July 16, 2014, Introduced by Senator PAPPAGEORGE and referred to the Committee on Regulatory Reform.
A bill to amend 1968 PA 251, entitled
"Cemetery regulation act,"
by amending section 16 (MCL 456.536), as amended by 2010 PA 326.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 16. (1) The commissioner shall require each cemetery to
establish and maintain an irrevocable endowment and perpetual care
trust fund. The amounts deposited into an endowment and perpetual
care trust fund pursuant to subsection (5) shall be held in
perpetuity by the trustee and may only be distributed to the
cemetery upon order of a court following petition by the
commissioner. Interest or income shall be used only for endowment
care.
Except as otherwise provided in subsection (2), subsections
(2) and (3), money in the endowment and perpetual care trust fund
shall not be commingled with any other money or trust accounts. The
cemetery shall report annually before July 1 of each year, on forms
approved and furnished by the commissioner, endowment and perpetual
care trust fund information required to be reported to the
commissioner by other statutes and information regarding the funds
as the commissioner considers pertinent in the public interest. A
cemetery applying to the commissioner as authorized by other
statutes for an endowment and perpetual care trust fund deposit
modification or waiver shall be assessed the actual expenses for an
examination or investigation by the commissioner.
(2) Notwithstanding subsection (1), bundling of funds held in
trust or escrow, for each cemetery or among cemeteries with common
ownership, is permissible, but only under all of the following
circumstances:
(a) Each cemetery maintains separate trust and escrow account
records pursuant to statutory and rule requirements for endowed
care, merchandise, or prepaid funeral and cemetery sales.
(b) A cemetery, or cemeteries with common ownership, has all
its trust or escrow accounts on deposit with 1 or more regulated
financial institutions with trust powers in this state.
(c) The trustee, or the trustee's trading block nominee, holds
title in the name of each individual trust or escrow account for
that trust or escrow account assets and the assets are promptly
settled back to the individual accounts by the trustee in the
ordinary course of business.
(3) Notwithstanding subsection (2), other comparable methods
of bundling or pooling of trust or escrow funds for investment
purposes
may be are permissible upon terms and conditions approved
in
writing by the commissioner and only after the commissioner is
reasonably satisfied that the title to, character of, and
accounting for funds held in trust or escrow is preserved.
(4) Not later than January 1, 2010, the irrevocable endowment
and perpetual care trust fund shall be established, or
reestablished, with 1 or more regulated financial institutions with
trust powers that shall be the trustee of the portion of the fund
allocated to it. Not later than January 1, 2015, a new or existing
irrevocable endowment and perpetual care trust fund may be
established or reestablished with 2 or more individuals acting as
trustees of the portion of fund allocated to them. The individuals
acting as trustees may be officers or directors of the cemetery.
The
cemetery shall enter into agreements of an irrevocable trust
agreements
with each trustee. agreement
with the trustee or
trustees of each portion of the fund. Those agreements shall
provide
that the investing of the assets asset investments are
subject to the Michigan prudent investor rule as set forth in
sections 1501 to 1512 and 7803 of the estates and protected
individuals code, 1998 PA 386, MCL 700.1501 to 700.1512 and
700.7803, except that the agreement shall not be modified or
amended, as allowed under sections 1502(2) and 7105 of the estates
and protected individuals code, 1998 PA 386, MCL 700.1502 and
700.7105, to provide less than the standard of care in the prudent
investor rule. The cemetery shall notify the commissioner, in
writing, not later than 14 days before the effective date of an
appointment of a trustee. The cemetery may remove and replace a
trustee at any time, subject to the consent of the commissioner,
and subject to the terms of the cemetery's agreement with the
trustee. The fees and costs of the trustee may, in accordance with
the terms of the trust agreement, be paid from the principal of the
trust. A cemetery that establishes its irrevocable endowment and
perpetual care trust with 1 or more regulated financial
institutions with trust powers, and that does not reserve, retain,
or otherwise exercise any power of direction of specific
investments, is not liable for any deficiencies in the irrevocable
endowment and perpetual care trust caused by performance of the
investments. A cemetery may reserve the right to recommend, to a
trustee,
an investment advisor , who
is registered with the
securities and exchange commission under the investment advisers
act of 1940, 15 USC 80b-1 to 80b-21, or under the uniform
securities act (2002), 2008 PA 551, MCL 451.2101 to 451.2703, to
advise the trustee in the trustee's decisions on asset allocation,
investment
managers, and investments. , except that a However, the
trustee
is not required to heed such follow
the advice of the
investment
advisor. Alternatively, and
notwithstanding any other
provisions
of this section, and at all times subject to the
Michigan
prudent investor rule, a cemetery may direct the trustees
to
make certain investments, provided that the trust is a named
beneficiary
of fiduciary liability insurance covering the
cemetery's
or other fiduciaries' actions in an amount equal to 100%
of
the amount so directed. Proof of the fiduciary liability
coverage
shall be provided not less than annually to the
commissioner,
in a form to be determined by the commissioner,
before
any direction being given. The commissioner or the attorney
general
may prosecute a claim against the fiduciary liability
insurance
on behalf of the trust. The trustees are not liable, or
otherwise
punishable, for complying with the direction of
investments
except that the trustees shall retain custody of all
the
investments.
