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Request for Proposal - doc

  1. 1. NEBRASKA STATE TREASURER AND THE NEBRASKA INVESTMENT COUNCIL Request for Proposals INVESTMENT AND ADMINISTRATIVE SERVICES College Savings Plan of Nebraska July 6, 2009
  2. 2. Table of Contents I. INTRODUCTION...............................................................................................................................................3 II. BACKGROUND INFORMATION.......................................................................................................................4 A. TREASURER ........................................................................................................................................................4 B. NEBRASKA COLLEGE SAVINGS PROGRAM........................................................................................................................5 C. THE NEBRASKA INVESTMENT COUNCIL..........................................................................................................................5 D. PLAN STATISTICS..................................................................................................................................................6 III. ANNOUNCEMENT.........................................................................................................................................6 A. RESPONSE SUBMISSION..........................................................................................................................................6 B. CLARIFICATION OF INFORMATION...............................................................................................................................7 C. NO CONTACT.....................................................................................................................................................7 IV. MINIMUM QUALIFICATIONS........................................................................................................................7 V. SCOPE OF WORK – DIRECT PLAN....................................................................................................................8 A. GENERAL REQUIREMENTS AND CONSIDERATIONS..............................................................................................................8 B. FINANCIAL SERVICES............................................................................................................................................11 C. ACCOUNT ADMINISTRATION.....................................................................................................................................12 D. MARKETING......................................................................................................................................................13 E. CUSTOMER SERVICE .............................................................................................................................................14 F. REPORTS..........................................................................................................................................................16 G. TRANSITION......................................................................................................................................................18 VI. SCOPE OF WORK –ADVISOR PLAN...............................................................................................................18 A. GENERAL.........................................................................................................................................................18 B. FINANCIAL SERVICES.............................................................................................................................................18 C. MARKETING......................................................................................................................................................18 D. RECORDKEEPING.................................................................................................................................................19 VII. SUBMISSION REQUIREMENTS ...................................................................................................................19 A. PROPOSAL FORMAT ............................................................................................................................................19 B. GENERAL PREPARATION INSTRUCTIONS........................................................................................................................19 C. TRANSMITTAL LETTER ..........................................................................................................................................19 D. VOLUME I – TECHNICAL PROPOSAL CONTENTS..........................................................................................................20 E. VOLUME II – FINANCIAL PROPOSAL CONTENTS .........................................................................................................29 VIII. SELECTION PROCESS AND CRITERIA ..........................................................................................................30 A. AWARD OF CONTRACT.........................................................................................................................................30 B. EVALUATION CRITERIA..........................................................................................................................................30 ATTACHMENT A – STATUTES AND ADMINISTRATIVE CODE..............................................................................32 ATTACHMENT C – PRICING SCHEDULE..............................................................................................................81 NEBRASKA STATE TREASURER AND NEBRASKA INVESTMENT COUNCIL 2
  3. 3. Request for Proposals I. INTRODUCTION The Nebraska State Treasurer (Treasurer) and the Nebraska Investment Council (Council and, together with the Treasurer, the Issuer) requests sealed Proposals from qualified financial services companies (Providers, you or your) who wish to provide investment, administrative, customer service and marketing services (Services) for the College Savings Plan of Nebraska, a qualified tuition program (CSPN) adopted under Section 529 of the Internal Revenue Code (IRC) and Chapter 85 (Enabling Act) of the Nebraska Revised Statutes (Neb.Rev.Stat.), as attached. CSPN is currently offered directly to the public (Direct Plan) and through financial professionals (Advisor Plan). The Direct Plan also includes a distribution and promotion channel through TD Ameritrade, Inc. The Issuer seeks Proposals from firms or groups of firms interested in providing the Services for the Direct Plan and the Advisor Plan. The Direct Plan must offer a reasonable choice of investment options for investors at a reasonable cost. The Direct Plan should focus advertising and planning on the dissemination of information about CSPN throughout the State of Nebraska, reaching both rural and urban environments and the full spectrum of socio-economic groups, including non-traditional investors. This includes outreach relationships throughout the State with interested organizations and constituent bodies, such as public and private schools (K-12), school districts, Parent-Teacher Organizations, hospitals, and similar entities, and payroll deduction options for employers or employer groups. In order to achieve the best choices available to potential investors, the Issuer recognizes that many investors prefer the professional services offered by financial advisors in connection with an assessment of the various alternatives available in the 529 marketplace. Therefore, the Issuer will continue to offer both a Direct Plan and an Advisor Plan. With respect to all Proposals, please note the following: A. Providers are required to submit Proposals for the Services for the Direct Plan and the Advisor Plan as one Proposal. Therefore, Providers who only provide direct 529 Plan services or advisor 529 Plan services should seek to partner with other firms to submit one bid for the Direct Plan and the Advisor Plan. B. Providers should consider their ability to compensate the Office of the Treasurer for the services it and its consultants and advisors provide to CSPN by receiving an asset based fee and/or fixed dollar commitment. 3
  4. 4. C. Providers that do not currently have a relationship with a state 529 Plan administrator should also consider their ability to enter into an exclusive arrangement for program management Services with the Issuer. D. Providers should consider their ability to provide marketing and/or relationship managers within the State. E. Providers should consider their ability to provide domestic call center services. F. The Issuer requests that all Providers interested in offering the Services submit a response in the manner described in this RFP. Based upon the responses to this RFP and, if the Issuer determines that such responses indicate that the goals of CSPN can best be served by contracting with a Provider, the Issuer shall select a Provider who can best satisfy the needs of CSPN. A Pre-Proposal Conference will be held on Wednesday, July 29, 2009 at 1:30 P.M. at State Capitol Building, Room 1113, Lincoln, Nebraska 68509. Please advise the Treasurer’s consultant, Mary Anne Busse, Managing Director, Great Disclosure LLC via phone (248-547-4500) or email (mabusse@greatdisclosure.com) by July 22, 2009 whether or not you plan to attend and for directions to the meeting site. You are encouraged to submit written questions via email prior to the date of the Pre-Proposal Conference (see Section III.B. of this RFP). The issuance of the RFP or the receipt of any Proposals submitted pursuant hereto creates no obligation, expressed or implied, on the part of either the Issuer or the State of Nebraska (State). II. BACKGROUND INFORMATION A. Treasurer The State Treasurer’s Office is currently comprised of five divisions – Treasury Management, Unclaimed Property, the Nebraska College Savings Program (Program), the Nebraska Child Support Payment Center and the Nebraska Long-Term Care Savings Plan. 4
