Nevada Administrative Code Chapter 353B - College Savings Plans of Nevada
Overview: NAC Chapter 353B — College Savings Plans of Nevada
NAC Chapter 353B governs the administration and operation of College Savings Plans of Nevada, which are state-sponsored investment programs designed to help families save for higher education expenses in a tax-advantaged manner. These plans typically include 529 savings plans, allowing contributions to grow tax-free if used for qualified education expenses.
The rules in this chapter establish the framework for managing these plans, outlining investment options, eligibility, account administration, and disclosure requirements.
Key Provisions of NAC Chapter 353B
1. Establishment and Administration
The rules provide for the establishment of the College Savings Plans by the state.
The Nevada State Treasurer or a designated authority administers the plans.
Investment managers or program managers may be contracted to handle plan operations.
2. Eligible Participants
Any Nevada resident, and often non-residents, may open an account.
Accounts may be opened for beneficiaries who are minors or adults intending to pursue higher education.
There are provisions governing account ownership, beneficiary designation, and transfers.
3. Contributions and Limits
Contributions are made by account owners to fund educational expenses.
The NAC may specify maximum contribution limits per beneficiary, consistent with federal limits on 529 plans.
Rules address rollovers, withdrawals, and treatment of excess contributions.
4. Qualified Education Expenses
Funds from the savings plans must be used for qualified expenses such as:
Tuition and fees,
Room and board,
Books and supplies,
Computers and related technology necessary for enrollment or attendance.
5. Investment Options
The plan offers a variety of investment portfolios, ranging from conservative to aggressive.
Participants can select or change their investment options in accordance with the rules.
The NAC outlines restrictions on switching investments and managing risk.
6. Fees and Disclosures
The plan administrators must disclose fees, expenses, risks, and other important information to participants.
Annual reports and statements are provided to account owners detailing account performance.
7. Tax Treatment and Compliance
The plan complies with federal Internal Revenue Code provisions governing 529 plans.
Withdrawals used for qualified expenses are exempt from state and federal income taxes.
Non-qualified withdrawals may be subject to taxes and penalties.
Statutory Authority
The rules derive authority from Nevada Revised Statutes (NRS) Chapter 353B, which authorizes the establishment and administration of college savings plans and grants regulatory powers to implement the program.
Relevant Case Law Principles
Although specific case law directly addressing NAC Chapter 353B may be limited due to the administrative and contractual nature of college savings plans, several legal principles are relevant:
1. Contract and Fiduciary Duties
Administrators and program managers may owe fiduciary duties to account holders and beneficiaries.
Courts may hold administrators liable for breaches of fiduciary duty, such as mismanagement of funds or failure to disclose risks adequately.
2. Compliance with Federal and State Law
Since these plans interact with federal tax laws (especially IRC Section 529), courts ensure that state rules do not conflict with federal requirements.
Cases have addressed conflicts where state tax treatment diverged from federal law, reinforcing preemption principles.
3. Consumer Protection and Disclosure
Courts emphasize the importance of clear disclosures to investors about risks, fees, and terms.
Failure to provide adequate disclosures can lead to claims under consumer protection laws or administrative enforcement actions.
4. Tax Implications and Challenges
Beneficiaries or account holders may challenge tax assessments related to plan withdrawals or contributions.
Courts examine whether withdrawals were used for qualified expenses and whether tax penalties were properly applied.
5. Example Case Concepts (Hypothetical)
Breach of Fiduciary Duty: An account holder alleges that the program manager invested funds imprudently, resulting in losses. The court reviews whether the manager complied with fiduciary standards.
Tax Penalty Dispute: A beneficiary faces a tax penalty for a non-qualified withdrawal and challenges the tax authority’s calculation. The court analyzes plan rules and federal tax law.
Summary
NAC Chapter 353B establishes the regulatory framework for Nevada’s College Savings Plans, including account administration, investment options, contributions, and qualified expenses.
The plans offer tax-advantaged savings opportunities for educational expenses in compliance with federal and state law.
Legal principles involve fiduciary duties of administrators, compliance with tax laws, and consumer protection regarding disclosures.
Courts generally uphold program rules but scrutinize fiduciary conduct and ensure proper application of tax benefits and penalties.
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