Senate File 2194 - Introduced SENATE FILE 2194 BY COMMITTEE ON COMMERCE (SUCCESSOR TO SSB 3058) A BILL FOR An Act relating to preneed sellers and purchase agreements 1 for cemetery merchandise, funeral merchandise, and funeral 2 services, providing penalties, and including applicability 3 provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 5167SV (1) 89 ko/rn
S.F. 2194 Section 1. Section 523A.207, Code 2022, is amended by 1 striking the section and inserting in lieu thereof the 2 following: 3 523A.207 Transfer of preneed purchase agreements —— sale of 4 a business or business assets. 5 1. A purchase agreement shall not be sold or transferred as 6 part of the sale of a business, or of the assets of a business, 7 until the seller of the business has provided all of the 8 following to the buyer of the business: 9 a. A copy of the most recent annual report filed with the 10 commissioner by the seller. 11 b. The aggregate amount of any interest income withdrawn 12 to date from trust accounts pursuant to section 523A.201, 13 subsection 8. 14 c. Copies of all purchase agreements to be assumed by the 15 buyer. 16 d. A list of the purchase agreements provided under 17 paragraph “c” that includes all of the following: 18 (1) The name of the purchaser and the name of the seller of 19 each purchase agreement. 20 (2) The total dollar amount of each purchase agreement. 21 (3) The date each purchase agreement was executed. 22 (4) Whether each purchase agreement is guaranteed, 23 nonguaranteed, or mixed, and affirm or deny one hundred percent 24 trusting of any guaranteed items and specify the lesser amount 25 or percentage placed in trust, if applicable. 26 e. A list of insurance policies that are applicable to the 27 purchase agreements provided under paragraph “c” . The list 28 shall identify the purchase agreement to which each insurance 29 policy applies, the named policyholder on each insurance 30 policy, and the face amount of each insurance policy. 31 f. A list of trust fund beneficiaries and the amount in 32 trust for each beneficiary. 33 g. A list that identifies and describes any items of presold 34 merchandise that are not fully funded with insurance or trust 35 -1- LSB 5167SV (1) 89 ko/rn 1/ 8
S.F. 2194 funds in compliance with this chapter, and the amount or 1 percentage that is either unfunded or underfunded. 2 2. a. The seller of a business shall file a disclosure 3 with the commissioner that contains the information required 4 under subsection 1, paragraphs “d” and “e” , at least thirty 5 calendar days prior to the date of the transfer of any purchase 6 agreements to the buyer. 7 b. If the seller fails to file the disclosure required under 8 paragraph “a” , the commissioner may suspend the buyer’s preneed 9 seller’s license, the seller’s preneed seller’s license, and 10 the license of any sales agent authorized to sell for the buyer 11 or seller until the disclosure is filed. In addition, the 12 commissioner may assess a penalty against the buyer or seller 13 in an amount up to one hundred dollars for each calendar day 14 that the disclosure remains unfiled. The commissioner shall 15 allow a thirty-day grace period after the date that a purchase 16 agreement is sold or transferred before the commissioner 17 suspends the preneed seller’s license of the buyer, seller, or 18 of a sales agent authorized to sell for the buyer or seller, 19 or assesses a penalty against the buyer or seller. Upon 20 good cause, the commissioner may issue an order waiving the 21 disclosure requirement. 22 3. All records maintained by the commissioner under this 23 section shall be confidential pursuant to section 22.7, 24 subsection 58, and shall not be made available for inspection 25 or copying except upon prior written approval of either the 26 commissioner or the attorney general, or if sought by the 27 preneed seller to whom the records relate. Such records shall 28 be privileged and confidential in a judicial or administrative 29 proceeding except for any of the following: 30 a. An action commenced by the commissioner. 31 b. An administrative proceeding brought by the division. 32 c. An action or proceeding which arises out of the criminal 33 provisions of the laws of this state or of the United States. 34 d. An action brought by the division or the attorney general 35 -2- LSB 5167SV (1) 89 ko/rn 2/ 8
