ADOPTED RULES An agency may take final action on a section 30 days after a proposal has been published in the Texas Register. The section becomes effective 20 days after the agency files the correct document with the Texas Register, unless a later date is specified or unless a federal statute or regulation requires implementation of the action on shorter notice. If an agency adopts the section without any changes to the proposed text, only the preamble of the notice and statement of legal authority will be published. If an agency adopts the section with changes to the proposed text, the proposal will be republished with the changes. TITLE 1. ADMINISTRATION Part V. General Services Commission Chapter 125. Travel and Transportation Division State Vehicle Fleet Management 1 TAC sec.125.45, sec.125.49 The General Services Commission adopts an amendment to sec.125.45 and new sec.125.49, concerning the State Vehicle Fleet Management Program, without changes to the proposed text as published in the November 17, 1995, issue of the Texas Register (20 TexReg 9520). Amendment to sec.125.45 is adopted to conform to House Bill 2448, sec.3, Acts, 74th Legislature (1995) requirements to change reporting sequences to a semiannual basis. New sec.125.49 identifies the Vehicle Use Report as the only official record of vehicle usage. Amendment to sec.125.45 will facilitate more accurate fleet analysis and new sec.125.49 clarifies the development and use of the Vehicle Use Report. No comments were received regarding adoption of the amendment and new section. The amendment and new section are adopted under the Government Code, Title 10, Subtitle D, sec.2171.101, which provides the General Services Commission with authority to promulgate rules consistent with the Code. This agency certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 19, 1995 TRD-9516551 David Ross Brown Assistant General Counsel General Services Commission Effective date: January 9, 1996 Proposal publication date: November 17, 1995 For further information, please call: (512) 463-3960 TITLE 16. ECONOMIC REGULATION Part I. Railroad Commission of Texas Chapter 3. Oil and Gas Division Conservation Rules and Regulations 16 TAC sec.3.83 The Railroad Commission of Texas adopts an amendment to sec.3.83, concerning a tax exemption for three-year inactive wells, with changes to the proposed text as published in the November 7, 1995, issue of the Texas Register (20 TexReg 9238). The section specifies which wells qualify as three-year inactive wells for the purpose of the ten-year severance tax exemption provided for in House Bill 1975, 73rd Legislature, 1993. Adoption of the proposed amendments will increase oil and gas production in Texas by providing an incentive to operators to produce wells which have been inactive for three years or more. There is no statutory requirement that a well show productive capacity before it may be certified. The amended rule, which removes the requirement that a well show productive capacity before certification, will allow a greater number of qualified wells to take advantage of the severance tax exemption. One commenter suggested that the rule should clarify that all certifications are also designations under the statute. The commission declines to make this change. The terms "certify" and "designate" are used interchangeably throughout the statute. Using one term or the other will cause less confusion. The same commenter suggested that language be added to the effect that "no designation or clarification may be revoked because production is not established on a well by February 29, 1996." The commission declines to make this change. The purpose of amending the current rule is to remove the requirement that inactive wells must establish productive capability on or before February 29, 1996, to receive certification. That requirement has been removed and language to that effect would be superfluous. The same commenter suggested that "all wells designated as candidates for certification are hereby designated as three-year inactive wells." This language is unnecessary. Since wells no longer need to establish productive capability before certification, there is no reason not to certify wells already identified as three-year inactive wells, and the commission will certify these wells on or before February 29, 1996. The same commenter suggested that certifications "shall be effective on the earlier of (i) February 29, 1996, or, (ii) the date of first production after such three-year inactive well is restored to production." This language is not necessary, because the commission's practice has been to certify any well establishing production as of the date of first production. The same commenter suggested that the commission designate as three-year inactive wells all qualifying, undesignated wells, including all non-producing plugged or temporarily abandoned wellbores in Texas. The commission declines to make a blanket designation of all such unknown wells. The commission will endeavor to identify as many three-year inactive wells as possible on or before February 26, 1996. The commission declines to find that certifying such unknown wells "would make the longstanding problems of unplugged wells disappear" and does not wish to encourage operators to abandon wells without plugging them. Another commenter suggested that "the rule include an opportunity for hearing when there is a denial of an application for certification." Under the statute no applications for certification can be filed after August 31, 1995. Applications received before that date for wells that have not established productive capability have been held in abeyance pending the adoption of these proposed amendments. All of these wells, more than likely, will be certified on or before February 29, 1996. If the commission did decline to certify a well, the operator would be entitled to notice and opportunity for hearing under the contested case procedures of the Administrative Procedures Act. However, the commission agrees that the rule should contain a provision to inform an operator of his opportunity for a hearing if certification was denied, and such change has been made to the rule. The following groups or associations commented and supported adoption of the amendments with no, or minor, changes: Texas Independent Producers and Royalty Owners Association, Permian Basin Petroleum Association, and North Texas Oil and Gas Association. There were no comments opposing the proposed amendments. The amendment is adopted pursuant to Texas Natural Resources Code, sec.sec.81. 052, 85.046, and 85.202, which provides the commission with authority to adopt rules to regulate persons and their operations under the jurisdiction of the commission and to prevent the waste of oil in producing operations, and Texas Tax Code, sec.202.056, which provides the commission with the authority to certify a well as a three-year inactive well, to revoke the certificate for cause, and to adopt all necessary rules to administer Texas Tax Code sec.202. 056. sec.3.83. Tax Exemption For Three-Year Inactive Wells. (a) (No change.) (b) Definitions. (1) Three-year inactive well-A well that has not produced any hydrocarbons in more than one calendar month in the three years prior to the date of certification by the commission under this section. Wells eligible under this section include those that: (A)-(C) (No change.) (2) (No change.) (c) Certification. The commission or its delegate may certify a well as a three-year inactive well. If the commission or its delegate declines to certify a well administratively, the operator affected by this action may request a hearing. (d) Revocation of Certification. Certification may be revoked by the commission for cause which includes, but is not limited to, receipt of information by the commission that a certified well produced hydrocarbons in more than one calendar month in the three years prior to certification, or if production from other wells is credited to the three-year inactive well, or if a certified well is reported to the commission to be capable of production but is not capable of production. The Comptroller of Public Accounts will be notified of any revocation. (e) Certified Wells. The commission may not certify a well under this section after February 29, 1996. Prior to applying to the Office of Comptroller for the tax incentives listed in subsection (a) of this section, the operator of a certified well shall file with the commission a test report showing productive capability for the well. Production is presumed to begin on this well test date. The certification remains with the well in the event of a change of operator or ownership. