Compliance Economic Review
Pursuant to section 120.745(5), Florida Statutes
Rule 69K-5.0026, Florida Administrative Code
Preneed License Renewal
Department of Financial Services
Board of Funeral, Cemetery, and Consumer Services
April 2013
JUSTIFICATION FOR THE RULE
Chapter 497 of the Florida Statutes requires regulation of sales of preneed funeral contracts. All
regulation of preneed sales under Chapter 497 is funded solely by fees paid by the licensees; no general
revenue is used for regulation under Chapter 497; see 497.140(1)(b): "It is the legislative intent that the
costs of regulation under this chapter be provided for by fees collected under this chapter."
Rule 69K-5.0026 implements s. 497.453(5), which requires annual renewal of preneed licensees. Rule
69K-5.0026 specifies forms and procedures to be used by a preneed licensee in making its annual
application for license renewal. Although rule 69K-5.0026 requires a renewal fee to be attached by the
preneed licensee to the annual renewal application, and thus raises revenue for the implementation of
Chapter 497, the amount of the renewal fees are specified in s. 497.453(5), and vary by the number of
preneed contracts sold in the prior year. The renewal fees are not set by the rule.
Section 497.453 is part of Part IV of Chapter 497. Part IV of Chapter 497 regulates the preneed sale of
funeral goods and services in Florida. Preneed sales refers to the purchase by a person, before their
death, of services and merchandise to be used after the person dies, for the final disposition of the
person's bodily remains. For example, this might include funeral director services, embalming, viewing
of remains, casket, burial service, headstone or other grave marker, or alternatively, cremation service.
Part IV of Chapter 497 provides a comprehensive regulatory scheme regarding preneed sales and
sellers. Statutory requirements include, among other provisions:





Preneed sales companies must obtain a license under Chapter 497, and the regulator must
determine if they meet certain net worth requirements, if their principals are of good
character, conduct a criminal background check, etc.
Preneed sales companies must place certain portions of sales proceeds in a trust that is
periodically examined by the regulator.
Complaints by consumers against Preneed sales companies must be investigated by the
regulator and where justified, disciplinary action must be taken by the regulator against the
preneed sales company.
The preneed contract forms used by the preneed sales company must be reviewed and
approved by the regulator.
Each individual sales agent of a preneed sales company must be licensed as a preneed sales
agent under Chapter 497.
Because preneed sales by their nature involve payment now in exchange for a promise by the seller to
perform years later, preneed sales have long been significantly regulated for the public good. See, for
example, the regulation of preneed sales in 1953, at Chapter 639, Florida Statutes (1953). The Division
estimates that approximately 95% of all states regulate preneed sales, including preneed sales agents.
2
STATEMENT OF ESTIMATED REGULATORY COSTS
There are typically in the range of 320-340 licensed preneed sales companies (the number goes up and
down slightly as new companies enter the market and other companies cease operations, are acquired,
etc.). Each year all preneed licensees must apply for renewal of the license.
Rule 69K-5.0026 is summarized as requiring the renewal applicant to provide, with the renewal
application, the following items (note that the rule does not use the term "Item A," etc., and same is
used herein only for the sake of explanation):





Item A. The preneed licensee's balance sheet as of the end of the preneed licensee's most
recently completed fiscal year, and an income and expense statement for the same fiscal year.
These financial statements are used to evaluate net worth and financial viability of the renewal
applicant.
A completed renewal application, which includes -Item B. For each different preneed trust, insurance company, and surety bond under which the
preneed licensee has any outstanding preneed contracts secured, a statement of the changes in
the covered preneed contracts (beginning balance, additions, deletions, ending balance).
Item C. A report bringing together and summarizing the individual Item B reports.
Item D. A completed questionnaire providing information for items such as whether the
preneed licensee or its principals have been subjected to criminal proceedings since the prior
renewal; whether there have been any changes in control; etc.
Cost of Preparing Item A.
The required financial statements (Item A) are required to be GAAP-compliant, but are not required to
be prepared by a CPA, nor to be audited.
