Deposit Restricted Qualified Tuition Programs Act Of 2009
Floor Speech
Mr. CLEAVER. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4178) to amend the Federal Deposit Insurance Act to provide for deposit restricted qualified tuition programs, and for other purposes, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 4178
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Deposit Restricted Qualified Tuition Programs Act of 2009''.
SEC. 2. DEPOSIT RESTRICTED QUALIFIED TUITION PROGRAMS.
Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is amended by adding at the end the following new subsection:
``(y) Deposit Restricted Qualified Tuition Programs.--
``(1) DEFINITIONS.--For purposes of this subsection, the following definitions shall apply:
``(A) DEPOSIT RESTRICTED QUALIFIED TUITION PROGRAM.--The term `deposit restricted qualified tuition program' means a qualified tuition program in which--
``(i) the cash provided by a contributor to such a qualified tuition program may be invested only in deposits insured by the Corporation;
``(ii) the contributor may become a participant in the program by depositing funds through the program into an account at a depository institution participating in the program; and
``(iii) the program may include multiple depository institutions, subject to the requirements of section 529 of the Internal Revenue Code of 1986, as amended.
``(B) QUALIFIED TUITION PROGRAM.--The term `qualified tuition program' has the same meaning as in section 529 of the Internal Revenue Code of 1986, as amended.
``(2) TREATMENT.--Notwithstanding any other provision of the law, the following provisions shall apply with respect to any deposit restricted qualified tuition program:
``(A) A deposit restricted qualified tuition program shall be deemed to be an `identified banking product' (as defined in Section 206 of the Gramm-Leach-Bliley Act of 1999) for purposes of the Securities Exchange Act of 1934.
``(B) None of the following shall be treated as a security, as defined in section 2(a)(1) the Securities Act of 1933, section 3(a)(10) of the Securities Exchange Act of 1934, or section 2(a)(36) of the Investment Company Act of 1940:
``(i) The deposits of cash at an insured depository institution relating to a deposit restricted tuition program.
``(ii) Any certificate of deposit or other instrument of an insured depository institution evidencing any such deposit.
``(iii) The rights and obligations of participants in a deposit restricted qualified tuition program arising from section 529 of the Internal Revenue Code, as amended.
``(C) In no event shall a deposit restricted qualified tuition program, the State entity designated by statute to oversee such program, the administrator appointed to operate the program on behalf of the State or a participating depository institution, be deemed to be an issuer of a security or to be an investment company (as defined in section 3(a) of the Investment Company Act of 1940).''.
SEC. 3. BUDGET COMPLIANCE.
The budgetary effects of this Act, for the purpose of complying with the Statutory Pay-As-You-Go Act of 2010, shall be determined by reference to the latest statement titled ``Budgetary Effects of PAYGO Legislation'' for this Act, submitted for printing in the Congressional Record by the Chairman of the Committee on the Budget of the House of Representatives, provided that such statement has been submitted prior to the vote on passage.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from Missouri (Mr. Cleaver) and the gentlewoman from Illinois (Mrs. Biggert) each will control 20 minutes.
The Chair recognizes the gentleman from Missouri.
GENERAL LEAVE
Mr. CLEAVER. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks on this legislation and to insert extraneous material thereon.
The SPEAKER pro tempore. Is there objection to the request of the gentleman from Missouri?
There was no objection.
Mr. CLEAVER. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, today we are taking up H.R. 4178, the Deposit Restricted Qualified Tuition Programs Act of 2009. This bill establishes an avenue for those wanting to save for the college education of a child, grandchild, or other related individual, to do so in a Federal Deposit Insurance Corporation, FDIC-insured, deposit.
At the present time, savers can only access the 529 College Savings Program through a securities-based plan, and my bill would not change this avenue. However, following the recent crash of the stock market, many savers saw their accounts drop in value by 50 percent or more, and as such, are reluctant to place any more money in a securities-based plan. Furthermore, many small savers can find investing in securities-based products both complex and intimidating. An FDIC-insured deposit option would provide guaranteed principal return and a guaranteed return on the deposit, all from a commercial bank with which the saver likely has a relationship.