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 20, 1995. TRD-9516576 Mary Ross McDonald Acting General Counsel, Office of General Counsel Railroad Commission of Texas Effective date: January 10, 1996 Proposal publication date: November 7, 1995 For further information, please call: (512) 463-7008 Part IV. Texas Department of Licensing and Regulation Chapter 61. Boxing Subchapter B. Elimination Tournaments 16 TAC sec.sec.61.200-61.202, 61.204-61.212 The Texas Department of Licensing and Regulation adopts the repeal of sec.sec.61.200-61.202 and sec.sec.61.204-61.212, concerning Elimination Tournaments, without changes to the proposed text as published in the November 3, 1995, issue of the Texas Register (20 TexReg 9111). These sections are being repealed to allow for adoption of new sections. No comments were received regarding adoption of the repeals. The repeals are adopted under Texas Civil Statutes, Article 8501-1, which provide the Texas Department of Licensing and Regulation with the authority to promulgate and enforce a code of rules and take all action necessary to assure compliance with the intent and purposes of the Texas Boxing Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 19, 1995. TRD-9516509 Jack W. Garison Executive Director Texas Department of Licensing and Regulation Effective date: January 9, 1996 Proposal publication date: November 3, 1995 For further information, please call: (512) 463-7357 16 TAC sec.sec.61.200-61.202, 61.204-61.211 The Texas Department of Licensing and Regulation adopts new sec.sec.61.200-61. 202, 61.204-61.211, concerning the regulation of elimination tournaments, without changes to the proposed text as published in the November 3, 1995, issue of the Texas Register (20 TexReg 9112) The new sections regulate elimination tournaments in the State of Texas and correspond with legislative changes. No comments were received regarding adoption of the new sections. The new sections are adopted under Texas Civil Statutes, Article 8501-1, which provide the Texas Department of Licensing and Regulation with the authority to promulgate and enforce a code of rules and take all action necessary to assure compliance with the intent and purposes of the Texas Boxing Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 19, 1995. TRD-9516510 Jack W. Garison Executive Director Texas Department of Licensing and Regulation Effective date: January 9, 1996 Proposal publication date: November 3, 1995 For further information, please call: (512) 463-7357 16 TAC sec.61.203 The Texas Department of Licensing and Regulation adopts the repeal of sec.61.203, concerning Elimination Tournaments, without changes to the proposed text as published in the August 11, 1995, issue of the Texas Register (20 TexReg 6072). The section is being repealed because bond requirements are now addressed in Texas Civil Statutes, Article 8501-1 due to recent legislative changes to the statute. No comments were received regarding adoption of the repeal. The repeal is adopted under Texas Civil Statutes, Article 8501-1, which provide the Texas Department of Licensing and Regulation with the authority to promulgate and enforce a code of rules and take all action necessary to assure compliance with the intent and purposes of the Texas Boxing Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 19, 1995. TRD-9516511 Jack W. Garison Executive Director Texas Department of Licensing and Regulation Effective date: January 9, 1996 Proposal publication date: August 11, 1995 For further information, please call: (512) 463-7357 TITLE 28. INSURANCE Part I. Texas Department of Insurance Chapter 3. Life, Accident and Health Insurance and Annuities Subchapter J. Required Reinstatement Relating to Mental Incapacity of the Insured for Individual Life Policies Without Nonforfeiture Benefits 28 TAC sec.sec.3.901-3.913 The Commissioner of Insurance of the Texas Department of Insurance adopts new sec.sec.3.901-3.913, concerning the required reinstatement relating to mental incapacity for individual life policies without nonforfeiture benefits, with changes to the proposed text as published in the October 24, 1995, issue of the Texas Register (20 TexReg 8781). New Subchapter J is necessary to implement amendments to the Insurance Code, Article 3.44d, passed by the 74th Legislature in 1995. The new subchapter will result in the protection of consumers who suffer from mental incapacity and who would otherwise have made timely payment of premiums on their individual life policies. The sections set forth guidelines for the appropriate determination and, under certain circumstances, require insurers to reinstate individual life policies which do not have nonforfeiture benefits within a year of their lapse if such lapse is due to mental incapacity. The adoption includes changes to the proposed text for reasons stated in this paragraph. Changes were made in sec.3.904 to the definition of "mental incapacity" to conform to the statute. For this same reason, the word "immediately" was deleted from sec.3.905. Paragraph (4) was added to sec.3.905 to clarify and enhance readability. Subsection (b) of sec.3.909 was changed to conform to the language of subsection (a), to clarify the section. The time frame for compliance with the notification requirements of the adopted sections was changed from January 1, 1996, to February 1, 1996, to ease the burden of compliance for industry. The language of sec.3.909(c) was changed to conform to the statute. The word "may" was replaced with the word "shall" in sec.3.911 to conform to the statute, as well as to clarify and enhance readability. The language in sec.3.911 regarding reduction in benefits has been changed to more clearly track the statute. A reference to "uncontroverted claim" was added to sec.3.911 to conform to the statute. The words "or methods" were added to sec.3.912(b) to clarify the options available to insurers for methods of compliance with the subchapter. There are numerous changes and additions made to sec.3.913 to clarify, enhance readability, or conform to changes made elsewhere in the sections. The new subchapter provides guidelines for the appropriate determination of mental incapacity and, under certain circumstances, requires insurers to reinstate individual life policies which do not have nonforfeiture benefits within a year of their lapse if such lapse is due to mental incapacity. The adopted sections address the reinstatement requirements for individual life policies that lapse due to the mental incapacity of the insured under certain conditions and describe the policies to which they apply, which are, specifically, all individual life policies issued in Texas which do not provide nonforfeiture benefits. Definitions are provided of words and terms used in the adopted sections, including the terms "insured," "owner," "policyholder," and "mental incapacity." Requirements are set forth which must be met for a policy to be eligible for reinstatement under the sections. A provision is made that an insurer may require, as a condition of reinstatement, payment of past due premiums plus interest. The new sections also provide that a reinstated policy continues in force as though it has not lapsed. The exception to reinstatement is set forth where the insured first became mentally incapacitated after lapse of the policy. The specific requirements of how, when, and to whom the required notification and disclosure requirements must be sent are enumerated. The procedure for request of reinstatement of an eligible policy is set forth, and the new sections allow the insurer to reduce the death benefit under a reinstated policy by the amount of premiums due and unpaid on the date of death, plus interest on such premiums. The sections set forth procedures for certification to the Texas Department of Insurance of notification by insurers to applicable policyholders, and promulgate the form for the required notice and disclosure under the sections. Several commenters express