The cost of preparing the Item A financial statements varies significantly from one preneed licensee to
another. Factors affecting cost to the preneed licensee include but are not limited to: how long the
preneed licensee has been in business; whether the preneed licensee started out as a brand new firm
with no outstanding liabilities, or resulted from an acquisition of an existing preneed licensee's assets
and liabilities; the number of preneed contracts the preneed licensee has outstanding; the size and
complexity of the preneed licensees' business; whether the preneed licensee is a standalone business or
part of a group of affiliated firms under common control; whether the preneed licensee itself wrote all
the preneed contracts it is responsible for, or whether it wrote some itself and acquired others from
some other preneed licensee; the degree to which the preneed licensee or its parent firm routinely
prepares annual financial statements for other purposes (e.g., the parent firm is publicly traded, and/or
the preneed licensee or its parent firm have banking or other financial arrangements that require the
preparation of annual financial statements for its creditors).
Accordingly, the Division provides the following matrix of estimated costs for financial statement
preparation costs. The Division uses a preneed licensee staff hourly cost of $30.
a. The Division estimates that 75 firms prepare financial statements for other business purposes, and
the cost of preparing the Item A financial statements is de minimus to these firms, and involves
relatively minor tailoring of material already prepared by the preneed licensee. The Division estimates
that it takes 3 hours of staff time (3 x $30 = $90), times 75 preneed licensee = $6,750.
3
b. The Division estimates that 200 preneed licensee are in a category that they collect for other
business purposes all the information needed for the financial statements, but they do not actually
produce financial statements except for the Item A requirement. These preneed licensees collect the
information and give it to their outside accountant who compiles it for them, into the form of a balance
sheet and income statement. The Division estimates that it takes 10 hours of staff time (10 x $30 =
$300), times 200 preneed licensee = $60,000. The Division estimates that the accountant typically
charges 3 hours at $100 per hour, totaling $300, times 200 preneed licensees, equals $60,000. The
aggregate cost to these preneed licensees is $120,000.
c. The Division estimates that approximately 65 preneed licensees are in a category that they collect
for other business purposes all the information needed for the financial statements, but they do not
actually produce financial statements except for the Item A requirement. These preneed licensees do
not use an accountant, and instead prepare the financial statements by their own staff. The Division
estimates that it takes 12 hours of staff time (12 x $30 = $360), times 65 preneed licensee = $23,400.
The aggregate cost to all 340 preneed licensees, of preparing the Item A financial statements, is thus:
$ 6,750
$120,000
$ 23,400
= $150,150 Aggregate cost for 340 preneed licensees of preparing the Item A financial statements.
$441 Average cost to individual preneed licensee of preparing Item A financial statements (150,150 /
340 = 441).
Cost Of Preparing Items B&C.
Items B and C are treated together, because Item C simply summarizes Item B.
The majority of the preneed licensees use a Servicing Agent to handle the administrative side of their
preneed sales, and the Servicing Agent prepares Items B and C for the preneed licensee, since the
Servicing Agent typically has in its computers detailed information about the preneed licensee's business
from which to prepare Items B and C.
A significant number of preneed licensees, especially small to moderate size preneed licensees, use a
Servicing Agent to handle the preneed licensees for the trust accounting and trust deposits and
withdrawal records and processes. The Servicing Agent specializes in providing record-keeping and
administrative services concerning preneed sales and trust data. The Servicing Agent is typically a firm
with a significant size staff and a robust, high level computer system. The licensees report sales data,
contracts sold, payments received, contracts fulfilled, etc., to the Servicing Agent, and the Servicing
Agent has staff that input the data into the Servicing Agent's computer systems. The Servicing Agent
typically provides a bundle of services to the licensee, some or many of which serve licensee business
needs not related to regulatory requirements. Among those services, the Servicing Agent will typically
prepares Items B and C for the preneed licensee, since the Servicing Agent typically has in its computers
detailed information about the preneed licensee's business from which to prepare Items B and C. The
Servicing Agent typically charges, for all its services, a single fee to the preneed licensee, related to the
4
dollar amount of preneed trust assets it services for the preneed licensee. The Servicing Agent typically
does not charge an additional or separate fee for this service, and the service is included in the basic fee
charged. This approach is highly cost efficient.
The Division estimates that there are 220 preneed licensees that use a Servicing Agent as indicated
above. The Division estimates that this service (preparation of Items B and C by the Servicing Agent
for the preneed licensee), if priced separately by the Servicing Agent, would be in the range of $200
per preneed licensee per renewal. Thus the total cost to this group of preneed licensees regarding
Items B and C, is estimated at $44,000 (220 x $200 = $ 44,000).
