HAR Chapter 75 – Cemeteries and Funeral Trusts

HAWAII ADMINISTRATIVE RULES
TITLE 16
DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS
CHAPTER 75
CEMETERIES AND FUNERAL TRUSTS
Subchapter 1 	General Provisions
§16-75-1 	Objective
§16-75-2 	Definitions
§16-75-3 	Notification and filing of names, addresses, and changes
§16-75-4 	Renewal of licenses
§16-75-5 	Bond
§16-75-6 	Office
§16-75-7 	Trustee
§16-75-8 	Doing business as
Subchapter 2 	Applications
§16-75-12 	Forms and instructions
§16-75-13 	Application for pre-need funeral authority and cemetery license
§16-75-14 	License
§16-75-15 	Reinstatement of suspended license
§16-75-16 	Denial
§16-75-17 	Hearing
§16-75-18 	License not transferable
Subchapter 3 	Validation Requirements
§16-75-22 	Exhibits
Subchapter 4 	Records
§16-75-26 	Keeping of books; accounts, records
§16-75-27 	Contract forms; content; filing
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Subchapter 5 	Reports
§16-75-31 	Audited financial statement
§16-75-32 	Actuarial report
§16-75-33 	Certificate of insurance
§16-75-34 	Application for extension of time for filing reports
§16-75-35 	Application for deferral of filing reports
Subchapter 6 	Trust Administration
§16-75-39 	Deposits to the trust account
§16-75-40 	Withdrawals from the trust account; principal
§16-75-41 	Use or withdrawal of income or net capital gains from the trust
account
§16-75-42 	Eligible investments; scope
§16-75-43 	Investment of trust funds allowable by a board of trustees
§16-75-44 	Prohibited investments
Subchapter 7 	Public Review of Records
§16-75-49 	Location of records
§16-75-50 	Hours of inspection
§16-75-51 	To whom and where request made
§16-75-52 	Form of request and identification
§16-75-53 	Number of records permitted
§16-75-54 	Use of pens prohibited
§16-75-55 	No opinion to be rendered
§16-75-56 	Temporary unavailability of records
Subchapter 8 	Practice and Procedure
§16-75-60 	Administrative practice and procedure
Subchapter 9 	Penalty
§16-75-64 	Penalty
Historical note: 	Chapter 16-75, Hawaii Administrative Rules, is based
substantially upon Title VII, Chapter 22, Cemetery, of the rules of the Board of
Cemetery, Department of Regulatory Agencies. 	[Eff 10/14/69; am 5/26/70; am
11/26/72; am 7/8/76; R 11/19/87]
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SUBCHAPTER 1
GENERAL PROVISIONS
§16-75-1 	Objective. 	This chapter is intended to clarify and implement
chapter 441, Hawaii Revised Statutes, in order that the provisions thereunder may
be best effectuated and the public interest most effectively served. [Eff 11/19/87;
comp 1/21/92] (Auth: 	HRS §26-9) (Imp: 	HRS §441-19)
§16-75-2 Definitions. Definitions of terms found in section 441-1, HRS,
shall be adopted by reference. 	In addition, the following definitions shall be
included:
"Board" means the designated board of trustees of the trust fund.
"Commingling" means to mingle or mix, such as deposit of client’s funds
in the licensee’s corporation or personal account or with other trust accounts.
Financial 	integrity" 	means 	the 	financial 	soundness 	or 	financial
responsibility of a cemetery or pre-need funeral authority to engage in business
as a cemetery and pre-need funeral authority.
"Provider" means the person obligated to provide the pre-need funeral or
interment services and merchandise described in a pre-need contract.
"Trust fund" means the perpetual care and pre-need trust.
"Year" means calendar or fiscal years, whichever is applicable to the
closing of the licensee’s books. [Eff 11/19/87; comp 1/21/92] (Auth: HRS §441-
19) (Imp: 	HRS §441-19)
§16-75-3 	Notification and filing of names, addresses, and changes. 	(a)
Any person holding a license shall file with the director the name and address of
the business, and in the case of a partnership, corporation, or association, the
names and addresses of the partners, officers, and directors, as the case may be,
and shall notify the director in writing of any changes of the names and addresses
as the case may be, not later than thirty days of the changes.
(b) 	A licensee who has a board as trustee of the trust fund shall cause
the board to file with the director the name, address, and principal place of
employment of each board member and the office held on the board by the
member. 	The licensee shall notify the director in writing of any change of the
members or composition of the board, as the case may be, not later than thirty
days of the change.
