(a) An educational services plan tuition contract entered into between the board and a purchaser shall allow the purchaser to purchase tuition units on behalf of a beneficiary at the price determined by the board pursuant to subsection (c) for the year in which the tuition unit is purchased. Each tuition unit purchased on behalf of a beneficiary shall entitle the beneficiary to an amount equal to one percent (1%) of the weighted average tuition during the academic term in which it is used. Each tuition unit shall cover the cost of the beneficiary's tuition in an amount no greater than one percent (1%) of the weighted average tuition in effect at Tennessee's four-year public universities at the time of use.

(b) “Weighted average tuition” means the tuition cost resulting from the following calculation:

(1) Add the products of the annual undergraduate tuition at each Tennessee four-year public university multiplied by that institution's total number of undergraduate full-time equivalent students; and

(2) Divide the gross total of the products from subdivision (b)(1) by the total number of undergraduate full-time equivalent students attending Tennessee's four-year public universities.

(c) The board shall develop a plan for the sale of tuition units. The board shall determine annually the weighted average tuition of Tennessee's four-year public universities in the academic year that begins on or after August 1 of the then current calendar year, and shall establish the price of a tuition unit in the ensuing sales period. The price shall be based on sound actuarial principles, and shall, to the extent actuarially possible, reasonably approximate one percent (1%) of the weighted average tuition for the academic year, plus the costs of administering the educational services plan and any amount necessary to ensure the plan remains actuarially sound. The sales period to which the price applies shall consist of twelve (12) months, and the board shall establish the date on which the sales period begins. The board may impose and collect additional administrative fees and charges in connection with the sale of tuition units. To promote the purchase of tuition units and in accordance with actuarially sound principles, the board may adjust the sales price as part of incentive programs.