Title 011 | Chapter 012 | Regulation 040REG
PROPOSED
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PREVIOUS VERSION
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KENTUCKY HIGHER EDUCATION ASSISTANCE AUTHORITY
Division of Student Financial Aid
(Amendment)
11 KAR 12:040.Residency classification for Kentucky Educational Savings Plan Trust vested participation agreements.
Section 1.
Residency Requirement.(1)
A person who has been a resident of the Commonwealth of Kentucky for at least eight (8) continuous years and was designated as a beneficiary under a participation agreement that is in full force and effect for that entire eight (8) year period, shall be deemed to have a vested participation agreement, even if the beneficiary leaves the state prior to enrollment in an institution of higher education.(2)
For purposes of subsection (1) of this section, a participation agreement shall be deemed to be in full force and effect if, at the end of the eight (8) year period:(a)
The total contributions of principal to the account that remain in the account balance equal(b)
The participation agreement has not been cancelled at the time that the beneficiary first enrolls in an institution of higher education.Section 2.
Proof of Residency.(1)
Following the expiration of the period of eight (8) years of continuous residency by the beneficiary, in order to establish a vested participation agreement, either the participant or the beneficiary shall submit to the program administrator evidence of the residency(a)
Evidence submitted on behalf of a dependent person shall pertain to the domicile of either parent during the claimed period of residency.(b)
An individual who enrolls in college immediately following graduation from high school and remains enrolled shall:1.(a)
Be treated as a dependent person unless the contrary is evident from the information submitted; and2.(b)
Have (2)
A person claiming independent status shall document independent status under subsection (4) of this section and shall demonstrate by clear and convincing evidence that domicile in Kentucky has been established(3)
The determination of residency shall be based upon verifiable circumstances or actions. A single fact shall not be paramount, and each situation shall be evaluated to identify those facts that(4)
The following facts, although not conclusive, shall have probative value in support of a claim for resident classification:(a)
Full-time employment in Kentucky or transfer to an employer in contiguous area while maintaining domicile in Kentucky;(b)
Filing of Kentucky resident income tax(c)
Attendance as a full-time, nonresident student at an out-of-state institution of higher education while determined to be a resident of Kentucky;(d)
Abandonment of a former domicile and establishing domicile in Kentucky with attendance at an institution of higher education following and incidental to the change in domicile;(e)
Payment of occupational taxes in Kentucky;(f)
Payment of real property taxes in Kentucky;(g)
Payment of intangible personal property taxes in Kentucky;(h)
Ownership of real property in Kentucky, if the property was used as a residence during the claimed period of residency status;(i)
Long-term lease of housing during the claimed period of residency status;(j)
Kentucky automobile registration during the claimed period of residency;(k)
Kentucky driver's license during the claimed period of residency status;(l)
Registration as a Kentucky voter during the claimed period of residency;(m)
Corroborating affidavit of a nonrelative; or(n)
A combination of facts established in paragraphs (a) through (m) of this subsection.(5)
The determination of residency shall be based upon verifiable circumstances or actions and(6)
The program administrator:(a)
May request additional documentation to clarify circumstances; and(b)
Shall base the determination consideringSection 3.
Nontransferability of Vested Participation Agreement.(1)
Although the participant may freely substitute beneficiaries under a participation agreement, the residency status acquired by a beneficiary of a vested participation agreement shall not be used to confer residency status on a substituted beneficiary; and(2)
The residency of one (1) beneficiary shall not be considered in determiningGREG ROUSH, Chair
APPROVED BY AGENCY: June 12, 2025
FILED WITH LRC: July 11, 2025 at 8:25 a.m.