the opinion that the proposed rule is well balanced and is a commendable effort to establish a workable solution to the mandated additions. Several commenters recommend adoption of the proposal with some suggested changes, primarily in order to more closely track the statute. Numerous commenters complimented the agency on the open and inclusive process used in developing the proposed sections, and believe the process has resulted in a significant increase in the practicality of the proposed regulation. Several commenters understand the complicated nature of implementation of the statute. These commenters applaud staff's efforts and appreciate inclusion of insurance industry in discussions regarding the most precise and accurate ways to implement the statute. Agency Response: The agency appreciates the assistance and comments provided by interested parties during the rule development process. The agency intends to maintain an open process, and invite participation from interested persons. One commenter suggested that the rule is in violation of the United States Constitution, in that it amends existing contracts. Agency Response: The agency disagrees. It is the agency's position that the sections are constitutional and authority exists for the agency to adopt the subchapter. Section 3.904: Several commenters suggest changing the language in the definitions of "insured," "owner," and "policyholder" to reflect what they believe is the underlying premise that the insured, owner, and policyholder are one and the same. Some commenters suggest the inclusion of only one of these definitions in the rule. One commenter suggests changing the definition of "owner." One commenter suggests amendment of the definition of "insured." Other commenters suggest the same changes in the contexts of sec.3.909 and sec.3. 910. Agency Response: The terms "owner" and "policyholder" are used interchangeably in the statute, and are defined separately in the section for clarification of the different uses of the terms within the statute. The term "insured" is defined in the section because it is necessary to indicate that there is a distinction between the insured and the owner, in that the owner has certain statutory rights independent of this section and the underlying statute. The definition of "insured" has been amended to include the language "as set forth in the policy" to clarify the usage of the term "insured" and "owner." The agency does not agree that other suggested amendments of the definitions are necessary, in that they neither accomplish substantive changes nor enhance readability of the sections. One commenter suggests changing the definition of "mental incapacity" by adding the words "nature and" so that the definition would read: "Lacking the ability, based on reasonable medical judgment, to understand and appreciate the nature and consequences of a decision regarding failure to pay a premium when due and the ability to reach an informed decision in the matter." Agency Response: Although there is no substantive change, the agency agrees with the suggested change. Section 3.905: One commenter suggests deleting the word "immediately" in order to conform with Texas Insurance Code Annotated, Article 3.44d. Another commenter suggests replacing the word "immediately" with the word "forthwith." Agency Response: Although the agency agrees with deleting the word "immediately" in order to conform with the statute, this deletion has no substantive effect, in that once past due premiums are paid, an eligible policy must be reinstated immediately. One commenter notes that the language of the proposed regulation does not allow for any type of investigation into the validity of the diagnosis of "proof of mental incapacity." This commenter feels that basic fairness and due process of law should allow an insurer the opportunity to investigate the validity of a tendered diagnosis, and that the regulation should be changed to provide for good faith investigation. Agency Response: The agency disagrees. The section is consistent with the underlying statute, which provides for reinstatement upon satisfaction of eligibility criteria. Specifically, (1) mental incapacity (2) established by a physician qualified to make the diagnosis. Some commenters suggest that the requirement for proof and request for reinstatement to be submitted within a year from the date of lapse should be added as a fourth enumerated requirement. Agency Response: The agency agrees and has made the change since it enhances readability. Some commenters feel that the language of sec.3.905(2) is inconsistent with the statute where it reads: "It has been without default in the payment of premiums during such period." Agency Response: The agency disagrees. The language in the section is consistent with the statute, and it enhances readability and clarifies the meaning of "default" as used in the context of the subchapter. Section 3.905 and sec.3.906: One commenter feels that the language of sec.3. 905 and sec.3.906 is inconsistent with the statute. Agency Response: The agency disagrees. The language tracks the statute exactly. Section 3.907: One commenter suggests adding an exemption of guaranteed issue products from this section on the basis that these products require reinstatement regardless of mental capacity. Agency Response: The agency disagrees. The agency acknowledges that such an exemption might be justified in some instances; however, the statute does not provide for any specific exemption to disclosure. In addition, there is the possibility that such an exemption could narrow the application of the statute (i.e., upon death there is no reinstatement requirement for a guaranteed issue product as is provided for in the subchapter). One commenter seeks to narrow the application of the proposed regulation by suggesting limiting the required notice to policyowners whose policy is eligible under the statute (i.e., already in effect for five years, no default, etc.). Agency Response: The agency disagrees. It is felt that the commenter confuses eligible applicants with applicable applicants. The two are very distinct. The statute requires notice to ALL new policyholders regardless of their current ELIGIBILITY. It logically follows that the same is contemplated of previously existing policyholders. One commenter suggests that "an eligible policy" should be changed to read "a policy to which this subchapter applies." Agency Response: The agency disagrees. The suggestion does not result in a substantive difference or enhancement of readability of the section. One commenter believes that subsection (b) contains an incorrect statement relating to "...disclosure of the reinstatement required by this subchapter ... ". This commenter recommends using language contained in sec.3.909(a) which makes it clear that the content of the disclosure relates to the "... conditions set forth in this subchapter under which the policy may qualify for reinstatement due to the mental incapacity of the insured." Reinstatement is not "required" until such conditions are met. Agency Response: The agency agrees that this clarifies and enhances readability and the suggested change has been made. One commenter suggests revising the September 1, 1995 date, since this date has passed. Agency Response: In order to comply with the statute, notice must be complied with for all policies issued on or after September 1, 1995. However, pursuant to the authority given to the commissioner in the statute to adopt reasonable rules to implement this article, and to prescribe the form and manner in which the required disclosure must be made, the agency has extended the time frame for such compliance to February 1, 1996. One commenter suggests that the language of sec.3.909(a) limits the statute and feels that other means of service should be available to insurers, and that the methods of compliance enumerated in the proposed regulation merely identify the methods which will be deemed to be in compliance, rather than restricting the alternative methods. This commenter recommends including the language "will be deemed to be in compliance." Agency Response: The agency agrees and the change has been made. Section 3.911: One commenter suggests that there is a discrepancy in the language used in sec.3.905 and sec.3.911. Section 3.905 states that a "policy ... shall be reinstated ... on payment of past due premiums if it meets the requirements...." Section 3.911 states "the insurer shall pay ... if the requirements for submitting proof of mental incapacity and request for reinstatement are met." Agency Response: The agency disagrees. Section 3.905 addresses eligibility under any circumstances, whether or not death has occurred. Section 3.911 addresses payment only after death. One commenter suggests changing the language to track the statute regarding reduction in benefits. Agency Response: The agency agrees and the suggested change has been made. A comment was received that this section should track the statute and include a reference to "uncontroverted claim." Agency Response: The agency agrees and has made the change. Section 3.912: One commenter believes that the notification and certification requirements set forth in the proposed sections will be burdensome and are unnecessary to assure compliance with the law. In addition, this commenter feels that this section appears to imply that insurers must elect only one method of notification rather than using a combination of methods. This commenter requests that TDI reconsider requiring any certification and, at a minimum, revising language to allow insurers to certify as to the "method or methods" of notification. Another commenter believes that TDI may be overstepping its statutory authority in requiring "certification." Agency Response: The agency disagrees. Notification requirements are required by the statute. The agency does not believe that the certification requirements are burdensome or unnecessary. The department has the authority to require certification. However, the agency has changed the section to allow insurers to certify as to the "method or methods" of notification to clarify that insurers may elect more than one method of notification. One commenter feels that a retroactive requirement is not appropriate, and maintains that companies have been filing such forms without such notification because no current rules require the notification. Agency Response: The agency disagrees and maintains that the section is consistent with the statute. The statute requires compliance for all applicable policies on or after September 1, 1995. However, the period for compliance has been extended until February 1, 1996. Section 3.913: One commenter recommended the following wording under "eligibility": "The insured is mentally incapacitated prior to the lapse date, and premium payments have stopped due to mental incapacity." The same commenter suggested changing the wording under "reinstatement" as follows: "After reinstatement, your policy will continue in force as though it had not lapsed, subject to all policy provisions." Agency Response: The agency disagrees. The suggested changes do not achieve any substantive changes, nor do they enhance readability. Many commenters suggest various changes to the promulgated disclosure form. One commenter suggests that the notice is too wordy. A commenter objected to the statement at the top of the form reading: "Attach This Notice to Your Policy", in that the commenter believes that the statement indicates that the contract is amended. The commenter suggests replacing the statement with: "Keep This Notice with your Insurance Papers." Another commenter felt that the promulgated notice incorrectly summarizes the statute. One commenter suggests that the language in the promulgated form relating to qualifications of the physician making the diagnosis of mental incapacity should match the language in sec.3.904, and suggested substituting "a clinical diagnosis by a physician licensed in this state and qualified to make the diagnosis" for "a clinical diagnosis by a qualified physician licensed in this state." This commenter expressed concern that not making this change would lead to unnecessary conflict over the term "qualified physician." Several commenters recommended modifications to the language of the promulgated disclosure form. Comments included recommendations of changes for stylistic purposes and/or enhanced readability. One commenter suggests changing the reference to "this state" in the first sentence of the "Proof and Request" section to "Texas." Agency Response: The agency agrees in part and has made changes to provide additional clarification. The statement at the top of the first page of the Notice was changed to "Keep This Notice With your Insurance Papers." However, it is important to note that should the carrier choose to comply with the provisions of this subchapter via an endorsement, appropriate contractual language amending the policy would need to appear in such endorsement. One commenter indicates that the promulgated notice might not be appropriate for all methods of compliance, and urges promulgation of additional language for purposes of clarification. Agency Response: The agency agrees and has made the suggested change. For, with changes: Guarantee Reserve Life Insurance Company, Insurance Alliance of America, Northwestern Mutual Life, Office of Public Insurance Counsel, Physicians Mutual Insurance Company and Physicians Life Insurance Company, Southwestern Life, State Farm Insurance Companies, Texas Association of Insurance Officials, Texas Legal Reserve Officials Association, Texas Service Life Insurance Company, Transamerica Occidental Life. Against: Insurance Alliance of America. The new subchapter is adopted under the authority of the Texas Insurance Code, Articles 3.44d, 3.42(e), and 1.03A. Article 3.44d authorizes certain reinstatement requirements relating to the mental incapacity for individual life policies without nonforfeiture benefits. Article 3.42(e) authorizes the Commissioner of Insurance to adopt reasonable rules and amendments to rules that are necessary to establish guidelines, procedures, methods, standards, and criteria by which the various and different types of forms and documents submitted to the department are to be reviewed and approved by the department as being in compliance with the Texas Insurance Code, and to provide those guidelines, procedures, methods, standards, and criteria by which a summary review and approval may be given to those particular types of forms and documents designated by the department that, in its opinion, will expedite the review and approval process of those forms and documents. Article 1.03A authorizes the Commissioner of Insurance to promulgate and adopt rules and regulations for the conduct and execution of the duties and functions of the department. sec.3.901. Purpose and Scope. The purpose of this subchapter is to address the reinstatement requirements for individual life policies that lapse due to the mental incapacity of the insured under certain conditions as prescribed in this subchapter. sec.3.902. Applicability. This subchapter applies to all individual life policies which do not provide nonforfeiture benefits issued to Texas residents by insurers licensed in this state, including stipulated premium companies and fraternal benefit societies, which lapse due to the mental incapacity of the insured, and which qualify for reinstatement under the eligibility requirements set forth in sec.3.905 of this title (relating to Eligibility Requirements). sec.3.903. Severability. Where any term or section of this subchapter is determined by a court of competent jurisdiction to be inconsistent with the statutes of this state or to be unconstitutional, the remaining terms and provisions of this subchapter shall remain in effect. sec.3.904. