STATE BOARD OF FUNERAL DIRECTORS [49 PA. CODE CH. 13] Preneed Funeral Arrangements [37 Pa.B. 4643]
[Saturday, August 25, 2007]The State Board of Funeral Directors (Board) proposes to amend §§ 13.1, 13.224, 13.225 and 13.226 and to add §§ 13.227, 13.228 and 13.229 (relating to limitations on preneed funeral contracts; transfer of a preneed funeral contract by customer; and sale or transfer of preneed funeral contracts or preneed funeral funds by funeral director) to read as set forth in Annex A.
Effective Date
The proposed rulemaking will be effective upon final-form publication in the Pennsylvania Bulletin.
Statutory Authority
The proposed rulemaking is authorized under sections 13(c) and 16(a) of the Funeral Director Law (act) (63 P. S. §§ 479.13(c) and 479.16(a)).
Background and Need for the Amendment
Section 13(c) of the act requires that a funeral director who accepts money under a contract with a living person to render funeral services to that person when needed to forthwith deposit the money in an escrow account or transfer it in trust to a banking institution in this Commonwealth. The money may be withdrawn or disbursed only for the purposes for which it was deposited.
The Board's current regulations regarding preneed funeral arrangements were originally promulgated in 1977 and last amended in 1991. Current § 13.224 (relating to funding and reporting of prepaid burial contracts) requires a funeral director to place the funds received for preneed funeral arrangements into trust or escrow accounts kept separate from the funeral director's personal or business accounts and to make reports to the Board. Under § 13.226 (relating to nature and description of escrow or trust account for prepaid burial contracts), interest or other earnings from preneed funds must be kept together with the principal to assure delivery of the same quality of services and merchandise for which the preneed contract was entered.
The Board determined that the regulations need to be updated to conform to existing practices in the funeral industry and to provide adequate protection to the consumer of preneed services in the instance of changed circumstances. For example, reports under § 13.224 are time-consuming to prepare and to review. However, the reports provide little value to the Board, the regulated community or the public. Existing regulations do not address the transferability of funds when a funeral director other than the contracting funeral director provides funeral services and merchandise or the ability of a customer to change funeral directors or transfer funds in the event of a change of funeral directors. The regulations do not adequately address the cessation or acquisition of a preneed funeral business.
Description of the Proposed Amendments
In § 13.1 (relating to definitions), definitions of ''prepaid burial contract'' and ''prepaid burial account'' would be deleted and replaced with definitions of new terms ''preneed funeral contract'' and ''preneed funds.'' The proposed definition of ''preneed funds'' would exclude premiums paid directly to an insurance company to purchase a life insurance policy. However, preneed funds would include amounts to be paid for arrangement fees or additional allowance for other services or merchandise. Preneed funds would also include the assignment of a life insurance policy or other asset received by a funeral director to fund a preneed contract.
Section 13.224 requires a funeral director to deposit in escrow or transfer in trust money received under a prepaid contract. The Board proposes to amend subsection (a) to require the deposit or transfer be made within 10 days of receipt. In addition, the Board proposes to add a provision to prohibit a funeral director or entity from using another person or entity to avoid this requirement. Currently, a funeral director must submit to the Board a written report every time the funeral director enters into a prepaid burial contract or performs under a prepaid contract. Under proposed subsection (b), a funeral director would be required to report to the Board all preneed accounts on a quarterly basis, including activity during that quarter. A funeral director could submit these reports on paper or disk or electronically and must maintain copies of the report for 3 years. A funeral director closing a business would be required to submit a report showing how all funds were distributed. These reports are not public records and will not be available for public review.
The limitations proposed for contract provisions are added in § 13.227. Under the proposed rulemaking, every preneed contract must be in writing. Also, a funeral director performing under a preneed contract would be prohibited from charging or collecting any fee that exceeds the fees set forth in the funeral director's current price list at the time the service or merchandise is provided. In addition, a preneed contract may not incorporate a contract with an unlicensed person or entity.
Proposed § 13.228 would govern customer transfers of preneed funds to another funeral director or funeral entity. Every preneed funeral contract entered into after the effective date of the final-form rulemaking must expressly permit the customer to transfer the preneed funeral account and funds to another funeral director or funeral entity of the customer's choosing that will provide funeral goods and services. The funeral director would be required to forward to the other funeral director the entire amount of preneed funds, including both principal and interest or other earnings, within 30 days of notice from the customer. The proposed rulemaking would prohibit a funeral director from collecting a fee for funeral goods or services that have not been provided or liquidated damages for the cancellation.
Proposed § 13.229 would govern funeral director transfers of preneed contracts or funds. It would require a funeral director or entity that acquires a portion of the preneed business of another to notify each customer and provide each customer with the opportunity to transfer the contract and funds to another funeral director of the customer's choosing. A funeral director ceasing preneed business must notify each customer and provide each customer with the opportunity to transfer the preneed funds to another funeral director of the customer's choosing.
Input from the Regulated Community
The Board solicited input from and provided an exposure draft of this proposed rulemaking to funeral directors and organizations. In addition, the Board considered the impact the rulemaking would have on the regulated community and on public health, safety and welfare.
