By Delco                                              H.B. No. 1850
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to trust-funded prepaid funeral benefits contracts.
    1-3        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-4        SECTION 1.  Section 5, Chapter 512, Acts of the 54th
    1-5  Legislature, Regular Session, 1955 (Article 548b, Vernon's Texas
    1-6  Civil Statutes), is amended to read as follows:
    1-7        Sec. 5.  (a)  All sums heretofore or hereafter paid or
    1-8  collected on contracts for prepaid funeral benefits entered into
    1-9  prior to the effective date of this Act shall be handled in
   1-10  accordance with the manner in which they have heretofore been
   1-11  handled.  All sums paid or collected on such contracts entered into
   1-12  after the effective date of this Act (with the exception of those
   1-13  paid where a contract of insurance previously is created or
   1-14  approved by the Department) shall be handled in the following
   1-15  manner:
   1-16              (1)  The seller of a trust-funded prepaid funeral
   1-17  benefits contract <funeral home (or other entity collecting said
   1-18  funds)> may retain as its own money, for the purpose of covering
   1-19  its selling expenses, servicing costs, and general overhead, an
   1-20  amount not to exceed one-half of all funds so collected or paid
   1-21  until it has received for its use and benefit an amount not to
   1-22  exceed ten percent of the total amount agreed to be paid by the
   1-23  purchaser of said prepaid funeral benefits as such total amount is
    2-1  reflected in the contract.  No charges or assessments, except
    2-2  premiums collected on an insurance policy guaranteeing the payments
    2-3  on a prepaid funeral benefits contract or the unpaid balance
    2-4  thereof, shall be collected from the purchaser other than those
    2-5  included in the total amount of said contract.
    2-6              (2)  All amounts paid or collected, with the exception
    2-7  of those permitted to be retained as set forth above, shall, within
    2-8  30 <thirty> days after such collection, be (a) deposited in a
    2-9  savings and loan association in this state in an interest-bearing
   2-10  account insured by the federal government, or (b) deposited in a
   2-11  state or national bank in this state in an interest-bearing account
   2-12  insured by the federal government, or (c) placed with the trust
   2-13  department in a state or national bank in this state, or in a trust
   2-14  company authorized to do business in this state, to be invested by
   2-15  such trust department or company in accordance with the terms and
   2-16  provisions of this Act <the Texas Trust Code (Subtitle B, Title 9,
   2-17  Property Code)>.  Such deposits or trust accounts shall be carried
   2-18  in the name of the funeral provider <home> or other entity to whom
   2-19  the purchaser makes payment, but accounting records shall be
   2-20  maintained by the seller showing the amount deposited or invested
   2-21  with respect to any particular purchaser's contract.
   2-22              (3)  On the death of a beneficiary named in a prepaid
   2-23  funeral benefits contract, the provider shall proceed to do what is
   2-24  provided or required in the prepaid funeral benefits contract as
   2-25  soon as notified by the person charged with the responsibility of
    3-1  making the funeral arrangement.  On completion of the funeral
    3-2  service, the provider shall take from the individual making that
    3-3  funeral arrangement an affidavit that the provider has performed
    3-4  the service required by the prepaid funeral benefits contract.  On
    3-5  presentation of the sworn affidavit, a certified copy of the death
    3-6  certificate, and a written request for payment to the depository in
    3-7  which the funds are held, the seller may withdraw:
    3-8                    (A)  for a trust-funded contract, the amount
    3-9  equal to the original contract amount paid in by the purchaser less
   3-10  amounts retained under Subdivision (1) of this section, plus
   3-11  earnings attributable to that remainder; or
   3-12                    (B)  for an insurance-funded contract, the amount
   3-13  necessary to fund the funeral expenses on the date of death.