The larger preneed licensees have robust computer systems that track all pertinent data regarding their
preneed business, and the cost to these preneed licensees of preparing Items B and C, is the relatively
modest marginal cost of updating the prior year's submission with data from the most recent completed
year.
The Division estimates that there are 20 preneed licensees in this category. The Division estimates
that it takes approximately 5 hours of preneed licensee staff time to prepare Items B and C. If we
estimate the value of their staff time at $30 per hour, the cost per preneed licensee is estimated at
$150, and the aggregate cost for all 20 preneed licensees is estimated at $3,000 (20 preneed
licensees x $150).
The Division estimates that the remaining approximately 100 preneed licensees prepare Items B and C
entirely on their own, using primarily manual (non-computer) records. These tend to be the smaller
preneed businesses. However, their work does not start from scratch each year, and instead it typically
consists of updating their submission from the prior year's renewal process.
The Division estimates that it takes these preneed licensees 10 hours to prepare Items B and C. If the
value of their staff time is valued at $25 per hour, the estimated cost per preneed licensee is $250,
and in aggregate for this group, at $25,000.
In aggregate, for all preneed licensees, the Division thus estimates that preparation of Items B and C
costs as follows:
$44,000
$3,000
$25,000
$72,000
The average cost per licensee, to prepare Items B and C, is estimated at $211 ($72,000 / 340 preneed
licensees = $211).
Cost of Preparing Item D
The cost of preparing item D, for all but the largest preneed licensees, is nominal, because the
information requested is of a type typically known to all the preneed licensee's managers and principals
without further inquiry being needed (e.g., was any officer of the preneed licensee convicted of any
crime since the last renewal?).
5
The Division estimates that there are 320 preneed licensees in this category. The Division estimates
that it takes approximately 0.25 hours of preneed licensee staff time to prepare Item D. If we
estimate the value of their staff time at $30 per hour, the cost per preneed licensee is estimated at
$7.50, and the aggregate cost for all 320 preneed licensees is estimated at $2,400 (320 preneed
licensees x $7.50).
The larger preneed licensees have somewhat more work in preparing Item D. Their larger size means
they have to check with multiple people in various locations to get the answers needed.
The Division estimates that there are 20 preneed licensees in this category. The Division estimates
that it takes approximately 2 hours of preneed licensee staff time to prepare Item D. If we estimate
the value of their staff time at $30 per hour, the cost per preneed licensee is estimated at $60, and
the aggregate cost for all 20 preneed licensees is estimated at $1,200 (20 preneed licensees x $60).
The aggregate cost of Item D, for both preneed licensees groups identified above, is $3,600 ($2400 +
$1200).
Total Aggregate Costs for Items A-D
The aggregate annual estimated costs to preneed licensees of preparing items A-D is as follows:
$150,150 Item A
$ 72,000 Items B and C
$ 3,600
Item D
$225,750 Total per year
Over 5 years the cost is estimated at $1,128,750 ($225,750 x 5)
************
Renewal Fees.
Although the rule specifies that the renewal fee must be included with the annual renewal application,
the amount of the annual preneed renewal fees are specified in s. 497.453(5), F.S. and vary by the
number of preneed contracts sold in the prior year. The renewal fees are not set by the rule.
The actual remittances paid pursuant to s. 497.453(5), F.S. and rule 69K-5.0026, per fiscal year (FY), have
been as follows for the two most recent years:
FY 2010-11 $580,431
FY 2011-12 $595,300
The average of the above two years is $587,866. Multiplied times 5 years, the aggregate remittances
were $2,939,328 over five years.
6
1. Direct or Indirect Economic Impacts
Is this rule likely to have an adverse impact on economic growth, private sector job creation or
employment, or private sector investment in excess of $1 million in the aggregate within five years after
the implementation of the rule?
The Division answers this question in the negative. The number of preneed contracts sold in Florida has
been rising in recent years:
2009
2010
2011
2012
74,611
94,698
98,307
99,041
In addition, the number of new preneed contracts sales agents licensed has been stable over the last
several years:
2010
2011
2012
760
821
795
The growth in the number of preneed contracts sold, and the relative stability in the number of new
preneed sales agents licensed, indicates a healthy preneed industry in Florida, especially considering the
severe Florida and national recession over the last several years.
