiana Tax Table Income in accordance with state law.

4. An account owner may not rollover any part or all of the value of an ESA to a START K12 account.

5. Beginning August 1, 2022, an account owner may rollover any or all of the value of an ESA to a START K12 account. Earnings enhancements may not be transferred to a START K12 account and will remain in the ESA for use by the beneficiary for qualified higher education expenses.

6. Beginning with distributions made on or after January 1, 2024, an account owner may rollover any or all of the value of an ESA to a Roth Individual Retirement Account (IRA), subject to the following restrictions:

a. the account must have been maintained for at least 15 years prior to the date of the requested rollover; and

b. the rollover must be comprised of funds that were deposited at least five years prior to the date of the requested rollover; and

c. the rollover must be made directly to the administrator of the Roth IRA; and

d. the total amount of the rollover, together with all other contributions during the year of the rollover, may not exceed the annual contribution limit for a Roth IRA as published annually by the Internal Revenue Service (IRS); and

e. the maximum aggregate dollar amount of rollovers from one or more ESAs to a Roth IRA for a single beneficiary in that beneficiary's lifetime shall not exceed $35,000.

La. Admin. Code tit. 28, § VI-311

Promulgated by the Tuition Trust Authority, Office of Student Financial Assistance, LR 23:717 (June 1997), amended LR 24:1273 (July 1998), repromulgated LR 26:2265 (October 2000), amended LR 27:38 (January 2001), LR 27:1882 (November 2001), LR 28:779 (April 2002), LR 30:790 (April 2004), LR 31:639 (March 2005), LR 32:1434 (August 2006), LR 32:2240 (December 2006), LR 33:444 (March 2007), LR 35:236 (February 2009), LR 36:492 (March 2010), LR 36:2551 (November 2010), LR 39:2238 (August 2013), Amended LR 421080 (7/1/2016), Amended LR 441887 (10/1/2018), Amended LR 4742 (1/1/2021), Amended LR 4958 (1/1/2023), Amended LR 491551 (9/1/2023).

AUTHORITY NOTE: Promulgated in accordance with 17:3091-3099.2.