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings unless the context clearly indicates otherwise. Commissioner-The Commissioner of Insurance. Department-The Texas Department of Insurance. Insured-The person whose life is insured under the policy. For purposes of this subchapter, the insured is the owner, unless the insured and owner are different parties as set forth in the policy. Mental Incapacity -Lacking the ability, based on reasonable medical judgment, to understand and appreciate the nature and consequences of a decision regarding failure to pay a premium when due and the ability to reach an informed decision in the matter. Owner-The person who has all the rights and all the responsibilities of the policy. Policyholder-The owner of the policy. Proof of mental incapacity-The clinical diagnosis of a physician licensed in this state and qualified to make the diagnosis. sec.3.905. Eligibility requirements. An eligible policy that is subject to this subchapter shall be reinstated, without evidence of insurability, on payment of past due premiums and interest if it meets the requirements set forth in paragraphs (1)-(4) of this subsection: (1) it has been in force continuously for at least five years immediately prior to the date of lapse; (2) all premiums have been paid during such period, or within the grace period; (3) there is a subsequent unintentional default in premium payments caused by the mental incapacity of the insured; and (4) proof and request for reinstatement are submitted within one year from the date of lapse. sec.3.906. Payment of Past Due Premiums. The insurer may require, as a condition of reinstatement, payment of past due premiums, plus interest at a rate not to exceed 6.0% per annum. sec.3.907. Coverage Dates Back to Date of Lapse. Upon reinstatement, the policy will continue in force as though it had not lapsed. sec.3.908. Exceptions to Reinstatement. An insurer is not required to reinstate coverage or pay benefits under this subchapter if the insured first became mentally incapacitated after the expiration of the grace period contained in the policy. sec.3.909. Notification and Disclosure Requirements. (a) The insurer is required to send notice of the conditions set forth in this subchapter under which the policy may qualify for reinstatement due to the mental incapacity of the insured. The notice must be sent to the owner of any individual life policy which does not provide nonforfeiture benefits if the policy is in force, renewed or issued on or after September 1, 1995. The notice required to be provided by this subsection shall either be: (1) provided within 90 days following lapse of an eligible policy; or (2) provided to existing policyholders within 90 days after the effective date of the Insurance Code, Article 3.44d, or if this subchapter is not effective on or before 90 days after the effective date of Article 3.44d, no later than February 1, 1996. (b) For all policies issued on or after September 1, 1995, disclosure of the conditions set forth in this subchapter under which the policy may qualify for reinstatement due to the mental incapacity of the may be made by incorporating the language of sec.3.913 of this title (relating to Notice and Disclosure Form), either in the policy or in an endorsement attached to the policy, in lieu of the notice requirements set forth in subsection (a) of this section. If this method is elected by the insurer, for policies issued on or after September 1, 1995 but prior to the effective date of this subchapter, the language of sec.3.913 of this title (relating to Notice and Disclosure Form) shall be incorporated no later than February 1, 1996. (c) The notice required to be provided by this subsection will be deemed to be in compliance if mailed by first class mail to the last known address of the policyholder or if contained in the policy or included as an endorsement thereto. (d) The notice required by this subsection shall be provided in the form set forth in sec.3.913 of this title (relating to Notice and Disclosure Form). sec.3.910. Reinstatement Procedures. (a) The insurer shall accept a request for reinstatement and proof of mental incapacity that is filed by: (1) the insured, or the owner, if the insured and owner are not the same party; (2) the legal guardian of the insured; (3) other legal representative of the insured; or (4) the legal representative of the estate of the insured. (b) Proof of mental incapacity and the request for reinstatement must be submitted within one year after the date of lapse of the policy. sec.3.911. Reduced Benefits. The insurer shall pay the death benefit under an eligible policy if the insured dies within one year of the date of lapse and the requirements for submitting proof of mental incapacity and request for reinstatement are met. The insurer shall reduce the death benefit under a policy that is eligible for reinstatement under this subchapter by the amount of premiums due and unpaid on the date of death, plus interest on such premiums at the reinstatement interest rate, if there is an uncontroverted claim for benefits that exceeds the amount of premiums and interest owed. sec.3.912. Form Filing Procedures. (a) For all new forms subject to this subchapter filed on or after September 1, 1995, the insurer must include with the form filing written notification to the department specifying the method of notification as set forth in sec.3.909 of this title (relating to Notification and Disclosure Requirements) by which the notice requirements of sec.3.913 of this title (relating to Notice and Disclosure Form) will be met. (b) For all forms subject to this subchapter approved or filed before September 1, 1995, the insurer must submit to the department a certification, signed by an officer of the company, specifying the method or methods of notification as set forth in sec.3.909 of this title (relating to Notification and Disclosure Requirements) by which the notice requirements of sec.3.913 of this title (relating to Notice and Disclosure Form) will be met. (c) All policies and endorsements are subject to the filing requirements of subchapter A of this chapter (relating to Requirements for Filing of Policy Forms, Riders, Amendments, and Endorsements for Life, Accident, and Health Insurance and Annuities). sec.3.913. Notice and Disclosure Form. (a) If the elected method of compliance is notification to all existing policyholders as described in sec.3.902(a)(2) of this subchapter (relating to Notification and Disclosure Requirements), the notice required by this subchapter shall be provided in the following manner: Figure 1: 28 TAC sec.3.913 (b) If the elected method of compliance is notification within 90 days following the lapse of an eligile policy as described in sec.3.909(a)(1) of this subchapter (relating to Notification and Disclosure Requirements), the notice required by this subchapter shall be provided in the following manner: (et)Figure 2: 28 TAC sec.3.913 (c) If the elected method of compliance is incorporating the language of sec.3.913 in the policy or in an endorsement, the insurer may incorporate the text of subsection (a) of this section, omitting the titles referencing "Notice" and substituting an appropriate prominent title, such as "Reinstatement Due to the Mental Incapacity of the Insured." This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 20, 1995. TRD-9516573 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: January 10, 1996 Proposal publication date: October 24, 1995 For further information, please call: (512) 463-6327 TITLE 34. PUBLIC FINANCE Part I. Comptroller of Public Accounts Chapter 7. Prepaid Higher Education Tuition Program The Comptroller of Public Accounts adopts new sec.sec.7.1, 7.2, 7.11-7.18, 7. 21, 7.31-7.33, 7.41-7.43, 7.51, 7.52, 7.61-7.63, 7.71, 7.81-7.83, and 7.91, concerning the Prepaid Higher Education Tuition Program. Sections 7.11, 7.18, 7.21, 7.41, 7.42, 7.43, 7.51, 7.61, and 7.81 are adopted with changes to the proposed text as published in the November 17, 1995, issue of the Texas Register (20 TexReg 9546). Sections 7.1, 7.2, 7.12-7.17, 7.31-7.33, 7.52, 7. 