(c) 	A licensee who has a trust company or bank as trustee of the trust
fund shall cause the trust company or bank to file with the director the name and
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address of the trust company or bank and the name and title of the trust officer
who is the fiduciary agent directly responsible for asset management and
safekeeping of the trust fund. The licensee shall notify the director in writing of
any change in trust officer not later than thirty days of the change.
(d) 	The licensee shall file a copy of any amendments thereto of the
declaration of the trust not later than thirty days of the amendments. 	[Eff
11/19/87; comp 1/21/92] (Auth: 	HRS §441-19) (Imp: 	HRS §§441-19, 441-37)
§16-75-4 Renewal of license. Biennial renewal fees paid by mail shall be
considered paid when due if the envelope bears a postmark of December 31 or
earlier of each odd-numbered year. In addition to the renewal fees, each licensee
shall submit, on a form prepared by the director, a report of the activities of the
trust fund for the current year. 	[Eff 11/19/87; comp 1/21/92] (Auth: §441-19)
(Imp: 	§§441-19, 441-24, 441-31)
§16-75-5 Bond. (a) Each applicant and licensee, as the case may be, shall
provide a bond by a surety authorized by a certificate of authority granted by the
state insurance commissioner to do business in the State.
(b) 	Where a bond cannot reasonably be secured, the director may
pursuant to the authority provided in section 441-19 (9), HRS, provide for an
alternative form of security so long as the alternative security is no less than that
provided by the bond. 	Alternative forms of security may include, but not be
limited to:
(1) 	Certificate of deposit from a federally insured institution in the
amount equal to the bond required; or
(2) 	Cashier’s check from a federally insured institution in the amount
equal to the bond required; or
(3) 	An irrevocable letter of credit in a form approved by the director
drawn upon a bank or savings and loan association in the amount
of the bond required.
(c) 	Any alternative security approved by the director for substitution
of the bond shall be in the name of the director or in the case of a letter of credit
shall designate the director as beneficiary for the benefit of any eligible person
sustaining damage resulting from a failure on the part of the licensee or trustee to
faithfully, promptly, and truly account and pay to the person sums that may be
properly due from the licensee or trustee.
(d) 	The director shall retain possession of the security as described in
subsection (b)(1), (2), and (3) under such terms and conditions as the director shall
determine are necessary to carry out the purposes of protecting the public. In the
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event the alternative security earns interest while in the possession of the director,
the interest shall belong to the licensee or trustee. 	[Eff 11/19/87; comp 1/21/92]
(Auth: 	HRS §§441-19) (Imp: 	HRS §§441-19(9), 441-22.
§16-75-6 Office. Each licensee shall be required to maintain an office in
the State and designate a person to be responsible for the daily operation of the
office. [Eff 11/19/87; comp 1/21/92] (Auth: HRS §441-19) (Imp: HRS §441-19)
§16-75-7 	Trustee. 	(a) The bank designated by the licensee as trustee of
the trust fund shall be a federally insured bank regulated by federal or state
authorities. Where the bank designated as trustee is not located in this State, the
licensee shall disclose in all written contracts the name of the bank, the state it is
located in, and its status with regard to state and federal insurance.
(b) 	The trust company designated by the licensee as trustee of the trust
fund shall be a state chartered trust company.
(c) 	The board designated by the licensee as trustee of the trust fund
shall be comprised of members, a majority of whom are residents of the State.
[Eff 11/19/87; comp 1/21/92] (Auth: 	HRS §441-19) (Imp: 	HRS §§441-19,
441-37)
§16-75-8 Doing business as. (a) A licensee shall not solicit business using
a name other than the name appearing on the licensee’s license.
(b) 	A licensee shall notify the director of any name change within
fifteen days of the change. 	A fee shall be paid by the licensee for reissuance of
a license when there has been a change of the licensee’s name. 	[Eff 11/19/87;
comp 1/21/92] (Auth: 	HRS §441-19) (Imp: 	HRS §§441-20, 441-31)
SUBCHAPTER 2
APPLICATIONS
§16-75-12 Forms and instructions. An application filed with the director
shall be prepared in accordance with and contain the information called for in the
application form provided, and exhibits which may be required by the director
with respect to the filing. 	The following forms are currently in use by the
director:
(1) 	Application for cemetery authority license;
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(2) 	Application for pre-need funeral authority license;
(3) 	Cemetery authority bond;
(4) 	Pre-need funeral authority bond;
(5) 	Board of trustees bond;
(6) 	Application for reinstatement of a suspended license; and
(7) 	Tri-party agreement for substitute security. 	The forms may be
modified from time to time as required. 	[Eff 11/19/87; comp
1/21/92] (Auth: 	HRS §441-19) (Imp: 	HRS §§441-22, 441-29,
441-37)
§16-75-13 Application for pre-need funeral authority and cemetery license.
