Section 25.11 - Recordkeeping Requirements for Trust-Funded Contracts(a) Application and general requirements. This section applies to a permit holder that sells or maintains trust-funded prepaid funeral benefit contracts (prepaid contracts). Unless the commissioner grants an exception as provided for in subsections (f)(2) and (g) of this section, a permit holder must maintain and produce for examination the records as specified in this section. The permit holder: (1) must make the records available to the department for examination at its physical location in Texas or if approved by the commissioner, in another state that the permit holder has designated in written notice to the department on file at the time of the examination;(2) is required to make all the records specified in the department's pre-examination records request available to the department at the beginning of an examination and must produce such other records that provide additional clarification of required documents as may be requested during the examination in a manner that does not impede the efficient completion of the examination; and(3) must maintain the records either in hard-copy form, in an electronic database, or on another form of media from which the record can be retrieved and printed in hard copy in a manner that does not impede the efficient completion of the examination.(b) Corporate Records. All corporate records of a permit holder subject to this section and all corporate minutes created since the last examination must be maintained and made available to the department at each examination.(c) General files. A permit holder subject to this section must maintain and produce for department examination general files regarding its prepaid funeral benefits operations. The files must contain the original or a copy of the following: (1) unless the permit holder is restricted from selling prepaid funeral benefits, financial statements of the permit holder or the permit holder's parent or holding company including a balance sheet and income statement dated not later than the last day of the permit holder's preceding fiscal year, or the permit holder's most recent income tax return, which must also include a balance sheet;(2) if the permit holder received a uniform risk rating of 3, 4, or 5 at the last examination or if the last examination was a limited scope examination, the examination report acknowledgements, signed by the permit holder's board of directors for the last examination report;(3) all written complaints received since the last examination related to prepaid contracts, and all documents received or created since the last examination related to any regulatory action or evidencing litigation activity;(4) all recordkeeping exceptions and other department or commissioner approvals or directions upon which the permit holder relies in connection with its current operations;(5) all trust agreements approved by the department since the last examination and all trust agreements that are still active, including amendments and changes to the trust agreements and all successor trust agreements;(6) all investment plans and reports created or received since the last examination, and all such plans and reports that apply to active trust funds;(7) all preneed abandoned property reports filed with the department and the State Comptroller of Public Accounts since the last examination;(8) records of the trustee/depository, reflecting at a minimum all savings account statements, certificate of deposit records, and/or trust statements, received since the last examination;(9) a copy of all price lists for any outstanding prepaid contract that has an issue date since the last examination;(10) if the permit holder sells through multiple locations or entities, provide a list of funeral home providers for all outstanding contracts; and(11) a list of funeral home providers or entities that have outstanding contracts under this permit that are known to the permit holder to have ceased business since the last examination.(d) Individual files. (1) A permit holder subject to this section shall maintain a prepaid contract file on each purchaser. The file must either be maintained separately or be capable of retrieval separately for outstanding contracts and may be maintained either chronologically or alphabetically. Each file must contain all correspondence pertaining to the contract.(2) Each file pertaining to an outstanding contract must contain a copy of the executed prepaid contract, any revocable and irrevocable assignments, the individual ledger, and, if applicable, all power of attorney agreements or letters of guardianship.(3) Each file pertaining to a matured contract must be retained for the period since the last examination. The file must contain copies of all documents required for an outstanding prepaid contract. In addition, a matured contract file must contain: (A) a fully executed and completed department withdrawal form or evidence of department withdrawal approval, and a computation of earnings withdrawal, if applicable, unless computation procedures are otherwise documented in the general file;(B) the original or a final copy of the completed at-need contract or funeral purchase agreement, itemization of services performed and merchandise delivered, or the interment order if the prepaid contract relates only to a grave opening and closing fee, outer burial container or other related merchandise and services. The document must be signed by the decedent's personal representative and indicate the prepaid credits and discounts applied and the balance due, if any, from the family at the time of death;(C) a copy of a Texas certified death certificate or a death certificate from the state in which death occurred;(D) documentation to substantiate any upgrades or downgrades or discounts or credits given and to explain any differences between the prepaid and the at-need contracts;(E) a pre-need to at-need reconciliation, which must be signed by the funeral provider, if the provider is not also the seller; and(F) if applicable, evidence of payment to the decedent's personal representative of any refund of prepaid contract overcharges by the funeral provider.