This proposed legislation will help families across the United States save in a safe, sound, and simple manner for their children and grandchildren's college education. This bill does not make any changes to the current 529 College Savings Program nor the current delivery system of the program through a securities-based plan, nor the tax treatment of the 529 plans. It simply adds another 529 College Savings Program delivery option through an FDIC-insured deposit.
This is a bipartisan bill. It has both the chairman and the ranking Republican member of the House Financial Services Committee as cosponsors, among other Republicans and Democrats. At a time when our Nation is concerned about congressional quarreling based on political party affiliation, it is refreshing that both parties can support this bill.
Currently, section 529 programs are established and maintained by the States, who in turn generally contract out with securities firms and others to administer the programs. Investors may go through a State agency to invest in a 529 or, in many cases, through a securities dealer. Many States typically offer a number of investment options or portfolios, including ones that minimize the potential loss of invested principal. The bill is intended to encourage States to offer, among the options they provide investors, deposit-restricted qualified tuition programs.
The bill will not be independent of, nor compete with, the current State programs. In order to qualify as a 529 program under section 529 of the Internal Revenue Code, the program must be established and maintained by a State. Therefore, this program would be a State program, and the laws of the various States would have to be adapted to establish such a program.
In my home State of Missouri, the law which has already been adopted establishes a deposit-only program as separate from the securities-based program. The State would still generally hire a third party to administer the program. The third party could be the same one that manages the securities program or it could be a different third party. I do have a letter of support from our State Treasurer asking that this bill be approved.
H.R. 4178 does not create a State program. The bill is intended to provide States another option to offer investors this deposit-restricted qualified tuition program.
Total 529 savings plans assets were $117 billion at the end of the fourth quarter of 2009, reflecting a 6 percent increase from third quarter 2009 assets of $110.5 billion.
My office asked the FDIC for statistical information on 529 plans and deposit insurance programs. The FDIC provided the following information: ``Currently seven States offer 529 plans that include an option to invest in an insured deposit either as part of a broader investment strategy or as a sole investment. All of these plans are open to nonresidents, although the Ohio plan requires nonresidents to go through a broker to access the plan. Two of the States have offered the insured deposit option since 1998. Three of the States recently added the insured deposit option to their plans. States offering an insured deposit investment option are Arizona, Colorado, Montana, Ohio, Utah, Virginia, and Wisconsin. Information gathered from five of these States indicates that at the end of 2009, there was approximately $670 million invested in FDIC-insured deposit options of their plans. For these States approximately $207 million was added to the FDIC-insured option in 2009. Three of the responding States were able to identify whether the funds invested in their FDIC-insured option represented new money or a transfer of funds from another option in an already established 529 plan. For these States approximately 47 percent of the funds placed in the FDIC-insured option in 2009 were transferred from other 529 options, representing approximately $82 million of the approximately $173 million added to the FDIC-insured option in these States.''
Additionally, the FDIC has already said they will insure 529 deposited accounts at the regular insured rate of $250,000, which we raised. The Congressional Budget Office and the Joint Committee on Taxation have completed the review of the budgetary impact of H.R. 4178, the Deposit Restricted Qualified Tuition Programs Act of 2009. They determined that by enacting this legislation, it would affect revenues but estimate that the reduction in revenues would not be significant over the 2010-2020 period. Similarly, implementing the bill could affect direct spending, but the net impact of such spending would be negligible over the next 10 years.
Mr. Speaker, in particular I would like to congratulate the Missouri Bankers Association president, Max Cook, for bringing this needed bill to my attention. The Missouri Bankers Association moved a bill in the Missouri legislature several years ago to allow the FDIC-insured 529 deposit accounts because they thought it would be helpful to Missouri college students and parents who were saving for them.