Is the rule likely to have an adverse impact on business competitiveness, including the ability of persons
doing business in the state to compete with persons doing business in other states or domestic markets,
productivity, or innovation in excess of $1 million in the aggregate within five years after the
implementation of the rule?
The Division answers this question in the negative. Any person coming into Florida to sell preneed must
comply with Florida's preneed licensing laws, including licensing of preneed sales agents. Conversely, if
Florida based sellers of preneed contracts want to sell preneed contracts in another state, they must
comply with the law in that other state, not Florida law (if the other state does not require use of
licensed preneed sales agents, the Florida based seller does not need to use a licensed preneed sales
agent in the other state).
Market forces tend to make preneed sales a "local" business. Competition is typically limited to
establishments and cemeteries in the buyer's county of residence and contiguous counties. It is simply
in the nature of things that a person arranging their funeral and burial on a preneed basis will usually
want to use a near-by funeral home and cemetery. The funeral home and cemetery needs to be fairly
convenient to their loved ones who will be involved in the funeral service and cemetery interment. The
idea of having their remains shipped long distances to some remote and unknown funeral establishment
and cemetery, simply for a price advantage, is not typically attractive to buyers of preneed contracts. If
7
the person already has a spouse, child, parent, etc., buried in a particular cemetery, that will usually
drive the choice of the cemetery. If a person has had a good experience with a particular funeral home
regarding the funeral services of another person, particularly a family member, that will typically have a
very strong influence on the purchase of a preneed contract. Although cremation tends to be somewhat
less of a "local" business, even regarding preneed contracts for cremation, there is typically significant
consumer resistance to having their remains shipped long distances to unknown facilities for cremation.
Thus, generally speaking, preneed sales tend to be a "local" business.
Sales of preneed contracts to Florida residents over the internet by sellers outside Florida have not to
date been a significant component of preneed sales in Florida. Any increase of such internet sales by
out-of-state sellers is expected to be slow, because the preneed sales tend to be a "local" business (see
discussion above).
Is the rule likely to increase regulatory costs, including any transactional costs, in excess of $1 million in
the aggregate within five years after the implementation of the rule?
The Division answers this question in the negative. The fees and transactional costs identified in this
Compliance Economic Review have been in place for years, so no additional cost will result. See
economic analysis, above.
2. NUMBER AND TYPES OF INDIVIDUALS AFFECTED
There are typically in the range of 320-340 licensed preneed sales companies (the number goes up and
down slightly as new companies enter the market and other companies cease operations, are acquired,
etc.). There is significant variation among the licensed preneed sales companies.
The 340 affected businesses are also either a licensed cemetery, a funeral home, or a direct disposal
establishment. In size, the 340 entities range from a few very large multi-state firms, to small funeral
homes operated by a family with only 2 to 4 full time staff. The average net worth of the preneed
licensees was approximately $3.342 million.
3. COST TO THE AGENCY, AND TO ANY OTHER STATE AND LOCAL GOVERNMENT ENTITIES, OF
IMPLEMENTING AND ENFORCING THE PROPOSED RULE, AND ANY ANTICIPATED EFFECT ON STATE
OR LOCAL REVENUES
There will be no additional costs to the Division to enforce the rule. The rule has been in effect for
many years and all staff and resources needed to implement the rule are in place. The Division
estimates that it takes on average approximately 45 minutes for Division staff to process an annual
preneed renewal application. If the value of staff time is estimated at $20 per hour, the cost to the
Division to process a single renewal application is estimated at $15. Multiplied times 340 renewal
applications per year, this equals $5,100 per year.
There will no cost to any other state or local government entity of enforcing the rule.
8
4. TRANSACTIONAL COSTS
Rule 69K-5.0026 is summarized as requiring the renewal applicant to provide, with the renewal
application, the following items (note that the rule does not use the term "Item A," etc., and same is
used herein only for the sake of explanation):





Item A. The preneed licensee's balance sheet as of the end of the preneed licensee's most
recently completed fiscal year, and an income and expense statement for the same fiscal year.
These financial statements are used to evaluate net worth and financial viability of the renewal
applicant.
