Any participant may cancel a participation agreement at will. The board shall impose a penalty equal to or greater than ten percent of the earnings of an account for any distribution that is not:

1. (1) Used exclusively for qualified higher education expenses of the designated beneficiary;
2. (2) Made because of death or disability of the designated beneficiary;
3. (3) Made because of the receipt of scholarship by the designated beneficiary;
4. (4) A rollover distribution, as defined in Section 529(c)(3)(C)(i) of the Internal Revenue Code; or
5. (5) Held in the fund for the minimum length of time established by the board.

(L. 2004 H.B. 959 § 166.530)