   3-14              (4)  The amount remaining after the seller's withdrawal
   3-15  under Subdivision (3)(B) shall be paid the beneficiary of the
   3-16  insurance contract.  <The date of death of the purchaser of such
   3-17  contract (or other individual who may be designated in the contract
   3-18  as the person for whose funeral such funds may be used) shall be
   3-19  the maturity date of the contract, and as soon as conveniently
   3-20  practicable after such maturity date and upon presentation of a
   3-21  certified copy of the death certificate of such person together
   3-22  with proper affidavits as may be required by the Department, such
   3-23  funds shall be released in fulfillment of the contract, and the
   3-24  funeral home (or other entity to the contract which has collected
   3-25  the funds) shall, if the amount so withdrawn does not equal one
    4-1  hundred percent of the total amount paid by the purchaser, make up
    4-2  the difference so that the amount available for funeral benefits
    4-3  shall equal one hundred percent of the total amount paid by the
    4-4  purchaser.  Any amounts accumulated at maturity on any particular
    4-5  contract in excess of one hundred percent of the amount deposited
    4-6  or placed by the seller shall be available to the funeral home (or
    4-7  other entity collecting said funds) in making up the difference on
    4-8  any particular contract which at maturity did not have funds
    4-9  available equal to one hundred percent of the amount paid by the
   4-10  purchaser.>
   4-11              (5) <(4)>  The seller may withdraw <at any time> funds
   4-12  out of earnings <accrued interest or income> on the accounts for
   4-13  the purpose of paying reasonable and necessary trustee's fees or
   4-14  depository fees.  With prior approval of the Department, the seller
   4-15  may withdraw funds out of accrued interest or income on the
   4-16  accounts <charges made by a savings and loan association, or bank,
   4-17  or trust department of a bank, or trust company, and trustee's fees
   4-18  made by a savings and loan association, or bank, or trust
   4-19  department of a bank, or trust company, with respect to such
   4-20  accounts,> for the purpose of paying any taxes<, with prior
   4-21  approval of the Department,> caused or created by reason of the
   4-22  existence of such deposit accounts or trust accounts<, or for the
   4-23  purpose of paying any assessment under this Act or ordered by the
   4-24  Department for funding a fund to guarantee performance of prepaid
   4-25  funeral contracts>.
    5-1        The seller may also withdraw funds from the earnings <accrued
    5-2  interest or income> on the deposit accounts for the purpose of
    5-3  paying the examination fee for one examination by the Department
    5-4  each calendar year, or for the preparation of financial statements
    5-5  required by the Department in lieu of an examination by the
    5-6  Department.
    5-7        Upon the maturity date of a trust-funded contract as above
    5-8  provided and only after the funeral provider <home> has fully
    5-9  performed its obligations under said contract with the purchaser,
   5-10  <or at the time of cancellation prior to maturity as provided in
   5-11  Subsection (5) herein,> the seller may <additionally> withdraw from
   5-12  said deposit account earnings <(whether a trust or other funded
   5-13  account) any enhanced value, accrued interest, or accrued income>
   5-14  on said contract.  Such withdrawal shall be the proportionate part
   5-15  of the earnings <total enhanced value, accrued interest or accrued
   5-16  income>, that the amount deposited under said contract bears to the
   5-17  total amount deposited from all unmatured contracts or, if the
   5-18  Commissioner has affirmatively determined that the records of the
   5-19  permit holder are adequate to allow this method to be exercised in
   5-20  an accurate manner, the withdrawals may be equal to the actual
   5-21  earnings on individual matured contracts, minus any properly
   5-22  allocated expenses permitted by this subsection.  <On application,
   5-23  the Commissioner may, after notice and hearing conducted pursuant
   5-24  to the Administrative Procedure and Texas Register Act (Article
   5-25  6252-13a, Vernon's Texas Civil Statutes), authorize the seller of
    6-1  preneed services to withdraw excess earnings from the trust
    6-2  deposits.  For the purposes of this section, "excess earnings"
    6-3  means funds in the trust deposit that exceed 107 percent of the
    6-4  seller's obligations on each contract for which deposits have been
    6-5  made after the date the contracts are entered into.  The
    6-6  Commissioner may grant the authorization if, in the Commissioner's
    6-7  opinion, the evidence shows that the seller's ability to deliver
    6-8  the contracted services and merchandise is not diminished by the
    6-9  withdrawal.  The Commissioner by rule may set out factors that may
   6-10  be considered in evaluating each application.  The Commissioner's
   6-11  decision on whether to grant the withdrawal is not limited to those
   6-12  factors.  A withdrawal of excess earnings made after an initial
   6-13  withdrawal as provided by this subsection may not be approved for
   6-14  more than 93 percent of the funds remaining in the accounts after
   6-15  the withdrawal that are in excess of the 107 percent to be
   6-16  maintained in satisfaction of the seller's contractual
   6-17  obligations.>
   6-18              (6) <(5)>  In the event a purchaser under a
   6-19  trust-funded contract should desire to cancel the contract prior to
   6-20  maturity, such cancellation may be accomplished by the seller
   6-21  giving 15 <fifteen> days notice in writing to the Department,
   6-22  signed by the purchaser, and thereafter, upon written authorization
   6-23  from the Department, such seller may withdraw the funds in such
   6-24  depository being held for the purchaser's use and benefit;
   6-25  provided, however, such purchaser shall be entitled to receive only
    7-1  the actual amounts paid in by him less the amounts permitted to be
    7-2  retained as provided in Subdivision <Subsection> (1) hereof.
