26:2H-14.5. Requirements for handling of security deposits paid to residential health care facility

1. If a residential health care facility requires a security deposit advanced prior to the admission of a person to the residential health care facility, the money or other form of security, until repaid or applied to payments in accordance with the terms of the contract or agreement, including the resident's portion of the interest or earnings accumulated thereon as hereinafter provided, shall continue to be the property of the resident and shall be held in trust by the residential health care facility and shall not be mingled with the personal property or become an asset of the residential health care facility, except as provided in section 2 of this act.

a. The residential health care facility shall: (1) invest that money in shares of an insured money market fund established by an investment company based in this State and registered under the "Investment Company Act of 1940," 54 Stat. 789 (15 U.S.C. s. 80a-1 et seq.) whose shares are registered under the "Securities Act of 1933," 48 Stat. 74 (15 U.S.C. s. 77a et seq.) and the only investments of which fund are instruments maturing in one year or less, or (2) deposit that money in a State or federally chartered bank, savings bank or savings and loan association in this State insured by an agency of the federal government in an account bearing a variable rate of interest, which shall be established at least quarterly, which is similar to the average rate of interest on active interest-bearing money market transaction accounts paid by the bank or association, or equal to similar accounts of an investment company described in paragraph (1) of this subsection, less an amount not to exceed 1% per annum of the amount so invested or deposited for the costs of servicing and processing the accounts.

b. Immediately after the security money is invested, the residential health care facility shall notify the resident in writing of the name and address of the investment company, State or federally chartered bank, savings bank or savings and loan association in which the deposit or investment of security money is made, and the amount of the deposit.

c. All of the money so deposited or advanced may be deposited or invested by the residential health care facility in one interest-bearing or dividend yielding account as long as the residential health care facility complies with all the other requirements of this act.

d. The residential health care facility is entitled to receive as administration expenses, a sum equivalent to 1% per annum thereon or 12.5% of the aggregate interest yield on the security deposit, whichever is greater, less the amount of any service fee charged by an investment company, a State or federally chartered bank, savings bank or savings and loan association for money deposited pursuant to this section, which is in lieu of all other administrative and custodial expenses. The balance of the interest or earnings paid thereon by the investment company, State or federally chartered bank, savings bank or savings and loan association shall belong to the resident and shall be permitted to compound to the benefit of the resident, or be paid to the resident in cash, or be credited toward the payments due on the anniversary of the resident's admission to the residential health care facility in accordance with the terms of the contract or agreement.

e. If the residential health care facility fails to notify the resident of the name and address of the investment company, State or federally chartered bank, savings bank or savings and loan association in which the deposit or investment of the security is made, and the amount thereof, within 30 days after receipt of the money from the resident, the resident may give written notice to the residential health care facility that the security money shall be applied on account of payments due or to become due from the resident, and thereafter the resident shall be without obligation to make any further security deposit and the residential health care facility shall not be entitled to make further demand for a security deposit.

f. Within 60 days after the person is no longer a resident of the residential health care facility, the residential health care facility shall return to the former resident or, if appropriate, to the resident's estate, by personal delivery or by registered or certified mail the sum so deposited plus the former resident's portion of the interest or earnings accumulated thereon, less any charges expended in accordance with the terms of a contract or agreement. The interest or earnings and any such deductions shall be itemized and the resident or, if appropriate, the resident's estate, notified thereof by personal delivery or by registered or certified mail.

g. The Commissioner of Banking may promulgate rules and regulations with respect to the establishment of the method of computing the interest due to either the residential health care facility or to the resident pursuant to the provisions of this act in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) if the money is deposited in an account or in shares of an investment company upon which the interest varies on a periodic basis.

L.1993,c.282,s.1.