New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter XIII - Life Care Communities
Part 350 - Continuing Care Retirement Communities
Section 350.7 - Surplus
Universal Citation: 11 NY Comp Codes Rules and Regs ยง 350.7
Current through Register Vol. 46, No. 39, September 25, 2024
(a)
(1) All part 1 paid in surplus contributions
to a continuing care retirement community shall be documented in a written
agreement between the continuing care retirement community and the person
making the part 1 paid in surplus contribution. The agreement shall state
whether the paid in surplus is expected to earn an investment return, and, if
so, the agreement shall state the terms of the annual investment return that is
subject to the restrictions in subdivision (b) of this section. A copy of each
such agreement shall be submitted to the superintendent for review at least 30
days in advance of it being finalized. A copy of each signed agreement shall be
submitted to the superintendent within 10 business days of the agreement being
signed.
(2) All part 2 paid in
surplus contributions to a continuing care retirement community shall be
documented in a written agreement between the continuing care retirement
community and the person making the part 2 surplus contribution. Investment
return on part 2 paid in surplus shall be made only as permitted pursuant to
subdivision (e) of this section. A copy of each such agreement shall be
submitted to the superintendent for review at least 30 days in advance of it
being finalized. A copy of each signed agreement shall be submitted to the
superintendent within 10 business days of the agreement being signed.
(3) A paid in surplus contribution may be
implemented using a subordinated loan agreement provided that the terms of the
agreement comply with the provisions of this subdivision and the subordinated
loan agreement contains a provision stating that no portion of the loan and
interest thereon may be repaid without the prior written approval of the
superintendent. A copy of each such agreement shall be submitted to the
superintendent for review at least 30 days in advance of it being finalized. A
copy of each signed agreement shall be submitted to the superintendent within
10 business days of the agreement being signed.
(b)
(1)
Part 1 paid in surplus may be increased by credits based upon the application
of a rate of return to the surplus, and shall be reduced by any payments or
distributions of the surplus.
(2)
The annualized rate of return applied to the part 1 paid in surplus in a given
fiscal year pursuant to paragraph (1) of this subdivision shall not be greater
than the greatest of:
(i) the aggregate
average mortgage interest rate or other long term financing rate applicable for
the year;
(ii) the average total
rate of return over the current 12-month period on the invested assets of the
continuing care retirement community based on the sum of investment income and
capital gains or losses on the assets;
(iii) the prime rate as published in the
Wall Street Journal as of the first business day of each month
increased by 100 basis points and compounded monthly. If the prime rate
published in the Wall Street Journal is a range, the prime
rate will be the average (i.e., arithmetic mean) of the
highest and lowest prime rates in the range, otherwise, the prime rate will be
the single prime rate published; and
(iv) if the continuing care retirement
community is a for profit corporation, an annualized rate of return of 10
percent.
(3) If during a
fiscal year there has been any increases or decreases to the part 1 paid in
surplus amount, then within 120 days of the end of the fiscal year the operator
shall submit to the superintendent a part 1 paid in surplus accounting showing:
(i) the amount of part 1 paid in surplus as
of the beginning of the fiscal year just ended;
(ii) the amount of additions to part 1 paid
in surplus contributed during the fiscal year just ended;
(iii) the amount of withdrawals from part 1
paid in surplus during the fiscal year just ended;
(iv) the amount of investment earnings
credited to part 1 paid in surplus for the fiscal year just ended and detailed
documentation of how the investment earnings amount was determined;
and
(v) the amount of part 1 paid
in surplus as of the end of the fiscal year just ended.
(c)
(1) Once a continuing care retirement
community has commenced operations and funds held in escrow are released
pursuant to Public Health Law section 4610, a for profit operator may designate
as profit up to five percent of all entrance fees and monthly and other fees
received from, or on behalf of, residents and nonresidents during the fiscal
year just ended, and all such amounts shall be retained and credited to part 1
paid in surplus and only distributed pursuant to subdivision (d) of this
section.
(2) Any profit designated
pursuant to paragraph (1) of this subdivision shall be documented by a written
agreement between the continuing care retirement community and the operator or
owner of the continuing care retirement community. The agreement shall state
whether the paid in surplus is expected to earn an investment return, and, if
so, the agreement shall state the terms of the annual investment return that is
subject to the restrictions in subdivision (b) of this section. A draft copy of
the agreement and a calculation of how the profit amount was determined shall
be submitted to the superintendent for review and approval, and upon approval,
a copy of the final signed agreement shall be submitted to the superintendent
within 10 business days of the agreement being signed.
(d) Distribution of part 1 paid in surplus or conversion of part 1 paid in surplus to part 2 paid in surplus.
(1) An operator may request
the superintendent's approval to repay all or part of part 1 paid in surplus,
or to convert all or part of part 1 paid in surplus to part 2 paid in surplus,
provided that:
(i) as of the end of the
fiscal year just ended the continuing care retirement community has been in
operation for at least 36 months;
(ii) the average independent living unit
occupancy rate for the fiscal year just ended was at least 90 percent and the
independent living unit occupancy rate for each of the most recent six months
was at least 90 percent;
(iii) all
bond, loan, and letter of credit document covenants, if any, are currently
being met;
(iv) part 1 paid in
surplus is positive;
(v) the
continuing care retirement community is in satisfactory actuarial balance;
and
(vi) the operator has submitted
a demonstration, satisfactory to the superintendent, that:
(a) is based on the assumption that increases
in future scheduled entrance fees, resident monthly fees, and nonresident fees
do not exceed the assumption for increases in future operating expenses on a
percentage basis;
(b) uses 105
percent of the components of the prospective reserve calculated pursuant to
section 350.3(b)(4) of
this Part each projection year; and
(c) shows that after the requested
distribution or conversion of part 1 paid in surplus has taken place:
(1) the requirements of section
350.6(a) and (b)
of this Part will be met for each of the next 10 projection years;
(2) the requirements of section
350.6(d) of this
Part will be met immediately after the requested distribution or conversion has
taken place;
(3) the net surplus of
the continuing care retirement community will be greater than or equal to zero
for each of the next 10 projection years; and
(4) all bond, loan, and letter of credit
document covenants, if any, will continue to be met.
(2) The operator shall
indicate the amount of repayment or conversion that is applicable to each of
the outstanding paid in capital agreements, as applicable.
(e) All assets allocated to part 2 paid in surplus shall be accounted for separately, with all investment income and realized and unrealized capital gains or losses of such assets assigned thereto. No investment income on assets not allocated to part 2 paid in surplus shall be assigned to part 2 paid in surplus. Such part 2 paid in surplus shall be disregarded in determining sufficiency of assets to support reserve liabilities. Distribution or payment of part 2 paid in surplus is not subject to the approval of the superintendent provided that the requirements of section 350.6(a) of this Part are currently satisfied and the continuing care retirement community has demonstrated to the superintendent's satisfaction during the prior 12 months that the community is in satisfactory actuarial balance.
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