  5. 5. B. Nebraska College Savings Program The following should particularly be noted: 1. The Program offers CSPN on a nationwide basis and offers CSPN in such a manner as to maximize the benefits to the Account Owners and to achieve the purposes of the Program as described in the Enabling Act. 2. The Program must operate without any cash outlay from the Issuer, the Program (except for the use of an Administrative Fee) or the State. 3. The Program currently includes three plans under the Nebraska Educational Savings Plan Trust (Trust) – The College Savings Plan of Nebraska (Direct, including the TD AMERITRADE 529 College Savings Plan (TDA Plan) and Advisor), The AIM College Savings Plan (AIM Plan) and The State Farm College Savings Plan (State Farm Plan). The Treasurer serves as the Program Trustee. The Council retains authority with respect to all investments offered under the Program. 4. The AIM Plan is scheduled to terminate effective December 4, 2009. In accordance with the terms of the Marketing and Administrative Services Agreement for the AIM Plan, upon termination of that agreement, account owners will have the option to transfer their assets to another option within CSPN, take a qualified or unqualified distribution of their assets or rollover their assets to a new AIM College Savings Plan not affiliated with the State. A final determination with regard to the assets held in the AIM Plan has not been made as of the date of the RFP. The RFP will be amended in the event that a final determination is made with regard to such assets prior to the end of the RFP solicitation period. C. The Nebraska Investment Council The Council manages the investments of 30 different entities, including the Program. For all these entities, the Council’s responsibilities are primarily asset management. See the Enabling Act for additional information regarding the Council’s responsibilities to the Program. The members of the Council are: Gail Werner-Robertson Richard A. DeFusco, Ph. D., CFA Norman D. Riffel John M. Dinkel Shane Osborn – Ex Officio (non-voting) John L. Maginn, CFA Phyllis Chambers – Ex Officio (non-voting) 5
  6. 6. The Council has final authority with regard to the investment options offered in CSPN as well as the mutual funds or other investments which comprise the investment options. D. Plan Statistics Following are the total number of funded accounts and assets in CSPN for annual periods since December 31, 2002 and for the period ending April 30, 2009: Date Total Total Assets (millions) Avg. Acct Accounts Balance Direct Advisor TDA State AIM1 Farm 12/31/02 48,194 147.8 41.0 26.8 - 55.2 5,621 12/31/03 86,531 306.6 93.5 71.7 27.4 114.1 7,089 12/31/04 111,696 449.1 148.4 123.8 67.1 167.0 8,554 12/31/05 127,275 579.3 199.8 171.4 99.8 205.8 9,870 12/31/06 142,417 763.0 262.4 234.0 137.3 251.4 11,573 12/31/07 158,343 947.2 321.9 297.9 169.2 282.2 12,748 12/31/08 169,715 773.6 267.4 245.5 118.8 189.9 9,399 5/31/09 172,080 828.5 286.0 267.2 135.0 205.7 10,009 III. ANNOUNCEMENT A. Response Submission Providers who are interested in responding to this RFP shall submit the original and ten (10) copies of their written responses and all attachments to: Nebraska State Treasurer Room 2005, State Capitol Bldg PO Box 94788 Lincoln, NE 68509-4788 Attention: Rachel Biar, Assistant Treasurer rachel.biar@treasurer.org A copy of each response should also be submitted electronically via email or other electronic media. Responses should be presented in accordance with the requirements of Section VII. of this RFP. The hard copies of each response must be 1 The AIM Plan terminates effective December 4, 2009. As of the date of this RFP, there is not yet a final determination with regard to the ultimate disposition of the assets held in the AIM Plan. 6
  7. 7. received in the Treasurer’s Office no later than 2:00 p.m. CST on September 1, 2009. Responses received after this time will not be considered. The Issuer will accept more than one Proposal per Provider. The Provider should designate one person as the principal contact with respect to this RFP. All responses will be considered open offers for a period of 180 days following submission to the Issuer, unless otherwise stated in your response. B. Clarification of Information It is the responsibility of any prospective Provider to inquire about and clarify any aspect of the RFP. Each inquiry should include a specific reference to the question in the RFP for which clarification is sought. Questions for clarification must be submitted in writing no later than July 22, 2009, at 4:00 p.m. CST and emailed, delivered, or sent via facsimile transmission to: Mary Anne Busse, Managing Director Great Disclosure LLC 622 S. West Street Royal Oak, Michigan 48067 Office: 248-547-4500 Fax: 248-547-4551 Email: mabusse@greatdisclosure.com Questions and answers will be discussed at the Pre-Proposal Conference to be held July 29, 2009. Copies of questions and answers submitted in writing and presented at the Pre-Proposal Conference will be available on the Treasurer’s web site at the following link www.treasurer.org no later than August 4, 2009. Providers shall have full responsibility for accessing the web site. C. No Contact Any contact concerning this RFP should be limited (preferably in writing). Mary Anne Busse is designated as the sole point of contact. The Issuer specifically requests that no contact concerning this RFP be made with the Treasurer or the Council, or their respective employees and advisors, during the selection process. Failure to honor this request may result in disqualification of the Provider. IV. MINIMUM QUALIFICATIONS A. Providers must clearly state and demonstrate within the Executive Summary of the Technical Proposal that they satisfy the following qualifications (Technical Proposal submission format is discussed under Section VII. Submission Requirements). 7
  8. 8. 1. Maintain or manage at least $1 billion in assets; 2. Been in business for at least 5 years (including predecessor organizations); 3. Been rated by 2 or more nationally recognized rating services within the three highest rating categories for financial condition and operational performance. If the Provider is privately held and has not been rated by a nationally recognized rating service, the Provider must describe the circumstances under which such ratings have not been conducted. The Provider shall also describe any alternative financial condition and operational performance measures that it believes will be helpful in considering the minimum qualifications of the Provider. 4. Maintain all applicable federal licenses and registrations necessary to conduct a financial services business (e.g. - registered Investment Advisor, Investment Company and/or Broker/Dealer, as applicable); and 5. Comply with the Disclosure Principles Statement No. 3 adopted by the College Savings Plans Network (Network) and agree to comply with any successor Disclosure Principles adopted by the Network. B. If the Provider is a joint venture, partnership or other consortium of financial services companies, qualifications 1 through 3 may be satisfied by the members of such venture, partnership or consortium collectively. In addition, experience in the 529 marketplace is preferred, but not mandatory. V. SCOPE OF WORK – DIRECT PLAN The Provider will provide the Services to the Issuer and the participants in CSPN, and, as applicable, the participants in the AIM Plan and the State Farm Plan. Providers should affirm that they will fully satisfy the following General Requirements or elaborate on any modification or exception to them. A Proposal that takes exception to any portion of the Scope of Work may be rejected. A. General Requirements and Considerations 1. Mandatory Contractual Terms. By submitting an offer in response to this RFP, a Provider, if selected for award, will be deemed to have accepted the terms of this RFP and the Agreement which is attached hereto and by this reference incorporated herein as Attachment B. The Issuer reserves the right to further negotiate the terms of the Agreement, in its discretion. Any exceptions to this 8
  9. 9. RFP or the Agreement must be clearly identified in the Executive Summary of the Technical Proposal. 2. Agreement Duration. If a Provider is selected pursuant to the RFP, the Agreement will be for a period of seven years (with the possibility of three renewal terms of one year each at the sole option of the Treasurer), commencing upon completion and execution of a contract for the Services. Please see Section VII. E – VOLUME II – Financial Proposal and Attachment C. 3. Compensation and Payment. The Provider will be compensated for the Services under the Agreement solely through fees collected from CSPN Account Owners, consistent with the Provider’s Financial Proposal. The Provider will not receive additional compensation for miscellaneous charges including, but not limited to, photocopying, postage, telephone, facsimile, shipping/handling and courier/messenger costs between the Provider’s location(s) and the Issuer’s offices. This type of administrative/operational expense may not be part of Attachment C, Financial Proposal Schedule, which is attached hereto and by this reference incorporated herein. The Provider will not receive compensation for travel time or related expenses such as transportation, mileage, parking, etc., for meetings with the Treasurer, the Council or any vendors rendering Services to the Treasurer, the Council and/ or the Provider. Travel related expense may not be part of Attachment C, Financial Proposal Schedule. Providers submitting Proposals must follow the Scope of Work parameters outlined in Sections V and VI. Fees for participants that do not use broker/dealers must not include any extra fees to compensate broker/dealers. Any additional fees necessary to recover broker commissions must be specified in Attachment C. A Proposal must clearly provide that any person interested in CSPN will not be required to use a broker/dealer, regardless of residency or ties to the State of Nebraska. 4. Administrative Fee. The Issuer requires that an Administrative Fee be payable on a monthly basis to the Treasurer to cover CSPN administrative services. Currently, the Treasurer receives an Administrative Fee of $100,000 per year plus amounts the current program manager receives from certain of the underlying mutual funds for its provision of administrative or other shareholder services to Account Owners. The Issuer is willing to consider a continuation of this type of arrangement or another arrangement based on basis points or other method of calculation. Consideration should be given to an increase in the Administrative Fee for achieving certain breakpoints. The Provider will calculate and remit the payment for these fees, as applicable, to the Treasurer by the 10th business day of every month for the prior month. 9
