2010 Arizona Revised Statutes
Title 15 - Education
15-1874 Use of contractor as account depository and manager

15-1874. Use of contractor as account depository and manager

A. The commission shall implement the operation of the program through the use of one or more financial institutions to act as the depositories of the fund and managers of the program. Under the program, persons may submit applications for enrollment in the program and establish accounts in the fund at the financial institution. Monies paid by account owners to the fund for deposit in accounts maintained by the fund at a financial institution shall be paid to the financial institution as an agent of the fund and the tuition savings agreements shall provide that all monies paid by account owners to fund accounts held at financial institutions are being paid to the fund.

B. The committee shall solicit proposals from financial institutions to act as the depositories of fund monies and managers of the program. Financial institutions that submit proposals must describe the financial instruments that will be held in accounts. The commission shall select proposals from financial institutions to act as depositories and managers, and the solicitation and selection process is exempt from the procurement code requirements of title 41, chapter 23.

C. On the recommendation of the committee, the commission shall select the financial institution or institutions to implement the program from among bidding financial institutions that demonstrate the most advantageous combination, both to potential program participants and this state, of the following factors:

1. Financial stability and integrity.

2. The safety of the investment instruments being offered, taking into account any insurance provided with respect to these instruments.

3. The ability of the investment instruments to track estimated costs of higher education as calculated by the commission and provided by the financial institution to the account holder.

4. The ability of the financial institutions, directly or through a subcontract, to satisfy record keeping and reporting requirements.

5. The financial institution's plan for promoting the program and the investment it is willing to make to promote the program.

6. The fees, if any, proposed to be charged to persons for maintaining accounts.

7. The minimum initial deposit and minimum contributions that the financial institution will require for the investment of fund monies and the willingness of the financial institution to accept contributions through payroll deduction plans and other deposit plans.

8. Any other benefits to this state or its residents included in the proposal, including an account opening fee payable to the commission by the account owner and an additional fee from the financial institution for statewide program marketing by the commission.

D. The commission shall enter into a contract with a financial institution, or except as provided in subsection E of this section, contracts with financial institutions, to serve as program managers and depositories. Program management contracts shall provide the terms and conditions by which financial institutions shall sell interests in the fund to account owners, invest monies in the fund and manage the program.

E. The commission may select more than one financial institution and investment for the program if both of the following conditions exist:

1. The United States internal revenue service has provided guidance that giving a contributor a choice of two investment instruments under a state plan will not cause the plan to fail to qualify for favorable tax treatment under section 529 of the internal revenue code.

2. The commission concludes that the choice of instrument vehicles is in the best interest of college savers and will not interfere with the promotion of the program.

F. A program manager shall:

1. Take all action required to keep the program in compliance with the requirements of this article and all action not contrary to this article or its contract to manage the program so that it is treated as a qualified tuition plan under section 529 of the internal revenue code.

2. Keep adequate records of each of the fund's accounts, keep each account segregated from each other account and provide the commission with the information necessary to prepare statements required by section 15-1875, subsections M, N and O or file these statements on behalf of the commission.

3. Compile and total information contained in statements required to be prepared under section 15-1875, subsections M, N and O and provide these compilations to the commission.

4. If there is more than one program manager, provide the commission with this information to assist the commission to determine compliance with section 15-1875, subsection L.

5. Provide representatives of the commission, including other contractors or other state agencies, access to the books and records of the program manager to the extent needed to determine compliance with the contract.

6. Hold all accounts in the name of and for the benefit of the fund and this state.

G. Any contract executed between the commission and a financial institution pursuant to this section shall be for a term of at least three years and not more than seven years.

H. The commission may terminate a contract with a financial institution at any time for good cause on the recommendation of the committee. If a contract is terminated pursuant to this subsection, the commission shall take custody of accounts held at that financial institution and shall seek to promptly transfer the accounts to another financial institution that is selected as a program manager and into investment instruments as similar to the original investments as possible.

I. If the commission determines not to renew the appointment of a financial institution as a program manager, the commission may take action consistent with the interests of the program and the accounts and in accordance with its duties as the trustee of the fund, including termination of all services or continuation of certain management and administrative services of that financial institution for accounts of the program managed by that financial institution during its term as a program manager, if any continuation of services is only permitted under the following conditions:

1. The commission and the financial institution enter into a written agreement specifying the rights of the program and the commission and the responsibilities of the financial institution, including the standards that continue to be applicable to the accounts as accounts of the program.

2. Any services provided by the financial institution to accounts continue to be subject to the control of the commission as the trustee of the fund with responsibility of all accounts of the program.