SENATE BILL NO. 1247

December 03, 2020, Introduced by Senator HOLLIER and referred to the Committee on Finance.

A bill to create the family savings account program act; to permit the establishment and maintenance of family savings accounts; to prescribe the requirements of and restrictions on family savings accounts; to prescribe the powers and duties of certain state agencies, boards, and departments; to provide for certain tax credits and deductions; and to provide penalties and remedies.

the people of the state of michigan enact:

Sec. 1. This act shall be known and may be cited as the "family savings account program act".

Sec. 3. As used in this act:

(a) "Account administrator" means any of the following:

(i) A financial institution.

(ii) A certified public accountant licensed to practice in this state pursuant to article 7 of the occupational code, 1980 PA 299, MCL 339.720 to 339.736.

(b) "Account holder" means an individual who establishes a family savings account individually or jointly with his or her spouse.

(c) "Department" means the department of treasury.

(d) "Domicile" means a place where an individual has his or her true, fixed, and permanent home and principal establishment, to which, whenever absent, he or she intends to return. Domicile continues until another permanent home or principal establishment is established.

(e) "Eligible expense" means an expense paid by an account holder for reasonable living expenses for himself or herself or his or her family as determined by the department. Eligible expenses include, but are not limited to, child care expenses, family planning expenses, fertility and reproductive health services expenses, adoption expenses, diapers, lead-safe home renovations, home renovations to improve accessibility or provide visitability, preventative health care expenses, and mental health services not covered by insurance. Eligible expenses do not include any expenses or costs incurred for tuition or attendance at a nonpublic school containing any of grades kindergarten to 12.

(f) "Family savings account" or "account" means an account established in this state under this act to be used to pay the eligible expenses of an account holder or his or her family.

(g) "Financial institution" means any bank, trust company, savings institution, industrial loan association, consumer finance company, credit union, or any benefit association, insurance company, safe deposit company, money market mutual fund, broker, or similar entity authorized to do business in this state.

(h) "Program" means the family savings account program established under section 5.

(i) "Resident" means an individual domiciled in this state.

Sec. 5. (1) The family savings account program is established within the department. The program shall provide individuals with an opportunity to establish accounts to be used to encourage savings to pay for reasonable living expenses as provided in this act. The department shall establish policies and procedures for the program. The department is responsible for approving account administrators for the program and making a list of those approved account administrators available to the public. The department is responsible for determining eligible expenses and the use of accounts under this program. The department shall work cooperatively with account administrators to implement the program under this act.

(2) For tax years that begin after December 31, 2019, an individual may establish a family savings account with an account administrator for himself or herself or for his or her family to be used to pay or reimburse the individual for eligible expenses. To establish an account, the individual shall enter into an agreement with an account administrator. A household shall not have more than 1 account under this program.

(3) Only cash and marketable securities may be contributed to a family savings account.

Sec. 7. (1) An account administrator shall administer the family savings account from which the payments are made and has a fiduciary duty to the individual for whose benefit the account administrator administers an account.

(2) The account administrator shall utilize the funds held in an account solely for the purpose of paying the eligible expenses of the account holder or his or her family. The account administrator may deduct a reasonable service fee from the account.

(3) The account administrator shall pay the eligible expenses based on bills or other evidence of a debt or account due or shall reimburse the account holder from the account holder's account for eligible expenses paid by the account holder based on documentation submitted to the account administrator.

Sec. 9. (1) Subject to subsection (2), if an account holder withdraws money for any purpose other than a purpose described in section 7(2), the administrator shall withhold from the amount of the withdrawal and on behalf of the account holder shall pay a penalty to the department equal to 10% of the amount of the withdrawal.

(2) The amount of a disbursement of any assets of an account pursuant to a filing for protection under title 11 of the United States Code, 11 USC 101 to 1330, by an account holder or an account holder's spouse is not considered a withdrawal for purposes of this section.

(3) Upon the death of the account holder, the account administrator shall distribute the principal and accumulated interest of the account to the estate of the account holder.

Sec. 11. (1) An account administrator shall file with the department an annual report of the family savings account program activity related to accounts established under this act. The report shall be filed no later than September 30 each year. The report shall include, but is not limited to, all of the following:

(a) The number of accounts established and administered under this act.

(b) The amount of deposits for each account.

(c) The amount and number of withdrawals made.

(d) The number of terminated accounts and the reasons for termination.

(e) Any other information the department may require under this program.

(2) Not later than December 31 of each year, the department shall file with the clerk of the house of representatives and the secretary of the senate a report that includes all of the information under subsection (1), copies of any changes in policies or procedures used to administer this act that occurred during the year, and the effectiveness of the program and the credit offered under section 276 of the income tax act of 1967, 1967 PA 281, MCL 206.276.

Enacting section 1. This act does not take effect unless Senate Bill No. 1248 of the 100th Legislature is enacted into

law.