For the RECORD, I would like to submit records of support from the Missouri Bankers Association, the Missouri Independent Bankers Association, the Office of the Missouri State Treasurer, the Independent Community Bankers Association, and the American Bankers Association. Although the support letters are written in support of H.R. 3599, H.R. 4178 is identical to H.R. 3599 except for some small technical changes and more cosponsors.
I am pleased this Congress will address H.R. 4178 and move the legislation forward. This is a bill all Members can support. I strongly urge all Members to vote for H.R. 4178.
MISSOURI BANKERS ASSOCIATION,
Jefferson City, MO, Nov. 3, 2009.
Hon. EMANUEL CLEAVER II,
House of Representatives,
Washington, DC.
Dear Representative Cleaver: I am writing today on behalf of the three hundred twenty-five Missouri Bankers Association member banks and savings and loans to express our exuberant support for H.R. 3599, The Deposit Restricted Qualified Tuition Programs Act of 2009.
As you know, this legislation establishes a means for thousands and thousands of Americans wanting to save for the college education of a child, grandchild or other related person and to do so in a Federal Deposit Insurance Corporation (FDIC) insured deposit. At the present time, savers can only access the 529 college savings program through a securities based plan. This legislation leaves that in place and adds the FDIC insured deposit option.
After the recent crash of the stock market, many savers saw their 529 accounts drop in value by as much as fifty percent or more and as such are reluctant to place any more monies in a securities based plan. Furthermore, many small savers can find investing in securities based products both complex and intimidating. A FDIC insured deposit option would provide guaranteed principal return and a guaranteed return on the deposit, all from a commercial bank that the saver likely has a relationship with. This proposed legislation will help families across the United States save in a safe, sound and simple manner for their children and grandchildren's college education.
We sincerely thank you for your sponsorship of this legislation and look forward to its swift passage in the House.
Sincerely,
Max Cook,
President and CEO.
--
November 2, 2009.
Hon. Emanuel Cleaver,
House of Representatives,
Washington, DC.
Dear Representative Cleaver: It was a pleasure meeting with you in Kansas City on October 13. We appreciate your interest in all subjects pertaining to community banking, and we thank you for your efforts on their behalf. We also commend your efforts in the passing of H.R. 3599, the Deposit Restricted Qualified Tuition Programs Act of 2009, which the House of Representatives will take up this week. The Missouri Independent Bankers Association, like our national affiliate, the Independent Community Bankers of America (ICBA), support H.R. 3599 and look forward to its successful passage.
We strongly support your effort to allow more banks to better assist families saving for college through the popular 529 program. H.R. 3599 would allow an avenue for consumers wanting to save for the college education of a child, grandchild or other related individual, to do so in a Federal Deposit Insurance Corporation (FDIC) insured deposit. At the present time, consumers can only access the 529 college savings program through a securities based plan. This bill would not affect those individuals that want to continue to use a securities based plan.
Due to the distressed economy and equity markets, many consumers saw their savings drop in value. These consumers should have full access to a safe FDIC insured deposit option for their education savings through their local banks. ICBA supports H.R. 3599 because it gives community bank customers both increased options and peace of mind that their savings will be protected by FDIC insurance.
Thank you very much for your leadership on this proposal. We urge all members of the House to vote yes on H.R. 3599.
Sincerely,
Jerry Sage,
Executive Director.
--
OFFICE OF THE MISSOURI
STATE TREASURER,
Jefferson City, MO, November 19, 2009.
Hon. Emanuel Cleaver II,
House of Representatives,
Washington, DC.
Dear Congressman Cleaver: I am writing to you to express my support for H.R. 3599, the Deposit Restricted Qualified Tuition Programs Act of 2009.