  10. 10. 5. Confidential Information. The Provider must recognize that all information concerning CSPN and participants therein is the sole property of the State, is confidential and is not to be used by the Provider for any other purpose. Providers shall refrain from any direct communication with the participants in the Plan, except as approved in advance by the Treasurer or his authorized representative. 6. Audits. The Provider will supply to the Issuer and any appropriate governmental entity all accountings, reports and information as may be required by the Issuer, the Enabling Act or Section 529. The Enabling Act requires an annual audit by either the Auditor of Public Accounts or an independent accounting firm designated by the Treasurer. Compliance with these audit requirements is a requirement of any Provider without additional charge to the State, the Issuer, the Program, the Trust or CSPN. 7. Separate Accounts. Each account must be maintained as a separate account, identifying each Account Owner by Social Security number (or alternative identification code). 8. Disbursements. Disbursements from an account must be made in accordance with the Enabling Act, Section 529 and the rules adopted thereunder, and the rules enacted from time to time by the Treasurer. The Provider must supply to the Treasurer an itemized list of disbursements and tax withholdings and, as the Treasurer's agent, affect the proper tax reporting forms. 9. Plan Features. a. Minimum Contribution. Currently, neither the Direct Plan nor the Advisor Plan requires a minimum contribution. b. Maximum Contribution. The current maximum contribution is limited to a $360,000 account balance for all accounts that have been opened for a Beneficiary. c. Expense Ratio. The Issuer is interested in offering best-in-class investments while minimizing the cost to investors. Therefore, the total expense ratio for the Direct Plan should reflect those goals. The total expense ratio for the Advisor Plan should be within industry standards for a Provider providing program management services to a Direct Plan and an Advisor Plan. Consideration should be given to an expense ratio for both the Direct Plan and the Advisor Plan that reduces as CSPN achieves certain breakpoints. d. Investment Options. The Direct Plan and the Advisor Plan currently each offer the same 30 portfolios, of which 4 are age-based. CSPN is structured as an open-architecture platform. The Issuer intends to continue operating CSPN as such and encourages Providers to present streamlined, simplified 10
  11. 11. investment options as part of its Proposal. The Issuer is also willing to review alternative CSPN structures and encourages each Provider to present its best recommended lineup of investment options. e. Enrollment Fee. Currently, no enrollment fee is charged for CSPN. The Issuer is not open to considering an enrollment fee as part of a Provider’s Proposal. 10. Investment Strategy and CSPN Goals. It is the goal of the Issuer that the investment strategy and structure of CSPN a. maximizes the return and minimizes the risk of loss to each participant, including Contributors, Account Owners and Beneficiaries; b. ensures availability of funds to meet higher education needs of Beneficiaries, considering the age of each Beneficiary; c. encourages participation by minimizing any required account balances or contribution levels; d. offers participants ample choice of investment options and fund selections; e. simplifies the current 529 plan options offered by the State; f. simplifies the current fee structure; and g. minimizes the overall fees charged to participants. 11. Network Guidelines and Data Submission. The Provider must agree to comply with all Network requirements, guidelines, and/or best practices including the Network Disclosure Principles Statement No. 3 and any successor Disclosure Principles adopted by the Network. The Provider must also agree to timely submit Network data required for maintenance of CSPN information on the Network website. B. Financial Services The Provider must possess the requisite knowledge and demonstrate previous experience in providing investment management services, including the ability to consistently deliver investment returns that meet or exceed their respective indexes in 3 - 5 year time periods. The Issuer intends to select one Provider but will not rule out multiple vendors in an effort to promote new types of Proposals and choice among portfolio options. The Issuer emphasizes that ease of understanding and minimization of fees are top priorities. 11
  12. 12. The Provider must propose the specific investments that would comprise each of the investment portfolios proposed. The Provider may also propose other investment portfolios along with the specific investments and an explanation of the consumer benefits of the additional portfolios. Any investments that would comprise an investment portfolio must meet the requirements of the Council’s Statement of Investment Philosophy (Investment Philosophy Statement). The Council has final authority with regard to the investment options offered under CSPN and the asset allocation within each investment option. If applicable, the Provider must provide appropriate and suitable investments for the transfer of investments in the current plan. Performance information with regard to each investment option must be updated at least daily on the CSPN website. The Provider must also comply with any performance related criteria recommended by the Issuer. On at least a quarterly basis, and more frequently as necessary, the Provider must inform the Council and its financial advisor about significant changes in the investment climate, market conditions or investment philosophies that could affect CSPN investments. C. Account Administration The Provider must possess the requisite knowledge and demonstrated previous experience in administering investment accounts, including the ability to deliver the performance standards outlined below. The Provider must submit as part of the Technical Proposal a plan for the establishment and maintenance of accounts, as well as all aspects of customer service to existing and prospective CSPN Account Owners. CSPN accounts are currently administered through Envision Financial Systems. However, the Issuer has no particular preference with regard to the recordkeeping platform recommended by the Provider. The account administration strategy referenced above will also address the location of the employees providing customer service and the installation of communications facilities that connect the Provider’s work site to the servers necessary to access customer accounts. The Provider must also address performance standards for all facets of account administration. These standards will include at a minimum: 1. Procedures for requests to change accounts, including quality controls; 2. Availability of live customer service representatives for both sales and service (number of representatives, hours during the day, days per year, online customer service) and access to electronic customer service at all other times; and 12
  13. 13. 3. Procedures for ensuring security of Account Owner and Beneficiary information including security measures for communication via internet or telephone or in writing. The Provider must provide CSPN enrollment online and through a central mailing location that can receive express deliveries by normal U.S. postal services. Consideration should also be given to providing for qualified withdrawals from accounts online. The Provider must process all contributions and withdrawals, maintain all records and comply with all tax and securities laws as required under Section 529 (and any rules adopted thereunder), federal and state securities regulations, guidelines established by CSPN and any performance criteria established by the Treasurer. Such responsibilities include aggregation of accounts for federal tax law purposes, having audits conducted annually and the provision of reporting information as requested by the Treasurer for the preparation of the annual report contained in Section 85-1811 of the Neb.Rev.Stat. The Provider will also be expected to provide account aggregation services for the other qualified tuition programs offered by the State as well as other administrative services relating to these plans, including development of interface systems to monitor account balances, review of training materials used by distributors and selling agents, review of enrollment materials, marketing materials and forms, and quarterly aggregation reports to the Issuer. Additional service requirements are listed under Section E, Customer Service. D. Marketing The Provider must possess the requisite knowledge and demonstrated experience in marketing investment products – preferably Section 529 Plans – to motivate and assist families in investing for future college expenses. Marketing efforts include advertising (television, radio, print), marketing materials (enrollment kits and brochures), a toll-free number and website, and face-to-face marketing (group presentations, event marketing). This allows prospective Account Owners to choose the plan(s) and investment options that best suit their specific needs and will also facilitate cross-selling opportunities. Marketing should be conducted both in-state and out-of-state year-round. Current marketing efforts on behalf of CSPN are conducted on a joint basis between the Treasurer and the current program manager. The source of funds includes the Administrative Fee collected by the Treasurer. A minimum of $350,000 is budgeted by the current program manager for marketing services, including preparation and distribution of disclosure statements. In addition, the current Administrative Fee collected by the Treasurer is equal to approximately $100,000 annually and is used to support the marketing and administration of CSPN. The Provider should expect that 13
  14. 14. the Treasurer will have limited available funds to contribute to the marketing of the Program. General Requirements include: 1. The Provider will work with the Treasurer or his authorized representative on all aspects of the marketing and public relations campaigns undertaken. The Treasurer will have final approval of all marketing and public relations decisions. 2. Depending on the structure of the Provider’s Proposal, including the structure of the Administrative Fee, up to 100% of the marketing costs associated with the in-state and out-of-state marketing efforts may be borne by the Provider. 3. CSPN’s web site will, at all times, be the sole source of detailed information available via the internet regarding CSPN. Any inquiries made on the Provider’s web site about CSPN must be linked directly to CSPN’s web site. E. Customer Service The Provider must possess the requisite knowledge and demonstrated experience in providing customer service for Section 529 Plans or similar products in a manner that substantially meets the performance guidelines specified in this Section V. Inbound telephone and online inquiries require interacting with prospective participants by answering any questions they may have about CSPN and by taking their names and addresses to send them information. Live Customer service representatives must be available to answer questions about CSPN from at least 9:00 am to 8:00 pm Central Standard Time, Monday through Friday, except U.S. bank holidays. These customer service representatives are trained by the Provider using materials approved in advance by the Treasurer or his authorized representative. An automated voice response unit and internet servicing access must be available at all other times. When calling the toll-free number for CSPN, currently 1-888-993-3746, a prospective customer will have several options through a voice response unit. For example, they can listen to a prerecorded message that provides a general overview about CSPN (approved by the Treasurer or his authorized representative and the Provider). One option will be to the office of the Provider to answer questions about CSPN. Any cost to modify CSPN’s existing toll-free number will be the responsibility of the Provider. 1. General Requirements: a. Maintain a database of inbound callers seeking enrollment materials, including information such as: i. Caller’s name, address and telephone number ii. County of residence (Nebraska callers only) iii. Number of children and ages 14