(a) An application for a pre-need funeral authority or cemetery license shall be
accompanied by the required application fee which shall not be refunded.
(b) 	At the time of filing the application the applicant shall submit the
exhibits as specified in section 16-75-22 (a). 	The exhibits specified in 16-75-22
(b) shall be required prior to licensure. [Eff 11/19/87; comp 1/21/92] (Auth: HRS
§441-19) (Imp: 	HRS §441-19)
§16-75-14 License. An applicant approved for licensure shall submit the
license fee which shall not be refunded. 	[Eff 11/19/87; comp 1/21/92] (Auth:
HRS §441-19) (Imp: 	HRS §441-31)
§16-75-15 	Reinstatement of suspended license. 	To reinstate a license
suspended for failing, refusing, or neglecting to maintain the bond required by
sections 441-22 and 441-37, HRS, the licensee, within sixty days from the date
the license is suspended, shall file an application for reinstatement and pay the
required fee. Failure to reinstate the license within the time prescribed shall cause
the license to be terminated. In order to receive a new license an application shall
be filed in accordance with section 16-75-13 and accompanied by the required
application and license fees. 	A licensee, within fifteen days after receipt of the
notification of the license termination, may request an administrative hearing to
review the termination pursuant to chapter 91, HRS. 	[Eff 11/19/87; comp
1/21/92] (Auth: 	HRS §441-19) (Imp: 	HRS §§441-22, 441-37)
§16-75-16 	Denials. 	In the event the director proposes to refuse an
application for the issuance of a license or for renewal of a license, the director
shall notify the applicant by letter of the director’s proposed action which shall
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include a concise statement of the reasons therefor and a statement informing the
applicant of the right to a notice and a hearing. 	[Eff 11/19/87; comp 1/21/92]
(Auth: 	HRS §441-19) (Imp: 	HRS §§441-23, 441-34)
§16-75-17 	Hearing. 	Any person whose application for a license or
renewal of a license is proposed to be denied by the director, may exercise the
right to notice and a hearing pursuant to chapter 16-201, administrative practice
and procedure, provided that a demand for hearing is filed with the director within
sixty days of the date of the letter informing the applicant of the proposed denial
of the application. 	If no demand for a hearing is filed within sixty days of the
date of the letter, the director’s proposed action shall become final. [Eff 11/19/87;
comp 1/21/92] (Auth: 	HRS §441-19) (Imp: 	HRS §441-34)
§16-75-18 License not transferable. No license issued under chapter 441,
HRS, shall be transferred, assigned, or loaned. 	[Eff 11/19/87; comp 1/21/92]
(Auth: 	HRS §441-19) (Imp: 	HRS §441-19)
SUBCHAPTER 3
VALIDATION REQUIREMENTS
§16-75-22 Exhibits. (a) With every application for licensure an applicant
shall submit the following:
(1) 	A current credit report covering not less than the previous five
years on the individual applicant, on each partner of a partnership,
on each officer of a corporate entity;
(2) 	A current financial statement prepared and signed by a licensed
certified 	public 	accountant 	or 	public 	accountant 	on 	a 	form
prescribed by the director; and
(3) 	A state tax clearance from the department of taxation.
(b) 	In addition to the requirements in subsection (a) the following shall
be submitted by the applicant prior to licensure:
(1) 	A statement indicating who will be the trustee for the trust fund.
