Creating a 401Kids savings program and the 401Kids savings program trust fund; granting rule-making authority; and making an appropriation. (FE)

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 conduct public outreach and fundraising to generate donations for the 401Kids savings program. The department must develop a plan that allows the department, after the program is fully operational, to devote revenues generated under the program to fund the establishment of future accounts. The bill also authorizes the department to enter into contracts for professional services to assist in administering and evaluating the program. The department may promulgate rules to implement and administer the program. Also under the bill, the department may charge reasonable fees to account owners to repay the general fund for costs related to establishing the program.

The bill allows ETF to select a vendor to administer the program using a competitive proposal process. If ETF elects to contract with a vendor, the contract between ETF and the vendor must require the vendor to reimburse the state for the state's administrative costs for the program; select an accounting firm to annually audit the program; and provide a quarterly account statement to each account owner.

The bill also creates a segregated fund designated the 401Kids savings program trust fund, which consists of revenue from account enrollment fees and account contributions, revenue from distributions and fees paid by the vendor, account owner repayments of board contributions, and fees for repayment to the general fund for initial costs to establish the program. This trust fund is managed by the State of Wisconsin Investment Board but is subject to guidelines established by the board.

However, SWIB's investment management duty excludes any funds under the management and control of a vendor selected by ETF.

The bill directs the Department of Revenue to establish a program under which taxpayers may direct that a portion of their tax refund be contributed to a 401Kids savings account.