  15. 15. iv. Where the caller heard about CSPN – radio, newspaper, friend, etc. b. Provide the Treasurer with a monthly report monitoring daily call volumes, call durations, time of calls, hold time, and abandoned calls. c. Update or change prerecorded messages, question and answer scripts, and training scripts when required or needed throughout the year using scripts approved by the Treasurer or his authorized representative. d. Provide a means for all participants to express concerns, comments or complaints regarding CSPN and create and maintain a website and toll- free voice response unit for customer service inquiries, account balance information, enrollment, and withdrawal and marketing requests. e. Provide a means for participants to contribute to their CSPN accounts through the workplace. f. Agree to maintain the confidentiality of all participant and Beneficiary information. g. Provide best-in-class website capability including online enrollment, account maintenance and withdrawals. 2. Service Level Requirements: a. Telephone Inquiries i. Abandonment Rate – less than 2% ii. Percent of Calls Answered within 30 seconds – 90% b. Correspondence: i. Financial Correspondence Timeliness – 99% of financially related correspondences are sent within 2 business days of receipt. ii. Non-Financial Correspondence Timeliness – 99% of non-financial correspondences are sent within 7 business days of receipt. c. Check Processing: i. Accuracy of Posting Payment – 99% of checks received are accurately posted to a matching account with the correct amount and with the day of receipt’s trade date. ii. Check Posting Timeliness – 99% of the checks are posted to the Account Owner’s account by the day after receipt. d. Confirmations, Statements, Tax Reporting: e. Timeliness of Monthly, Quarterly and Year-End Account Owner Statements – 99% are mailed within 7 business days of approval 15
  16. 16. f. Timeliness of Daily Confirmations – 99% of daily confirmations are mailed within 5 business days. g. Accuracy of Confirmations, Statements and Tax Reports – 99% of confirmations, statements and tax reports are accurate. h. Timeliness of Tax Reporting – 99% of federal tax reports are mailed on the agreed-to date. F. Reports 1. The Provider will generate reports to evaluate the effectiveness of all aspects of the Services. Such reports will be produced individually or combined and will be provided to the Treasurer and/or the Council, as applicable. Reports will include, at a minimum: a. Quarterly Reports i. Contribution volumes by portfolio ii. Average account balance iii. Average contribution amount iv. Total contributions (a) For the quarter (b) Year-to-date v. Distribution of beneficiaries by age vi. Total Distributions for the quarter vii. Number of accounts i. Amount of distribution viii. Nebraska Account Owner Information (a) Number of Nebraska owned accounts, broken down by Portfolio (b) Market value of Nebraska owned accounts (c) Number and $ amount of distributions from Nebraska owned accounts ix. Call Center performance statistics (a) Average second delay (b) Number of calls (c) Abandon Rate x. Performance data for all Portfolios as compared to independent benchmarks (a) Quarterly, YTD, 1-year, 3-year, and 5 year numbers for the Portfolios, as applicable (b) Data in 10(a) for each underlying mutual fund (c) Current asset allocation percentages of portfolios xi. Data for NAST/CSPN requests (a) Total Number of Accounts (b) Total Market Value (c) Total Dollars Paid Out 16
  17. 17. (d) Total Number of beneficiaries with withdrawals xii. Account Demographics (a) Average Account Owner Age (b) Average Beneficiary Age (c) Account Owner relationship to beneficiary (d) Residence of account owners by State b. Monthly Reports i. Financial reports. ii. Plan Market Value iii. Total number of Account Owners and Beneficiaries iv. Number of new accounts v. Number of closed accounts vi. Total contributions for the month vii. Total distributions for the month viii. Call Center performance statistics c. Annual Reports Annual tax information for Nebraska State income tax purposes i. Calendar year contributions by Account Owner Name/Social Security number ii. Rollovers to another state’s 529 Plan reported by Account Owner Name/Social Security Number iii. Other information as requested by the Issuer for State income tax reporting purposes The Provider will provide such other information as the Treasurer or his authorized representative may request to monitor and control this Agreement. The Provider must attend all regularly scheduled Council meetings to review the investment management Services to be provided under the Agreement. 17
  18. 18. G. Transition The Treasurer’s contract with the current program manager expires on December 5, 2010. If the Issuer awards a contract under this solicitation to a Provider other than the current program manager, the new Provider will begin providing Services outlined in this Section V, on or about December 6, 2010. The Provider will submit a plan to describe the transition of Services that will begin with the commencement of the effective date of the Agreement, which is currently planned for December 2009. The transition planning and execution would then occur from December 2009 through December 31, 2010 (or until such time as the transition is complete) to ensure proper transfer of all Services. VI. SCOPE OF WORK –ADVISOR PLAN Each of the Services and benchmarks outlined under Section V above also apply to the Advisor Plan. In addition to such Services, the Advisor Plan must include the following Services. A. General Services for third party account administration, broad channel distribution, broad-based marketing and high quality customer support. These efforts will be designed to reach the broadest segments of the Nebraska and national population by using multiple financial intermediaries. The Contractor will develop fee structures that appeal to a variety of distributors while also maintaining a reasonable cost structure for Nebraska residents. B. Financial Services The Provider may design distinct investment options for each of the Direct Plan and the Advisor Plan. The Provider must describe the proposed distribution plan, including the use of wholesalers and independent broker/dealers within the State, the mid-West and remaining U.S. regions. C. Marketing The Provider must provide all necessary tools, literature, and support services for the distribution of the Advisor Plan by the broadest possible group of financial intermediaries. This will include a training program and related information materials concerning potential risks associated with the Advisor Plan. Within the State, the Provider must include prominently in its disclosure materials the availability of the Direct Plan (including the TDA Plan) and The State Farm Plan as 18
  19. 19. alternative 529 investment options. Direct Plan disclosure materials will also include references to the availability of the Advisor Plan and the State Farm Plan through financial intermediaries and other professionals. Language used and placement within disclosure and other enrollment materials used in the Advisor Plan must be subject to approval by the Treasurer or his authorized representative. D. Recordkeeping The Provider will provide a means to make commission and other sales-related payments to third party financial intermediaries in an efficient manner. VII. SUBMISSION REQUIREMENTS A. Proposal Format Proposals must be submitted in two parts: Volume I – TECHNICAL PROPOSAL, and Volume II – FINANCIAL PROPOSAL The Technical Proposal and the Financial Proposal may be presented in one sealed package and as one document as long as each portion of the Proposal is clearly identified. An original and ten (10) copies of each Provider’s Proposal are to be submitted. If the Provider is submitting an electronic version via email, this should be noted in the transmittal letter. If the Provider is submitting an electronic version via CD or other electronic media, such media should be included in the Proposal package. All pages of each Proposal volume must be consecutively numbered from beginning to end and should follow the same format as this RFP. B. General Preparation Instructions The Provider’s Proposal should address all points and questions outlined in this RFP. It should be clear and precise in response to the information, requirements and format described in this RFP. C. Transmittal Letter A transmittal letter must accompany the Proposal. The transmittal letter should be brief and signed by an individual who is authorized to commit the Provider to the Services and requirements as stated in this RFP. All Providers must acknowledge, in their transmittal letter, receipt of this RFP and any addenda to this RFP. The outside 19
  20. 20. envelope should be sealed and clearly marked: "Response to Request for Proposals for the College Savings Plan of Nebraska ". All Bids must be submitted to: Nebraska State Treasurer Room 2005, State Capitol Bldg PO Box 94788 Lincoln, NE 68509-4788 Attention: Rachel Biar, Assistant Treasurer D. VOLUME I – Technical Proposal Contents The Technical Proposal must include a Table of Contents and a declaration of confidential sections of the Proposal (if any). The Technical Proposal must also include an Executive Summary. The Executive Summary should clearly demonstrate that the Provider has an understanding of the objectives and goals of the Issuer set forth in this RFP, and an understanding of the scope of work. This Summary must clearly state and demonstrate the minimum qualifications as listed in Section IV of this RFP. It should also contain a brief synopsis of the contents of the entire Proposal as well as include an analysis of the effort and resources that will be needed to realize the objectives of this RFP. The Executive Summary will also identify any exceptions the Provider has taken to the requirements of this RFP or the Agreement (Attachment B.) A Proposal that takes exception to the requirements of this RFP or the Agreement terms may be rejected. 1. General Information a. State name, address, telephone number, facsimile number, and Web site address of Provider. b. Provide names, addresses, telephone numbers, facsimile numbers and e- mail addresses of the individuals who will coordinate all activities related to the Services. Provide background and experience information on each individual. c. Provide a brief history of the Provider, including ownership, current management, and any significant changes in the forgoing (i) during the last five years and/or (ii) expected or pending. d. Furnish a copy of the Provider's annual report and audited financial statements for fiscal years 2007 and 2008. e. Provide the most recent ratings reports on the Provider from any available agencies (e.g. - A.M. Best, Moody, Standard & Poor). Indicate the date the Provider was last reviewed by each rating service. State the current rating and identify and explain any and all rating changes during the last five years. 20
