Iowa Administrative Code › Agency 191 - Insurance Division › Regulated Industries › Chapter 101 - Burial Sites and Cemeteries › Rule 191-101.8 - Distribution of Care Fund Amounts Using a Total Return Distribution Method

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
Purpose.
This rule is authorized by Iowa Code section
				523I.811(2)
				 and is intended to encourage care fund
				investments in appreciating assets that will produce higher care fund income
				levels created by growth in the care fund principal.
(2)
Definition of "total return
				distribution method."
For purposes of this rule, a "total return
				distribution method" is a plan for distributing care fund amounts which takes
				into account both income (interest and dividends) earned by the care fund and
				capital appreciation (the change in the market value) of the care fund's
				assets. A total return distribution method takes into account the estimated
				rate of return to ensure growth of the care fund over time.
(3)
Principal of care fund.
The principal of a care fund required by Iowa Code section
				523I.806 shall
				remain available as a funding source for care of the cemetery. A cemetery shall
				not reduce the principal of a care fund voluntarily, except for the
				distribution of income. Pursuant to Iowa Code section
				523I.811(2),
				the commissioner, by this rule, establishes terms and conditions under which a
				care fund trustee or, in the event of multiple trustees, a majority of the
				trustees, may, in the trustee's or trustees' sole discretion and without
				approval of a court, adopt a total return distribution method for the
				distribution of care fund income, subject to the terms and conditions of this
				rule.
a. In maintaining accounts for the care
				fund, the trustee or trustees shall maintain separate accountings of principal
				and of income.
b. The care fund
				trust's governing instrument must clearly manifest intent to use a total return
				distribution method. Conversion to an investment policy utilizing the total
				return distribution method shall not conflict with or affect any provision of
				the trust agreement, if any, regarding the distribution of principal. If the
				trust agreement indicates intent that net appreciation shall not be expended,
				the trust may not use the total return distribution method. The care fund
				trust's governing instrument shall clearly indicate how the reserve account
				shall be established and administered.
c. Distributions permitted under the total
				return distribution method shall be paid from the following sources in the
				order listed:
(1) Income; and
(2) If permitted by paragraph
				101.8(6)
"a,"
principal.
d. The distributions under the total return
				distribution method shall be used in any manner determined to be in the best
				interests of the cemetery if authorized by a resolution, bylaw, or other action
				or instrument establishing the care fund, including but not limited to the
				following: the general care of memorials; memorialization; cutting and trimming
				lawns, shrubs, and trees at reasonable intervals; maintaining drains, water
				lines, roads, buildings, fences, and other structures; maintaining machinery,
				tools, and equipment; compensating maintenance employees; paying insurance
				premiums; making payments to maintenance employees' pension and benefit plans;
				paying expenses necessary to maintain ownership, transfer, and interment
				records of the cemetery; capital improvements; and paying overhead expenses
				incidental to such purposes.
e. The
				trustee or trustees shall, not less than annually, determine the fair market
				value of each asset of the care fund that consists primarily of real property
				or other property that is not traded on a regular basis in an active market, by
				appraisal or other reasonable method or estimate. That determination, if made
				reasonably and in good faith, shall be conclusive as to all persons interested
				in the care fund.