If a board shall be appointed as trustee the name, address, and
principal place of employment of each board member and the
office to be held by the member shall be disclosed. 	If a trust
company or bank shall be appointed as trustee the name and
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address of the trust company and the name and title of the trust
officer who is to be the fiduciary agent shall be disclosed;
(2) 	An executed copy of the declaration of the trust between the
applicant and the designated trustee of the trust fund and any
amendments thereto;
(3) 	A copy of the sales contract forms to be used by the applicant in
the selling of pre-need services and cemetery property;
(4) 	A list of the providers obligated to provide the pre-need funeral or
interment 	services 	and 	merchandise 	described 	in 	a 	pre-need
contract;
(5) 	In the case of an applicant who is:
(A) 	A corporation organized and existing under laws of the
State, a filed stamped copy of the articles of incorporation
and 	affidavit 	of 	officers 	as 	filed 	with 	the 	business
registration division of the department; or
(B) 	An association organized and existing under laws of the
State, a copy of the by-laws of the association and names
of the directors and officers; and
(6) 	In the case of an applicant who has:
(A) 	Established a trust account with a bank or trust company,
a bond in the penal sum of $50,000 with the applicant
designated as principal; or
(B) 	Appointed a board as trustee of the trust fund, a bond in the
penal sum of $50,000 with the applicant designated as
principal; a bond in the penal sum of $100,000 with the
board designated as principal; and an affidavit by the
chairman of the board attesting that no member of the
board 	is 	affiliated 	with 	the 	applicant 	who 	is 	seeking
licensure. [Eff 11/19/87; comp 1/21/92] (Auth: HRS §441-
19) (Imp: 	HRS §§441-21, 441-22, 441-37)
SUBCHAPTER 4
RECORDS
§16-75-26 	Keeping of books; accounts; records. 	(a) A licensee shall
maintain separate accounting records of its pre-need sales and perpetual care sales,
including contracts sold, payments received, trust deposits, requests for trust
withdrawals, and payments to providers. 	Records shall be separate from the
licensee’s other accounting records.
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(b) 	A trustee shall maintain within the State, all books, account records,
cash ledgers, and evidence of investments relating to the trust fund. The accounts
shall include a record of trust deposits, trust withdrawals, principal, income, and
investment. 	[Eff 11/19/87; comp 1/21/92] (Auth: 	HRS §441-19) (Imp: 	HRS
§§441-19, 441-24)
§16-75-27 Contract forms; content; filing. The contract forms used by a
licensee for the selling of pre-need services and cemetery property shall not
contain misleading or deceptive information, or be used in connection with
solicitation by false, misleading or deceptive advertising or sales practices. 	No
licensee shall use a contract form without first filing the contract with the director.
[Eff 11/19/87; comp 1/21/92] (Auth: 	§441-19) (Imp: 	§441-32.5)
SUBCHAPTER 5
REPORTS
§16-75-31 	Audited financial statement. 	(a) A licensee selling pre-need
services or holding money in trust for pre-need funeral services shall file with the
director an audited financial statement which shall file with the director an audited
financial statement which shall include the following special areas of concern:
(1) 	The 	amount 	collected 	for 	the 	year 	pursuant 	to 	pre-need
arrangement contracts or plans or any agreements collateral thereto;
and
(2) 	An accounting of the principal deposits and additions to principal
for the year to include an analysis of the time frame within which
deposits are made to principal after receipt by the licensee; and
(3) 	An accounting of any withdrawal from the principal for the year,
itemized as to the nature of the expenditures; and
(4) 	The total amount of principal and income held at the end of the
year; and
(5) 	A statement showing separately the total amount of the trust fund
invested in each of the investments authorized by this chapter and
the amount of cash principal on hand not invested.
(b) 	A licensee operating a cemetery or a cemetery holding perpetual
care funds shall file with the director an audited financial statement which shall
include the following special areas of concern:
(1) 	The amount collected for the year as payment for perpetual care;
and
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(2) 	Accounting of the principal deposits and additions to principal for
the year, including an analysis of the time frame within which
deposits are made to principal after receipt of final payment by the
licensee; and
(3) 	A statement concerning whether separate accounts are maintained,
reflecting the principal amount, the income apportioned for the
year, the cost of care charged for the year, and the excess of
income credited to the trust account to be used in any future years;
and
(4) 	A statement showing separately the total amount of the perpetual
care funds invested in each of the investments authorized by this
chapter, and the amount of cash on hand not invested; and
(5) 	A statement of the general operations of the cemetery, including
current maintenance, reflecting income and expense or receipts and
disbursements. 	The principal sources of revenue and expense are
to be detailed. 	The statement shall also include a summary of
payroll costs indicating by classification cemetery labor, office,
administrative and supervisory, and officers and trustees salaries.
(c) 	The audited financial statement described in subsections (a) and (b)
shall be prepared by a certified public accountant or a public accountant licensed
in this State, and each report shall contain a certificate prepared and signed by the
accountant regarding the financial statements given or made in each report and
each statement shall fully and accurately report the position and financial
condition of the trust fund.