  21. 21. f. List similar 529 Plans for which you provide (either currently, or within the last three years) investment and administrative services. Include the following information: i. Length of time of your involvement ii. Types of services you offer iii. Aggregate annual cash flow iv. Total assets of each plan v. Plan assets held by your company vi. Actual annual rates of return by investment option credited under each plan during the past three (3) years vii. Name, address, email, and telephone number of the government official or other person who could be contacted as a reference viii. Total number of accounts and/or participants 2. Plan of Service This section will provide a detailed discussion of the Provider's service capabilities demonstrating the Provider’s ability to meet the requirements outlined in Section V and Section VI of this RFP. The Plan of Service will fully explain how the proposed Services will satisfy each requirement listed in this RFP (Section V - Scope of Work and Section VI –Scope of Work- Advisor Plan). It should indicate all significant capabilities or issues that will be examined to fulfill the scope of work. Providers must include a transition and management plan to ensure continuity of Services currently being provided under the Treasurer’s existing contract, and also, a similar plan describing how they would ensure continuity of Services when the term of the Agreement concludes. This demonstration should be presented in the same numbered order in which the requirements appear in Section V and Section VI. The Provider will propose a staffing plan to provide the Services required by this RFP in accordance with all required quality standards and will include resumes for those with principal responsibilities for managing the Provider’s responsibilities under the Agreement as well as for those with principle responsibilities for each functional area. Each Provider should identify any sub-contractors intended to be used in the performance of the Agreement, and the role each proposed sub-contractor will perform in providing the Services. If the Provider will use no sub-contractors, so state. In addition to addressing the requirements described in Section V and Section VI, Providers must submit the following as part of their Plan of Service: a. Financial Services. Each Proposal should include the following: i. Describe the specific investments that would comprise each of the investment options in CSPN. The Provider may also propose other investment options along with the specific investments and an explanation of the consumer benefits of the additional options. 21
  22. 22. ii. Describe the Provider’s due diligence process regarding selection and monitoring of the proposed investment vehicle(s). Give examples of reasons for removal of investment vehicles. Provide an example of and rationale for a recent change in an investment vehicle as a result of the due diligence process. iii. Describe the Provider’s internal and outside mutual fund offerings including the amount of revenue sharing with each mutual fund. iv. Describe the Provider’s internal investment management capabilities and breadth of mutual fund offerings. v. If non-proprietary mutual funds are proposed for inclusion in the investment options, describe the limitations, if any, on the (a) number of outside mutual funds that may be utilized or (b) the dollar amounts that can be allocated to outside mutual funds. vi. Describe any limitations on the use of non-proprietary mutual funds and any additional fees that may be assessed in connection with the use of such non-proprietary mutual funds. vii. Describe whether the Provider, its employees, and/or any affiliated or related entity will be paid fees or commissions (including those from revenue-sharing and commission recapture services to CSPN) from sources other than CSPN. viii. Describe how investment management fees may be used to reduce or offset other service fees. b. Account Administration Proposals will include, at a minimum, descriptions of: i. The proposed system, the number of accounts currently administered on this system, the approximate dollar value of such accounts, and the frequency and volume of individual transactions that are processed on a daily and weekly basis. ii. The reliability and integrity history, other market experience and uses of the proposed system. iii. Plans and procedures for accepting and processing new enrollments, maintaining individual accounts, including making changes to accounts, posting contributions (including payroll and Electronic Funds Transfer transactions), and ensuring that the current accumulated contributions and net asset value for each Account Owner and Beneficiary are available on a daily basis. 22
  23. 23. iv. Online access capabilities to the account administration system, including online enrollment, account maintenance and withdrawals. v. If applicable, the Provider’s ability to coordinate all facets of account administration for a Direct Plan and an Advisor Plan. Issues such as maximum contributions, distributions, rollovers and aggregation of accounts for federal tax law reporting purposes should be addressed. vi. The Provider’s account administration experience specifically for Section 529 Plans. vii. Procedures for generating account statements and reports, including information regarding format, frequency, transmittal methods, customization, joint account statement options, etc. and any available sample reports. viii. A disaster recovery plan describing in detail, how Services will be resumed within twenty-four (24) hours of a disaster. ix. The Provider’s policies, procedures, data encryption, and technical measures to prevent unauthorized access or alteration, fraud, theft, misuse, or physical damage to hardware, software, communications networks and data. c. Marketing i. Provider must present marketing strategies to be utilized for Nebraska families, as well as marketing strategies to attract Account Owners outside of Nebraska. ii. The Provider will outline existing relationships that it has with companies or firms that provide consulting or other marketing services that are expected to contribute in any way to the marketing of CSPN. iii. The Provider will provide samples of marketing and disclosure information that it currently uses. iv. The Provider will outline the steps it will take to separate the marketing message of CSPN and any other Section 529 Plans it administers when marketing in Nebraska and the surrounding region to ensure that CSPN will be the only 529 Plan in the Provider’s marketing strategies in the State. v. The Provider will outline any arrangements with other 529 Plans with regard to marketing an advisor sold plan within the State and how the 23
  24. 24. Advisor Plan will be given priority and promoted within the State. The Provider will also outline how the Advisor Plan will be promoted outside of the State, especially in states where the Provider already markets an advisor sold plan. vi. The Provider will outline the steps it will take to separate the marketing message of CSPN from other Provider-administered Section 529 Plans outside of the State. vii. The Provider must describe any agreements it or any of its affiliates has with other states regarding the marketing of Section 529 Plans around the country and the marketing of other Section 529 Plans in any such plan’s home state. viii. The Provider should describe plans for marketing opportunities outside of the State. ix. The Provider will describe its ability to develop and maintain the CSPN web site (www.planforcollegenow.com) and describe its maintenance and intended references to CSPN on the Provider’s web site. x. Provider will provide plans to market CSPN specifically to State employees. xi. Describe any products that Provider currently offers to State residents that compete or potentially could compete with CSPN. Indicate whether the Provider would agree to contract with the Treasurer to refrain from directly or indirectly offering any competing product for so long as the Provider is providing Services to CSPN. If the Provider would not agree to contract to refrain from offering any competing product, explain how the Provider’s offering of one or more competing products can be done consistently with an obligation to aggressively and effectively market and administer CSPN. 24
  25. 25. d. Customer Service i. The Provider will describe its strategies for transmitting and sharing databases of callers to and with CSPN, as well as ensuring the confidentiality of the database. ii. The Provider will include a discussion of the steps that will be taken to ensure that the CSPN database is not combined with other databases maintained by the Provider. iii. The Provider will provide the Treasurer with contingency plans or emergency plans for days and/or times when the call volume may exceed the successful Provider’s ability to handle the calls quickly and expeditiously. The Provider will also provide the Treasurer with any contingency plans for handling telephone calls from hearing impaired and non-English speaking callers. iv. The Provider will outline the ability of its customer service representatives to transfer callers to the Direct Plan or Advisor Plan, as applicable. v. The Provider will outline procedures for responding to verbal, written, and online inquires or complaints about CSPN. vi. The Provider will outline procedures for the production and distribution of quarterly statements to Account Owners, as well as the Provider’s ability to accommodate additional or more detailed reports if required by the Treasurer or his authorized representative. vii. The Provider will include service levels achieved for Section 529 Plans currently under management and/or similar programs. Describe how the Provider intends to meet the service level requirement contained in Section V.E. Provide anticipated service levels for each measure listed and describe the Provider’s resources available for CSPN. e. Transition Plan Describe the Provider’s proposed Transition Plan as outlined in Section V.G. 25
  26. 26. 3. Experience and Capabilities a. Provider’s Minimum Qualifications In compliance with the minimum qualifications set forth in Section IV, Provider must: i. Describe the firm(s), including who holds controlling interest in the firm(s). Provide a percentage breakdown of any party having a legal or beneficial interest of greater than five percent (5%). If the firm(s) is employee-owned/controlled, indicate what percentage of the ownership interest is employee-owned. ii. Discuss organizational structure, including size and location(s). iii. Discuss whether the Provider or its parent or affiliate is a registered broker/dealer. If the Provider trades in securities with a parent or affiliate, describe any process designed to avoid conflict of interest. Describe if these systems negatively affect the Provider’s ability to perform its duties and if so, what measures have been utilized to lessen this impact. iv. Providers must provide a statement of their firm’s invested assets under management for the past five years. Indicate if mergers or acquisitions influenced any growth in that time. b. Capabilities: Provider must describe in detail how they possess the following capabilities: i. Full Service - Provider must be a financial services firm experienced in all facets of investment management services. ii. Contact Personnel - Provider must provide a senior level manager who will be responsible for the relationship between the Provider and the Issuer. The principal day-to-day contact must also be identified. iii. Project Management Team - Provider must list its project management team and describe both how the team will interact with the Issuer and staff and how the team will accomplish the requirements of this RFP. Please also provide summary resumes for all essential personnel who may provide these Services. Their resumes should include past experience servicing similar types of programs and any familiarity with agencies, authorities, and instrumentalities of the State. 26