62- 7.63, 7.71, 7.82-7.83, and 7.91 are adopted without changes and will not be republished. The new chapter is in response to legislation during the 74th Legislature, 1995, which requires the state to use all of the higher education facilities and resources within the state, both public and private, to provide a wide variety of educational environments and instructional options and to preserve the partnership between the state and private or independent institutions of higher education. The following is a summary of the changes made to the proposed text. Proposed sec.7.11(d), proposed sec.7.18(a), proposed sec.7.41(b), and proposed sec.7.42(a) were changed to reflect a different mailing address for the Prepaid Higher Education Tuition Program. Proposed sec.7.21(5) was changed to clarify the manner in which the board will establish contract prices. Proposed sec.7.51(b) was changed to clarify that the board will establish the estimated average private tuition and required fees on an annual basis. Proposed sec.7.61 was changed to clarify the date on which a beneficiary must satisfy applicable age requirements. Proposed sec.7.81(d) was changed to provide purchasers with the ability to designate a person with a right of survivorship with respect to the contract in the event of the purchaser's death, and to provide purchasers with the ability to elect to transfer benefits to an accredited out of state college or university. The subparts following subsection (d) were renumbered to reflect the change. Proposed sec.7.81(d)(2) was changed in response to comment to reflect the amount of refund allowed if a beneficiary receives a partial scholarship. The changes provide that the refund amount shall equal the amount of the partial scholarship rather than the amount by which the average amount of tuition and required fees exceeds the scholarship amount. Proposed sec.7.81(b), (d)(1)-(5), (d)(6), (7) were changed in response to comment to address the tax consequences of refunds to a person other than the purchaser. The changes provide that refunds shall be made to the purchaser, instead of a person so designated in the contract. Comments were received from three sources regarding adoption of the new sections. The proposed rules do not provide for reciprocity with other states that have programs similar to the Prepaid Higher Education Tuition Program. An individual requested that the rules allow for reciprocity. The board disagrees with this request since the Education Code, Chapter 54, Subchapter F does not authorize reciprocity. Proposed sec.7.81(d)(2) requires that if a beneficiary receives a partial scholarship, a refund shall equal the amount by which the average amount of tuition and required fees exceeds the scholarship amount. An individual requested clarification regarding a refund in the event of a partial scholarship. The board agrees with this request and has changed sec.7.81(d)(3), to clarify the refund of scholarship amounts. Proposed sec.7.81(b), (d)(1)-(5), (d)(6) and (7) provided that a refund would be made to the person specified by the purchaser in the Prepaid Tuition contract. Ernst & Young raised concerns that such an option had potential tax consequences since a person other than the purchaser could receive a refund. The board agrees that the refund should be limited to the purchaser as necessary to avoid potential tax consequences of the refunds as stated in the proposed rules. Section 7.81(b), (d)(1)-(5), (d)(6) and (7) have been changed accordingly. Subchapter A. General Rules 34 TAC sec.7.1, sec.7.2 The new sections are adopted under the Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules necessary for the implementation of Prepaid Higher Education Tuition Program. The new sections implement the Education Code, Chapter 54, Subchapter F. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 18, 1995. TRD-9516493 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: January 8, 1996 Proposal publication date: November 17, 1995 For further information, please call: (512) 463-4028 Subchapter B. Board Meeting Guidelines and Requirements 34 TAC sec.sec.7.11-7.18 The new sections are adopted under Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules necessary for the implementation of Prepaid Higher Education Tuition Program. sec.7.11. Board Officers. (a) The comptroller is the presiding officer of the board. The comptroller's chief clerk shall serve as presiding officer in the comptroller's absence. (b) The board shall designate one of its members or board staff to serve as secretary of the board to ensure that appropriate notices are posted, minutes of board meetings are prepared, and to perform other duties delegated to the secretary by the board. (c) The comptroller is the executive director of the board and shall perform the duties prescribed by law and such other duties as may be prescribed by the board. (d) Notices, suggestions, correspondence or other documents to be delivered to the board may be delivered to the staff for distribution to the members of the board. Such information should be addressed to the Prepaid Higher Education Tuition Program, Office of the Comptroller of Public Accounts, P.O. Box 13407, Austin, Texas 78711-3407; 111 E. 17th St., Room 131, Austin, Texas 78774-0001. Staff for the program may be reached by calling toll-free at 1-800-445-GRAD (4723). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 18, 1995. TRD-9516494 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: January 8, 1996 Proposal publication date: November 17, 1995 For further information, please call: (512) 463-4028 Subchapter C. Board Responsibilities 34 TAC sec.7.21 The new section is adopted under Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules necessary for the implementation of Prepaid Higher Education Tuition Program. sec.7.21. General Responsibilities. The board shall retain the following responsibilities, all of which expressly are not delegated to the executive director: (1) initiation, settlement or defense of litigation and the retention of legal counsel in connection with litigation; provided that limited authority with respect to litigation is delegated to the executive director as set forth in sec.7.33(2) of this title (relating to Delegated Responsibilities); (2) adoption of rules relating to the program; (3) development of investment guidelines; (4) limitation of enrollments in the program; (5) approval of contract prices; (6) negotiation and execution of purchase, contracts, leases, lease purchases, licenses and agreements involving payments of more than $10,000; and (7) all policy making responsibilities of general applicability, provided that the board may delegate policy making responsibility to the executive director where parameters have been adopted by the board to be followed by the executive director in the exercise of such responsibility. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 18, 1995. TRD-9516495 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: January 8, 1996 Proposal publication date: November 17, 1995 For further information, please call: (512) 463-4028 Subchapter D. Executive Director 34 TAC sec.sec.7.31-7.33 The new sections are adopted under Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules necessary for the implementation of Prepaid Higher Education Tuition Program. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 18, 1995. TRD-9516496 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: January 8, 1996 Proposal publication date: November 17, 1995 For further information, please call: (512) 463-4028 Subchapter E. Application, Enrollment, Payment, and Fees 34 TAC sec.sec.7.41-7.43 The new sections are adopted under Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules necessary for the implementation of Prepaid Higher Education Tuition Program. sec.7.41. Application. (a) These rules apply to prepaid tuition contracts for the prepayment of tuition and required fees necessary for a beneficiary to attend an institution of higher education or private or independent institution of higher education. Prepayments are expressly limited to payment of tuition and required fees as specified in this chapter, the Education Code, Chapter 54, Subchapter F, and the prepaid tuition contracts issued pursuant thereto. (b) Applications shall be made available through the Prepaid Higher Education Tuition Program, Office of the Comptroller of Public Accounts, P.O. Box 13407, Austin, Texas 78711-3407; 111 E. 17th St., Room 131, Austin, Texas 78774-0001, or by calling toll-free at 1-800-445-GRAD (4723), or as otherwise provided by the board. (c) The rights of purchasers and beneficiaries are subject to the provisions of this chapter, the Education Code, Chapter 54, Subchapter F, and the terms and conditions of the prepaid tuition contract. Prepaid tuition contract prices shall be determined by the board annually to ensure the actuarial soundness of the fund. Prepaid tuition contract prices will be published in the Texas Register and shall apply to prepaid tuition contracts entered into subsequent to board approval. sec.7.42. Enrollment Period. (a) Each enrollment period shall begin and end on dates set annually by the board and published in the Texas Register, with the initial enrollment period beginning January 2, 1996, and ending March 31, 1996. The