A completed renewal application, which includes -Item B. For each different preneed trust, insurance company, and surety bond under which the
preneed licensee has any outstanding preneed contracts secured, a statement of the changes in
the covered preneed contracts (beginning balance, additions, deletions, ending balance).
Item C. A report bringing together and summarizing the individual Item B reports.
Item D. A completed questionnaire providing information for items such as whether the
preneed licensee or its principals have been subjected to criminal proceedings since the prior
renewal; whether there have been any changes in control; etc.
Cost of Preparing Item A.
The required financial statements (Item A) are required to be GAAP-compliant, but are not required to
be prepared by a CPA, nor to be audited.
The cost of preparing the Item A financial statements varies significantly from one preneed licensee to
another. Factors affecting cost to the preneed licensee include but are not limited to: how long the
preneed licensee has been in business; whether the preneed licensee started out as a brand new firm
with no outstanding liabilities, or resulted from an acquisition of an existing preneed licensee's assets
and liabilities; the number of preneed contracts the preneed licensee has outstanding; the size and
complexity of the preneed licensees' business; whether the preneed licensee is a standalone business,
or part of a group of affiliated firms under common control; whether the preneed licensee itself wrote
all the preneed contracts it is responsible for, or whether it wrote some itself and acquired others from
some other preneed licensee; the degree to which the preneed licensee or its parent firm routinely
prepares annual financial statements for other purposes (e.g., the parent firm is publicly traded, and/or
the preneed licensee or its parent firm have banking or other financial arrangements that require the
preparation of annual financial statements for its creditors).
Accordingly, the Division provides the following matrix of estimated costs for financial statement
preparation costs. The Division used a preneed licensee staff hourly cost of $30.
a. The Division estimates that 75 firms prepare financial statements for other business purposes, and
the cost of preparing the Item A financial statements is de minimus to these firms, and involves
relatively minor tailoring of material already prepared by the preneed licensee. The Division estimates
that it takes 3 hours of staff time (3 x $30 = $90), times 75 preneed licensee = $6,750.
b. The Division estimates that 200 preneed licensee are in a category that they collect for other
business purposes all the information needed for the financial statements, but they do not actually
produce financial statements except for the Item A requirement. These preneed licensees collect the
9
information and give it to their outside accountant who compiles it for them, into the form of a balance
sheet and income statement. The Division estimates that it takes 10 hours of staff time (10 x $30 =
$300), times 200 preneed licensee = $60,000. The Division estimates that the accountant typically
charges 3 hours at $100 per hour, totaling $300, times 200 preneed licensees, equals $60,000. The
aggregate cost to these preneed licensees is $120,000.
c. The Division estimates that approximately 65 preneed licensees are in a category that they collect
for other business purposes all the information needed for the financial statements, but they do not
actually produce financial statements except for the Item A requirement. These preneed licensees do
not use an accountant, and instead prepare the financial statements with their own staff. The Division
estimates that it takes 12 hours of staff time (12 x $30 = $360), times 65 preneed licensee = $23,400.
The aggregate cost to all 340 preneed licensees, of preparing the Item A financial statements, is thus:
$ 6,750
$120,000
$ 23,400
= $150,150 Aggregate cost for 340 preneed licensees of preparing the Item A financial statements.
$441 = Average cost to preneed licensees of preparing Item A financial statements ($150,150 / 340 =
$441).
Cost Of Preparing Items B & C.
Items B and C are treated together, because Item C simply summarizes Item B.
The majority of the preneed licensees use a Servicing Agent to handle the administrative side of their
preneed sales, and the Servicing Agent prepares Items B and C for the preneed licensee, since the
Servicing Agent typically has in its computers detailed information about the preneed licensee's business
from which to prepare Items B and C.