(4) Each file pertaining to a matured-contract file for which services were provided by a funeral provider other than the permit holder or a permit holder related by common ownership, must be retained for the period since the last examination. The file must contain copies of all documents required for an outstanding prepaid contract and: (A) a signed statement from the purchaser or purchaser's representative requesting the delivery of funds to the servicing funeral provider;(B) evidence of payment to the servicing funeral provider; and(C) a copy of a Texas certified death certificate or a death certificate from the state in which death occurred.(5) Each file pertaining to a canceled prepaid contract must be retained for the period since the last examination. The file must contain copies of all documents required for an outstanding contract, a completed departmental withdrawal form or evidence of departmental withdrawal approval; and evidence of payment of the cancellation benefit.(e) Other records. A permit holder subject to this section must maintain the following records regarding its prepaid funeral benefits operations in hard-copy form, in an electronic database, or on another form of media from which they may be reasonably retrieved in hard-copy form: (1) an historical contract register, maintained either chronologically or by contract number, indicating: (B) the date of purchase;(C) the purchaser's name;(D) the beneficiary's name (if different from the purchaser's name);(E) the amount of the contract; and(F) final disposition of the contract, including notations as to whether the contract is matured or canceled, the date of withdrawal from the depository or date withdrawal requested from the depository, and the amount of funds withdrawn; or, in lieu thereof, a record separate from the register, listing matured and canceled contracts for the examination period and setting out the contract number, contract purchaser, date of withdrawal from the depository or date withdrawal was requested from the depository, and amount of the withdrawal;(2) cash receipts records reflecting payments collected;(3) deposit records reflecting payments deposited;(4) individual ledgers for each contract purchaser, balanced at least quarterly to the control ledger and to the records of the trustee/depository, reflecting the: (A) contract purchaser's name;(C) the date of purchase;(D) the face amount of the prepaid funeral contract;(E) total finance charges payable under the contract, if any;(F) total retention allowable under the contract, if any;(G) beginning contract balance;(H) amounts paid on the contract itemized to reflect retention, finance charges and principal paid with individual cumulative totals;(I) earnings on deposits, if any; and(J) total amount of the trust; and(5) a control ledger for all purchasers, balanced at least quarterly to the principal total and contract count total of the individual ledgers and in total to the records of the trustee/depository, reflecting: (A) the net cumulative total of outstanding contracts;(B) deposits of payments;(C) withdrawal of payments;(D) net amount of payments on deposit;(E) earnings of deposit accounts;(F) earnings withdrawn on deposit accounts; and(G) net amount of earnings.(f) Exceptions. (1) With respect to contracts sold prior to the effective date of this section, a permit holder will not violate this section if it cannot produce records required under this section which were not previously required by statute or rule.(2) A permit holder may apply to the commissioner for an exception to the requirements of this section. An exception may be granted or revoked for good cause only by prior written direction of the commissioner.(g) Relocation of Records. Prior to changing the location where required records are maintained or where the examination is to be performed pursuant to § RSA 154.053(a) of the Texas Finance Code, a permit holder must notify the department, specifying the new address in writing, and, if the change in location requires the granting of an exception, comply with subsection (f)(2) of this section before required records are moved to the new location. The commissioner may revoke approval of a records location if the commissioner determines that such action is necessary to effectively regulate the permit holder and examine the records.(h) Maintenance of Files. Documents and records required to be maintained under this section must be filed within thirty days of receipt. Cash received must be posted within 30 days of receipt, and cash withdrawn on death maturity must be posted within 30 days of the actual withdrawal.(i) Disaster recovery plan. If required records are maintained electronically, the permit holder must provide evidence of a disaster recovery plan, including documentation to substantiate periodic testing and test results, including offsite data storage capabilities regarding all records and documentation related to prepaid contracts.7 Tex. Admin. Code § 25.11
The provisions of this §25.11 adopted to be effective March 8, 2012, 37 TexReg 1497; Amended by Texas Register, Volume 45, Number 18, May 1, 2020, TexReg 2830, eff. 5/7/2020