(d) 	Whenever a licensee fails to file an audited financial statement, the
director may cause an audit of the funds to be made, the cost of which shall be
borne by the licensee. 	If any licensee refuses to pay the expense for the audit
within fifteen days of the completion thereof it shall be cause for disciplinary
action against the licensee pursuant to chapter 91, HRS. 	[Eff 11/19/87; comp
1/21/92] (Auth: 	HRS §§441-19, 441-20.5) (Imp: 	HRS §§441-24.5, 441-20.5,
441-23)
§16-75-32 	Actuarial report. 	(a) The actuarial report submitted by the
licensee to the director shall, at a minimum include the following information:
(1) 	The actual assets of the fund at the end of the year;
(2) 	A statement of the fund’s deposits, income, and disbursements for
the year;
(3) 	The liabilities of the fund and the actuarial assumptions used to
calculate 	those 	liabilities 	in 	sufficient 	detail 	to 	allow 	the
reasonableness of the assumptions to be examined;
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(4) 	The actuary’s conclusion as to whether the fund has a deficit or
surplus;
(5) 	If the fund has a deficit, the actuary’s recommendation as to what
steps are necessary to eliminate the deficit; and
(6) 	The actuary’s background including years in practice and any
professional designations which have been received.
(b) 	If a deficit exists, the report shall be accompanied by a proposal
from the licensee to eliminate the deficit.
(c) 	The actuarial report described in subsection (a) shall be prepared
by an actuary who at a minimum has passed the first five examinations
administered by the Society of Actuaries and has earned the designation of
Associate of the Society of Actuaries (A.S.A.). 	[Eff 11/19/87; comp 1/21/92]
(Auth: 	HRS §441-19) (Imp: 	HRS §441-24.6)
§16-75-33 Certificate of insurance. A licensee who has a board as trustee
of the trust fund shall obtain insurance in accordance with section 441-41 (b)(2),
HRS, if the institution where the trust fund is held does not federally insure the
full amount of the fund. 	A certificate of insurance from an insurance company
or agency, showing full policy coverage of the licensee for the amount of the fund
held in trust shall be submitted within one year from the date of original licensure
and with every biennial renewal period of the license. The insurance policy shall
provide that the insurer will give written notice of cancellation or termination to
the director sixty days before the effective date of the cancellation or termination
of the insurance. 	[Eff 11/19/87; comp 1/21/92] (Auth: 	HRS §441-19) (Imp:
HRS §441-41)
§16-75-34 Application for extension of time for filing reports. (a) When
a written application is made for an extension of time within which to make and
file any periodic report required by the director or to otherwise comply with any
statutory requirement or order by the director, the petition for an extension of time
shall be filed before the expiration of the period described, shall be sworn to
before a notary public, and shall set forth in detail:
(1) 	What efforts have been made by the licensee to prepare the report
or to comply with the statute or order specified;
(2) 	Facts showing why the report could not be made and filed or the
statute or order complied with within the time prescribed;
(3) 	Other facts which justify an extension of time; and
(4) 	The further period of time necessarily required within which to
make and file the report or to comply with the statute or order.
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(b) 	The petition for an extension of time to file a report shall be
available for public inspection by any person requesting review of the licensee’s
reports in accordance with section 441-24.7, HRS. [Eff 11/19/87; comp 1/21/92]
(Auth: 	HRS §441-19) (Imp: 	HRS §441-19)
§16-75-35 	Application for deferral of filing reports. 	(a) Consideration
may be given by the director to defer the filing of a periodic report; provided the
written application for deferral is filed by a licensee who demonstrates proof that
one or more of the following conditions exists:
(1) 	The licensee has sold eighty per cent of the cemetery property
available where the property shall not be developed further;
(2) 	The amount of gross income for the licensee for the year is less
than $15,000;
(3) 	The number of sales by the licensee for the year totaled not more
than ten;
(4) 	The cost for the licensee to do the periodic report would exceed
twenty per cent of the income from the trust; or
(5) 	The audited financial statement of the trust filed in accordance with
section 441-24.5, HRS, shows that the assets of the trust exceed ten
per cent of the liabilities of the trust.
(b) 	A written application for deferral in filing a periodic report shall be
filed with the director before the expiration of the period described, shall be
notarized, and shall set forth in detail:
(1) 	The report for which application is made for deferral;
(2) 	Facts which support the licensee’s claim to meeting one or more
of the conditions specified in subsection (a);
(3) 	A proposal by the licensee of an alternative report which could be
submitted that would provide similar information as would be
contained in the report requesting to be deferred; and
(4) 	The date which the alternative report shall be submitted.
(c) 	The director shall have the right to approve or disapprove the
application for deferral, to approve the alternative report proposed by the licensee,
or require that the licensee submit other information to the satisfaction of the
director. 	Any report submitted in lieu of the required periodic report, at a
minimum, shall disclose the current financial condition of the trust fund.