  27. 27. iv. Discuss whether the Provider is registered (or is exempt from such registration) under the Investment Advisors Act of 1940 and/or registered or licensed by the U.S. Securities and Exchange Commission, any self-regulatory organization (as such term is defined in §3(a) (26) of the Securities Exchange Act of 1934, as amended); any regulatory agency of any state of the United States; or any U.S. Government department or agency. v. State whether the Provider is a licensed member of the Securities Investor Protection Corporation (SIPC). If so, state the amount of SIPC protection the Provider provides. vi. Describe how the Provider proposes to properly evaluate the project management team on a continual basis to ensure that quality standards are met. The Provider will provide the Treasurer periodic analysis of results of program performance. vii. Provide an overview of experience rendering services to other Section 529 Plans, or in offering services similar to those included in Sections V and VI of this RFP. This description must include a summary of the services offered, whether the services are currently being provided or whether the relationship with the Section 529 Plan has terminated, the number of years the Provider has provided these services, the number of clients, the size of the programs served, and geographic locations the Provider currently serves. viii. Provide three references that will be applicable to the specific Services requested in this RFP. The Issuer will have the right to contact any reference as part of the evaluation and selection process. If a Proposal uses a sub-contractor(s), provide three references per sub-contractor. If the Provider (or a sub-contractor) provides this service or a similar service to another Section 529 Plan – or a state or municipal government, the Provider must identify all such entities as a reference. References are to include descriptions of: (a)The Provider's ability to manage contracts of comparable size and complexity; (b)The quality and breadth of services provided by the Provider; (c)Each client reference is to include the following information; (d)Name of client organization: Name, title, and telephone number of point of contact for client organization; 27
  28. 28. (e)Value and type of contract(s) supporting the client organization, the date the work was performed or the duration of contract(s) supporting the client organization, and the service location; and (f) If the Provider is no longer serving this client, an explanation of why the Provider is no longer providing the services. 4. Legal Actions Summary The Provider(s) must include the following: a. A statement as to whether there are any outstanding legal actions against the Provider, and a brief description of any such action. b. A brief description of any settled or closed legal actions against the Provider over the past five (5) years. c. A brief description of any pending or prior litigation against the Provider, its officers, directors, principals or key personnel related to participation in company, employer or government sponsored investment plans over the past three (3) years. d. A statement as to whether or not the Provider has filed (or has filed against it) any bankruptcy or insolvency proceeding, and if so, provide details. e. A brief description of any extraordinary investigation, examination, complaint, disciplinary action or other proceeding relating to or affecting the Provider or any of its employees, agents, etc. that has occurred within the last ten (10) years, which was commenced by any of the following: the U.S. Securities and Exchange Commission; any self-regulatory organization (as such term is defined in §3(a)(26) of the Securities Exchange Act of 1934, as amended); any Attorney General or any regulatory agency of any state of the United States; any U.S. Government department or agency, or any governmental agency regulating securities of any country in which the Provider is doing business. 5. Indemnity Insurance Describe the level of worker’s compensation insurance, directors’ and officers’ liability insurance, fiduciary professional liability insurance, public liability insurance and fidelity bonds or similar coverage maintained by the Provider and any agents and/or sub- contractors proposed to provide any of the Services described in this RFP. All such insurance should be provided by insurer(s) rated A-, class X or better by A.M. Best & Company, or otherwise approved in writing by the Treasurer. If the Provider is a joint venture, partnership or consortium, each party must meet these criteria. 6. Financial Capabilities and Statements 28
  29. 29. Providers must demonstrate financial stability. Technical Proposals must include: a. Evidence that the Provider has adequate financial capacity to provide the Services. b. Copies of the last two (2) year-end audited (preferred) financial statements or best available equivalent report. c. An analysis of those financial statements/reports. 7. Sub-contractors If any significant portion of the work listed above is not expected to be performed by the Provider, the Provider must list any sub-contractors that are proposed to provide the required products and Services. Providers must identify sub-contractors and the role these sub-contractors will have in the performance of the contract. E. VOLUME II – Financial Proposal Contents The Financial Proposal must contain all cost information in the format specified in Attachment C. All Financial Proposals will be typewritten or written legibly in ink. The signer will initial all erasures in ink. All Financial Proposals (Attachment C) will be signed in ink as follows: 1. As an Individual – Sign with full name and address. 2. As a Partnership – Partners will sign with full names and business address. 3. As a Corporation – An authorized officer of the corporation will sign with full name and title and will include the name and address of the corporation. 29
  30. 30. VIII. SELECTION PROCESS AND CRITERIA A. Award of Contract The Issuer reserves the right to reject any and all responses to this RFP. The Issuer may choose to appoint a selection committee to compile a list of finalists and either seek additional information from these Providers to clarify best and final offers and/or permit an oral presentation to the Treasurer and/or the Council. The Issuer will determine which Proposal offers the best means of servicing the interests of CSPN and the State. The Issuer reserves the right to add additional Providers at any time, particularly in the area of marketing and CSPN education. B. Evaluation Criteria Responses will be evaluated based on the following criteria, which is presented in no particular order: 1. Competitiveness of investment performance and product features; 2. Financial stability and strength of Provider; 3. Customer service; 4. Costs charged to any account or any other entity; 5. Nebraska resident and non-resident accessibility; 6. Marketing commitment to broaden customer base; 7. Administrative capacity and strategy; 8. Any other quality or characteristic deemed in the best interests of the State or the Issuer; and 9. Goal measurement and monitoring criteria. Potential Providers are advised that materials contained in Proposals are subject to the Nebraska Public Records Statutes and may be viewed and/or copied by any member of the public, including news agencies and competitors, in accordance with said Public Records Statutes (Neb.Rev.Stat. - 84-712 through 84-712.09). Providers claiming a statutory exception to the Nebraska Public Records Statutes should indicate on the 30
  31. 31. outside of the envelope that confidential materials are included and should specify which statutory exception provision applies. 31
  32. 32. ATTACHMENT A – STATUTES AND ADMINISTRATIVE CODE NEBRASKA REVISED STATUTES 85-1801 Legislative findings. The Legislature finds that the general welfare and well-being of the state are directly related to educational levels and skills of the citizens of the state and that a vital and valid public purpose is served by the creation and implementation of programs which encourage and make possible the attainment of higher education by the greatest number of citizens of the state. The state has limited resources to provide additional programs for higher education funding and the continued operation and maintenance of the state's public institutions of higher education, and the general welfare of the citizens of the state will be enhanced by establishing a program which allows parents and others interested in the higher education of our youth to invest money in a public trust for future application to the payment of higher education costs. The creation of the means of encouragement for persons to invest in such a program represents the carrying out of a vital and valid public purpose. In order to make available to parents and others interested in the higher education of our youth an opportunity to fund future higher education needs, it is necessary that a public trust be established in which money may be invested for future educational use. It is also necessary to establish an endowment fund which may not be funded with public funds but may receive gifts, grants, and donations from private parties, which will be made available to participants in the trust to enhance their savings invested for the payment of future higher education costs. Source Laws 2000, LB 1003, § 1. 85-1802 Terms, defined. For purposes of sections 85-1801 to 85-1814: (1) Administrative fund means the administrative fund created in section 85-1807; (2) Beneficiary means the individual designated by a participation agreement to benefit from advance payments of higher education costs on behalf of the beneficiary; (3) Benefits means the payment of higher education costs on behalf of a beneficiary by the trust during the beneficiary's attendance at an institution of higher education; (4) Endowment fund means the endowment fund created in section 85-1807; (5) Higher education costs means the certified costs of tuition and fees, books, supplies, and equipment required for enrollment or attendance at an institution of higher education. Reasonable room and board expenses, based on the minimum amount applicable for the institution of higher education during the period of enrollment, shall be included as a higher education cost for those students enrolled on at least a half-time basis. Higher education costs shall not include any amounts in excess of those allowed by section 529 of the Internal Revenue Code; (6) Institution of higher education means an institution described in section 529 of the Internal Revenue Code which is eligible to participate in the United States Department of Education's student aid programs; (7) Nebraska educational savings plan trust means the trust created in section 85-1804; 32
