Ala. Admin. Code r. 395-X-11-.09
Current through Register Vol. 43, No. 1, October 31, 2024
Section 395-X-11-.09 - Endowment Care Fund(1) Each endowment care cemetery must establish and maintain an irrevocable trust known as an endowment care fund irrespective of whether the cemetery authority holds a certificate of authority to sell preneed contracts. Each cemetery authority that operated an endowment care cemetery and sold interment rights on or after the effective date of the Act (May 1, 2002) and had an existing fund or trust for endowment care shall transfer the assets of such fund or trust into an endowment care fund to be administered according to the Act and this Chapter.(2) The endowment care fund shall be placed with and held by a bank, trust company, savings and loan association, or other financial institution authorized to provide trust services under the provisions of Alabama Code or under the applicable laws of the United States or any other state, or a board of trustees. The endowment care fund trust agreement must be filed with and approved by the Board.(3) If used, a board of trustees shall consist of at least three members, who shall each reside in Alabama and at least one of whom is engaged in outside cemetery management. Each such member shall be bonded to honestly perform the duties of trustee under the trust agreement as approved by the Board. Effective July 1, 2014, a person serving on a board of trustees for cemetery authority may not also serve as a trustee of an endowment care fund for the cemetery authority.(4) A board of trustees in existence as of July 1, 2014, may thereafter continue to serve as the trustee of an endowment care fund if, unless exempted by the Board as provided in paragraph (5), each member of the board of trustees shall furnish a bond in the amount of $100,000 or the amount in each endowment care fund for which the board acts as trustee as of December 31, 2014, whichever amount is greater. The amount of the bonds shall be increased on January 1 of each succeeding year to equal the amount in each endowment care fund as of the immediately preceding December 31. The bond, its form, and amount must be approved by the Board prior to use and written through an insurance company authorized to transact surety insurance in Alabama.(5) The Board shall exempt a board of trustees from a bond requirement in paragraph (4) if the board of trustees provides to the Board an annual audit that satisfies all the following:(a) The report is prepared by a certified public accountant authorized to practice in Alabama.(b) The report evidences that the review made subject of the report by the accountant encompasses each endowment care fund for which the board acts as trustee.(c) The report notes relating to the endowment care fund or funds are in a form that is reasonably acceptable to the Board.(d) The report does not evidence any material violation of or noncompliance relating to an endowment care fund.(6) An endowment care fund report in a form approved by the Board shall be filed by the trustee with the Board within ninety (90) days after the close of each calendar year. Such report shall include a complete disclosure of all activity concerning the fund since the previous report and a statement detailing fund investments.(7) The Board has the authority to examine the records or facilities of any cemetery authority operating an endowment care cemetery as often as the Board may require.(8) Net income from an endowment care fund, to the extent that it is distributed from the fund, shall be used exclusively to pay for costs of the endowment care cemetery. "Net income" does not include realized or unrealized capital gains or losses. All realized capital gains or losses should be recorded to the fund corpus. For purposes of this subpart, corpus is the sum of the deposits made by the cemetery authority into an endowment care fund and all realized capital gains or losses. Capital gains taxes, if any, may be paid from the corpus. Unrealized capital gains and losses, if any, shall be recorded as an adjustment to the fair market value of the endowment care fund.(9) Except as permitted under paragraph (10), a deposit to an endowment care fund cannot be withdrawn from the endowment care fund upon later cancellation of the transaction or in the event of a later discovered calculation error or other error resulting in an excess deposit over that required or for any other reason outside the scope of Code of Ala. 1975, § 34-13-270(b).(10)(a) A cemetery authority may recognize and apply a "credit" against future required deposits to the endowment care fund in the following instances: 1. When the cemetery authority permits a purchaser to cancel a transaction giving arise to a deposit in the endowment care fund and the cemetery authority has refunded one hundred (100) percent of the transaction purchase price (to include any amount allocated to endowment care) to the purchaser; or2. As a result of a calculation error or other error, the amount contributed to the endowment care fund for a transaction exceeds what is required under Code of Ala. 1975, § 34-13-269(a) (2014) or a greater amount, if any, as may be required by the transaction.(b) In these instances, the cemetery authority may decrease the amount of a subsequent deposit into the endowment care fund by the amount of the contribution actually made for a cancelled transaction or the excess amount deposited in error. This type of adjustment should not be reflected as a "withdrawal" from the endowment care fund in the cemetery authority's records.(c) Whether to recognize a "credit" in these instances is at the election of the cemetery authority. The "credit," however, must be recognized not later than four (4) calendar months after the date of the event (cancellation or discovery of an error) giving rise to the "credit."(d) Each cemetery authority using this "credit" method must maintain detailed records that identify the specific contracts involved in any adjustment by "credit" to endowment care fund deposits and, upon examination, or otherwise upon request, must be able to furnish the Board's examiners or representatives with a summary of all endowment care fund adjustments during the period covered by the examination or request.(11) For preneed contracts entered into on or after January 1, 2015, a cemetery authority providing a discounted, free or complimentary interment right in any grave space, crypt or niche shall timely make an endowment care fund deposit for such discounted, free or complimentary interment right. The amount of such deposit shall be determined by the sale price of interment rights in grave spaces, crypts or niches as of the date of the sale and applying the proper percentage specified in Code of Ala. 1975, § 34-13-269(a).(12) On or after October 1, 2023 for preneed contracts in which a cemetery authority provides a discounted interment right in any grave space, crypt, or niche, the cemetery authority shall timely make a deposit to the endowment care fund for such discounted interment right. The amount of such deposit shall be determined by the net sale price of interment rights in grave spaces, crypts or niches as of the date of the sale and applying the proper percentage specified in Code of Ala. 1975, § 34-13-269(a).(13) On or after October 1, 2023, if a cemetery authority donates or gives a free space, mausoleum, or niche, a minimum of fifty dollars ($50) shall be paid to the endowment care fund.Ala. Admin. Code r. 395-X-11-.09
Adopted by Alabama Administrative Monthly Volume XLII, Issue No. 06, March 29, 2024, eff. 5/13/2024.Author: Charles M. Perine
Statutory Authority:Code of Ala. 1975, §§ 34-13-26, 34-13-27, 34-13-170 to -277.