3-2-1. No guarantee of principal or earnings; re-
quired statement. Each account contract, account appli-
cation, and account deposit slip, and all promotional ma-
terials for the Kansas postsecondary education savings
program shall contain the following statement or an
equivalent statement approved by the treasurer, in a
typeface and a location that are readily visible: ``NOTICE:
Accounts established under the Kansas Postsecondary
Education Savings Program and their earnings are nei-
ther insured nor guaranteed by the State of Kansas.'' (Au-
thorized by K.S.A. 1999 Supp. 75-644 and 75-647; imple-
menting K.S.A. 1999 Supp. 75-647; effective June 30,
2000.)

3-2-2. Excess contributions. (a)(1) ``Excess contri-
butions'' means contributions on behalf of a designated
beneficiary in excess of the maximum contribution
amount.

 (2)  ``Maximum contribution amount'' means an
amount equal to the average amount of the qualified
higher education expenses that would be incurred by des-
ignated beneficiaries with the same projected year of en-
rollment for five years of study at institutions of post-
secondary education located in the midwest states, as
determined annually by the state treasurer.

 (b)  In accordance with the management agreement, the
program manager shall establish adequate safeguards to
prevent excess contributions. At a minimum, those safe-
guards shall include all of the following:

 (1)  The program manager shall identify all accounts
with the same designated beneficiary.

 (2)  The program manager shall calculate the current,
cumulative contributions for all of the accounts for a des-
ignated beneficiary.

 (3)  When a contribution is forwarded to the program
manager, the program manager shall determine whether
that contribution, when added to current, cumulative
contributions for that designated beneficiary, would ex-
ceed the maximum contribution amount.

 (4)  If the program manager determines that a contri-
bution will result in excess contributions for that desig-
nated beneficiary, the program manager shall deposit
only that portion of the contribution, if any, that will not
result in excess contributions. The program manager shall
return the balance of the contribution to the account
owner.

 (c)  The program manager shall continuously monitor
the current, cumulative contributions in all of the ac-
counts for each designated beneficiary. If at any time the
cumulative contributions in all of the accounts for a given
designated beneficiary exceed the maximum contribution
amount, the program manager shall notify the account
owner of each account creating the excess contributions
that excess contributions have been made on behalf of the
designated beneficiary and that the cumulative contri-
butions for that designated beneficiary must be reduced
below the maximum contribution amount through a non-
qualified withdrawal or a rollover distribution from one
or more of the accounts.

 (d)  If, within 30 days of the date the notice is mailed
to the owner of each account creating the excess contri-
butions, one or more account owners do not submit a
request for a nonqualified withdrawal or rollover distri-
bution in an amount sufficient to eliminate the excess con-
tributions for that designated beneficiary, the program
manager shall process one or more nonqualified with-
drawals in the following manner.

 The program manager shall process a nonqualified
withdrawal from each account creating the excess contri-
butions for that designated beneficiary in an amount
equal to the total excess contributions, adjusted for gain
or loss. The program manager shall return the nonquali-
fied withdrawal to each account owner, minus the pen-
alty provided in K.S.A. 75-646(g), and amendments
thereto. (Authorized by K.S.A. 1999 Supp. 75-644 and 75-
646; implementing K.S.A. 1999 Supp. 75-646; effective
June 30, 2000.)

3-2-3. Withdrawals. (a)(1) Subject to the limitations
in K.S.A. 75-646(q), and amendments thereto, any account
owner may withdraw part or all of the balance from the
owner's account at any time.

 (2)  Any account owner may submit a written request
for a waiver of the limitations established in K.S.A. 75-
646(q), and amendments thereto, in a form prescribed by
the treasurer. The limitations in K.S.A. 75-646(q), and
amendments thereto, may be waived by the treasurer
upon a finding that failure to grant the requested waiver
would create a manifest injustice or undue hardship for
the account owner, designated beneficiary, or both and
that the waiver would not violate any of the provisions
of section 529 of the federal internal revenue code of 1986,
as amended.