PUBLIC HEARING AND COMMENT PERIOD: A public hearing on this administrative regulation shall be held on Wednesday, September 24, 2025, at 10:00 a.m. Eastern Time at 100 Airport Road, Frankfort, Kentucky 40601. Individuals interested in being heard at this hearing shall notify this agency in writing by five (5) workdays prior to the hearing, of their intent to attend. If no notification of intent to attend the hearing is received by that date, the hearing may be canceled. This hearing is open to the public. Any person who attends will be given an opportunity to comment on the proposed administrative regulation. A transcript of the public hearing will not be made unless a written request for a transcript is made. If you do not wish to be heard at the public hearing, you may submit written comments on the proposed administrative regulation. Written comments shall be accepted through September 30, 2025. Send written notification of intent to be heard at the public hearing or written comments on the proposed administrative regulation to the contact person.
CONTACT PERSON: Hon. Miles F. Justice, General Counsel, Kentucky Higher Education Assistance Authority, P.O. Box 798, Frankfort, Kentucky 40602-0798, phone (502) 696-7309, fax (502) 696-7293, email mjustice@kheaa.com.
REGULATORY IMPACT ANALYSIS AND TIERING STATEMENT
Contact Person:
David Lawhorn
(1) Provide a brief summary of:
(a) What this administrative regulation does:
This administrative regulation establishes the standards of proof of residency of a beneficiary for a vested participation agreement.
(b) The necessity of this administrative regulation:
The Authority is required to promulgate administrative regulations pertaining to the vested participation agreement under the Kentucky Education Savings Plan Trust.
(c) How this administrative regulation conforms to the content of the authorizing statutes:
This administrative regulation conforms to the content of the authorizing statutes by prescribing the residency requirements for the vested participation agreement for KESPT.
(d) How this administrative regulation currently assists or will assist in the effective administration of the statutes:
This administrative regulation assists with the effective administration of the statutes by establishing the standards of proof required for residency of a beneficiary in a vested participation agreement.
(2) If this is an amendment to an existing administrative regulation, provide a brief summary of:
(a) How the amendment will change this existing administrative regulation:
The amendment changes the existing regulation by updating the provisions of the proof of residency requirements for the vested participation agreement.
(b) The necessity of the amendment to this administrative regulation:
The amendment to this administrative regulation is necessary in order to succinctly and clearly describe the proof of residency requirements for vested participation agreements in the KESPT.
(c) How the amendment conforms to the content of the authorizing statutes:
This amendment conforms to the content of the authorizing statutes by stating with specificity how a beneficiary under the KESPT must prove residency in order to benefit from a vested participation agreement.
(d) How the amendment will assist in the effective administration of the statutes:
This amendment will assist in the effective administration of the KESPT by clarifying the types of documentation that satisfy the proof of residency requirements for the vested participation agreement under the Trust.
(3) List the type and number of individuals, businesses, organizations, or state and local governments affected by this administrative regulation:
As of January 31, 2025, there were 24,895 participants in the Kentucky Educational Savings Plan Trust.
(4) Provide an analysis of how the entities identified in question (3) will be impacted by either the implementation of this administrative regulation, if new, or by the change, if it is an amendment, including:
(a) List the actions that each of the regulated entities identified in question (3) will have to take to comply with this administrative regulation or amendment:
Those participants who seek to take advantage of the vested participation option under the KESPT must establish residency via the proof required in the regulation.
(b) In complying with this administrative regulation or amendment, how much will it cost each of the entities identified in question (3):
There will be no cost to the applicants in complying with this amendment.
(c) As a result of compliance, what benefits will accrue to the entities identified in question (3):
As a result of compliance, otherwise qualified applicants will be able to benefit from the vested participation agreement in the Trust.
(5) Provide an estimate of how much it will cost the administrative body to implement this administrative regulation:
(a) Initially:
There is no cost to implement this administrative regulation.
(b) On a continuing basis:
See 5(a) above.
(6) What is the source of the funding to be used for the implementation and enforcement of this administrative regulation:
The funds held in the Trust are private funds contributed by the participant. In accordance with KRS 164A.335, funds may be transferred from the Program Fund to an Administrative Fund for the purpose of paying operating costs associated with administering the trust.
