1. (a) Application. This section applies to a permit holder who sells or maintains trust-funded prepaid funeral benefit contracts. Unless the Department of Banking (the department) is petitioned for and agrees to a different location under subsection (f)(3) of this section, all specified records must be made available to the department for examination at the physical location in Texas that the permit holder has designated in written notice to the department on file at the time of the examination.

2. (b) General file. A permit holder subject to this section must maintain general files regarding its prepaid funeral benefits operations. Such files may be maintained in hard-copy form or on microfiche or in an electronic database from which they may be reasonably retrieved in hard-copy form. These files must contain the original or a copy of the following:

   1. (1) the latest approved renewal permit application for the permit holder and its last filed annual report, if any;
   2. (2) the current permit issued to the permit holder by the department;
   3. (3) each contract form approved for sales transacted within the last three years unless no outstanding contracts exist using such form;
   4. (4) all department-approved depository letters received within the last three years and all depository letters pertaining to active contracts;
   5. (5) the most current consolidated financial statement or, in lieu thereof, the most current financial records and/or tax returns;
   6. (6) each department-approved agent appointment made and resignation given within the last three years and all appointments that are still active;
   7. (7) all examination reports made by the department within the past three years;
   8. (8) all trust agreements approved by the department within the past three years and all trust agreements that are still active, including trustee fee schedules covering deposited funds for the last three years;
   9. (9) all investment plans and reports submitted to the department within the past three years and all such plans and reports that apply to active trust funds;
   10. (10) all preneed abandoned property reports filed with the department and the State Comptroller of Public Accounts within the past three years;
   11. (11) records of the trustee/depository, balanced at least quarterly to the total of the control ledger and the principal of the individual ledgers, reflecting at a minimum all savings account statements, certificate of deposit records (both principal and interest), and/or trust statements for the past three years; and
   12. (12) all correspondence with the department within the past three years, including but not limited to all transfer of funds approval letters issued by the department.

3. (c) Individual files.

   1. (1) Each permit holder subject to this section shall maintain a prepaid funeral benefits contract file on each purchaser. These files must be maintained separately for outstanding contracts, matured contracts, and canceled contracts. Files may be maintained either chronologically or alphabetically in hard-copy form or on microfiche or in an electronic database from which they may be reasonably retrieved in hard-copy form. Each individual file should contain all correspondence pertaining to the contract for that file.
   2. (2) Each file pertaining to an outstanding contract must contain copies of the prepaid funeral benefits contract and any revocable and irrevocable assignments.

   3. (3) Each file pertaining to a matured contract must be retained for three years. Each such file must contain copies of all documents required for an outstanding contract, a 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. Each matured contract file must also contain:

      1. (A) the original or copy of the completed at-need contract or funeral purchase agreement, or an itemization of services performed and merchandise transferred signed by the decedent's personal representative; or, if the preneed funeral contract relates only to the opening and closing of a grave, the cemetery interment order and/or other documents signed by the decedent's representative, provided the interment order or other documents must denote the balance that was due on the preneed contract at the time of death, if any, and any preneed discount;
      2. (B) a certified death certificate or a copy of a certified original death certificate; and
      3. (C) if the service is performed by an entity other than the permit holder or a permit holder related by common ownership, a signed statement from the purchaser or purchaser's representative requesting the delivery of funds to the servicing funeral home and evidence of payment to the servicing funeral home;
   4. (4) Each file pertaining to a canceled contract must be retained for three years. Each such file must contain copies of all documents required for an outstanding contract, a completed departmental withdrawal form or evidence of departmental withdrawal approval, a computation of earnings withdrawal, if applicable, unless otherwise documented in the general file, and evidence of payment of the cancellation benefit.

4. (d) Other records. Each permit holder subject to this section must maintain the following records regarding its prepaid funeral benefits operations in hard-copy form, or on microfiche or in an electronic database from which they may be reasonably retrieved in hard-copy form:

   1. (1) an historical contract register, maintained either chronologically or by contract number, indicating:

      1. (A) the contract number;
      2. (B) the date of purchase;
      3. (C) the purchaser's name;
      4. (D) the beneficiary's name (if different from the purchaser's name);
      5. (E) the amount of the contract; and
      6. (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. (2) cash receipts records reflecting payments collected;
   3. (3) deposit records reflecting payments deposited;

   4. (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:

      1. (A) contract purchaser's name;
      2. (B) contract number;
      3. (C) the date of purchase;
      4. (D) the face amount of the prepaid funeral contract;
      5. (E) total finance charges payable under the contract, if any;
      6. (F) total retention allowable under the contract, if any;
      7. (G) beginning contract balance;
      8. (H) amounts paid on the contract itemized to reflect retention, finance charges and principal paid with individual cumulative totals;
      9. (I) earnings on deposits, if any; and
      10. (J) total amount of the trust; and

   5. (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:

      1. (A) the net cumulative total of outstanding contracts;
      2. (B) deposits of payments;
      3. (C) withdrawal of payments;
      4. (D) net amount of payments on deposit;
      5. (E) earnings of deposit accounts;
      6. (F) earnings withdrawn on deposit accounts; and
      7. (G) net amount of earnings.
5. (e) Corporate records. Corporate records of a permit holder subject to this section pertaining to actual or anticipated regulatory action or litigation that could result in the permit holder's insolvency and all corporate minutes must be maintained and made available to the department at each examination.

6. (f) Exceptions.

   1. (1) A permit holder that sells only trust-funded contracts is not required to maintain records that are applicable only to insurance-funded contracts.
   2. (2) With respect to contracts sold prior to the effective date of this section or amendments hereto, 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.
   3. (3) A permit holder may apply to the Commissioner for an exception to the record keeping requirements other than as provided under this subsection. An exception may be granted only for good cause by prior written approval of the Commissioner.
7. (g) Relocation of Records. Prior to changing the location where required records are maintained or where the examination is to be performed, 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)(3) of this section.
8. (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.

Source Note:The provisions of this §25.11 adopted to be effective May 2, 1984, 9 TexReg 2236; amended to be effective January 28, 1991, 16 TexReg 171; amended to be effective March 23, 1994, 19 TexReg 1650; amended to be effective November 28, 1995, 20 TexReg 9417; amended to be effective September 16, 1999, 24 TexReg 7220.