1. (1) As used in this rule, "contract" means a full benefits plan contract that was issued during 1988.

2. (2) A contract may be terminated in the following instances upon a written request to the trust by the beneficiary or by a person who has legal authority to act on behalf of a beneficiary who has died or is disabled:

   1. (a) The beneficiary has reached 18 years of age or has received a high school diploma, certifies that he or she will attend an independent degree-granting college or university, and directs payment of any refund to that independent degree-granting college or university.
   2. (b) The beneficiary has reached 18 years of age or has received a high school diploma and certifies that he or she will attend an out-of-state institution of higher education.
   3. (c) The beneficiary has reached 18 years of age or has received a high school diploma and certifies that he or she will attend a higher education institution under a full-tuition scholarship.
   4. (d) The beneficiary has died or is disabled.
   5. (e) The beneficiary has reached 18 years of age or has received a high school diploma and certifies 1 of the following:
   6. (i) He or she does not plan to attend a higher education institution.

   7. (ii) He or she will attend an independent degree-granting college or university, but does not direct payment of any refund to that independent degree-granting college or university.

      1. (iii) He or she will attend a community or junior college.
   8. (f) The board approves a termination for any other reason.

3. (3) The amount of the refund for a contract terminated pursuant to the provisions of subrule (2) of this rule shall be as follows:

   1. (a) If a contract is terminated pursuant to the provisions of subrule (2)(a) of this rule, the refund shall be the weighted average tuition cost of state institutions of higher education based upon the last full academic year before the refund payments commence for the number of academic years covered by the contract.
   2. (b) If a contract is terminated pursuant to the provisions of subrule (2)(b) or (c) of this rule, the refund shall be the sum of 4 annual installment payments made pursuant to the provisions of subrule (4)(b) of this rule, less the termination fee. Each installment shall be determined annually according to the following provisions:
   3. (i) If the beneficiary directs payment of the installment to a higher education institution or certifies that he or she will attend a higher education institution under a full-tuition scholarship, an annual amount equal to 1/4 of the average tuition.

   4. (ii) For beneficiaries who are not subject to the provisions of paragraph (i) of this subdivision, an annual amount equal to 1/4 of the lowest tuition.

      1. (iii) The calculation of average tuition and lowest tuition cost for purposes of paragraphs (i) and (ii) of this subdivision shall be based upon the last full academic year before the refund payments commence and for the number of academic years covered by the contract.
   5. (c) If a contract is terminated pursuant to the provisions of subrule (2)(d), (e), or
   6. (f) of this rule, the refund shall be the lowest tuition cost based upon the last full academic year before the refund payments commence, and for the number of academic years covered by the contract, less a termination fee.
   7. (d) A refund shall not be less than the prepaid tuition amount.

4. (4) Refunds under the provisions of subrule (3) of this rule shall be made according to the following schedule:

   1. (a) For a refund for a termination pursuant to the provisions of subrule (2)(a) or (e)(iii) of this rule, the refund amount shall be made to the higher education institution to which it is directed in payments equal to the tuition charges of the higher education institution. However, the total amount transferred to higher education institutions shall not be more than the maximum refund due under the provisions of subrule (3)(a) or (d) of this rule. Any refund amount determined pursuant to the provisions of subrule (3)(a) or (d) of this rule which has not been paid to a higher education institution and is remaining on August 15 of the fourth year following the last full academic year before the refund commences shall be refunded to the person specified in the contract.
   2. (b) For a refund regarding a termination pursuant to the provisions of subrule (2)(b), (c), (e)(i) or (ii), or (f) of this rule, the refund shall be made in 4 annual installments. Each annual installment shall be paid directly to the higher education institution as necessary to pay tuition charges, not including mandatory fees, of the higher education institution or, if the annual installment is made pursuant to the provisions of subrule (2)(b), (c), (e)(i) or (ii), or (f) of this rule, to other than a higher education institution, the annual installment shall be paid not later than August 15 of each year to the person specified in the contract. Any remaining annual installment amount in excess of the tuition charges, not including mandatory fees, for the academic year shall be returned at the end of the academic year to the person specified in the contract. For refunds under the provisions of this subdivision, any refund amount pursuant to the provisions of subrule (3)(d) of this rule which is remaining on August 15 of the fourth year following the last full academic year before the refund commences shall be refunded to the person specified in the contract.
   3. (c) For a refund for a termination pursuant to the provisions of subrule (2)(d) of this rule, a lump-sum refund shall be paid within 60 days after the trust's approval of the requested termination.
5. (5) If educational benefits have been received under the contract before the contract is terminated, the refund pursuant to subrule (3) of this rule shall be reduced by the amount transferred to a public educational institution to pay for tuition charges for the beneficiary. If the contract is terminated for a reason set forth in subrule (2)(b), (c), (e)(i) or (ii), or (f) of this rule, the reduction shall be made in equal amounts against each annual installment.
6. (6) If a contract is paid for, in whole or in part, from the proceeds of a secured loan and the trust is required to pay a refund because the contract is terminated due to the death or disability of the beneficiary, termination by the trust for fraud, or termination by the trust due to actuarial unsoundness, the refund shall be reduced by the amounts required to pay off the secured loan, any early withdrawal fee, and the trust's expenses for processing payment on the secured loan.
7. (7) A beneficiary who requests a refund pursuant to a termination under the provisions of subrule (2)(a), (b), (c), (e), or (f) of this rule shall give the trust written notice by July 15 before the academic year in which the refund payments are to commence. The notice shall be received or postmarked by July 15 or the trust may postpone the commencement of the refund.

History: 1992 AACS.