official postmark date affixed by the United States Postal Service or date stamp evidencing actual receipt of the application at the address specified below, whichever is earlier, shall be considered the date of receipt of an application for purposes of the enrollment period. Applications may be mailed to the following address: Prepaid Higher Education Tuition Program, Office of the Comptroller of Public Accounts, P.O. Box 13407, Austin, Texas 78711-3407. In the alternative, applications may be delivered to the following address 111 E. 17th St., Room 131, Austin, Texas 78774-0001. (b) The board reserves the right to limit enrollment as necessary to insure the actuarial soundness of the fund. sec.7.43. Administrative Fees. (a) The board shall adopt an administrative fee schedule to cover costs of administration of the program. (b) Fees adopted by the board shall reflect the intent to make the program self-supporting and to maintain the actuarial soundness of the fund. The fees may include the following: (1) a nonrefundable application fee collected at the time the application is submitted; (2) a termination fee assessed upon the termination of a contract by the purchaser prior to being fully paid, which fee shall be in an amount determined by the board to allow reimbursement of the board's estimated expenses in terminating the contract; (3) a change of beneficiary fee assessed in connection with a request to substitute beneficiaries under the plan; (4) a change in purchaser fee assessed for assignment of contract rights and obligations to another purchaser; (5) a cancellation or benefits transfer fee deducted from payments when funds are used for out-of-state tuition or not used for college; (6) an account maintenance fee for servicing accounts; (7) a fee for changes in the mode of payment or payment schedule requested by a purchaser; (8) a late fee assessed for payments made past the due date; (9) an insufficient funds fee assessed for all payments returned for insufficient funds; (10) an improper notice fee assessed for failure to provide timely notice of the intent to use contract benefits; (11) replacement of coupon books and other contract related documents; and (12) other administrative fees established by the board. (c) Where applicable, charges for copies of public records shall be assessed at the rates established by the General Services Commission pursuant to the Government Code, sec.552.261, and consistent with similar charges assessed for public records by the Office of the Comptroller. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 18, 1995. TRD-9516497 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: January 8, 1996 Proposal publication date: November 17, 1995 For further information, please call: (512) 463-4028 Subchapter F. Tuition. 34 TAC sec.7.51, sec.7.52 The new sections are adopted under Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules necessary for the implementation of Prepaid Higher Education Tuition Program. sec.7.51. Tuition Paid. (a) For prepaid tuition contracts issued under the junior college plan, junior/senior college plan, or senior college plan, the tuition and required fees paid pursuant to such prepaid tuition contracts shall be paid in accordance with the rates charged to Texas residents. (b) For prepaid tuition contracts issued under the private college plan, tuition, and required fees paid pursuant to the prepaid tuition contract shall be limited to the estimated average private tuition and required fees as determined by the board on an annual basis. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 18, 1995. TRD-9516498 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: January 8, 1996 Proposal publication date: November 17, 1995 For further information, please call: (512) 463-4028 Subchapter G. Beneficiaries. 34 TAC sec.sec.7.61-7.63 The new sections are adopted under Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules necessary for the implementation of Prepaid Higher Education Tuition Program. sec.7.61. Qualified Beneficiary. A qualified beneficiary is an individual who is under the age of 18 at the time the purchaser enters into the contract, who has not graduated from high school nor obtained high school equivalency certification, and is either: (1) a resident of the state of Texas; or (2) a non-resident who is the child of a parent who is a resident of the state of Texas at the time the parent enters into the contract. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 18, 1995. TRD-9516499 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: January 8, 1996 Proposal publication date: November 17, 1995 For further information, please call: (512) 463-4028 Subchapter H. Conversion 34 TAC sec.7.71 The new section is adopted under Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules necessary for the implementation of Prepaid Higher Education Tuition Program. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 18, 1995. TRD-9516500 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: January 8, 1996 Proposal publication date: November 17, 1995 For further information, please call: (512) 463-4028 Subchapter I. Refunds, Termination 34 TAC sec.sec.7.81-7.83 The new sections are adopted under Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules necessary for the implementation of Prepaid Higher Education Tuition Program. sec.7.81. Refunds. (a) Refunds shall be made in accordance with provisions of these rules and the prepaid tuition contract, in a manner that will not adversely affect the tax status of the program under applicable provisions of the Internal Revenue Code, as amended from time to time. Refunds shall be governed by these rules as amended and as in effect on the date the request for refund is submitted to the board. In general, it is the board's intent that the amount of any refund shall be the sum of all payments made under the contract for tuition and required fees, less fees due and payable to the program under the board's fee schedule and less any amounts paid by the program pursuant to the prepaid tuition contract prior to the refund. (b) Refunds shall be made to the purchaser of the prepaid tuition contract unless otherwise designated by the purchaser in writing to the board in the event of the purchaser's death. (c) Should a beneficiary terminate his/her student status on or after the date on which the institution denies refunds to students withdrawing for a particular semester, no refund shall be paid under the prepaid tuition contract for amounts relating to such semester. (d) Examples of circumstances under these rules in which refunds may be made include, but are not limited to, the following. (1) Under any plan, if the beneficiary receives a full scholarship, the average amount of tuition and required fees under the plan selected or the estimated average private tuition and required fees, as applicable, may be refunded. Refund payments may be issued each academic term as long as the scholarship is effective. The purchaser of the prepaid tuition contract shall be entitled to such refund. Proof of scholarship must be submitted in a form acceptable to the board. (2) Under the junior college plan, junior/senior college plan or senior college plan, if a beneficiary receives a partial scholarship, the tuition scholarship amount may be refunded. Under the private college plan, if a beneficiary receives a partial scholarship, a refund may be made in an amount equal to the excess of: (A) the estimated average private tuition and required fee amounts, over (B) the actual tuition and required fee amounts less the scholarship amount. Refund payments up to the amount determined in accordance with this paragraph may be issued each academic term as long as the scholarship is effective. The purchaser of the prepaid tuition contract shall be entitled to such refund. Proof of scholarship must be submitted in a form acceptable to the board. (3) If the beneficiary dies or becomes disabled while attending an institution of higher education or a private or independent institution of higher education, the amount of benefits remaining available under the prepaid tuition contract, less any applicable fees, may be refunded or the benefits under such contract may be transferred to another qualified beneficiary. If a change of beneficiary is not