 (3)  The decision to grant a requested waiver may be
delegated to the program manager, subject to all of the
following conditions:

 (A)  The circumstances in which the decision to grant a
waiver is delegated to the program manager may be lim-
ited by the treasurer.

 (B)  The program manager shall base the decision to
approve a waiver on the findings required in paragraph
(2) of this subsection.

 (C)  The decision of the program manager may be re-
versed by the treasurer upon a request for review by the
account owner or on the initiative of the treasurer. Each
decision of the treasurer shall be final.

 (b)  Each request for a withdrawal shall be made in the
form prescribed by the treasurer. The request shall in-
clude an identification of the account from which the
withdrawal is to be made, the amount of the request, and
an indication of which of the following types of with-
drawals the account owner intends to make:

 (1)  A qualified withdrawal for qualified higher edu-
cation expenses;

 (2)  a withdrawal made as the result of the death or
disability of the designated beneficiary of the account;

 (3)  a withdrawal made because of a scholarship, or
other allowance or payment recognized under section 529
of the federal internal revenue code of 1986, as amended,
that is received by the designated beneficiary. However,
this withdrawal shall not exceed the amount of the schol-
arship or other allowance or payment;

 (4)  a nonqualified withdrawal subject to the penalty
provided in K.S.A. 75-646(g), and amendments thereto;
or

 (5)  a rollover distribution.

 If the request for a withdrawal does not contain appro-
priate documentation regarding the basis for the with-
drawal, as required by the postsecondary education sav-
ings agreement, the withdrawal shall be treated as a
nonqualified withdrawal.

 (c)  Except as otherwise provided by the postsecondary
education savings agreement, the program manager shall
process each withdrawal upon receipt of a completed
withdrawal request and any required documentation.
(Authorized by K.S.A. 1999 Supp. 75-644 and 75-646; im-
plementing K.S.A. 1999 Supp. 75-646; effective June 30,
2000.)

 Article 4. Low-Income Family Postsecondary Savings Accounts Incentive Program

            K.A.R. 3-4-1.  Definitions.  In addition to the terms and definitions in K.S.A. 75-643 and L. 2006, ch. 189, sec. 3, and amendments thereto, the following terms shall have the meanings specified in this regulation:   

            (a)  “Contribution” means any deposit made by a participant to the participant’s account during a calendar year, except any deposit that is one of the following:

            (1) A rollover from another account in the Kansas postsecondary education savings program;

            (2) a rollover from another state’s qualified tuition program as defined in internal revenue code section 529;

            (3) a transfer from a Coverdell education savings account as defined in internal revenue code section 530; or

            (4)  a transfer of proceeds from a qualified U.S. savings bond as described in internal revenue code section 135(c)(2)(C).  

            (b)  “Household” means a group of individuals who are related by birth, marriage, or adoption and who share a residence.  

            (c) “Participant” has the meaning specified in L. 2006, ch. 189, sec. 3, and amendments thereto.  Each participant shall be an account owner.  Each set of joint account owners shall be treated as one participant, but each joint account owner shall separately meet the program’s eligibility requirements.  (Authorized by and implementing L. 2006, ch. 189, sec. 3; effective, T-3-6-29-06, June 29, 2006; effective P- October 27, 2006.)

            K.A.R. 3-4-2.  Eligibility requirements.  (a) Each applicant shall meet the following requirements:

            (1) Be a resident of the state of Kansas;

            (2) reside in a household with a combined federal adjusted gross income for all individuals residing in the household that is not more than 200 percent of the current federal poverty level; and

            (3) be a taxpayer listed on an income tax return used to verify income and not be claimed as a dependent by another taxpayer. 

            (b) Any individual who files a joint income tax return may apply individually or jointly with the other individual listed on the income tax return if that other individual also meets the program’s eligibility requirements.  (Authorized by and implementing L. 2006, ch. 189, sec. 3; effective, T-3-6-29-06, June 29, 2006; effective P- October 27, 2006.)