A significant number of preneed licensees, especially small to moderate size preneed licensees, use a
Servicing Agent to handle the preneed licensees for the trust accounting and trust deposits and
withdrawal records and processes. The Servicing Agent specializes in providing record-keeping and
administrative services concerning preneed sales and trust data. The Servicing Agent is typically a firm
with a significant size staff and a robust, high level computer system. The licensees report sales data,
contracts sold, payments received, contracts fulfilled, etc., to the Servicing Agent, and the Servicing
Agent has staff that input the data into the Servicing Agent's computer systems. The Servicing Agent
typically provides a bundle of services to the licensee, some or many of which serve licensee business
needs not related to regulatory requirements. Among those services, the Servicing Agent will typically
prepares Items B and C for the preneed licensee, since the Servicing Agent typically has in its computers
detailed information about the preneed licensee's business from which to prepare Items B and C. The
Servicing Agent typically charges, for all its services, a single fee to the preneed licensee, related to the
dollar amount of preneed trust assets it services for the preneed licensee. The Servicing Agent typically
does not charge an additional or separate fee for this service, and the service in included in the basic fee
charged. This approach is highly cost efficient.
10
The Division estimates that there are 220 preneed licensees that use a Servicing Agent as indicated
above. The Division estimates that this service (preparation of Items B and C by the Servicing Agent
for the preneed licensee), if priced separately by the Servicing Agent, would be in the range of $200
per preneed licensee per renewal. Thus the total cost to this group of preneed licensees regarding
Items B and C, is estimated at $44,000 (220 x $200 = $ 44,000).
The larger preneed licensees have robust computer systems that track all pertinent data regarding their
preneed business, and the cost to these preneed licensees of preparing Items B and C, is the relatively
modest marginal cost of updating the prior year's submission with data from the most recent completed
year.
The Division estimates that there are 20 preneed licensees in this category. The Division estimates
that it takes approximately 5 hours of preneed licensee staff time to prepare Items B and C. If we
estimate the value of their staff time at $30 per hour, the cost per preneed licensee is estimated at
$150, and the aggregate cost for all 20 preneed licensees is estimated at $3,000 (20 preneed
licensees x $150).
The Division estimates that the remaining approximately 100 preneed licensees prepare Items B and C
entirely on their own, using primarily manual (non-computer) records. These tend to be the smaller
preneed businesses. However, their work does not start from scratch each year, and instead it typically
consists of updating their submission from the prior year's renewal process.
The Division estimates that it takes these preneed licensees 10 hours to prepare Items B and C. If the
value of their staff time is valued at $25 per hour, the estimated cost per preneed licensee is $250,
and in aggregate for this group, at $25,000.
In aggregate, for all preneed licensees, the Division thus estimates that preparation of Items B and C
costs as follows:
$44,000
$ 3,000
$25,000
$72,000
The average cost per licensee, to prepare Items B and C, is estimated at $211 ($72,000 / 340 preneed
licensees = $211).
Cost of Preparing Item D
The cost of preparing item D, for all but the largest preneed licensees, is nominal, because the
information requested is of a type typically known to all the preneed licensee's managers and principals
without further inquiry being needed (e.g., was any officer of the preneed licensee convicted of any
crime since the last renewal?).
The Division estimates that there are 320 preneed licensees in this category. The Division estimates
that it takes approximately .25 hours of preneed licensee staff time to prepare Item D. If we
estimate the value of their staff time at $30 per hour, the cost per preneed licensee is estimated at
11
$7.50, and the aggregate cost for all 320 preneed licensees is estimated at $2,400 (320 preneed
licensees x $7.50).
The larger preneed licensees have somewhat more work in preparing Item D. Their larger size means
they have to check with multiple people in various locations to get the answers needed.
The Division estimates that there are 20 preneed licensees in this category. The Division estimates
that it takes approximately 2 hours of preneed licensee staff time to prepare Item D. If we estimate
the value of their staff time at $30 per hour, the cost per preneed licensee is estimated at $60, and
the aggregate cost for all 20 preneed licensees is estimated at $1,200 (20 preneed licensees x $60).
The aggregate cost of Item D, for both preneed licensees groups identified above, is $3,600 ($2400 +
$1200).
Total Aggregate Costs for Items A-D
The aggregate annual estimated costs to preneed licensees of preparing items A-D is as follows:
$150,150
$ 72,000
$ 3,600
$225,750
Item A
Items B and C
Item D
Total per year
$664 Average cost per preneed licensee, per year, of preparing Items A-D ($225,750 / 340).
Over 5 years the cost is estimated at $1,128,750 (225,750 x 5)
5. ANALYSIS OF THE IMPACT ON SMALL BUSINESSES
The Division estimates that there are approximately 304 small businesses affected by the rule,
statewide.