(7) Provide an assessment of whether an increase in fees or funding will be necessary to implement this administrative regulation, if new, or by the change if it is an amendment:
No increase in fees or funding will be necessary to implement the amendment to this administrative regulation.
(8) State whether or not this administrative regulation establishes any fees or directly or indirectly increases any fees:
This administrative regulation does not establish any fees, nor does it directly or indirectly increase any fees.
(9) TIERING: Is tiering applied?
Tiering was not applied. It is not applicable to this amendment. This administrative regulation is intended to provide equal opportunity to participate, and consequently does not inherently result in disproportionate impacts on certain classes of regulated entities. The "equal protection" and "due process" clauses of the Fourteenth Amendment of the U.S. Constitution may be implicated as well as Sections 2 and 3 of the Kentucky Constitution. The regulation provides equal treatment and opportunity for all applicants and recipients.
FISCAL IMPACT STATEMENT
(1) Identify each state statute, federal statute, or federal regulation that requires or authorizes the action taken by the administrative regulation:
KRS 164A.310 and 164A.325, 26 U.S.C. 529.
(2) State whether this administrative regulation is expressly authorized by an act of the General Assembly, and if so, identify the act:
KRS 164A.310(14) and 164A.325.
(3)(a) Identify the promulgating agency and any other affected state units, parts, or divisions:
Finance and Administration Cabinet, Kentucky Higher Education Assistance Authority
(b) Estimate the following for each affected state unit, part, or division identified in (3)(a):
1. Expenditures:
For the first year:
No additional expenditures will be required as a result of this amendment to the administrative regulation.
For subsequent years:
Same as above.
2. Revenues:
For the first year:
No additional revenues will be generated through this amendment to the administrative regulation.
For subsequent years:
Same as above.
3. Cost Savings:
For the first year:
No costs are associated with this administrative regulation.
For subsequent years:
Same as above
(4)(a) Identify affected local entities (for example: cities, counties, fire departments, school districts):
There are no affected local entities.
(b) Estimate the following for each affected local entity identified in (4)(a):
1. Expenditures:
For the first year:
No expenditures will be required as a result of this amendment to the regulation.
For subsequent years:
Same as above.
2. Revenues:
For the first year:
No revenues will be generated through this amendment to the administrative regulation.
For subsequent years:
Same as above.
3. Cost Savings:
For the first year:
No costs are associated with this amendment to the administrative regulation.
For subsequent years:
Same as above.
(5)(a) Identify any affected regulated entities not listed in (3)(a) or (4)(a):
The entities affected by the amendment to this administrative regulation are those who elect to participate in the KESPT program.
(b) Estimate the following for each regulated entity identified in (5)(a):
1. Expenditures:
For the first year:
No additional expenditures will be required as a result of this amendment to the administrative regulation.
For subsequent years:
Same as above.
2. Revenues:
For the first year:
No additional revenues will be generated through this amendment to the administrative regulation.
For subsequent years:
Same as above.
3. Cost Savings:
For the first year:
No costs are associated with this administrative regulation.
For subsequent years:
Same as above.
(6) Provide a narrative to explain the following for each entity identified in (3)(a), (4)(a), and (5)(a)
(a) Fiscal impact of this administrative regulation:
Since this administrative regulation merely defines applicable terms for the KESPT program and the forms to be utilized in accessing benefits, there is no fiscal impact.
(b) Methodology and resources used to reach this conclusion:
As noted, there is no fiscal impact on any of the affected entities as this regulation simply defines terms and prescribes the forms to be used for the KESPT program.
(7) Explain, as it relates to the entities identified in (3)(a), (4)(a), and (5)(a):
(a) Whether this administrative regulation will have a "major economic impact", as defined by KRS 13A.010(13):
This administrative regulation will not have a "major economic impact".
(b) The methodology and resources used to reach this conclusion:
As discussed above, there is no fiscal impact from this administrative regulation.