(5) Beginning January 12, 2009, an irrevocable endowment and
perpetual care trust fund shall be created by the deposit of at
least $50,000.00 into the fund before any sale of burial rights,
entombment rights, or columbarium rights is made.
(6) Each month, not less than 15% of all proceeds received
during the previous month from the sales of burial rights,
entombment rights, or columbarium rights shall be deposited with
the trustee for inclusion in the endowment and perpetual care trust
fund.
No The total deposit for a single burial right sale or
assignment shall not be less than $20.00. A cemetery may apply to
the commissioner for a modification of the minimum deposit
requirement. The commissioner shall take testimony and investigate
as he or she considers necessary and if the commissioner determines
that the applicant's endowment and perpetual care trust fund will
generate sufficient income to meet all current costs of keeping the
applicant's cemetery in good condition, the commissioner may modify
the minimum deposit requirement. A cemetery applying to the
commissioner for a modification of the endowment and perpetual care
trust fund deposit requirements shall be assessed the actual costs
for the commissioner's examination and investigation. Excess money
in the fund may be applied by a cemetery against future deposits
and shall be annually reported to the commissioner in a manner
prescribed by the commissioner.
(7) The commissioner shall require each person engaged as
agent or seller in the selling of burial rights, entombment rights,
or columbarium rights owned by a party other than a cemetery or
corporation subject to the irrevocable endowment and perpetual care
trust
fund requirements of this act and other laws , to deposit 15%
of all gross proceeds received from the sales of those rights into
the irrevocable endowment and perpetual care trust fund of the
cemetery in which the rights are located if an irrevocable
endowment and perpetual care trust fund exists for that cemetery. A
deposit required to be made by those persons shall be modified or
waived if the cemetery has received an irrevocable endowment and
perpetual care trust fund deposit modification or waiver approved
by the commissioner. The total deposit for a single adult burial
right sale or assignment shall not be less than $20.00.
(8) Interest or income from the money in the endowment and
perpetual care trust fund shall be used exclusively for endowment
and perpetual care. No portion of the interest or income may be
used directly or indirectly for salaries or other payments to the
officers, directors, partners, members, or managers of the entity
owning the cemetery. Withdrawals of accumulated interest or income
from the endowment and perpetual care trust fund may be authorized
by
the trustee, and such the withdrawals shall be documented in the
manner provided by rule of the commissioner. A cemetery shall
maintain records showing that interest from the endowment and
perpetual care trust fund is used exclusively for endowment and
perpetual care. The trustees are not responsible for ascertaining
that money paid to the cemetery is expended for the limited
purposes permitted by this subsection.
(9) Subject to subsection (17), a cemetery that is required to
register pursuant to this act and an agent authorized by a cemetery
or acting on its behalf under an agreement or sales contract to
sell cemetery merchandise or cemetery services shall establish a
merchandise trust account and deposit a percentage of the gross
proceeds received from the sales as determined by the commissioner.
The merchandise trust account shall be maintained exclusively for
the deposit of the money into a regulated financial institution
under the terms of a written trust agreement approved by the
commissioner. All documents, reports, and records regarding the
trust
shall be kept in this state. It shall be the responsibility
of
each Each registrant under this act to assure shall ensure that
documents relating to the merchandise trust account are provided to
the commissioner upon request. If a subpoena is issued to obtain
these documents, the registrant shall pay all costs related to
obtaining
the documents. The money Money
shall be deposited in the
merchandise trust account not later than the month following its
receipt.
(10) Subject to subsection (17), the total deposits to a
merchandise trust for the sale of cemetery burial vaults or other
outside containers, other than crypts installed underground and
sold as part of a cemetery lot, shall at all times be not less than
the greater of $100.00 per vault or outside container or 130% of
the total costs of the containers covered by the trust. Money
deposited in connection with a sale shall be repaid within 30 days
upon written demand of the purchaser. A burial vault shall be
installed only at need or by separate written authorization of the
purchaser. The cemetery shall have the right to withdraw the amount
on deposit for the delivered vault or outside container.