S.F. 2194 to recover moneys from embezzlement, misappropriation, or 1 misuse of trust funds. 2 Sec. 2. Section 523A.401, subsection 4, Code 2022, is 3 amended to read as follows: 4 4. The premiums of any new insurance policy shall be 5 fully paid If a preneed funeral purchase agreement contains 6 a provision stating that the agreement will be funded by the 7 purchase of a new insurance policy, the insurance producer 8 who sells the insurance policy that will fund the purchase 9 agreement shall require that any payment made by the purchaser 10 shall be made payable only to the insurance company designated 11 in the purchase agreement. The insurance producer shall 12 remit the insurance policy application and the premium made 13 payable to the insurance company designated in the purchase 14 agreement to the insurance company within thirty calendar days 15 after execution of the purchase agreement or, with respect 16 to a purchase agreement that provides for periodic payments, 17 the premiums shall be paid directly by the purchaser to the 18 insurance company issuing that issues the insurance policy. 19 Sec. 3. Section 523A.402, subsection 4, Code 2022, is 20 amended to read as follows: 21 4. The premiums of any new annuity shall be fully paid 22 If a preneed funeral purchase agreement contains a provision 23 stating that the agreement will be funded by the purchase of 24 a new annuity, the insurance producer who sells the annuity 25 that will fund the purchase agreement shall require that any 26 payment made by the purchaser shall be made payable only to the 27 insurance company designated in the purchase agreement. The 28 insurance producer shall remit the annuity application and the 29 premium made payable to the insurance company designated in 30 the purchase agreement to the insurance company within thirty 31 calendar days after execution of the purchase agreement or, 32 with respect to a purchase agreement that provides for periodic 33 payments, the premiums shall be paid directly by the purchaser 34 to the insurance company issuing that issues the annuity. 35 -3- LSB 5167SV (1) 89 ko/rn 3/ 8
S.F. 2194 Sec. 4. NEW SECTION . 523A.505 Duty to disclose. 1 1. A sales agent, and any person who owns at least five 2 percent of a preneed seller business, shall have an ongoing 3 duty to disclose to the commissioner all felony crimes and 4 those misdemeanor-level crimes involving dishonesty or false 5 statement for which the sales agent or person has been found 6 guilty, or for which the sales agent or person has pled 7 guilty or no contest. Such disclosure shall be made to the 8 commissioner within thirty calendar days of the date that 9 the sales agent or person has been found guilty by a court 10 of competent jurisdiction, or of the date the sales agent or 11 person pleads not guilty or no contest. 12 2. A sales agent, and any person who owns at least five 13 percent of a preneed seller business, shall have an ongoing 14 duty to disclose to the commissioner all liens and judgments 15 over twenty thousand dollars that have been entered against 16 the sales agent or person, and all bankruptcy petitions that 17 have been filed by the sales agent or person. Such disclosure 18 shall be made to the commissioner within thirty calendar days 19 of the date on which the lien or judgment is entered, or of the 20 date on which the sales agent or person files a petition for 21 bankruptcy. 22 Sec. 5. NEW SECTION . 523A.506 Business continuity planning. 23 A preneed seller shall establish, implement, and maintain 24 written procedures relating to business continuity and 25 succession planning. The business continuity and succession 26 plan shall be based upon the specific facts and circumstances 27 of the preneed seller’s business model including the size of 28 the preneed seller’s business, the types of services provided, 29 and the number of physical locations established and maintained 30 by the preneed seller. The plan must provide for all of the 31 following: 32 1. The protection, secure backup, and recovery of the 33 preneed seller’s business records. 34 2. Alternative forms of communication to ensure timely 35 -4- LSB 5167SV (1) 89 ko/rn 4/ 8
S.F. 2194 notice of all of the following to customers, key personnel, 1 employees, vendors, and service providers: 2 a. A significant business interruption. 3 b. The death or unavailability of key personnel. 4 c. A disruption of service. 5 d. The cessation of business activities. 6 3. Reassignment of key duties to qualified individuals in 7 the event of the death or unavailability of key personnel. 8 4. Minimization and mitigation of service disruptions and 9 negative impacts to clients that may result from a significant 10 business interruption. 11 Sec. 6. NEW SECTION . 523A.605 Allocation of growth or 12 interest. 13 If a purchase agreement funded by insurance proceeds under 14 section 523A.401 or by annuity proceeds under section 523A.402 15 includes nonguaranteed merchandise or services, the purchaser, 16 beneficiary, or the beneficiary’s estate shall receive a credit 17 for, and the benefit of, any growth in death benefits that is 18 at least equal to the percentage of the total price under the 19 purchase agreement that is attributable to the nonguaranteed 20 merchandise or services. 21 Sec. 7. Section 523A.807, subsection 3, unnumbered 22 paragraph 1, Code 2022, is amended to read as follows: 23 If the commissioner finds that a person has violated section 24 523A.201 , 523A.202 , 523A.203 , 523A.204 , 523A.207 , 523A.401 , 25 523A.402 , 523A.403 , 523A.404 , 523A.405 , 523A.501 , 523A.502 , 26 or 523A.502A , 523A.505, or 523A.605, or any rule adopted 27 pursuant thereto, the commissioner may order any or all of the 28 following: 29 Sec. 8. APPLICABILITY. The following applies to purchase 30 agreements sold or transferred as part of the sale of a 31 business, or the assets of a business, on or after July 1, 32 2022: 33 The section of this Act amending section 523A.207. 34 EXPLANATION 35 -5- LSB 5167SV (1) 89 ko/rn 5/ 8
