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.