(a) The Alaska Higher Education Savings Trust is established in the University of Alaska. The purpose of this trust is to secure obligations to participants and beneficiaries under a postsecondary education savings program operated by the University of Alaska and to provide participants a convenient method of saving for college or other postsecondary education. The Board of Regents of the University of Alaska shall

(1) adopt policies that provide for the administration, management, promotion, and marketing of the trust;

(2) maintain the trust in compliance with requirements of 26 U.S.C. (Internal Revenue Code) for a qualified state tuition program as defined in 26 U.S.C. 529;

(3) coordinate savings options established under the trust and the administration of the trust with the Alaska advance college tuition savings fund (AS 14.40.803), including the creation of common administrative and record-keeping systems, marketing programs, and operating reserves;

(4) establish participation agreements, including application, savings options, and withdrawal procedures;

(5) enter into participation agreements with participants for the

(A) accumulation, investment, and distribution of funds;

(B) payment or reimbursement of qualified higher education expenses; and

(C) benefit of a beneficiary;

(6) enter into contracts with one or more contractors, including investment managers; in determining the persons to act as investment managers, consideration must be given to the qualifications of the contractor, including the contractor's ability to

(A) administer financial programs with individual account maintenance and reporting;

(B) develop, market, and administer investment options appropriate for the trust; and

(C) augment the savings program with other beneficial products and services;

(7) allow both residents and nonresidents to participate in the trust;

(8) allow the transfer or rollover of funds from the Alaska advance college tuition savings fund and other qualified state tuition programs under 26 U.S.C. 529 and the participation agreement;

(9) allow withdrawals from the trust to be used for qualified higher education expenses, including room and board as allowed by 26 U.S.C. 529;

(10) establish penalties for withdrawals from the trust for nonqualified expenses and other distributions as required under 26 U.S.C. 529 or as provided in the participation agreement;

(11) engage an independent firm of certified public accountants to audit the financial position of the trust.

(b) The board may

(1) divide the trust into multiple investment portfolios;

(2) commingle amounts credited to some or all accounts for investment purposes;

(3) establish trusts and accounts as the board considers appropriate under 26 U.S.C. 529;

(4) require trust participants to pay all administrative fees;

(5) establish earnings reserves as provided in the participation agreement, including reserves for the payment of administrative costs.

(c) The University of Alaska, the board, the state, or an agency of the state is not liable for a loss of funds that are invested under a participation agreement or for the denial of a perceived tax or other benefit. The board shall provide written notice to each applicant that there is no guarantee of any rate of return or benefit and that any risk of loss in account value or other benefit rests exclusively with the participant and the beneficiary.

(d) Notwithstanding any other provision of law, earnings on funds deposited with the trust are not subject to taxation by the state or a municipality.

(e) Except for needs-based scholarships, funds on deposit with the trust may not be considered by the University of Alaska or an agency of the state to limit eligibility for a state-funded scholarship.

(f) A participant has the right, as provided in the participation agreement, to

(1) change the beneficiary of an account to another individual who is a member of the family of the former beneficiary; or

(2) direct that all or a portion of an account be transferred to an account with a new beneficiary if the new beneficiary is a member of the family of the former beneficiary.

(g) The right to change the beneficiary or to transfer between accounts described in (f) of this section may be denied or limited as provided in the participation agreement, including transfers that would result in contributions or account balances in excess of allowable limits under the participation agreement.

(h) Except as provided under AS 34.40.110(b)(4), an account established under this section

(1) is exempt from a claim by the creditors of a participant or of a beneficiary;

(2) is conclusively presumed to be a spendthrift trust;

(3) is not an asset or property of either the participant or the beneficiary;

(4) may not be assigned, pledged, or otherwise used to secure a loan or other advancement;

(5) is not subject to involuntarily transfer or alienation.

(i) Except as permitted in 26 U.S.C. 529, a participant or beneficiary may not directly or indirectly direct the investment of an account or earnings on the account.

(j) A participant may, as provided in the participation agreement, designate a person other than the participant as a successor participant. The designation of a successor participant does not take effect until the participant dies or is declared legally incompetent. If a participant dies or is declared legally incompetent without having effectively designated a successor participant, the beneficiary may designate a successor participant in the manner prescribed above if the beneficiary is not the same person as the successor participant.

(k) The trust, a participation agreement, and this section are intended to comply with the requirements of 26 U.S.C. 529 and shall be interpreted in that manner to the extent permitted by law.

(l) The trust and participation agreements may be modified or amended on a retroactive basis in order to maintain compliance with 26 U.S.C. (Internal Revenue Code) and to maintain efficient operation of the trust as determined by the board.

(m) A name, address, or other information identifying a person as a participant or beneficiary in the trust is confidential.

(n) In this section,

(1) “account” means an individual trust account established under this section;

(2) “beneficiary” means any person designated by a participation agreement, or by another method of designation authorized in this section, to benefit from payments for qualified higher education expenses at an eligible educational institution;

(3) “board” means the Board of Regents of the University of Alaska;

(4) “member of the family” has the meaning given in 26 U.S.C. 529(e);

(5) “participant” means a person who has entered into a participation agreement or has been appointed as a participant as provided in this section and in the participation agreement;

(6) “participation agreement” means an agreement between a participant and the board providing for the establishment by the participant of one or more accounts under this section and for the administration of those accounts for the benefit of the participant and the beneficiary;

(7) “qualified higher education expenses” has the meaning given in 26 U.S.C. 529(e);

(8) “trust” means the Alaska Higher Education Savings Trust.