As you know, this legislation is important to families wishing to save for college. It would provide, for the first time on a broad basis, for certificates of deposit and other savings products insured by the Federal Deposit Insurance Corporation (FDIC) to help families save on a tax-free basis for college expenses. This is tremendously important for promoting higher education, and is consistent with the goals of the White House Task Force on Middle Class Families headed by Vice President Biden. That task force is responsible for making recommendations on how to make college more accessible and affordable for lower- and middle-class families. Providing FDIC-insured investment options is a clear cut way to doing so.
Furthermore, H.R. 3599 would greatly expand the use of FDIC-insured 529-qualified savings products because it would make it easier for community banks across the country to offer them. Presently, only a few states offer a bank product within their 529 plans and due to current regulations, these products are primarily offered by only a few larger institutions. By extending the use of 529-qualified savings products to a greater number of banks, I believe this product will reach new groups of investors that previously have been reluctant to invest in securities-dominated 529 investment options. Additionally, the legislation would provide for a no-risk investment option for current 529 investors, something I believe is needed and will spur additional savings.
I appreciate your sponsorship of this important legislation, and am willing to help you in any way to secure its passage.
Sincerely,
Clint Zweifel.
INDEPENDENT COMMUNITY BANKERS
OF AMERICA,
Washington, DC, November 2, 2009.
Hon. Emanuel Cleaver,
House of Representatives,
Washington, DC.
Dear Representative Cleaver: On behalf of the Independent Community Bankers of America (ICBA) and the 5,000 community banks that we represent around the nation, we want to thank you for your leadership on H.R. 3599, the Deposit Restricted Qualified Tuition Programs Act of 2009, which the House of Representatives will take up this week.
We strongly support your effort to allow more banks to better assist families saving for college through the popular 529 program. H.R. 3599 would allow an avenue for consumers wanting to save for the college education of a child, grandchild or other related individual, to do so in a Federal Deposit Insurance Corporation (FDIC) insured deposit. At the present time, consumers can only access the 529 college savings program through a securities based plan. This bill would not affect those individuals that want to continue to use a securities based plan.
Due to the distressed economy and equity markets, many consumers saw their savings drop in value. These consumers should have full access to a safe FDIC insured deposit option for their education savings through their local banks. ICBA supports H.R. 3599 because it gives community bank customers both increased options and peace of mind that their savings will be protected by FDIC insurance.
Thank you very much for your leadership on this proposal. We urge all members of the House to vote yes on H.R. 3599.
Sincerely,
Camden R. Fine,
President and CEO.
--
AMERICAN BANKERS ASSOCIATION,
Washington, DC, November 4, 2009.
Hon. Barney Frank,
Chairman, Committee on Financial Services, House of Representatives, Washington, DC.
Hon. Emanuel Cleaver II,
House of Representatives,
Washington, DC.
Dear Chairman Frank and Representative Cleaver: On behalf of the members of the American Bankers Association (ABA), I am writing in strong support of H.R. 3599, the Deposit Restricted Qualified Tuition Programs Act of 2009. The legislation would provide families the opportunity to save for college tuition and other education expenses using deposits insured by the Federal Deposit Insurance Corporation (FDIC). Designed after 529 plans, the Deposit Restricted Qualified Tuition Program is a safe and secure way to protect education contributions up to $250,000.
Under H.R. 3599, contributions to the Program would be banking products, and not securities. Traditionally, 529 plans, while widely available, have primarily been used by higher-income investors. By making the education tuition savings program available through insured deposits, lower and middle income families will have a greater opportunity to plan for the future of their children. Moreover, the change would increase deposit activity in our nation's banks, particularly smaller community banks.
FDIC-insured banking deposits can be a safe alternative to investments made through the financial markets. H.R. 3599 would protect the future education of American families while also strengthening the banking system.
We look forward to working with you to have H.R. 3599 enacted into law as quickly as possible.
Sincerely,
Floyd E. Stoner.
I reserve the balance of my time.