  33. 33. (8) Nebraska institution of higher education means an institution described in section 529 of the Internal Revenue Code which is eligible to participate in the United States Department of Education's student aid program and which is located in Nebraska; (9) Participant means an individual, an individual's legal representative, or any other legal entity authorized to establish a savings account under section 529 of the Internal Revenue Code who has entered into a participation agreement for the advance payment of higher education costs on behalf of a beneficiary; (10) Participation agreement means an agreement between a participant and the Nebraska educational savings plan trust entered into under sections 85-1801 to 85-1814; (11) Program fund means the program fund created in section 85-1807; (12) Refund penalty means the amount assessed by the State Treasurer for cancellation of a participation agreement or other refund which is not considered a de minimis penalty pursuant to section 529 of the Internal Revenue Code; (13) Section 529 of the Internal Revenue Code means such section of the code and the regulations interpreting such section, as such section and regulations existed on April 18, 2001; and (14) Tuition and fees means the quarter or semester charges imposed to attend an institution of higher education and required as a condition of enrollment. Source Laws 2000, LB 1003, § 2; Laws 2001, LB 750, § 1. 85-1803 Funding. The Nebraska educational savings plan trust shall be operated with no General Fund appropriations. Money from the trust transferred from the program fund or endowment fund to the administrative fund in an amount authorized by an appropriation from the Legislature shall be utilized to pay for the costs of administering, operating, and maintaining the trust, to the extent permitted by section 529 of the Internal Revenue Code. The administrative fund shall not be credited with any money other than money transferred from the program fund or endowment fund in an amount authorized by an appropriation by the Legislature or any interest income earned on the balances held in the administrative fund. Source Laws 2000, LB 1003, § 3; Laws 2003, LB 574, § 27. 85-1804 Nebraska educational savings plan trust; created; State Treasurer; Nebraska Investment Council; powers and duties. The Nebraska educational savings plan trust is created. The State Treasurer is the trustee of the trust and as such is responsible for the administration, operation, and maintenance of the program and has all powers necessary to carry out and effectuate the purposes, objectives, and provisions of sections 85-1801 to 85-1814 pertaining to the administration, operation, and maintenance of the trust and program, except that the state investment officer shall have fiduciary responsibility to make all decisions regarding the investment of the money in the administrative fund, endowment fund, and program fund, including the selection of all investment options and the approval of all fees and other costs charged to trust assets except costs for administration, operation, and maintenance of the trust as appropriated by the Legislature, pursuant to the directions, guidelines, and policies established by the Nebraska Investment Council. The State Treasurer may adopt and promulgate rules and regulations to provide for the efficient administration, operation, and maintenance of the trust and program. 33
  34. 34. The State Treasurer shall not adopt and promulgate rules and regulations that in any way interfere with the fiduciary responsibility of the state investment officer to make all decisions regarding the investment of money in the administrative fund, endowment fund, and program fund. The State Treasurer or his or her designee shall have the power to: (1) Enter into agreements with any institution of higher education, the state, any federal or other state agency, or any other entity to implement sections 85-1801 to 85-1814, except agreements which pertain to the investment of money in the administrative fund, endowment fund, or program fund; (2) Carry out the duties and obligations of the trust; (3) Accept any grants or gifts which shall be deposited into the endowment fund; (4) Carry out studies and projections to advise participants regarding present and estimated future higher education costs and levels of financial participation in the trust required in order to enable participants to achieve their educational funding objectives; (5) Participate in any federal, state, or local governmental program for the benefit of the trust; (6) Procure insurance against any loss in connection with the property, assets, or activities of the trust as provided in section 81-8,239.01; (7) Solicit and accept for the benefit of the endowment fund gifts, grants, and donations from private parties; (8) Enter into participation agreements with participants; (9) Make payments to institutions of higher education pursuant to participation agreements on behalf of beneficiaries; (10) Make refunds to participants upon the termination of participation agreements pursuant to the provisions, limitations, and restrictions set forth in sections 85-1801 to 85-1814; (11) Contract for goods and services and engage personnel as necessary, including consultants, actuaries, managers, legal counsels, and auditors for the purpose of rendering professional, managerial, and technical assistance and advice regarding trust administration and operation, except contracts which pertain to the investment of the administrative, endowment, or program funds; and (12) Establish, impose, and collect administrative fees and charges in connection with transactions of the trust, and provide for reasonable service charges, including penalties for cancellations, refund penalties, and late payments with respect to participation agreements. The Nebraska Investment Council may adopt and promulgate rules and regulations to provide for the prudent investment of the assets of the trust. The council or its designee also has the authority to select and enter into agreements with individuals and entities to provide investment advice and management of the assets held by the trust, establish investment guidelines, objectives, and performance standards with respect to the assets held by the trust, and approve any fees, commissions, and expenses, which directly or indirectly affect the return on assets. Source Laws 2000, LB 1003, § 4; Laws 2001, LB 750, § 2; Laws 2003, LB 574, § 28. 85-1805 Advertising or promotional materials; restriction. Any advertising or promotional materials relating to the Nebraska educational savings plan trust may include references to a public office but shall not refer to an officeholder by name. Source Laws 2000, LB 1003, § 5. 85-1806 Participation agreements; terms and conditions. 34
  35. 35. The Nebraska educational savings plan trust may enter into participation agreements with participants on behalf of beneficiaries pursuant to the following terms and conditions: (1) A participation agreement shall require a participant to agree to invest a specific amount of money in the trust for the benefit of a beneficiary as allowed by section 529 of the Internal Revenue Code. A participant shall not be required to make an annual contribution on behalf of a beneficiary. The maximum contribution shall not exceed the amount allowed under section 529 of the Internal Revenue Code. The State Treasurer may set a maximum cumulative contribution, as necessary, to maintain compliance with section 529 of the Internal Revenue Code. Participation agreements may be amended to provide for adjusted levels of contributions based upon changed circumstances or changes in educational plans or to ensure compliance with section 529 of the Internal Revenue Code or any other applicable laws and regulations; (2) Beneficiaries designated in participation agreements shall meet the requirements established by the trustee and section 529 of the Internal Revenue Code; (3) Payment of benefits provided under participation agreements shall be made in a manner consistent with section 529 of the Internal Revenue Code; (4) The execution of a participation agreement by the trust shall not guarantee in any way that higher education costs will be equal to projections and estimates provided by the trust or that the beneficiary named in any participation agreement will (a) be admitted to an institution of higher education, (b) if admitted, be determined a resident for tuition purposes by the institution of higher education, (c) be allowed to continue attendance at the institution of higher education following admission, or (d) graduate from the institution of higher education; (5) A beneficiary under a participation agreement may be changed as permitted under the rules and regulations adopted under sections 85-1801 to 85-1814 and consistent with section 529 of the Internal Revenue Code upon written request of the participant as long as the substitute beneficiary is eligible for participation. Participation agreements may otherwise be freely amended throughout their term in order to enable participants to increase or decrease the level of participation, change the designation of beneficiaries, and carry out similar matters as authorized by rule and regulation; and (6) Each participation agreement shall provide that the participation agreement may be canceled upon the terms and conditions and upon payment of applicable fees and costs set forth and contained in the rules and regulations. Source Laws 2000, LB 1003, § 6; Laws 2001, LB 750, § 3. 85-1807 Deposit of funds; participation agreement; benefit received. (1) The State Treasurer shall deposit money received by the Nebraska educational savings plan trust into three funds: The program fund, the endowment fund, and the administrative fund. The State Treasurer shall deposit money received by the trust into the appropriate fund. The State Treasurer and Accounting Administrator of the Department of Administrative Services shall determine the state fund types necessary to comply with section 529 of the Internal Revenue Code and state policy. The money in the funds shall be invested by the state investment officer pursuant to policies established by the Nebraska Investment Council. All money paid by participants in connection with participation agreements and all investment income earned on such money shall be deposited as received into separate accounts within the program fund. All money received by the trust from the proceeds of gifts and other endowments for the purposes of the trust and all investment income earned on such money shall be deposited as received into the endowment fund. The program fund, administrative fund, and endowment fund shall be 35
