Bill Text: HI SB938 | 2012 | Regular Session | Introduced

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Bill Title: Funeral Industry; Commerce and Consumer Protection; Advisory Committee; Fees

Spectrum: Partisan Bill (Democrat 6-0)

Status: (Introduced - Dead) 2011-12-01 - Carried over to 2012 Regular Session. [SB938 Detail]

Download: Hawaii-2012-SB938-Introduced.html

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THE SENATE	S.B. NO.	938
TWENTY-SIXTH LEGISLATURE, 2011
STATE OF HAWAII

A BILL FOR AN ACT

 

 

relating to the funeral industry.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  The legislature finds that it is necessary to ensure that consumers who purchase cemetery and pre-need cemetery or funeral services are able to make informed decisions, are protected against the loss of pre-paid funds, and are able to deal with ethical and licensed pre-need funeral service authorities.

     The purpose of this Act is to adopt measures to increase oversight and regulation of Hawaii's funeral industry to protect consumers.  This Act establishes an advisory committee; establishes a pre-need cemetery and funeral special fund with proceeds used for investigations, audits, and legal actions including retention of legal counsel, certified public accountants, personnel, and consultants; requires new information in reports submitted by cemetery and pre-need authorities; requires annual reports from the department of commerce and consumer affairs; and introduces other provisions to increase protection of funeral industry consumers.

     SECTION 2.  Chapter 441, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

     "§441‑    Advisory committee.  (a)  In addition to any other powers and duties authorized by law, the director shall appoint an advisory committee consisting of cemetery authorities and pre-need funeral authorities licensed under this chapter and members of the public; provided that:

     (1)  At least two of the committee members shall be licensees; and

     (2)  At least three of the committee members shall be public members, including:

         (A)  A certified public accountant licensed pursuant to chapter 466 who is experienced in trust-related financial accounting;

         (B)  An actuary who at minimum has earned the designation of associate of the Society of Actuaries and who has experience in preparing actuarial reports;

         (C)  A public member with not less than five years of experience in analyzing financial information including but not limited to credit analysis; and

         (D)  A public member who is associated with an advocacy group having an interest in the program.

The director may also appoint members as may be recommended by industry organizations and consumer organizations.

     (b)  The advisory committee, at the request of the director, shall advise the director:

     (1)  On an on-going basis, in carrying out the director's duties under section 441-19(1) and any administrative rules adopted thereunder;

     (2)  In determining the availability, efficacy, associated costs, and possible revenue sources related to the development, collection, and reporting of additional licensee and trust financial information;

     (3)  On enforcement of this chapter or chapter 436B and related administrative rules;

     (4)  In proposing and developing amendments to this chapter or to any rules adopted pursuant to this chapter; and

     (5)  On any other matter of concern regarding the funeral industry.

     (c)  The members of the advisory committee shall serve without compensation, but shall be reimbursed for expenses, including travel expenses, necessary for the performance of their duties.

     (d)  No member of the advisory committee shall bear any civil liability for any act done in furtherance of the purpose for which the advisory committee was established.

     §441‑    Pre-need cemetery and funeral special fund; use of fund; fees.  (a)  The director shall establish and maintain a trust fund that shall be known as the pre-need cemetery and funeral special fund, the proceeds of which may be used by the department to investigate any violation of this chapter or chapter 436B, and any related administrative rules.

     (b)  The director shall collect a one time fee of not more than $           per contract from each cemetery authority, pre‑need funeral authority, or other operator defined by the department for deposit into the pre-need cemetery and funeral special fund, as provided in rules adopted by the director pursuant to chapter 91.  The fee shall apply to every contract accepted by the cemetery authority, pre‑need funeral authority, or other operator on or after July 1, 2011.  The fee may be reduced proportionately for each contract that terminates or is cancelled within the first six months of the life of the contract.  Each cemetery authority, pre-need funeral authority, or other operator shall provide payment to the director on January 31 and June 15 of every year for all contracts accepted by the authority during the prior six-month period.

