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KENTUCKY HIGHER EDUCATION ASSISTANCE AUTHORITY

Division of Student Financial Aid

(Amendment)

11 KAR 12:070.Benefits payable from the Kentucky Educational Savings Plan Trust Program fund.

RELATES TO:

KRS 164A.310(8), 164A.330(5), 164A.335, 26 U.S.C. 529

STATUTORY AUTHORITY:

KRS 164A.310(14), 164A.325(9)

CERTIFICATION STATEMENT:

This is to certify that this administration regulation complies with the requirements of 2025 RS HB 6, Section 8.

NECESSITY, FUNCTION, AND CONFORMITY:

KRS 164A.325(9) authorizes the board to promulgate administrative regulations to implement the Kentucky Educational Savings Plan Trust. This administrative regulation establishes the maximum benefits payable in an academic period, the duration of the payments, the payment of benefits for a beneficiary residing off campus and the notice provisions for a refund of the payments for nonuse or unused benefits from the program fund.

Section 1.

Distribution of Benefits.

(1)

Upon submission of a notice to use trust benefits, the participant shall specify the level of benefits to be paid. The participant shall elect distribution of an allotment of the account balance~~, calculated by dividing the account balance by the number of academic periods in the beneficiary's program of study,~~ or a higher amount, which shall not exceed the beneficiary's higher education costs for each academic period. The ~~participant~~ may adjust the level of benefits paid in an academic period by notifying the program administrator in writing either by mail or electronically.

(2)

Distribution of benefits shall begin on request~~after receipt by the program administrator of a notice to use trust benefits~~ and ~~shall~~ continue throughout the beneficiary's period of enrollment at an institution of higher education, or until the account balance has been exhausted, whichever occurs first.

(3)

If a participant transfers ownership rights pursuant to KRS Chapter 385, Uniform Transfers to Minors Act, notwithstanding KRS 385.202(1), which mandates the transfer of custodial property to the minor upon attainment of age eighteen (18), the property shall be distributed for postsecondary educational purposes in accordance with the terms of the participation agreement during each academic period of the beneficiary's educational program.

Section 2.

Beneficiary Residing Off Campus. If a beneficiary resides off campus, upon written request of the participant, the program administrator shall pay to the beneficiary or participant, for room and board for an academic period, that portion of higher education costs not paid to the institution that shall not exceed the amount of the beneficiary's higher education costs permitted for room and board pursuant to 26 U.S.C. 529.

Section 3.

Unused Benefits.

(1)

During academic period. If a beneficiary's higher education costs are less than the benefits due ~~for an academic period~~, that portion of the unused benefits shall accumulate to the beneficiary's account. The unused benefits plus the beneficiary's entitlement in the program fund ~~in an academic period~~ not exceeding the higher education costs may be paid for the beneficiary at a future date~~in the next succeeding academic period~~.

(2)

After education attainment~~graduation~~. If the beneficiary completes education attainment~~graduates from an institution of higher education~~, and a balance remains in the beneficiary's account, the program administrator shall pay, upon the written request of the participant submitted by mail or electronically, the balance of the payments and the earnings from the investments in the program fund remaining in the account to the participant pursuant to KRS 164A.350.

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 maximum benefits payable in an academic period, the duration of the payments, the payment of benefits for a beneficiary residing off campus, and the notice provisions for a refund of payments for unused benefits under the KESPT program.

(b) The necessity of this administrative regulation:

The Authority is required to promulgate administrative regulations pertaining to operation of the KESPT program including benefits and refunds.

This administrative regulation conforms to the content of the authorizing statutes by prescribing provisions for payments of benefits and refunds of unused funds.

(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 prescribing the requirements for payments of benefits and refunds of unused forms under the KESPT program.

(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 authorizing the submission of requests for plan benefit use and refunds to be made by electronic means as well as simplifying the determination of the allotment of benefits eligible for use in an academic year.

(b) The necessity of the amendment to this administrative regulation:

The amendment to this administrative regulation is necessary in order to expand the method of submission of forms as well as to advise plan participants of the method of determination for benefits eligible for use in an academic year.

This amendment conforms to the content of the authorizing statutes by clarifying usage of plan benefits.

(d) How the amendment will assist in the effective administration of the statutes:

This amendment will assist in the effective administration of the KESPT program by expanding the means of submission of requests to utilize plan benefits.

(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 are 24,895 participants in the KESPT program.

(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 plan participants who seek to use plan benefits will be able to submit those requests electronically.

(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.

As a result of compliance, applicants will be able to utilize plan benefits.

(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:

No funding source is required in order to implement this administrative regulation since it merely specifies the means by which requests to utilize plan benefits can be submitted.

(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(14), 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 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.

(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 12:070.Benefits payable from the Kentucky Educational Savings Plan Trust Program fund.

RELATES TO:

KRS 164A.310(8), 164A.330(5), 164A.335, 26 U.S.C. 529

STATUTORY AUTHORITY:

KRS 164A.310(14), 164A.325(9)

CERTIFICATION STATEMENT:

This is to certify that this administration regulation complies with the requirements of 2025 RS HB 6, Section 8.

NECESSITY, FUNCTION, AND CONFORMITY:

Section 1.

Distribution of Benefits.

(1)

Upon submission of a notice to use trust benefits, the participant shall specify the level of benefits to be paid. The participant shall elect distribution of an allotment of the account balance or a higher amount, which shall not exceed the beneficiary's higher education costs for each academic period. The may adjust the level of benefits paid in an academic period by notifying the program administrator in writing either by mail or electronically.

(2)

Distribution of benefits shall begin on request and continue throughout the beneficiary's period of enrollment at an institution of higher education, or until the account balance has been exhausted, whichever occurs first.

(3)

Section 2.

Section 3.

Unused Benefits.

(1)

During academic period. If a beneficiary's higher education costs are less than the benefits due, that portion of the unused benefits shall accumulate to the beneficiary's account. The unused benefits plus the beneficiary's entitlement in the program fund not exceeding the higher education costs may be paid for the beneficiary at a future date.

(2)

After education attainment. If the beneficiary completes education attainment, and a balance remains in the beneficiary's account, the program administrator shall pay, upon the written request of the participant submitted by mail or electronically, the balance of the payments and the earnings from the investments in the program fund remaining in the account to the participant pursuant to KRS 164A.350.