Deposit Restricted Qualified Tuition Programs Act of 2010

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.

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.

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.

Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.

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.

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.

Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.