(d) 	The application for deferral of filing a periodic report shall be
available for public inspection by any person requesting review of the licensee’s
reports in accordance with section 441-24.7, HRS. [Eff 11/19/87; comp 1/21/92]
(Auth: 	HRS §441-19) (Imp: 	HRS §441-19)
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SUBCHAPTER 6
TRUST ADMINISTRATION
§16-75-39 	Deposits to the trust account. 	A trustee shall accept all
payments transferred to it from the licensee, shall immediately deposit the
payments into trust, and shall hold, administer, and distribute the money in trust
in accordance with chapter 441, HRS, and this chapter. 	[Eff 11/19/87; comp
1/21/92] (Auth: 	HRS §441-19) (Imp: 	HRS §§441-38, 441-40)
§16-75-40 Withdrawals from the trust account; principal. (a) The trustee
of the pre-need trust account shall permit withdrawal of principal only under the
following circumstances and conditions:
(1) 	If the licensee files a certified statement with the trustee that the
pre-need merchandise and services covered by a pre-need contract
have been furnished and delivered in accordance therewith; or
(2) 	If the licensee files a verified statement that a specified pre-need
contract has been cancelled in accordance with its terms.
(b) 	The trustee of the perpetual care trust account shall not permit nor
withdraw money from the principal and shall keep the principal forever irreducible
and inviolable. [Eff 11/19/87; comp 1/21/92] (Auth: HRS §441-19) (Imp: HRS
§§441-39, 441-40)
§16-75-41 Use or withdrawal of income or net capital gains from the trust
account. (a) The trustee of the pre-need trust account shall permit withdrawal by
the licensee of the income from the trust, or any net capital gains subject to the
limitations described below:
(1) 	If the price of a pre-need funeral or interment services is fixed in
a pre-need contract, no withdrawal of income or net capital gains
can be made if the aggregate market value of the trust falls below
five per cent of the principal amount then held in trust; or
(2) 	If the price of a pre-need funeral or interment services is to be
determined at need, no withdrawal of income or net capital gains
can be made if the withdrawal would reduce the market value of
the trust fund below an amount equal to the sum of:
(A) 	All payments made under all contracts; plus
(B) 	Interest on the payments at a commercially reasonable rate.
The trustee shall arrange for the income or any net capital gains to be
applied to the principal of the trust when it finds the conditions described in
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paragraph (1) or (2) are present and shall continue to apply the income or any net
capital gains to the principal until withdrawals of income or any net capital gains
can be permitted by the licensee without limitations.
(b) 	Subject to the limitations specified in subsection (a) hereinabove,
the trustee of the pre-need trust account shall permit the withdrawal by the
licensee 	of 	any 	remaining 	surplus 	income, 	or 	any 	net 	capital 	gains 	from
investments, under the following limitations.
(1) 	The trustee shall establish a reserve from which principal losses
may be replaced by setting aside a reasonable percentage of surplus
income, if any, or net capital gains from any investments; and
(2) 	The audited financial statements filed by licensee in accordance
with section 441-24.5, HRS, and the actuarial reports filed by the
licensee in accordance with section 441-24.6, HRS, for the fiscal
or calendar year preceeding such withdrawal indicates that the
funds deposited in the pre-need trust are sufficient to cover the
claims of the pre-need trust participants.
For the purposes of this chapter, "net capital gains" means the amount by which
the cumulative capital gains since the establishment of the pre-need trust account
exceeds the sum of cumulative capital losses since the establishment of the
account.
(c) 	The 	trustee 	of 	the 	perpetual 	care 	trust 	account 	shall 	permit
withdrawal by the licensee of the income from the trust for the sole purpose of
ordinary and necessary expenses of the care, maintenance, and embellishment of
the cemetery. [Eff 11/19/87; am and comp 1/21/92] (Auth: HRS §441-19) (Imp:
HRS §§441-39, 441-40)
§16-75-42 	Eligible investments; scope. 	(a) The trust company or bank
designated as trustee shall invest in and shall hold as assets only allowable
investments as provided in section 441-41(a), HRS. A board designated as trustee
shall invest in and shall hold as assets only allowable investments as provided in
section 16-75-43.