KENTUCKY HIGHER EDUCATION ASSISTANCE AUTHORITY
Division of Student Financial Aid
(Amendment)
11 KAR 12:040.Residency classification for Kentucky Educational Savings Plan Trust vested participation agreements.
Section 1.
Residency Requirement.(1)
A person who has been a resident of the Commonwealth of Kentucky for at least eight (8) continuous years and was designated as a beneficiary under a participation agreement that is in full force and effect for that entire eight (8) year period, shall be deemed to have a vested participation agreement, even if the beneficiary leaves the state prior to enrollment in an institution of higher education.(2)
For purposes of subsection (1) of this section, a participation agreement shall be deemed to be in full force and effect if, at the end of the eight (8) year period:(a)
The total contributions of principal to the account that remain in the account balance equal at least $2400; and(b)
The participation agreement has not been cancelled at the time that the beneficiary first enrolls in an institution of higher education.Section 2.
Proof of Residency.(1)
Following the expiration of the period of eight (8) years of continuous residency by the beneficiary, in order to establish a vested participation agreement, either the participant or the beneficiary shall submit to the program administrator evidence of the residency.(a)
Evidence submitted on behalf of a dependent person shall pertain to the domicile of either parent during the claimed period of residency.(b)
An individual who enrolls in college immediately following graduation from high school and remains enrolled shall:1.
Be treated as a dependent person unless the contrary is evident from the information submitted; and2.
Have domicile determined based on the student's permanent address, parent's mailing address, or location of high school of graduation.(2)
A person claiming independent status shall document independent status under subsection (4) of this section and shall demonstrate by clear and convincing evidence that domicile in Kentucky has been established.(3)
The determination of residency shall be based upon verifiable circumstances or actions. A single fact shall not be paramount, and each situation shall be evaluated to identify those facts that are essential to the determination of domicile.(4)
The following facts, although not conclusive, shall have probative value in support of a claim for resident classification:(a)
Full-time employment in Kentucky or transfer to an employer in contiguous area while maintaining domicile in Kentucky;(b)
Filing of Kentucky resident income tax for each applicable calendar year of claimed residency status;(c)
Attendance as a full-time, nonresident student at an out-of-state institution of higher education while determined to be a resident of Kentucky;(d)
Abandonment of a former domicile and establishing domicile in Kentucky with attendance at an institution of higher education following and incidental to the change in domicile;(e)
Payment of occupational taxes in Kentucky;(f)
Payment of real property taxes in Kentucky;(g)
Payment of intangible personal property taxes in Kentucky;(h)
Ownership of real property in Kentucky, if the property was used as a residence during the claimed period of residency status;(i)
Long-term lease of housing during the claimed period of residency status;(j)
Kentucky automobile registration during the claimed period of residency;(k)
Kentucky driver's license during the claimed period of residency status;(l)
Registration as a Kentucky voter during the claimed period of residency;(m)
Corroborating affidavit of a nonrelative; or(n)
A combination of facts established in paragraphs (a) through (m) of this subsection.(5)
The determination of residency shall be based upon verifiable circumstances or actions and copies of relevant documentation.(6)
The program administrator:(a)
May request additional documentation to clarify circumstances; and(b)
Shall base the determination considering all relevant facts.Section 3.
Nontransferability of Vested Participation Agreement.(1)
Although the participant may freely substitute beneficiaries under a participation agreement, the residency status acquired by a beneficiary of a vested participation agreement shall not be used to confer residency status on a substituted beneficiary; and(2)
The residency of one (1) beneficiary shall not be considered in determining the establishment of a vestment period for a substituted beneficiary.GREG ROUSH, Chair
APPROVED BY AGENCY: June 12, 2025
FILED WITH LRC: July 11, 2025 at 8:25 a.m.
