Preneed Reporting: drilling down to each consumer
For most Illinois funeral homes, March 15th is the due date for the filing of their preneed data with the Comptroller’s office. For those funeral homes that bolted from the IFDA after the master trust melt down, this has been an extremely frustrating process. The majority of funeral homes must file on line, with supporting documentation to be mailed no later than March 16th. Those funeral home operators of Irish descent will have reason to hoist an extra brew come St. Patty’s day: the Comptroller’s office has ample reason to change the contract reporting requirements yet again.
The 2010 reporting forms were changed to reflect SB1682’s elimination of depository accounts. However, the annual reports are still premised on the old IFDA master trust structure that credited consumer accounts with an amount of fixed interest. For each consumer preneed contract the funeral home is required to report beginning principal and interest, additions of principal and interest, withdrawals of principal and interest, and ending totals of principal and interest. In essence, the annual report views each consumer account as a passbook saving account.
No need to beat a dead horse, but the IFDA master trust was wrestled away from the association because the Comptroller determined the trust could not sustain itself. Contracts were being credited with interest rates greater than the trust’s investment return.
In response to the situation, the IFDA selected Fiduciary Partners to succeed Merrill Lynch as the master trust fiduciary. The switch to Fiduciary Partners includes a needed change in the investment strategy of the IFDA master trust: diversification through pooled funds.
To determine whether the IFDA master trust (or score of master trusts spawned in the mass exodus) will be self sustaining, the Comptroller’s office will need to revamp its annual report to track such contract issues as sales price, deposits to trust, and market value allocations. In light of the IFDA’s past use of insurance vehicles, Illinois fiduciaries should anticipate providing detail of their trusts’ investments and transactions.
Other states’ preneed regulators are also drilling down to the individual contract with new reporting requirements. Most notably, Nebraska revised its 2010 annual report to include new disclosures regarding market values, with all preneed sellers to provide individual contract data in an Excel format. The data must also be backed up with trust asset listings and transaction reports. Missouri has also implemented individual contract reporting, and Kansas has legislation pending that will impose similar requirements on cemeteries that sell preneed.