(b) 	No security or other investment shall be eligible for purchase or
acquisition under section 16-75-43, unless it is interest bearing or interest accruing
or dividend or income paying. [Eff 11/19/87; comp 1/21/92] (Auth: HRS §441-
19) (Imp: 	HRS §441-41)
§16-75-43 Investment of trust funds allowable by a board of trustees. (a)
In addition to the investments permitted by section 441-41(b), HRS, a board of
trustees may invest and re-invest the trust funds in the following enumerated
securities; provided that the investment standards of section 441-41, HRS, are met:
75-14

(1) 	Deposits in a bank which is insured by the Federal Deposit
Insurance Corporation (FDIC);
(2) 	Deposits in a savings and loan association which is insured by the
Federal Savings and Loan Insurance Corporation (FSLIC);
(3) 	Certificates of deposits or other interest-bearing accounts in any
bank in this State insured by the FDIC or any savings and loan
association in this State insured by the FSLIC;
(4) 	Investment certificates or shares in any state or federally chartered
savings and loan association which is federally insured;
(5) 	Interest-bearing bonds of the United States or any agency thereof,
or of this State, or of any County in this State of which the faith
of the United States, State, or County, as the case may be, is
pledged; and
(6) 	Stocks as provided in section 441-41(b)(3), HRS.
(b) 	Trust funds invested in the above enumerated securities shall be
insured on a cash basis by the institution or agency for the full amount of the
funds. If the institution or agency insures a portion of the fund, the perpetual care
and pre-need authority shall acquire additional insurance in the amount equal to
or in excess of the funds held by the institution or agency. 	The insurance shall
be in full force and effect and shall not lapse or be reduced below the full amount
of the funds. The license of the cemetery and pre-need authority shall be subject
to the same actions as provided in section 441-41(b)(2), HRS, for failure, refusal,
or neglect to maintain in full force and effect the insurance as required by this
section. [Eff 11/19/87; comp 1/21/92] (Auth: 	HRS §441-19) (Imp: HRS §441-
41)
§16-75-44 	Prohibited investments. 	(a) Trust funds shall not be used in
any way, directly or indirectly, as prohibited in this section.
(b) 	In the case of trust funds where a board is appointed as trustee, the
trustee shall not make any loan or loans to any officer or director of the cemetery
and pre-need funeral authority, or to any of its officers, directors, agents, or
employees, or to any trustee of the trust, or to any company, firm, copartnership,
association, or individual, either directly or indirectly.
(c) 	In the case of trust funds where a bank or trust company is
appointed as trustee, the trustee may be permitted to make a loan or loans to an
officer, director, agent, or employee of the cemetery and pre-need funeral
authority, or to a company, firm, copartnership, association, or individual upon the
written application of the person, company, firm, copartnership, association, or
individual, stating the line of credit applied for, terms and security offered therefor
to the trust fund, and then only with the written approval of the trustee of the trust
75-15

fund before the loan is made, and the approval of the loan as allowed by the
trustee of the trust fund shall be made a part of the financial records of the
cemetery and pre-need funeral authority to be disclosed in the annual audit. Loans
may be made to any officer, director, agent, or employee of the cemetery or pre-
need funeral authority without application and approval:
(1) 	In any amounts where the loans are secured by bonds of the State,
or 	bonds 	or 	notes 	of 	the 	United 	States, 	or 	certificated 	of
indebtedness of the United States, where the amount of the
collateral is equal to at least one hundred five per cent of the
amount of such loan; and
(2) 	In amounts, excluding loans secured, as provided in paragraph (1),
not in excess of $5,000 in aggregate principal owing by any
individual at any one time.
Any cemetery or pre-need funeral authority, or trustee who knowingly permits the
funds of the trust fund to be loaned in a dishonest manner or contrary to this
section shall be in violation of chapter 441, HRS, and this chapter.
(d) 	No trust funds shall be used in any way by the cemetery or
pre-need funeral authority, or any director, officer, agent, or employee of any
cemetery or pre-need funeral authority, or trustee as collateral for other security.
(e) 	No trust funds or monies intended for the trust fund shall be
commingled 	with 	the 	funds 	of 	any 	person, 	firm, 	company, 	copartnership,
association, or corporation. [Eff 11/19/87; comp 1/21/92] (Auth: HRS §441-19)
(Imp: 	HRS §441-19)
SUBCHAPTER 7
PUBLIC REVIEW OF RECORDS
§16-75-49 	Location of records. 	The following types of records shall be
available for public review at the department’s office of the cemetery and
mortuary program:
(1) 	Trust agreement filed by the licensee; and
(2) 	Audited financial statement filed by the licensee; and
(3) 	Actuarial report filed by the licensee.