    7-3  <Purchaser or seller may make no partial cancellations or
    7-4  withdrawals.>
    7-5              (7)  A purchaser of a trust-funded contract who elects
    7-6  to cancel the contract during the first year of the contract when
    7-7  payments required under the contract are current is entitled to
    7-8  receive 90 percent of the actual amounts paid in by the purchaser
    7-9  regardless of the amount held in trust.  A purchaser of
   7-10  insurance-funded contracts who elects to cancel the contract during
   7-11  the first year of the contract when payments required under the
   7-12  contract are current is entitled to receive the cash surrender
   7-13  value of the policy.
   7-14        (b)  The purchaser may elect before the maturity of the
   7-15  contract to amend the contract's terms only to the extent that the
   7-16  total cost to the purchaser of the prepaid funeral benefits may be
   7-17  reduced by selection of lesser funeral benefits.  In that event,
   7-18  the purchaser is entitled to receive the difference between the
   7-19  cost to the purchaser under the original contract and the cost to
   7-20  the purchaser of the amended contract.
   7-21        (c)  If the purchaser cancels the contract on the
   7-22  solicitation of the seller, the purchaser is entitled to withdraw
   7-23  all funds paid to the seller and all earnings <enhanced value>
   7-24  attributable to the funds.  If the funds are used to purchase a new
   7-25  prepaid <preneed> funeral contract pursuant to a solicitation by
    8-1  the seller, the new contract must, as determined by the Department,
    8-2  protect the purchaser to an extent equal to or greater than that
    8-3  provided by the original contract, and the purchaser's cost of the
    8-4  same or substantially the same services and merchandise may not be
    8-5  increased above that contained in the canceled contract.
    8-6        (d)  The purchaser of a prepaid funeral benefits contract may
    8-7  irrevocably waive and renounce the purchaser's right to cancel the
    8-8  contract under Subsection (a)(6) of this section.  The waiver and
    8-9  renunciation may be included as a provision of the contract or be
   8-10  made in a separate writing signed by the purchaser and the seller.
   8-11  The waiver and renunciation of a purchaser's right to cancel the
   8-12  purchaser's prepaid funeral benefits contract do not affect:
   8-13              (1)  a right the purchaser has under the contract to
   8-14  change the beneficiary of the contract; or
   8-15              (2)  any right of the purchaser to cancel the contract
   8-16  upon any seizure of the seller's prepaid funeral funds by the
   8-17  Commissioner; or
   8-18              (3)  any abandonment of the funds paid by the purchaser
   8-19  under the contract in accordance with Section 5A of this Act.
   8-20        SECTION 2.  The importance of this legislation and the
   8-21  crowded condition of the calendars in both houses create an
   8-22  emergency and an imperative public necessity that the
   8-23  constitutional rule requiring bills to be read on three several
   8-24  days in each house be suspended, and this rule is hereby suspended,
   8-25  and that this Act take effect and be in force from and after its
    9-1  passage, and it is so enacted.