 
            K.A.R. 3-4-3.  Applications.  Each application shall be processed in the order received for awarding the number of matching grants authorized by L. 2006, ch. 189, sec. 3, and amendments thereto.  Each application shall be accompanied by a copy of the federal income tax return for the previous tax year for each individual residing in the household who is required to file an income tax return.  (Authorized by and implementing L. 2006, ch. 189, sec. 3; effective T-3-6-29-06, June 29, 2006; effective P- October 27, 2006..)

            K.A.R. 3-4-4.  Eligibility period.  Each participant shall be entitled to a matching grant equal to the amount of the participant’s contributions to the participant’s account or accounts for the calendar year in which the participant’s application is approved. Each participant shall reapply each year to remain eligible for the program. (Authorized by and implementing L. 2006, ch. 189, sec. 3; effective, T-3-6-29-06, June 29, 2006; effective P- October 27, 2006.)

 
            K.A.R. 3-4-5. Matching grant accounts.  The matching grant funds for each participant shall be deposited in a separate account in the participant’s name, with the following restrictions:

            (a)  Only the participant shall be the account owner of the matching grant account.   Joint applicants shall be joint account owners of both their joint account and the corresponding matching grant account.

            (b) No change in ownership of the participant’s account or the corresponding matching grant account shall be allowed, except upon the participant’s death, divorce, or incapacity.

            (c)  Any participant may change the designated beneficiary for that participant’s account or accounts.   However, the designated beneficiary for the matching grant account shall always be the same as the designated beneficiary for the participant’s account. 

            (d)   The investment portfolio for the corresponding matching grant account shall always be the same as the investment portfolio selected for the participant’s account.

            (e)  Each request for a withdrawal from the matching grant account shall be submitted to the treasurer’s office for approval.  If the treasurer determines that the request is for qualified higher education expenses, then the request shall be approved.  Each approved withdrawal from the matching grant account shall be paid either directly to the educational institution or to the participant or the designated beneficiary, upon presentation of documentation acceptable to the treasurer that the participant or designated beneficiary has paid qualified higher education expenses at least equal to the amount of the requested withdrawal. Each approved withdrawal shall be equally funded from the participant’s account and the corresponding matching grant account.  (Authorized by and implementing L. 2006, ch. 189, sec. 3; effective, T-3-6-29-06, June 29, 2006; effective P- October 27, 2006.)

            K.A.R. 3-4-6.   Multiple accounts.  Each participant with multiple accounts shall receive only one matching grant and shall allocate the grant between or among the participant’s corresponding matching grant ac counts.  The portion of the matching grant funds allocated to each corresponding matching grant account shall not exceed the participant’s contributions to each of the participant’s accounts for the applicable calendar year.  (Authorized by and implementing L. 2006, ch. 189, sec. 3; effective, T-3-6-29-06, June 29, 2006; effective P- October 27, 2006.)

            K.A.R. 3-4-7.  Forfeit of matching grant funds.  (a)(1) Except as specified in paragraphs (a)(2) and (a)(3), funds in a participant’s matching grant account shall be forfeited in an amount equal to either of the following:

            (A) Any nonqualified withdrawal from the participant’s account; or

            (B) any rollover distribution to another qualified tuition plan. 

            (2) If any nonqualified withdrawal or rollover distribution closes the participant’s account, the corresponding matching grant account shall be closed and its entire balance shall be forfeited.

            (3) Any participant who contributes more than the $600 maximum matching grant amount may make a nonqualified withdrawal or rollover distribution of the excess contribution without forfeiting funds from the matching grant account. 

            (b)  If the treasurer determines that a participant has made a material misrepresentation on the participant’s application, all matching grant funds resulting from the application shall be forfeited.

            (c)  If a participant’s account ever becomes reportable as unclaimed property under K.S.A. 58-3934 et seq. and amendments thereto or the laws of any other state, the remaining balance in the matching grant account shall be forfeited.

            (d)  All forfeited funds shall be returned to the Kansas postsecondary education savings trust fund.  (Authorized by and implementing L. 2006, ch. 189, sec. 3; effective, T-3-6-29-06, June 29, 2006; effective P- October 27, 2006.)