KRS 164A.701: Commonwealth postsecondary education prepaid tuition trust fund --

Prepaid postsecondary tuition administrative account.

(1) (a) There is hereby created an instrumentality of the Commonwealth to be known

as the "Commonwealth postsecondary education prepaid tuition trust fund", to

be governed by the board and administered by the Tuition Account Program

Office. The fund shall be attached to the Kentucky Higher Education

Assistance Authority for administrative and reporting purposes, and shall be

governed, managed, and administered as a separate and distinct

instrumentality of the Commonwealth under the provisions of KRS 164A.700

to 164A.709.

(b) The fund shall consist of payments received from prepaid tuition contracts

under KRS 164A.700 to 164A.7 09. Payments received relating to contracts in

existence on April 25, 2006, and income earned from the investment of those

payments shall be maintained separately from payments received relating to

contracts entered into after April 25, 2006, and income ea rned from the

investment of those payments. Income earned from the investment of

payments to the fund shall remain in the fund and be credited to it.

(c) Notwithstanding any other statute to the contrary, all moneys received under

the authority of KRS 164A.700 to 164A.709 shall be deemed to be trust funds

to be held and applied solely for payment to qualified beneficiaries and

purchasers and to meet the expenses necessary for the administration and

maintenance of the fund as provided in KRS 164A.700 to 164A.709.

(d) The fund shall not constitute an investment company as defined in KRS

291.010.

(e) Obligations under a prepaid tuition contract incurred in accordance with the

provisions of KRS 164A.700 to 164A.709 shall not be deemed to constitute a

debt, liabi lity, or obligation of the Kentucky Higher Education Assistance

Authority, but shall be payable solely from the fund. Each prepaid tuition

contract shall contain a statement that the obligation shall be payable solely

from the fund.

(2) The purposes of the fund are:

(a) To provide affordable access to participating institutions for the qualified

beneficiaries; and

(b) To provide students and their parents economic protection against rising

tuition costs.

(3) The Tuition Account Program Office and the facili ties of the Kentucky Higher

Education Assistance Authority shall be used and employed in the administration of

the fund including, but not limited to, the keeping of records, the employment of

staff to assist in the administration of the fund, the manageme nt of accounts and

other investments, the transfer of funds, and the safekeeping of securities

evidencing investments.

(4) (a) Assets of the fund shall be invested in any of the following security types that

are deemed appropriate by the board:

1. Government and agency bonds;

2. Investment grade asset-backed securities and corporate bonds;

3. Mortgages, excluding interest -only (IO), principal -only (PO), and

inverse floaters; and

4. Equities.

(b) Equities shall constitute no greater than sixty percent (60%) of the entire

portfolio, including up to ten percent (10%) in equities from outside the

United States.

(c) The duration of the fixed -income portion of the portfolio shall reflect the

future liability of the fund for tuition payments.

(d) Assets may be pooled for investment purposes with any other investment of

the Commonwealth that is eligible for asset pooling.

(e) Leveraging is strictly prohibited.

(5) The board may receive and deposit into the fun d gifts made by any individual or

agency as deemed acceptable by the board together with funds that are obtained

from sources legally available and determined by the board to be applicable for the

purposes of KRS 164A.700 to 164A.709.

(6) There is created a separate account within the Kentucky Higher Education

Assistance Authority to be known as the prepaid postsecondary tuition

administrative account for the purposes of implementing and maintaining the fund.

(a) Moneys shall be transferred from the fund to the administrative account to

meet the expenses necessary for the administration and maintenance of the

fund. Expenses incurred by the board and the Tuition Account Program Office

in carrying out the provisions of KRS 164A.700 to 164A.709 shall be made

payable from the fund through the administrative account, and no

administrative expenses shall be incurred by the Kentucky Higher Education

Assistance Authority beyond those for which moneys are provided by the

fund.

(b) The board may establish administrativ e fees for handling prepaid tuition

contracts and deposit the funds attributable to the fees in the administrative

account.