§454.2. Income distribution methods; application; restrictions

            A. For the purposes of this Section, the following terms have the following meanings ascribed to them:

            (1) "Average fair market value" means the average of the fair market value of assets held by the trust fund on the last day of the current calendar year and the last day of each of the two preceding calendar years or the average of the fair market value for the entire term of the trust fund if there are less than two preceding years.

            (2) "Inception" means the first day of the calendar year on which distributions from the perpetual care trust fund are first made based on the total return distribution method.

            (3) "Net income" means interest and dividends reduced by permissible fees and taxes.

            (4) "Total return distribution" means the distribution of funds from the perpetual care fund based on the average fair market value of the fund assets multiplied by the total return percentage.

            (5) "Total return percentage" means the annual percentage selected by the cemetery authority and approved by the board in accordance with this Section. The total return percentage shall not exceed four percent of the average fair market value of the trust fund.

            B. Income distributions from perpetual care trust funds shall be made with consideration of either net income or total return distribution.

            C. A trustee of a perpetual care trust fund may elect to use the total return distribution method only if the trust fund is administered by either a qualified institutional trustee as provided for by R.S. 8:454(B), for trusts established in accordance with R.S. 8:457, or where the trustee or investment advisor managing the funds demonstrates sufficient knowledge and expertise related to total return investing and distributions.

            D.(1) The cemetery authority shall apply to the board at least ninety days prior to the effective date of the election to use the total return distribution method. The cemetery authority or trustee shall provide the board with all of the following:

            (a) A written investment policy with investment goals to achieve principal growth through permissible investments pursuant to this Title for perpetual care trust funds and with a secondary goal of achieving current income.

            (b) An amended perpetual care trust agreement on board-approved forms that clearly states the selection of the total return distribution method.

            (c) A written distribution policy establishing 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.

            (2) The board may require such information, supporting documentation, and proof as it deems reasonable concerning the applicant's compliance with this Title and the rules and regulations of the board.

            (3) The board shall determine that the cemetery authority or trustee has met the requirements provided for in this Section prior to approving the application to implement a total return distribution method. If the board refuses to approve the application, such notification shall contain details of the information needed to remedy any deficiencies with the application. The board shall notify the cemetery authority no later than ninety days after receiving the application. An application that is submitted ninety days prior to the beginning of the calendar year, once approved by the board, shall be retroactive to the beginning of that calendar year.

            (4) The cemetery authority shall submit the information required in this Subsection on an application form prescribed by the board, accompanied by an application fee set by the board not to exceed one thousand five hundred dollars to cover the board's reasonable and ordinary expenses associated with determining compliance with applicable provisions of this Title.

            E. A cemetery authority may select a distribution method by delivering written instructions to the trustee of the fund no later than thirty days prior to the beginning of a calendar year. Once approved by the board, the distribution method and the total return distribution rate shall remain in effect unless the cemetery authority notifies the trustee of its desire to effect a change, provides an application for such change to the board, and provides copies of such documentation to the trustee. In the event that the trustee does not receive written instructions from the cemetery authority informing the trustee of the distribution method chosen, the trustee shall calculate and distribute based on the net income distribution method.

            F. The approved total return distribution percentage may be reduced by the cemetery authority but may not be increased unless an additional application is made to the board with documentation demonstrating the rate of return of the perpetual care funds over the last three years to support an increase in the percentage.

            G. A cemetery authority that has implemented the total return distribution method may elect to reconvert to a net income distribution method by submitting written documentation to the board in support of the reconversion, including a copy of the trust agreement, a written notification on the proposed effective date of the reconversion, and any additional information required by the board. No cemetery authority may change its distribution method more than once within a three-year period unless required by the board.

            H.(1) The board shall require corrective measures be taken, including reducing the approved total return percentage, requiring a distribution of only net income for a calendar year, or requiring a monthly retest outlined in Subparagraph (c) of this Paragraph applies and whereby no distribution of any income is made until the failed test is passed, if any of the following circumstances occur:

            (a) The average fair market value of the trust fund at the end of the most recent rolling three-year period, as compared to the average fair market value of the previous rolling three-year period, declines by ten percent or more.

            (b) The fair market value of the trust fund at the end of a calendar year is less than ninety percent of the sum of the fair market value of the fund at inception plus all deposits made since inception.

            (c) A cemetery authority has failed to meet the tests in Subparagraph (a) or (b) of this Paragraph, and after a full calendar year of distributing only net income, still fails to meet the tests in this Subsection.

            (d) There is an uncorrected financial- or investment-related perpetual care deficiency as determined by the board after review of the annual trust fund report or onsite examination.

            (2) If a cemetery authority fails to take any required action, it shall be subject to any and all enforcement actions or penalties pursuant to this Chapter.

            I. In the event that permissible fees paid from the perpetual care fund exceed one and one-half percent of the fair market value in a given year, the amount in excess shall be deducted from the approved total return distribution.

            Acts 2023, No. 29, §1.