PUBLIC HEARING AND COMMENT PERIOD: A public hearing on this administrative regulation shall be held on Wednesday, September 24, 2025, at 10:00 a.m. Eastern Time at 100 Airport Road, Frankfort, Kentucky 40601. Individuals interested in being heard at this hearing shall notify this agency in writing by five (5) workdays prior to the hearing, of their intent to attend. If no notification of intent to attend the hearing is received by that date, the hearing may be canceled. This hearing is open to the public. Any person who attends will be given an opportunity to comment on the proposed administrative regulation. A transcript of the public hearing will not be made unless a written request for a transcript is made. If you do not wish to be heard at the public hearing, you may submit written comments on the proposed administrative regulation. Written comments shall be accepted through September 30, 2025. Send written notification of intent to be heard at the public hearing or written comments on the proposed administrative regulation to the contact person.
CONTACT PERSON: Hon. Miles F. Justice, General Counsel, Kentucky Higher Education Assistance Authority, P.O. Box 798, Frankfort, Kentucky 40602-0798, phone (502) 696-7309, fax (502) 696-7293, email mjustice@kheaa.com.
REGULATORY IMPACT ANALYSIS AND TIERING STATEMENT
Contact Person:
David Lawhorn
(1) Provide a brief summary of:
(a) What this administrative regulation does:
This administrative regulation establishes the standards of proof of residency of a beneficiary for a vested participation agreement.
(b) The necessity of this administrative regulation:
The Authority is required to promulgate administrative regulations pertaining to the vested participation agreement under the Kentucky Education Savings Plan Trust.
(c) How this administrative regulation conforms to the content of the authorizing statutes:
This administrative regulation conforms to the content of the authorizing statutes by prescribing the residency requirements for the vested participation agreement for KESPT.
(d) How this administrative regulation currently assists or will assist in the effective administration of the statutes:
This administrative regulation assists with the effective administration of the statutes by establishing the standards of proof required for residency of a beneficiary in a vested participation agreement.
(2) If this is an amendment to an existing administrative regulation, provide a brief summary of:
(a) How the amendment will change this existing administrative regulation:
The amendment changes the existing regulation by updating the provisions of the proof of residency requirements for the vested participation agreement.
(b) The necessity of the amendment to this administrative regulation:
The amendment to this administrative regulation is necessary in order to succinctly and clearly describe the proof of residency requirements for vested participation agreements in the KESPT.
(c) How the amendment conforms to the content of the authorizing statutes:
This amendment conforms to the content of the authorizing statutes by stating with specificity how a beneficiary under the KESPT must prove residency in order to benefit from a vested participation agreement.
(d) How the amendment will assist in the effective administration of the statutes:
This amendment will assist in the effective administration of the KESPT by clarifying the types of documentation that satisfy the proof of residency requirements for the vested participation agreement under the Trust.
(3) List the type and number of individuals, businesses, organizations, or state and local governments affected by this administrative regulation:
As of January 31, 2025, there were 24,895 participants in the Kentucky Educational Savings Plan Trust.
(4) Provide an analysis of how the entities identified in question (3) will be impacted by either the implementation of this administrative regulation, if new, or by the change, if it is an amendment, including:
(a) List the actions that each of the regulated entities identified in question (3) will have to take to comply with this administrative regulation or amendment:
Those participants who seek to take advantage of the vested participation option under the KESPT must establish residency via the proof required in the regulation.
(b) In complying with this administrative regulation or amendment, how much will it cost each of the entities identified in question (3):
There will be no cost to the applicants in complying with this amendment.
(c) As a result of compliance, what benefits will accrue to the entities identified in question (3):
As a result of compliance, otherwise qualified applicants will be able to benefit from the vested participation agreement in the Trust.
(5) Provide an estimate of how much it will cost the administrative body to implement this administrative regulation:
(a) Initially:
There is no cost to implement this administrative regulation.
(b) On a continuing basis:
See 5(a) above.
(6) What is the source of the funding to be used for the implementation and enforcement of this administrative regulation:
The funds held in the Trust are private funds contributed by the participant. In accordance with KRS 164A.335, funds may be transferred from the Program Fund to an Administrative Fund for the purpose of paying operating costs associated with administering the trust.