  36. 36. separately administered. Any gifts, grants, or donations to the trust for deposit to the endowment fund shall be a grant, gift, or donation to the state for the accomplishment of a valid public eleemosynary, charitable, and educational purpose and shall not be included in the income of the donor for state income tax purposes. Contributions to the trust made by participants or received in the form of gifts, grants, or donations may only be made in the form of cash. All funds generated in connection with participation agreements shall be deposited into the appropriate accounts within the program fund. A participant or beneficiary shall not provide investment direction regarding program contributions or earnings held by the trust. (2) Each beneficiary under a participation agreement shall receive a pro rata interest in the endowment fund each year after any transfers to the administrative fund have been made. The amount received from the endowment fund shall be in the ratio that the principal amount paid by the participant under the participation agreement and investment income earned to date under the agreement bears to the principal amount of all money, funds, and securities then held in the program fund, but not to exceed the amount which, in combination with the current payment due from the program fund, equals the beneficiary's higher education costs for the current period of enrollment. Money accrued by participants in the program fund may be used for payments to any institution of higher education. No rights to any money derived from the endowment fund shall exist if money payable under the participation agreement is paid to an institution of higher education which is not a Nebraska institution of higher education. Source Laws 2000, LB 1003, § 7; Laws 2003, LB 574, § 29. 85-1808 Participation agreement; cancellation; when; effect. (1) A participant may cancel a participation agreement at will. The trustee shall determine and collect a refund penalty by deducting the refund penalty from the returned funds. Collected refund penalties shall be deposited in the endowment fund. Endowment fund money credited to the program account shall be forfeited and returned to the endowment fund. (2) Upon the occurrence of any of the following circumstances, no refund penalty shall be levied by the trust in the event of a refund or termination of a participation agreement: (a) Death of the beneficiary; (b) Permanent disability or mental incapacity of the beneficiary; (c) The beneficiary is awarded a scholarship as defined in section 529 of the Internal Revenue Code, but only to the extent the refund of earnings does not exceed the scholarship amount; or (d) A qualified rollover is made as permitted by section 529 of the Internal Revenue Code, except that if a qualified rollover is made into a plan sponsored by another state or entity, the participation agreement shall be deemed to have been canceled for purposes of subdivision (8) (d) of section 77-2716 and federal adjusted gross income shall be increased to the extent previously deducted as a contribution to the trust. (3) In the event of cancellation of a participation agreement for any of the causes listed in subsection (2) of this section, the participant shall be entitled to receive the principal amount of all contributions made by the participant under the participation agreement plus the actual program fund investment income earned on the contributions, less any losses incurred on the investment, but not endowment fund money. Notwithstanding any other provisions of this section, under no circumstances shall a participant or beneficiary receive a refund or distribution that is more than the fair market value of the specific account on the applicable liquidation date. Source Laws 2000, LB 1003, § 8; Laws 2001, LB 750, § 4; Laws 2003, LB 574, § 30; Laws 2005, LB 216, § 36
  37. 37. 20. 85-1809 Ownership rights under participation agreement. (1) A participant retains ownership of all contributions made under a participation agreement up to the date of utilization for payment of higher education costs for the beneficiary. Notwithstanding any other provision of law, any amount credited to any account is not susceptible to any levy, execution, judgment, or other operation of law, garnishment, or other judicial enforcement, and the amount is not an asset or property of either the participant or the beneficiary for the purposes of any state insolvency or inheritance tax laws. All income derived from the investment of the contributions made by the participant shall be considered to be held in trust for the benefit of the beneficiary. (2) If the program created by sections 85-1801 to 85-1814 is terminated prior to payment of higher education costs for the beneficiary, the participant is entitled to receive the fair market value of the account established in the program, less any assessed refund penalty. (3) If the beneficiary graduates from an institution of higher education and a balance remains in the participant's account, any remaining funds may be transferred as allowed by rule or regulation, subject to the provisions of section 529 of the Internal Revenue Code, as well as any other applicable state or federal laws or regulations. (4) The institution of higher education shall obtain ownership of the payments made for the higher education costs paid to the institution at the time each payment is made to the institution. (5) Any amounts which may be paid to any person or persons pursuant to the Nebraska educational savings plan trust but which are not listed in this section are owned by the trust. (6) A participant may transfer ownership rights to another eligible participant, including a gift of the ownership rights to a minor beneficiary. The transfer shall be made and the property distributed in accordance with the rules and regulations or with the terms of the participation agreement. (7) A participant shall not be entitled to utilize any interest in the Nebraska educational savings plan trust as security for a loan. (8) The Nebraska educational savings plan trust may accept transfers of cash investments from a custodian under the Nebraska Uniform Transfers to Minors Act or any other similar laws under the terms and conditions established by the trustee. Source Laws 2000, LB 1003, § 9; Laws 2001, LB 750, § 5; Laws 2003, LB 574, § 31. Cross Reference Nebraska Uniform Transfers to Minors Act, see section 43-2701. 85-1810 Benefits received; effect on other student aid. A student loan program, student grant program, or other program administered by any agency of the state, except as may be otherwise provided by federal law or the provisions of any specific grant applicable to the federal law, shall not take into account and shall not consider amounts available for the payment of higher education costs pursuant to the Nebraska educational savings plan trust in determining need and eligibility for student aid. Source Laws 2000, LB 1003, § 10. 85-1811 Annual audit. (1) The State Treasurer shall submit an annual audited financial report, prepared in accordance with generally accepted accounting principles, on the operations of the Nebraska educational 37
  38. 38. savings plan trust by November 1 to the Governor and the Legislature. The State Treasurer shall cause the audit to be made either by the Auditor of Public Accounts or by an independent certified public accountant designated by the State Treasurer, and the audit shall include direct and indirect costs attributable to the use of outside consultants, independent contractors, and any other persons who are not state employees. (2) The annual audit shall be supplemented by all of the following information prepared by the State Treasurer: (a) Any related studies or evaluations prepared in the preceding year; (b) A summary of the benefits provided by the trust, including the number of participants and beneficiaries in the trust; and (c) Any other information which is relevant in order to make a full, fair, and effective disclosure of the operations of the trust, including the investment performance of the funds. Source Laws 2000, LB 1003, § 11. 85-1812 Benefits received; tax consequences. (1) For federal income tax purposes, the Nebraska educational savings plan trust shall be considered a qualified state tuition program exempt from taxation pursuant to section 529 of the Internal Revenue Code. The trust meets the requirements of section 529(b) of the Internal Revenue Code as follows: (a) Pursuant to section 85-1806, a participant may make contributions to an account which is established for the purpose of meeting the qualified higher education costs of the designated beneficiary of the account; (b) Pursuant to section 85-1806, a maximum contribution level is established; (c) Pursuant to section 85-1807, a separate account is established for each beneficiary; (d) Pursuant to section 85-1807, contributions may only be made in the form of cash; (e) Pursuant to section 85-1807, a participant or beneficiary shall not provide investment direction regarding program contributions or earnings held by the trust; (f) Pursuant to section 85-1808, penalties are provided on refunds of earnings which are not used for qualified higher education costs of the beneficiary, made on account of the death or disability of the designated beneficiary, or made due to scholarship, allowance, or payment receipt as provided in section 529(b)(3) of the Internal Revenue Code; and (g) Pursuant to section 85-1809, a participant shall not pledge any interest in the trust as security for a loan. (2) State income tax treatment of the Nebraska educational savings plan trust shall be as provided in section 77-2716. Source Laws 2000, LB 1003, § 12. 85-1813 Assets of trust; how treated. The assets of the Nebraska educational savings plan trust, including the program fund and endowment fund, shall at all times be preserved, invested, and expended solely and only for the purposes of the trust and shall be held in trust for the participants and beneficiaries. No property rights in the trust shall exist in favor of the state. The assets of the trust shall not be transferred or used by the state for any purposes other than the purposes of the trust. Source Laws 2000, LB 1003, § 13. 38
  39. 39. 85-1814 Sections; how construed. Nothing in sections 85-1801 to 85-1813 shall be deemed to prohibit both resident and nonresident participants and designated beneficiaries from being eligible to participate in and benefit from the Nebraska educational savings plan trust and program. It is the intent of the Legislature that funds and income credited to the program fund are fully portable and may be used at any institution of higher education. Source Laws 2000, LB 1003, § 14. 39

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