     (c)  The director, as the trustee of the pre-need cemetery and funeral special fund, shall be authorized to expend moneys in the fund to:

     (1)  Enforce this chapter, chapter 436B, and any related administrative rules;

     (2)  Retain private legal counsel to represent the interest of the department in any action that involves, or that may result in the enforcement of any payment from a cemetery authority or a pre-need funeral authority;

     (3)  Retain a certified public accountant for accounting and auditing of pre-need trusts, perpetual care funds, providers of funeral service, and cemetery authorities;

     (4)  Employ necessary personnel, not subject to chapter 76, to assist the director and the department in exercising their respective powers and duties in accordance with this chapter; and

     (5)  Retain a consultant to recover and collect any payments to the pre-need cemetery and funeral special fund, including interest, from cemetery authorities and pre-need funeral authorities.

     (d)  The sums received by the director for deposit into the pre-need cemetery and funeral special fund shall be held by the department in trust for carrying out the purpose of the fund.  The director, as trustee of the fund, shall be authorized to expend the funds as set forth in this section, and shall hold the funds for investment and reinvestment in the same manner as funds of the state employees' retirement system under chapter 88.  The interest from these investments shall be deposited to the credit of the fund.  The director, as trustee, may combine, for the purpose of investing, these sums with other funds held in the same manner; provided that the director shall have the duty to keep separate and distinct accounting records for the pre-need cemetery and funeral special fund."

     SECTION 3.  Section 441-1, Hawaii Revised Statutes, is amended by adding three new definitions to be appropriately inserted and to read as follows:

     ""Board" means the board of cemetery and funeral trusts.

     "Consumer organization" means an organization that advocates for the interests of consumers under this chapter.

     "Industry organization" means an organization composed of businesses in the funeral industry."

     SECTION 4.  Section 441-23, Hawaii Revised Statutes, is amended to read as follows:

     "§441-23  Fine, revocation, suspension, and renewal of authority licenses.  In addition to any other actions authorized by law, the director may fine an authority, revoke any authority license, [or] suspend the right of the licensee to use the license, impose restrictions, conditions, or limitations upon the authority's license, deny, or refuse to renew, reinstate, or restore any license for any cause authorized by law, including but not limited to the following:

     (1)  [Any dishonest or fraudulent act as a cemetery or pre-need funeral authority that causes substantial damage to another;] Making one or more untrue statements, omitting one or more material facts, committing a dishonest or fraudulent act, or engaging in conduct that is deceptive, unfair, misleading, coercive, or intimidating;

     (2)  Making [repeated] one or more misrepresentations or false promises through advertising or otherwise;

     (3)  Violation of this chapter or the rules adopted pursuant thereto[;], or failure to comply with requirements for licensure, including any restrictions, conditions, or limitations imposed by the director;

     (4)  Commingling the money or other property of others with that of the licensee;

     (5)  Having been adjudicated insane or incompetent;

     (6)  Selling or offering to sell any cemetery property, pre-need interment, funeral services, or pre-need funeral services based on speculation or promises of profit from resale;

     (7)  Failing to timely file the actuarial study or an audited financial statement or to maintain in effect the bond [as] required by section 441-22;

     (8)  Failing to maintain pre-need trusts or perpetual care funds as required by this chapter; or

     (9)  Violating section 441-22.7."

     SECTION 5.  Section 441-24, Hawaii Revised Statutes, is amended to read as follows:

     "§441-24  Inspection of cemetery or pre-need funeral authority books.  The books, records, and papers of every cemetery authority whether or not a corporation, which operates or claims to operate a perpetual care cemetery, and of every pre-need funeral authority shall be subject to examination by the director as provided by law, and every cemetery authority operating a perpetual care cemetery, and every pre-need funeral authority shall submit [such] the information as may be required by the director to furnish information as to whether or not the cemetery or pre-need funeral authority has complied with this chapter.

     The records of every cemetery authority shall include the information required under section 441-3(b).  The records of every cemetery and pre-need funeral authority shall also include a record of any and all notifications from purchasers or representatives of purchasers regarding:

     (1)  Any change in address; and

     (2)  Notice of cancellation,

and shall include copies of any and all written notices of termination that were sent to purchasers.  Change of address notices, cancellation notices, [and] notices of termination, and all other records altering or amending the contract, or otherwise relating to each contract containing any pre-need funeral services or pre-need interment services shall be maintained by the authority at all times prior to delivering goods or rendering services on the contract and for a period of at least [six months] three years after all goods have been delivered or all services have been rendered."