[Eff 11/19/87; comp 1/21/92] (Auth: 	HRS §441-19) (Imp: 	HRS
§441-24.7)
§16-75-50 	Hours of inspection. 	Requests for records may be made and
records may be reviewed during regular working hours on each business day the
75-16

office is open to the public. [Eff 11/19/87; comp 1/21/92] (Auth: HRS §441-19)
(Imp: 	HRS §441-24.7)
§16-75-51 To whom and where request made. The request for a particular
record shall be made to the designee of the office in which the record is located
who shall be the records access officer for the office. 	[Eff 11/19/87; comp
1/21/92] (Auth: 	HRS §441-19) (Imp: 	HRS §441-24.7)
§16-75-52 Form of request and identification. Where original or official
records are requested to be reviewed, the name and address, together with
appropriate proof of identity shall be requested of the applicant. 	[Eff 11/19/87;
comp 1/21/92] (Auth: 	HRS §441-19) (Imp: 	HRS §441-24.7)
§16-75-53 Number of records permitted. It shall be discretionary with the
director or the records access officer as to the number of records an applicant may
request and receive for review at any one time. 	[Eff 11/19/87; comp 1/21/92]
(Auth: 	HRS §441-19) (Imp: 	HRS §441-24.7)
§16-75-54 	Use of pens prohibited. 	The use of pens shall be prohibited
when reviewing records. 	No marks of any kind shall be made on any record
provided. [Eff 11/19/87; comp 1/21/92] (Auth: HRS §441-19) (Imp: HRS §441-
24.7)
§16-75-55 	No opinion to be rendered. 	No opinion or similar statement
shall be offered or rendered by the records access officer or employee of the
office with reference to the interpretation of the records. 	[Eff 11/19/87; comp
1/21/92] (Auth: 	HRS §441-19) (Imp: 	HRS §441-24.7)
§16-75-56 Temporary unavailability of records. Where a record is in use,
or has not been filed by a licensee pursuant to section 16-75-34 or section 16-75-
35, the applicant shall be so notified and shall be afforded the opportunity to
review the record once it is returned, or to review the written application and any
alternative report filed by the licensee with respect to compliance with section 16-
75-34 or section 16-75-35. [Eff 11/19/87; comp 1/21/92] (Auth: HRS §441-19)
(Imp: 	HRS §441-24.7)
75-17

SUBCHAPTER 8
PRACTICE AND PROCEDURE
§16-75-60 	Administrative practice and procedure. 	The rules of practice
and procedure for cemetery and pre-need funeral authorities shall be as provided
in chapter 16-201, the rules of practice and procedure of the deparment of
commerce and consumer affairs, which are incorporated by reference and made
a part of this chapter. [Eff 11/19/87; comp 1/21/92] (Auth: HRS §§91-2, 441-19)
(Imp: 	HRS §§91-2, 441-19)
SUBCHAPTER 9
PENALTY
§16-75-64 Penalty. In addition to the penalties otherwise provided by law,
any licensee who violates, or fails to comply with any of the provisions of this
chapter shall be subject to:
(1) 	A fine of not more than $1000 for each violation;
(2) 	Surrender of license;
(3) 	Revocation of license;
(4) 	Suspension of the right to use the license;
(5) 	Refusal of right of licensee to use the license;
(6) 	Refuse to renew any license; and
(7) 	Any of the penalties enumerated in chapter 441, HRS. 	[Eff
11/19/87; comp 1/21/92] (Auth: 	HRS §§91-2, 441-23, 441-45,
441-46) (Imp: 	HRS §§91-2, 441-23, 441-45)
75-18

DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS
Amendments to and compilation of chapter 16-75, Hawaii Administrative
Rules on the Summary page dated December 31, 1991, were adopted on
December 31, 1991, following a public hearing held on November 8, 1991, after
public notices were given in the Garden Island, Maui News, West Hawaii Today,
Hawaii Tribune-Herald, and the Honolulu Star-Bulletin and Honolulu Advertiser
on October 6, 1991.
These rules shall take effect ten days after filing with the Office of the
Lieutenant Governor.
/s/ Robert A. Alm
ROBERT A. ALM, Director
Department of Commerce and Consumer Affairs
APPROVED AS TO FORM: 	Date12/31/91
/s/ David A. Webber
Deputy Attorney General
APPROVED: 	Date 1/10/92
/s/ John Waihee
JOHN WAIHEE
GOVERNOR
STATE OF HAWAII
1/10/92
Filed
75-19

DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS
Amendments and Compilation of Chapter 16-75
Hawaii Administrative Rules
December 31, 1991
1. 	§16-75-41 is amended.
2. 	Chapter 75 is compiled.