Mrs. BIGGERT. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise today to express my strong support for H.R. 4178 and to commend the sponsor of this measure, the gentleman from Missouri (Mr. Cleaver), for his thoughtful efforts to encourage Americans to save for their children's college education.
529 plans have been around for many years and have become common vehicles for saving and investment; however, given recent market volatility, some families are understandably hesitant to save in these securities-based plans. Therefore, for the first time, H.R. 4178 provides an option for States to expand their 529 programs. The bill allows community banks, which are FDIC-insured institutions, to directly offer consumers a college savings plan. At the same time, savers in these new deposit-based plans will be able to benefit from all of the traditional tax incentives of existing securities-based 529s.
As an added benefit, this legislation will protect accounts under the FDIC's insurance fund up to $250,000 per account. For those families seeking lower-risk alternatives, the FDIC-insured college savings plan would provide a guaranteed return. By expanding the options available to those saving for an education, this simple step will help more families prepare for their children's future and provide added financial security in today's difficult economic climate.
Again, I thank Mr. Cleaver and his staff for their hard work on this bipartisan measure, and I urge my colleagues to support it.
Ms. JACKSON LEE of Texas. Mr. Speaker, today I rise in support of H.R. 4178--The Deposit Restricted Qualified Tuition Programs Act. As co-chair of the Congressional Children's Caucus, I support this legislation because I believe that it is an important measure to help families pay for higher education. A quality education continues to be the best pathway to social and economic mobility in this country, and this legislation will enable such paths. I want to thank my colleague, Emanuel Cleaver, for introducing this important legislation.
Today, Americans are simultaneously faced with rising higher education costs and a difficult economy. Families across Texas are sending their children to college and when they graduate, they should not be saddled with debt. Democrats pledged to make a college education more affordable, and this legislation makes good on our promise. This legislation is evidence that the Democratic-led Congress is committed to working on a bipartisan basis, and with this President, to address the key concerns of America's families.
During these tough economic times, many Americans saving for college saw their accounts drop over 50 percent in value and are now reluctant to invest in a securities-based plan. During the past year, many parents who contributed to a 529 college savings plan--an investment vehicle where earnings grow tax free--saw those savings take a hit. Many 529 plans were heavily invested in stocks, though their beneficiaries were just a few years away from attending college. This is a big blow to the 63 percent of parents who are saving for college expenses, according to a September 2009 Fidelity survey, and who must now manage a wide array of expenses with less money and security.
H.R. 4178 establishes an avenue for those wanting to save for the college education of a child, grandchild or other related individual, in a Federal Deposit Insurance Corporation, FDIC, insured deposit. Today, savers can only access the 529 college savings program through a securities-based plan, and this plan would offer another option. H.R. 4178 amends the Federal Deposit Insurance Act to prescribe requirements for deposit restricted qualified tuition programs which are exempt from Federal income tax. It also declares that in no event shall a deposit restricted qualified tuition program, the State entity designated by statute to oversee such program, or the administrator appointed to operate it on behalf of the State or a participating depository institution, be deemed to be an issuer of a security or an investment company. This bill does not make any changes to the current 529 college savings program nor the current delivery system of the program through a securities based plan. It simply adds another 529 college savings program delivery option through an FDIC insured deposit.
The Congressional Budget Office and the Joint Committee on Tax have completed a review of the budgetary impact of H.R. 4178, the Deposit Restricted Qualified Tuition Programs Act of 2009. They determined that by enacting this legislation it would affect revenues, but estimate that the reduction in revenues would not be significant over the 2010-2020 period. Similarly, implementing the bill could affect direct spending but the net impact of such spending would be negligible over the next 10 years.
Mrs. BIGGERT. Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.
Mr. CLEAVER. Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the gentleman from Missouri (Mr. Cleaver) that the House suspend the rules and pass the bill, H.R. 4178, as amended.
The question was taken; and (two-thirds being in the affirmative) the rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
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