(11) Subject to subsection (17), a contract or agreement made
with a purchaser of cemetery merchandise and cemetery services
shall contain a complete description of the cemetery merchandise
purchased and of the cemetery services to be rendered.
(12) The commissioner shall require the cemetery owner or
operator to report annually before July 1 of each year on forms
provided by the commissioner. The reports shall contain information
as the commissioner considers necessary to ascertain that the
requirements of this act and rules promulgated under this act are
being implemented. Subject to approval of the department, the
cemetery owner or operator may ask for an extension not to exceed
90 days to submit the report required by this subsection. All
reports required by this subsection and subsection (13) shall
include a sworn statement by the cemetery owner or operator that
includes all of the following:
(a) A certification that the signing cemetery owner or
operator has reviewed the report.
(b) Based on the operator's or owner's knowledge, that the
report does not contain any untrue statement of material fact
related to the financial condition of the endowment and perpetual
care trust fund or merchandise trust accounts.
(c) Based on the operator's or owner's knowledge, that the
report fairly presents all material information regarding the
financial condition of the endowment and perpetual care trust fund
or merchandise trust accounts.
(d) That the signing operators or owners are responsible for
establishing and maintaining internal controls; have designed those
internal controls to ensure the accuracy of material information
relating to the condition of the endowment and perpetual care trust
fund or merchandise trust accounts; have evaluated the
effectiveness of the internal controls within 90 days before the
issuance of the report; and have included information evaluating
the effectiveness of those internal controls.
(13) At a minimum, the commissioner shall require the
following information concerning the endowment and perpetual care
trust fund, the accuracy of which shall be certified by a certified
public accountant:
(a) Beginning and ending balances.
(b) Receipts from the sale of burial, entombment, and
columbarium rights.
(c) Deposits to the endowment and perpetual care trust fund.
(d) Itemized payments of interest or income.
(e) Documentation that interest was utilized solely for
endowment care.
(14) If, after an audit by the commissioner's staff, a deficit
in
the amount of required deposits to the a trust funds fund is
found, the commissioner may assess a penalty in the amount allowed
under this act. The cemetery entity may request an administrative
hearing before the commissioner or a hearing officer designated by
the commissioner within 30 days after being notified of a deficit
by the commissioner. If, following the administrative hearing, the
commissioner determines that a deficit does exist, an additional
penalty may be assessed each month on the unpaid monthly balance
until the deficit is paid in full.
(15) In addition to all other remedies at law or in equity,
the attorney general and the circuit court of the county in which
the cemetery is located have all the powers and jurisdiction
granted to the attorney general and court as to trusts covered by
1915 PA 280, MCL 554.351 to 554.353. The remedies granted include
all endowment and perpetual care trust funds without regard to
uncertainty or indefiniteness of beneficiaries.
(16) All fees, charges, and penalties, or other money from any
source, collected under this act, other than fines prescribed in
section 21, shall be paid to the commissioner. Upon receipt, the
commissioner shall remit money received to the department of
treasury for deposit in the general fund of this state.
(17) Any preneed contracts for cemetery merchandise or
services entered into on or after January 1, 2005 are subject to
the prepaid funeral and cemetery sales act, 1986 PA 255, MCL
328.211 to 328.235.
(18) Not less than 7 days before 30% of the endowment and
perpetual care or perpetual care funds established under this act
are moved from an account or otherwise engaged in some type of
financial transaction or investment, the cemetery owner or operator
shall notify the commissioner of the transaction on appropriate
forms that the commissioner shall authorize. The commissioner may
allow the submission of a notification up to 7 days after the
transaction, for good cause shown. Failure to comply with this
subsection
is considered a violation of this act.
(19) The commissioner, upon finding after notice and an
opportunity for a hearing pursuant to the administrative procedures
act of 1969, 1969 PA 306, MCL 24.201 to 24.328, that a cemetery
owner or operator has failed to timely submit a report required
under subsections (12) and (13), regardless of whether he or she
acted alone or through an employee or agent, may impose an
administrative fine, payable to the commissioner, for the
enforcement of this act. If the commissioner finds that a violation
occurred despite the exercise of due care, the commissioner may
issue a warning instead of imposing an administrative fine.
(20) The commissioner shall advise the attorney general of the
failure of a person to pay an administrative fine imposed under
this section. The attorney general may bring an action in a court
of competent jurisdiction for the failure to pay an administrative
fine imposed under this section.
(21) Applicable provisions of the revised judicature act of
1961, 1961 PA 236, MCL 600.101 to 600.9947, apply to civil actions
filed pursuant to this section.