(7) Provide an assessment of whether an increase in fees or funding will be necessary to implement this administrative regulation, if new, or by the change if it is an amendment:
No increase in fees or funding will be necessary to implement the amendment to this administrative regulation.
(8) State whether or not this administrative regulation establishes any fees or directly or indirectly increases any fees:
This administrative regulation does not establish any fees, nor does it directly or indirectly increase any fees.
(9) TIERING: Is tiering applied?
Tiering was not applied. It is not applicable to this amendment. This administrative regulation is intended to provide equal opportunity to participate, and consequently does not inherently result in disproportionate impacts on certain classes of regulated entities. The "equal protection" and "due process" clauses of the Fourteenth Amendment of the U.S. Constitution may be implicated as well as Sections 2 and 3 of the Kentucky Constitution. The regulation provides equal treatment and opportunity for all applicants and recipients.
FISCAL IMPACT STATEMENT
(1) Identify each state statute, federal statute, or federal regulation that requires or authorizes the action taken by the administrative regulation:
KRS 164A.310 and 164A.325, 26 U.S.C. 529.
(2) State whether this administrative regulation is expressly authorized by an act of the General Assembly, and if so, identify the act:
KRS 164A.310(14) and 164A.325.
(3)(a) Identify the promulgating agency and any other affected state units, parts, or divisions:
Finance and Administration Cabinet, Kentucky Higher Education Assistance Authority
(b) Estimate the following for each affected state unit, part, or division identified in (3)(a):
1. Expenditures:
For the first year:
No additional expenditures will be required as a result of this amendment to the administrative regulation.
For subsequent years:
Same as above.
2. Revenues:
For the first year:
No additional revenues will be generated through this amendment to the administrative regulation.
For subsequent years:
Same as above.
3. Cost Savings:
For the first year:
No costs are associated with this administrative regulation.
For subsequent years:
Same as above
(4)(a) Identify affected local entities (for example: cities, counties, fire departments, school districts):
There are no affected local entities.
(b) Estimate the following for each affected local entity identified in (4)(a):
1. Expenditures:
For the first year:
No expenditures will be required as a result of this amendment to the regulation.
For subsequent years:
Same as above.
2. Revenues:
For the first year:
No revenues will be generated through this amendment to the administrative regulation.
For subsequent years:
Same as above.
3. Cost Savings:
For the first year:
No costs are associated with this amendment to the administrative regulation.
For subsequent years:
Same as above.
(5)(a) Identify any affected regulated entities not listed in (3)(a) or (4)(a):
The entities affected by the amendment to this administrative regulation are those who elect to participate in the KESPT program.
(b) Estimate the following for each regulated entity identified in (5)(a):
1. Expenditures:
For the first year:
No additional expenditures will be required as a result of this amendment to the administrative regulation.
For subsequent years:
Same as above.
2. Revenues:
For the first year:
No additional revenues will be generated through this amendment to the administrative regulation.
For subsequent years:
Same as above.
3. Cost Savings:
For the first year:
No costs are associated with this administrative regulation.
For subsequent years:
Same as above.
(6) Provide a narrative to explain the following for each entity identified in (3)(a), (4)(a), and (5)(a)
(a) Fiscal impact of this administrative regulation:
Since this administrative regulation merely defines applicable terms for the KESPT program and the forms to be utilized in accessing benefits, there is no fiscal impact.
(b) Methodology and resources used to reach this conclusion:
As noted, there is no fiscal impact on any of the affected entities as this regulation simply defines terms and prescribes the forms to be used for the KESPT program.
(7) Explain, as it relates to the entities identified in (3)(a), (4)(a), and (5)(a):
(a) Whether this administrative regulation will have a "major economic impact", as defined by KRS 13A.010(13):
This administrative regulation will not have a "major economic impact".
(b) The methodology and resources used to reach this conclusion:
As discussed above, there is no fiscal impact from this administrative regulation.