1. (a) Intent to satisfy tax exempt requirements. This subchapter, the savings plan, each savings trust agreement, and each savings trust account hereunder are intended to satisfy all requirements of:

   1. (1) Internal Revenue Code of 1986, §529, as amended, and regulations thereunder; and
   2. (2) federal securities laws.
2. (b) Media for making payments to savings trust accounts. Any payment of an amount due to a savings trust account under a savings trust agreement must be made in cash or by electronic funds transfer.

3. (c) Excess contributions prohibited.

   1. (1) The owner of a savings trust account may not contribute to the account any sum that would cause the balance of the account to exceed the amount that is required to pay the qualified higher education expenses of the beneficiary of the account. Contributions to a savings trust account may not be made if, as a result thereof, the balance of the savings trust account would exceed the sum of four times the cost of one year of undergraduate tuition, fees, books, supplies, and room and board at the most expensive educational institution that is eligible for the savings plan, and three times the cost of one year of graduate school tuition, fees, books, supplies, and room and board at the most expensive graduate school that is eligible for the savings plan, which amount will be determined and published annually by the board. Contributions to a savings trust account shall be limited to the amount, if any, by which the foregoing sum exceeds the balance of that savings trust account (together with the balance of all other savings trust accounts that are maintained under the savings plan for the beneficiary of that savings trust account). Any contribution that exceeds that limit will be promptly refunded, without interest or earnings, to the account's owner.
   2. (2) A plan manager shall monitor contributions to each savings trust account that is in the manager's custody, to ensure compliance with any applicable limits on contributions.
   3. (3) In application of these rules, the plan manager must determine whether the beneficiary of a savings trust account is the beneficiary of any other qualified tuition program under Internal Revenue Code of 1986, §529, as amended, that is maintained by the state, and must enforce the foregoing limitation on contributions by incorporating all other such accounts into calculations of allowed contributions.
4. (d) Separate accountings. A plan manager shall maintain a separate accounting for each savings trust account in the manager's custody.

5. (e) Investment and earnings control prohibited. Except as provided in §7.106(f) of this title (relating to investment alternatives), neither the owner of a savings trust account nor the beneficiary of that account may control or direct the investment of:

   1. (1) the principal of the account; or
   2. (2) any earnings of the account.

6. (f) Pledge of interest as security prohibited. Neither the owner of a savings trust account nor the beneficiary of that account may:

   1. (1) assign any interest in the account for the benefit of a creditor;
   2. (2) use any interest in the account as security or collateral for a loan or other obligation; or
   3. (3) otherwise alienate, sell, transfer, assign, pledge, encumber, or charge any interest in the account.

7. (g) Reports. A plan manager shall make reports that are required by:

   1. (1) Internal Revenue Code of 1986, §529, as amended; and
   2. (2) any other applicable tax law.

8. (h) Policies and procedures. Except where in conflict with Education Code, Chapter 54, Subchapter G, or this subchapter, the board may adopt any policy or procedure, and such policy or procedure automatically amends each outstanding savings trust agreement as necessary for:

   1. (1) the savings plan to obtain or maintain qualification as a qualified tuition program under Internal Revenue Code of 1986, §529, as amended;
   2. (2) owners and beneficiaries to obtain or maintain the federal income tax benefits or favorable treatment that is provided by Internal Revenue Code of 1986, §529, as amended; or
   3. (3) the savings plan to obtain or maintain exemption from registration under federal securities laws.

Source Note:The provisions of this §7.103 adopted to be effective July 14, 2002, 27 TexReg 6044.