Fiscal Impact and Paperwork Requirements
The proposed rulemaking will have no adverse fiscal impact on the Commonwealth or its political subdivisions. The proposed rulemaking will not impose additional paperwork requirements upon the Commonwealth, its political subdivisions or the private sector.
Sunset Date
The Board continuously monitors the cost effectiveness of its regulations. Therefore, no sunset date has been assigned.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on August 15, 2007, the Board submitted a copy of this proposed rulemaking and a copy of a Regulatory Analysis Form to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Professional Licensure Committee and the Senate Consumer Protection and Professional Licensure Committee. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, IRRC may convey any comments, recommendations or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections must specify the regulatory review criteria which have not been met. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Board, the General Assembly and the Governor of comments, recommendations or objections raised.
Public Comment
Interested persons are invited to submit written comments, suggestions or objections regarding this proposed rulemaking to Michelle T. Smey, Administrative Officer, State Board of Funeral Directors, P. O. Box 2649, Harrisburg, PA 17105-2649 within 30 days of publication of this proposed rulemaking in the Pennsylvania Bulletin. Reference No. 16A-4815 (Preneed funeral arrangements) when submitting comments.
ANTHONY SCARANTINO,
ChairpersonFiscal Note: 16A-4815. No fiscal impact; (8) recommends adoption.
Annex A TITLE 49. PROFESSIONAL AND VOCATIONAL STANDARDS PART I. DEPARTMENT OF STATE Subpart A. PROFESSIONAL AND OCCUPATIONAL AFFAIRS CHAPTER 13. STATE BOARD OF FUNERAL DIRECTORS GENERAL PROVISIONS § 13.1. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
* * * * * [Prepaid burial account--An account in which moneys are deposited by the funeral director during the lifetime of an individual in accordance with a contract executed between the parties for funeral merchandise and services to be performed and delivered at a future time.
Prepaid burial contract--A contract executed between a consumer and a licensed funeral director which provides that the funeral director will provide funeral merchandise and render services to the consumer upon the consumer's death or the death of another designated individual and for which the consumer pays to the funeral director moneys at the time of the contract or at a time prior to the rendition of these services.]
Preneed funeral contract--An agreement under which a funeral entity promises or agrees to provide funeral merchandise and render services upon the death of a person living at the time the contract is made, whether or not the funeral entity receives preneed funeral funds.
Preneed funeral funds--
(i) Funds provided to a funeral director or funeral entity for the purpose of providing funeral services or merchandise on behalf of a person living at the time of provision of funds, whether or not a contract to provide specified funeral services or merchandise exists.
(ii) The term includes any funds paid, or to be paid, for arrangement fees, or additional allowance for other fees for service or merchandise.
(iii) The term includes the assignment of an insurance policy and any other asset received by a funeral director or funeral entity to fund a preneed funeral contract.
(iv) The term does not include any premiums paid directly to an insurance company.
* * * * * [PREPAID BURIAL CONTRACTS]
PRENEED FUNERAL ARRANGEMENTS§ 13.224. [Funding] Depositing and reporting [of prepaid burial contracts] preneed funeral funds.
(a) A funeral director or funeral entity shall deposit in escrow or transfer in trust to a banking institution in this Commonwealth, the entire amount of [monies received by the funeral director under a prepaid contract for funeral services or merchandise, including additional service fees or arrangement fees] preneed funeral funds within 10 days of receipt. A funeral director or funeral entity may not avoid the requirements of this subsection by creating or controlling or otherwise utilizing a person or entity that is not a funeral entity.
(b) [In regard to prepaid contracts entered into by funeral directors after November 4, 1989, a funeral director shall file a report with the Board within 90 days containing the information specified in subsection (c) with respect to each prepaid contract for funeral services and merchandise. Forms for the reports, including the report required under subsection (d), will be provided by the Board.] Within 30 days of the end of each calendar quarter, every funeral entity shall file with the Board a report containing the information required in subsection (c) of all accounts of preneed funeral funds of the funeral entity during that quarter. The report must include all accounts held by the funeral entity at any time during the reporting period, including those first created during the period and those closed during the period. The rollover of an account shall be treated as the closing of one account and the opening of another account.
(c) [A funeral director shall file a report] Each report required by subsection (b) shall be filed with the Board on a form provided by the Board, certifying as true and correct, the following information with respect to each [prepaid contract for funeral services and merchandise entered into] account containing preneed funeral funds:
(1) The date [of the prepaid contract] preneed funeral funds were first received by the funeral entity and the name and address of the [purchasers under the contract] person for whose benefit the funds were received.
(2) The name and address of the banking institution in which [100% of the money received by the funeral director on account of the contract had been deposited] the account is held.
* * * * * (4) [In installment contracts, if the entire amount of the contract has not been paid, the report shall expressly indicate the fact that an installment contract is involved, and the total amount of installments received by the funeral director and deposited in escrow or in trust.] The account balance at the beginning of the period, the total principal amounts added, interest or other earnings, disbursements or other transfers out and balance at the end of the period.
