SB 947

401Kids savings program

This bill creates the 401Kids Savings Program and requires the Department of

Employee Trust Funds (ETF) to establish and administer the program or to select

a vendor to administer the program.

The bill provides several ways of establishing a 401Kids savings account. First,

the bill requires the state registrar to submit to ETF a copy of the record of birth for

each child born in Wisconsin on or after the effective date of the bill and requires ETF

to establish a 401Kids savings account for the child, with the child designated as the

account beneficiary and each parent identified in the record of birth designated as

an account owner. Second, the bill requires each court order granting an adoption

of a minor in Wisconsin on or after the effective date of the bill to be submitted to ETF

and requires ETF to establish a 401Kids savings account for the child, with the child

designated as the account beneficiary and each parent identified in the court order

designated as an account owner. Third, any other person may establish a 401Kids

savings account by making application for the account, designating an individual

who is a minor as the account beneficiary, and making an initial contribution to the

account. If ETF establishes a 401Kids savings account based on the receipt of a birth

record or adoption order for the account beneficiary, ETF must deposit $25 into the

account. When an account beneficiary reaches 18 years of age, the account

beneficiary becomes the only account owner.

Under the bill, after ETF establishes the account, the account beneficiary,

account owner, or any person authorized by the account beneficiary or account owner

may contribute to the account. Distributions from an account may be used only to

pay for a “qualified expense,” which is defined as any of the following: 1) any cost

incurred by an account beneficiary in connection with the account beneficiary

attending an institution of higher education or receiving any postsecondary training;

2) any cost incurred by an account beneficiary in connection with the account

beneficiary purchasing the account beneficiary's first home; 3) a medical emergency

of the account beneficiary; or 4) any cost incurred by an account beneficiary during

the account beneficiary's retirement relating to housing, food, clothing, health care,

transportation, or other household needs. The department may terminate an

account under certain circumstances, including if the account balance is $0, the

account beneficiary dies, or there has been no activity on the account for a period of

10 years. If the department terminates an account, the department must distribute

the account balance to the account owner or the account owner's estate. If the

department contributed to an account, the account owner must repay the full amount

of all state contributions if the account beneficiary is not a resident of this state at

the time of any distribution from the account.

The bill imposes certain duties on ETF, including establishing investment

guidelines for 401Kids savings accounts. The bill also requires the department to