S.F. 2194 The inclusion of this explanation does not constitute agreement with 1 the explanation’s substance by the members of the general assembly. 2 This bill relates to preneed sellers and purchase agreements 3 (agreement) for cemetery merchandise, funeral merchandise, and 4 funeral services. 5 The bill provides that an agreement shall not be sold or 6 transferred as part of the sale of a business, or the assets 7 of a business, until the seller of the business (seller) has 8 provided the buyer of the business (buyer) with copies of 9 all agreements to be assumed by the buyer, as well as the 10 additional information detailed in the bill. Current law 11 requires a certified public accountant to complete a procedures 12 engagement in accordance with the attestation standards 13 established by the American institute of certified public 14 accountants that verifies the adequacy or inadequacy of funding 15 related to the agreements to be sold or transferred. The 16 buyer must file a copy of the report with the commissioner of 17 insurance (commissioner). 18 The bill requires that the seller file a disclosure with the 19 commissioner at least 30 calendar days prior to the date of the 20 transfer of any agreements that lists all of the agreements 21 that are to be transferred to the buyer, and provides 22 additional information as detailed in the bill. If the seller 23 fails to file the disclosure, the commissioner may suspend 24 certain licenses or assess penalties as detailed in the bill. 25 The bill requires that if an agreement contains a provision 26 stating that it will be funded by either the purchase of a 27 new insurance policy or a new annuity, the insurance producer 28 (producer) who sells the policy or annuity that will fund the 29 agreement must require that any payment made by the purchaser 30 be made payable only to the insurance company (company) 31 designated in the agreement. The producer must remit the 32 insurance or annuity application and the premium to the company 33 designated in the agreement within 30 calendar days after the 34 date of execution of the agreement. Current law requires that 35 -6- LSB 5167SV (1) 89 ko/rn 6/ 8
S.F. 2194 the premiums for any new insurance policy be fully paid within 1 30 days after execution of the agreement. 2 The bill requires sales agents (agents), and any persons 3 who own at least five percent of a preneed seller business, to 4 disclose to the commissioner all felony crimes and misdemeanors 5 that involve dishonesty or false statement to which the agent 6 or person has been found guilty, or to which the agent or 7 person has pled guilty or no contest. The disclosure must be 8 made within 30 days of the date that the agent or person is 9 found guilty, or of the date the agent or person pleads not 10 guilty or no contest. The agent or person must also disclose 11 all liens and judgments over $20,000 that are entered against 12 them, and all bankruptcy petitions filed by the agent or 13 person. Disclosure must occur within 30 calendar days of the 14 date that the lien or judgment is entered, or that a petition 15 for bankruptcy is filed. 16 Preneed sellers are required by the bill to establish, 17 implement, and maintain written procedures relating to business 18 continuity and succession planning (plan). The plan must 19 be based upon the specific facts and circumstances of the 20 seller’s business model, and must also address the additional 21 circumstances detailed in the bill. 22 Under the bill, if a purchase agreement funded by insurance 23 or annuity proceeds includes nonguaranteed merchandise or 24 services, the purchaser, beneficiary, or the beneficiary’s 25 estate shall receive a credit for, and the benefit of, 26 any growth in death benefits that is at least equal to the 27 percentage of the total price under the purchase agreement that 28 is attributable to the nonguaranteed merchandise or services. 29 The bill provides that if the commissioner finds that a 30 person has violated the duty to disclose a felony, misdemeanor, 31 judgment, or lien; or failed to credit a purchaser, 32 beneficiary, or the beneficiary’s estate for any growth in 33 death benefits, the person is subject to the remedies and 34 penalties under Code section 523A.807(3). 35 -7- LSB 5167SV (1) 89 ko/rn 7/ 8
S.F. 2194 The section of the bill that amends Code section 523A.207 1 applies to purchase agreements sold or transferred as part of 2 the sale of a business, or of the assets of a business, on or 3 after July 1, 2022. 4 -8- LSB 5167SV (1) 89 ko/rn 8/ 8