DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part of the
legislative instrument. The keyword, one-liner, abstract, and digest do not constitute part of the law
or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 554 Original 2023 Regular Session Riser
Abstract: Relative to cemeteries, creates income distribution methods that can be implemented for
perpetual care trust funds.
Present law requires the principal of a cemetery trust fund to remain permanently intact and for any
income generated to be expended. Present law further requires for the income to only be used for
the care for the portion of the cemetery where interment spaces have been sold for perpetual or
endowed care.
Present law provides that income funds are intended and shall only be used for the care of interment
spaces sold for perpetual or endowed care and for the care of other portions of the cemetery
immediately surrounding spaces that need to be preserve.
Proposed law retains present law and includes that income distributions within a perpetual care trust
fund shall mean the net income or total return distribution method as provided for in proposed law
(R.S. 8:454.2).
Proposed law defines "average fair market value", "board", "inception", "net income", "total return
distribution", and "total return percentage".
Proposed law requires income distributions from perpetual care trust funds to be made with
consideration of either net income or total return distribution.
Proposed law requires that a perpetual care trust fund may elect to use the total return distribution
method, if the trust fund is administered by either a qualified institutional trustee as provided for in
present law or when the trustee or investment advisor managing the funds demonstrates sufficient
knowledge and expertise related to total return investing and distributions.
Proposed law provides that the cemetery authority shall apply to the board at least 90 days prior to
the effective date of the election to use the total return distribution method.
Proposed law requires the cemetery authority or trustee to provide all of the following to the board:
(1)A written investment policy that details investment goals for achieving principal growth
through permissible investments for perpetual care trust fund in addition to a secondary goal
for achieving current income. (2) An amended perpetual care trust agreement on board approved forms that clearly states the
selection of the total return distribution method.
(3) A written distribution policy that establishes the total return percentage and initial estimated
average fair market value, using the most recent month end balances as the estimate for the
current calendar year, signed by the cemetery authority or trustee.
(4) The board acquisition of any information, supporting documentation, and proof concerning
the applicant's compliance.
(5) The board shall determine if the cemetery authority or trustee has met all requirements prior
to approving the application to implement a total return distribution method. Proposed law
further provides the procedure for when the board refuses to approve an application.
(6) The cemetery authority shall submit the information required by proposed law on an
application form prescribed by the board, accompanied by an application fee not to exceed
$1,500.
Proposed law allows a cemetery authority to select a distribution method by delivering written
instructions to the trustee of the fund no later than 30 days prior to the beginning of a calendar year.
Proposed law provides that the distribution method and the total return distribution rate shall remain
in effect unless the cemetery authority notifies the trustee of its desire to effectuate change, provides
the board an application with such change, and provides copies of such documentation to the trustee.
Proposed law allows a cemetery authority that has implemented the total return distribution method,
the option to elect to reconvert to a net income distribution method. Proposed law provides that if
the cemetery authority elects to do so, the cemetery authority must submit written documentation to
the board in support of the reconversion.
Proposed law provides that, unless required by the board, no cemetery authority may change its
distribution method more than once within a three year period.
Proposed law requires the board to take corrective measures if any of the following circumstances
occur:
(1)When the average fair market value of the trust fund at the end of the most recent rolling
three year period, in comparison to the average fair market value of the previous rolling three
year period, declines by 10% or more.
(2)When the fair market value of the trust fund at the end of a calendar year is less than 90% of
the sum of the fair market value of the fund at inception in addition to all deposits made since
inception. (3)When a cemetery authority has failed to meet the tests required by proposed law and after a
full calendar year of distributing only net income, the cemetery board still fails to meet the
tests required by proposed law.
(4) When, upon review of the annual trust fund report or on-site examination, the board
determines there is an uncorrected financial or investment related perpetual care deficiency.
Proposed law provides that in addition to the aforementioned corrective measures, the board can also
reduce the approval total return percentage, require a distribution of only net income for a calendar
year, or require a monthly retest.
Proposed law requires that if a cemetery authority fails to take any required action, the authority will
be subject to any and all enforcement actions or penalties provided for in present law.
Proposed law states that if permissible fees paid from the perpetual care fund exceed 1.5% of the fair
market value in a given year, the amount in excess shall be deducted from the approved total return
distribution.
(Amends R.S. 8:454.1(A); Adds R.S. 8:454.2)