More specifically, the Division estimates that 304 of the approximately 340 (89%) affected businesses
are small businesses within the definition at section 288.703(6), Florida Statutes. The average net worth
of those 304 affected businesses was approximately $438,450 in 2010. The majority of the affected
small businesses were funeral homes.
Sales of preneed contracts are not distributed ratably among the approximately 340 preneed sellers.
The Division estimates that the 20 largest preneed sellers (who are not small businesses) sell
approximately 74% of all preneed contracts sold, and the remaining 320 preneed sellers sell
approximately 26% of the preneed contracts sold.
12
As noted in a prior section of this document, the Division estimates that the transaction costs per
preneed licensee (to include small businesses), to prepare the materials required for preneed license
renewal application, are $664 per year, on average.
METHODOLOGY USED TO CONDUCT THE ANALYSIS
Hourly rates for state personnel were calculated from actual salaries paid to those personnel. The $30
per hour for staff time of industry personnel is an estimate of the average composite cost of various
grades of staff that must spend some time on the task for the licensee. This composite was calculated
from knowledge of the industry. For example, to prepare a financial statement will require work and
review at multiple levels by staff of increasing responsibility, skill and compensation level. Low level
accounting clerks will assemble the data and prepare rough versions of the statements. These will be
passed to a person who is an accountant with a college degree and possibly professional licensure, who
will finalize the statements and endorse them and send them up the chain, where they will get reviewed
at one or two additional levels on the finance side of the firm. Frequently they will then cross over to
the firm’s legal staff for review of issues that may have potential legal/regulatory compliance impacts.
Some of these higher levels of staff may be compensated at $80 to $100 per hour.
Data as to amounts paid as remittances under the rule in issue, were taken from Department of
Financial Services receipts accounting records. Data as to numbers of licenses in force and issued, are
taken from Department of Financial Services computer systems relating to licenses under Chap. 497, F.S.
The Division has staff that has extensive experience in deathcare industry regulation and, to a significant
extent, the economics and empirical characteristics of deathcare industry businesses, particularly
deathcare industry licensees.
13
TEXT OF RULE
69K-5.0026 Preneed License Renewal.
(1) Each active preneed license shall be renewed for the annual period beginning July 1 of each year
upon approval by the Board of Funeral, Cemetery, and Consumer Services. The application for renewal
will be presented to the Board upon receipt and review by the Department of a non-refundable renewal
fee as established by Section 497.453(5), F.S., a financial statement as of the entity’s most recent fiscal
year end, and a completed Annual COA Renewal Statement. Preneed License Renewal, Form DFS-COAR1, effective 1-18-96, Annual COA Financial Statement, Form DFS-COA-R2, effective 1-18-96, and Annual
COA Renewal Statement, Form DFS-COA-R3, revised 12-6-01, are hereby incorporated by reference and
available by mail or electronically from the Department of Financial Services, Division of Funeral,
Cemetery, and Consumer Services, 200 East Gaines Street, Tallahassee, Florida 32399-0361.
(2) Failure to submit the statements as required in subsection (1) may result in the levy of a fine by the
Board of Funeral, Cemetery, and Consumer Services in the amount of $50 per day for each day the
financial and renewal statements are not submitted as follows:
(a) Annual COA Financial Statement must be submitted to and received by the Department of Financial
Services, Division of Funeral, Cemetery, and Consumer Services, 200 East Gaines Street, Tallahassee,
Florida 32399-0361, within 3 months of the end of the preneed licensee’s fiscal year.
(b) Annual COA Renewal Statement and the required renewal fee must be submitted to and received by
the Department of Financial Services, Division of Funeral, Cemetery, and Consumer Services, 200 East
Gaines Street, Tallahassee, Florida 32399-0361, on or before April 1 of each year.
(3) Financial statements may be prepared either on the form promulgated by this rule or by an
independent certified public accountant on the accrual or income tax basis of accounting in conformity
with Rule 69K-5.0016, F.A.C. Audited statements are acceptable. The financial statements must
document compliance with the minimum financial responsibility requirements of Rule 69K-5.0016,
F.A.C. Failure to comply with said rule shall result in denial of the renewal application.
(4) In the event the renewal application is denied by the Board, the renewal fee paid is not refundable. If
a hearing is requested on the denial, the certificate shall remain in active status during the pendency of
the hearing.