     SECTION 6.  Section 441-24.5, Hawaii Revised Statutes, is amended to read as follows:

     "§441-24.5  Pre-need trusts and perpetual care funds; audited financial statements.  (a)  Every cemetery authority operating a perpetual care cemetery or which engages in pre-need sales [or] and holds money in trust for pre-need interment services, and every pre-need funeral authority which engages in pre-need sales or holds money in trust for pre-need funeral services shall submit an audited financial statement and actuarial report of its pre‑need trusts and perpetual care funds to the director within ninety days after the close of the authority's books on a fiscal or calendar year basis.

     (b)  The director shall impose restrictions on sales and withdrawals for a period of time determined by the director to be adequate to ensure the integrity of the trust; provided that the period of time shall in no event be less than thirty days.  All costs of the audit imposed by the director shall be borne by the pre-need funeral authority or cemetery authority.

     (c)  During any period that sales are suspended or withdrawals are prohibited under subsection (b), the cemetery authority or pre-need funeral authority shall honor all contracts that were entered into prior to the suspension of sales and become due.  The director shall authorize withdrawals from the trust to fulfill these contracts."

     SECTION 7.  Section 441-24.6, Hawaii Revised Statutes, is amended by amending its title and subsection (a) to read as follows:

     "[[]§441-24.6[]]  Pre-need trusts and perpetual care funds; actuarial studies.  (a)  Every cemetery authority operating a perpetual care cemetery and every cemetery or pre-need funeral authority offering pre-need services shall contract with an independent actuary to conduct an annual study of its level of funding.  In the case of a perpetual care cemetery, the study shall [be to] determine whether the authority's perpetual care fund will provide sufficient income to cover the costs of the perpetual care of the cemetery.  In the case of a cemetery or pre-need funeral authority, the study shall [be to] determine whether the amount in the authority's pre-need trust as of the end of the fiscal year will be sufficient to cover the future claims of pre-need plan participants[.] as of the end of the fiscal year."

     SECTION 8.  Section 441-24.7, Hawaii Revised Statutes, is amended by amending its title and subsection (a) to read as follows:

     "[[]§441-24.7[]]  Actuarial study, audited financial statement, trust agreement; available for review.  (a)  The actuarial study, audited financial statement, and trust agreement filed by a cemetery or pre-need funeral authority, as required by this chapter, shall be available for review by any member of the general public upon request.  The review of these documents shall be done during the department's normal business hours.  The director shall have the right to deny review for reasons specified in rules adopted by the director pursuant to chapter 91.  The department shall submit a report annually to the legislature that describes the status of the audited financial reports and actuarial reports of licensees.  The report shall include but not be limited to the following:

     (1)  A list of all licensees required to submit reports;

     (2)  Licensees granted extensions for filing reports;

     (3)  Penalties assessed for late reports;

     (4)  The total estimated aggregate dollar amount required to perform contracts in all trusts;

     (5)  The total estimated aggregate dollar amount due to all trusts as of the date of execution of contracts not yet performed;

     (6)  The total aggregate dollar amount in all trusts; and

     (7)  Recommendations for improving the reporting system for licensees and oversight of the cemetery and pre-need funeral industry."

     SECTION 9.  Section 441-38, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  [A] No less than seventy per cent of the funds paid by the purchaser shall be transferred to the trustee to remain in trust; provided that a cemetery or pre-need funeral authority may take and receive, but shall transfer to the trustee as part of or incident to the pre-need trust, all payments received after the recovery of acquisition costs, which shall be the lesser of thirty per cent of the contract price or the difference between the contract price and the cost of the pre-need interment or pre-need funeral services contracted to be provided.  The transfer shall be made not later than thirty days after receipt of payment from the purchaser and shall be immediately deposited in the trust.  The cemetery authority or pre-need funeral authority shall provide an annual statement to the purchaser within thirty days after the close of the cemetery authority or pre-need funeral authority's prior fiscal year."

     SECTION 10.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 11.  This Act shall take effect on July 1, 2011.

 

INTRODUCED BY:	_____________________________

 

 

Report Title:

Funeral Industry; Commerce and Consumer Protection; Advisory Committee; Fees

 

Description:

Establishes an advisory committee to assist the director of commerce and consumer affairs regarding regulation of the funeral industry.  Establishes a pre-need cemetery and funeral special fund.  Clarifies prohibited practices.  Authorizes the director of commerce and consumer affairs to prohibit a pre-need authority from engaging in sales and withdrawals for failure to submit required audits.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.