Section R7-3-505. Account Balance Limitations

A.       For each designated beneficiary, the balance in all qualified tuition programs, as defined in § 529 of the Code, shall not exceed the lesser of:

1.        The product (rounded down to the nearest multiple of

$1000) of 7 and the average one year’s undergraduate tuition, fees, room and board at the ten independent four

year eligible educational institutions as measured and last published by the College Board’s Independent College 500 Index that have the largest total direct charges. For purposes of this subsection, “total direct charges” means the charges determined for each eligible educational insti- tution by multiplying the eligible educational institution’s undergraduate enrollment by the reported tuition, fees, room and board for an on-campus student at the eligible educational institution; or

2.        The cost in current dollars of qualified higher education expenses the account owner reasonably anticipates the designated beneficiary will incur.

B.       No person shall make any contribution to a qualified tuition program during an account year that would cause the sum of the account balances in all qualified tuition programs of the designated beneficiary as of the first day of the account year plus contributions made during the account year less with- drawals during the account year to or from any such account to exceed the maximum allowable balance set forth in subsection (A). Any excess contributions with respect to a designated beneficiary shall be promptly withdrawn as a non-qualified withdrawal or transferred to another account in accordance with A.R.S. § 15-1875(F).

C.       No financial institution shall accept for deposit in any account a contribution if the contribution would cause the sum of the values (as of the beginning of an account year) of all qualified tuition programs of the designated beneficiary that are man- aged by  the financial institution  and  contributions to  such accounts less withdrawals from such accounts during the account year to exceed the maximum allowable balance set forth in subsection (A).

D.       Each year, the Commission shall review the amounts set forth in subsection (A).

E.       Persons making a contribution to an account shall certify that as to the account’s designated beneficiary, and to the best of the contributor’s knowledge, the contribution shall not cause the balances in all qualified tuition programs to exceed the account balance limitations described in subsection (A).

F.       If the Commission determines that contributions have been made to program accounts in violation of subsection (B) or (C), it shall notify the designated beneficiary and the account owners of all accounts of such designated beneficiary. The account owners shall have 60 days after receipt of such notice to reduce the balances of the qualified tuition programs through distributions and/or changes in beneficiaries to a level less than or equal to the maximum account balance described in subsection (A). If the balances are not appropriately reduced, the Commission will disqualify such accounts in reverse order of their date of opening until the sum of the bal- ances in the accounts does not exceed the maximum allowable balance set forth in subsection (A). This subsection shall not apply to any contribution made at a time when such contribu- tions did not cause the account balance limits to be exceeded.

Historical Note

Adopted effective October 31, 1997, under an exemption from the Administrative Procedure Act pursuant to

A.R.S. § 15-1852(C) (Supp. 97-4). Section repealed; new Section adopted effective December 21, 1998, under an exemption from the Administrative Procedure Act pursu-

ant to A.R.S. § 15-1852(C) (Supp. 98-4). Amended by exempt rulemaking at 6 A.A.R. 917, effective February 10, 2000 (Supp. 00-1). Amended by exempt rulemaking

at 7 A.A.R. 5699, effective November 26, 2001 (Supp.

01-4). Amended by exempt rulemaking at 9 A.A.R. 3886,

effective August 14, 2003 (Supp. 03-3).