(5) Any Preneed License not approved or denied by the Board prior to July 1 of each year shall
automatically expire on July 1 and the entity shall be required to cease and desist from all selling of
preneed funeral and cemetery goods and services. All preneed sales agent registrations associated with
the preneed license will be terminated. New applications for certification/registration must be
submitted to and approved by the Board in order to return the certificate and agent registrations to
active status. The applicants shall be subject to all requirements of initial application.
Specific Authority 497.103(1), 497.407 FS. Law Implemented 497.453 FS. History–New 6-24-96,
Amended 7-10-02, Formerly 3D-30.041, 69K-100.041.
14
STATUTE IMPLEMENTED
497.453 Application for preneed license, procedures and criteria; renewal; reports.—
(5) RENEWAL OF LICENSES.—
(a) A preneed license shall expire annually on June 1, unless renewed, or at such other time or times
as may be provided by rule. The application for renewal of the license shall be on forms prescribed
by rule and shall be accompanied by a renewal fee as specified in paragraph (c).
(b) Within 3 months after the end of its fiscal period, or within an extension of time therefore, as the
department for good cause may grant, the licensee shall file with the department a full and true
statement of her or his financial condition, transactions, and affairs, prepared on a basis as adopted
by rule, as of the end of the preceding fiscal period or at such other time or times as may be
required by rule, together with such other information and data that may be required by rule. To
facilitate uniformity in financial statements and to facilitate department analysis, there may be
adopted by rule a form for financial statements. The rules regarding net worth, authorized by
paragraph (2)(b), shall be applicable to the renewal of preneed licenses.
(c)
1. Each annual application for renewal of a preneed license that is not held by a monument
establishment shall be accompanied by the appropriate fee as follows:
a. For a preneed licensee with no preneed contract sales during the immediately preceding
year..........$300.
b. For a preneed licensee with at least 1 but fewer than 50 preneed contract sales during the
immediately preceding year..........$400.
c. For a preneed licensee with at least 50 but fewer than 250 preneed contract sales during
the immediately preceding year..........$500.
d. For a preneed licensee with at least 250 but fewer than 1,000 preneed contract sales
during the immediately preceding year..........$850.
e. For a preneed licensee with at least 1,000 but fewer than 2,500 preneed contract sales
during the immediately preceding year..........$1,500.
f. For a preneed licensee with at least 2,500 but fewer than 5,000 preneed contract sales
during the immediately preceding year..........$2,500.
g. For a preneed licensee with at least 5,000 but fewer than 15,000 preneed contract sales
during the immediately preceding year..........$6,000.
h. For a preneed licensee with at least 15,000 but fewer than 30,000 preneed contract sales
during the immediately preceding year..........$12,500.
i. For a preneed licensee with 30,000 preneed contract sales or more during the
immediately preceding year..........$18,500.
15
2. Each annual application for renewal of a preneed license that is held by a monument
establishment shall be accompanied by the appropriate fee determined by its total gross
aggregate at-need and preneed retail sales for the 12-month period ending 2 full calendar
months prior to the month in which the renewal is required, as follows:
a. Total sales of $1 to $50,000: $1,000 renewal fee.
b. Total sales of $50,001 to $250,000: $1,500 renewal fee.
c. Total sales of $250,001 to $500,000: $2,000 renewal fee.
d. Total sales over $500,000: $2,500 renewal fee.
(d) An application for renewal shall disclose the existence of all preneed contracts for service or
merchandise funded by any method other than a method permitted by this chapter, which contracts
are known to the applicant and were entered into by the applicant, or any other entity under
common control with the applicant, during the annual license period then ending. Such disclosure
shall include the name and address of the contract purchaser, the name and address of the
institution where such funds are deposited, and the number used by the institution to identify the
account.
(e) In addition to any other penalty that may be provided for under this chapter, there may be levied
a late fee as determined by licensing authority rule but not to exceed $50 a day for each day the
preneed licensee fails to file its annual statement, and there may be levied a late fee as determined
by licensing authority rule but not to exceed $50 a day for each day the preneed licensee fails to file
the statement of activities of the trust. Upon notice to the preneed licensee by the department that
the preneed licensee has failed to file the annual statement or the statement of activities of the
trust, the preneed licensee’s authority to sell preneed contracts shall cease while such default
continues.
16