(d) [A funeral director shall report within 30 days all fulfilled prepaid contracts, following:
(1) The name of the deceased.
(2) The date of death.
(3) The account number.
(4) The name of the banking institution.] Within 30 days of the sale or other cessation of all or part of its preneed business, a funeral entity shall file with the Board a report, including all accounts as specified in subsection (b) and all information as specified in subsection (c), to demonstrate how all preneed funeral funds were distributed. Each distribution must identify the recipients and amount of funds, including transfers to other funeral entities and payments to the funeral entity for provision of funeral goods and services.
(e) [The report required in subsection (c) is not a public record] The reports required under subsections (b) and (d) are not public records under the act of June 21, 1957 (P. L. 390, No. 212) (65 P. S. §§ 66.1--[66.4]66.9), known as the Right-to-Know Law. The [report] information contained in the reports will be available to the following:
(1) Parties privy to the preneed funeral contract.
* * * * * (f) [Prepaid burial contracts or preneed contracts to be used by a funeral director shall be reviewed and approved by the Board and should reflect whether or not an additional service fee or arrangement fee is charged. Prepaid burial contracts or preneed contracts used by a funeral director may not incorporate a contract for funeral merchandise entered into by a person or entity other than a funeral director.] Reports made under this section may be filed in paper form or on disk or electronically, as permitted by the Board. A funeral entity shall retain a copy of each report required to be filed under this section for 3 years after the report was due or filed, whichever is later.
§ 13.225. Affidavit for [prepaid burial accounts] preneed funeral funds.
* * * * * § 13.226. Nature and description of escrow or trust accounts for [prepaid burial contracts] preneed funeral funds.
(a) [Funds received for prepaid burial contracts] Preneed funeral funds shall be placed in an escrow or trust fund account which shall be separate and distinct from the business and personal accounts of the funeral director and funeral entity.
(b) [If funds received by a funeral director for preneed burial contracts are deposited in a banking account which bears interest, or are invested by the trustee bank and produce earnings, the] The interest or earnings of all preneed funeral funds shall be retained in the account with the principal and shall be held, accounted for and transferred in the same manner as the principal amount, to assure delivery of the same quality of service and merchandise for which the contract was made or the funds were provided.
[(c) In the event of a sale or transfer of the business of a funeral director, prepaid burial contracts and prepaid burial accounts shall immediately be transferred to the control of the licensee who will assume responsibility for completion of the prepaid burial contracts. The licensee-transferee shall notify the Board in writing of the licensee's willingness to accept responsibility for completion of the prepaid burial contracts.]
§ 13.227. Limitations on preneed funeral contracts.
(a) A preneed funeral contract must be in writing.
(b) A funeral director or funeral entity may not charge or collect any fees under a preneed funeral contract for funeral goods and services that exceed the fees for the goods and services as set forth on the funeral entity's general price list at the time the goods or services are provided.
(c) A preneed funeral contract may not incorporate a contract for funeral merchandise entered into by a person or entity other than a funeral director.
§ 13.228. Transfer of a preneed funeral contract by customer.
(a) Every preneed funeral contract entered into after______ (Editor's Note: The blank refers to the effective date of adoption of this proposed rulemaking.), must expressly permit the customer to transfer the preneed funeral account and funds to another funeral director or funeral entity of the customer's choosing that will provide funeral goods and services.
(b) Within 30 days after written notification of the election to transfer a preneed funeral account and funds as authorized by subsection (a), the funeral director or funeral entity shall forward to the other funeral entity as requested by the customer the entire amount of funds in the prepaid funeral account, including accumulated interest and earnings.
(c) A funeral director or funeral entity may not retain any amount of fees for services that have not been provided or merchandise that has not been delivered to the customer under a preneed funeral contract for which the preneed funeral account or funds have been transferred as authorized by subsection (a).
(d) A funeral director or funeral entity may not collect liquidated damages for the transfer of a preneed funeral account or funds under a preneed funeral contract as authorized by subsection (a).
§ 13.229. Sale or transfer of preneed funeral contracts or preneed funeral funds by funeral director.
(a) In the event of a sale or transfer of any portion of the preneed funeral business of a funeral entity, a funeral entity that assumes an obligation to perform under an existing preneed funeral contract or receives a preneed funeral account or funds shall, within 30 days of the transfer, notify each customer under those contracts or provider of those funds of the transfer and permit each customer who chooses to do so to notify the funeral director within 90 days that the funeral entity is to transfer the preneed funeral account and funds, including all accumulated interest and earnings, to another funeral entity of the customer's choosing as authorized by § 13.228(a) (relating to transfer of a preneed funeral contract by customer).
(b) A funeral entity that is ceasing business or otherwise will not perform under a preneed funeral contract, except as provided in subsection (a), shall notify each preneed customer at least 60 days in advance of the planned cessation and notify each customer of the customer's right to choose to transfer the preneed funeral account and funds, including all accumulated interest and earnings, to another funeral entity of the customer's choosing as authorized by § 13.228(a).
[Pa.B. Doc. No. 07-1549. Filed for public inspection August 24, 2007, 9:00 a.m.]