requested, a lump sum refund may be made within 60 days of the date the program is notified of the death or disability to the purchaser of the prepaid tuition contract, provided proof of death or disability is submitted in a form acceptable to the board. (4) If the beneficiary dies or becomes disabled after having graduated from high school but prior to attending an institution of higher education or a private or independent institution of higher education, a refund may be issued or the benefits under such contract may be transferred to another qualified beneficiary. If a change of beneficiary is not requested, a lump sum refund may be made within 60 days of the date the program is notified of the death or disability to the purchaser of the prepaid tuition contract, provided proof of death or disability is submitted in a form acceptable to the board. Under the junior college plan, junior/senior college plan, or senior college plan, the refund will equal the average amount of tuition and required fees in effect at the time the refund is requested. Under the private college plan, the refund will equal the estimated average of private tuition and required fees as determined annually by the board. (5) If a prepaid tuition contract is terminated under sec.7.82(c) of this title (relating to Termination of Prepaid Tuition Contract), such contract may be refunded in an amount equal to the lesser of: (A) the lowest amount of tuition and required fees among all institutions under the plan selected, less a cancellation fee and any other applicable fee; or (B) the amount of payments made under the plan for tuition and required fees; plus the average annual earnings rate on the fund, less 3.0% but not to exceed 5.0% times the accumulated payments made under the contract as of December 31, of each year; less a cancellation fee and any other applicable fee. Any such refund may be made in semi-annual installments to the purchaser of the prepaid tuition contract. (6) If the purchaser who selected the junior college plan, junior/senior college plan, or senior college plan dies or becomes disabled and payments cease before the contract is paid in full, and unless otherwise directed by the purchaser in writing, a refund may be made. The refund amount will be equal to a percentage of the average amount of tuition and required fees in effect at the time the refund is requested, determined by reference to the percentage of payments made under the contract by the purchaser. If the purchaser who selected the private college plan dies or becomes disabled and payments cease before the contract is paid in full, a refund may be made. The refund amount will be equal to a percentage of the estimated amount of private tuition and required fees set forth in the prepaid tuition contract, determined by reference to the percentage of payments made under the contract by the purchaser. A lump-sum refund may be made within 60 days to the purchaser of the prepaid tuition contract unless otherwise specified in writing by the purchaser as described in this paragraph. In the alternative, contract benefits may be converted to a plan with reduced benefits. Proof of death or disability shall be in a form acceptable to the board. Notwithstanding any other provision of this paragraph, the purchaser, in a writing to the board, and providing such other information as the board may request, may designate a person who shall have a right of survivorship with respect to the purchaser's rights and obligations pursuant to a prepaid tuition contract; provided that such designation shall in no way affect the purchaser's ability to modify or terminate the contract and receive a refund without the consent or authorization of the designee. (7) Refunds may be made for other reasons as approved by the board. By way of example, such refunds may by made in an amount equal to the lowest amount of tuition and required fees of all institutions under the plan selected, less a cancellation fee. Refund payments may be made in semi-annual installments to the purchaser of the prepaid tuition contract. (8) As an alternative to a refund, the purchaser may transfer benefits to an out of state college or university accredited by a regional accrediting association. The amount of the transfer shall not exceed the average amount of tuition and required fees under the plan selected, or the estimated average private tuition and required fees, as applicable, less a cancellation fee and any other applicable fees. Payments may be transferred each academic term to the out of state college or university as necessary to pay for tuition and required fees up to the credit hours limit identified in the prepaid tuition contract. A statement from the out-of-state college or university shall be submitted to the board during each academic term, in a form acceptable to the board. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 18, 1995. TRD-9516501 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: January 8, 1996 Proposal publication date: November 17, 1995 For further information, please call: (512) 463-4028 Subchapter J. Default 34 TAC sec.7.91 The new section is adopted under Education Code, Chapter 54, Subchapter F, sec.54.618, which authorizes the board to adopt rules for the necessary for the implementation of Prepaid Higher Education Tuition Program. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 18, 1995. TRD-9516502 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: January 8, 1996 Proposal publication date: November 17, 1995 For further information, please call: (512) 463-4028 TITLE 37. PUBLIC SAFETY AND CORRECTIONS Part I. Texas Department of Public Safety Chapter 6. License To Carry Concealed Handgun The Texas Department of Public Safety adopts new sec. sec.6.1-6.5, 6.11-6.21, 6.31, 6.32, 6.41-6.47, 6.51-6.54, 6.61-6.63, 6.71-6.96, and 6.111-6.119, concerning License To Carry Concealed Handgun. Section 6.3 and sec.6.5 are adopted with changes to the proposed text as published in the October 17, 1995, issue of the Texas Register (20 TexReg 8418). Sections 6.1, 6.2, 6.4, 6.11-6.21, 6.31, 6.32, 6.41-6.47, 6.51-6.54, 6.61-6.63, 6.71-6.96, and 6.111-6. 119 are adopted without changes and will not be republished. Section 6.5(c)(1) was changed for grammatical corrections. An editorial change was made to sec.6.3(a) to provide a new address for all correspondence relating to requests for hearings made by persons having experienced a denial, suspension, or revocation of an instructor certification or license to carry. Requests for hearings are time-sensitive documents and specific handling is required to assure that the department may respond in a timely manner. The justification for these sections is the licensing of individuals to carry a concealed handgun. These sections set forth eligibility and procedures for licensing persons to carry concealed handguns, enforcement, suspension and revocation procedures, and certification of qualified handgun instructors. Comments on the proposed new rules were received from the Texas Automobile Dealers Association and the Texas Hospital Association. Full and objective analysis and consideration was given to all comments received, as evidenced by the revisions made from the rules as proposed, and the responses to comments in the following paragraphs in this preamble. The factual, statutory, and policy basis for parts of the rules which received comments, are described in these responses. A summary of the comments received and the department's responses are as follows: COMMENT: A comment was received suggesting grammatical corrections in the Spanish text as quoted in sec.6.5(c)(1). RESPONSE: The department agrees that corrections should be made in portions of the Spanish text quoted in sec.6.5(c)(1) and the optional notice was revised to read: "No se permite posser armas de fuego en este edificio bajo authoridad de la Ley de Permisos para portar armas de fuego en el Estado de Texas (Texas Civil Statutes, Article 4413(29ee)." COMMENT: A comment was received which asked the department "If a customer decides to leave a concealed handgun in his or her automobile when it is brought to a dealership for service, if the dealership posts one of the two notices, as set out in sec.6.5(b), is this notice adequate to inform the customer to remove a concealed handgun when the motor vehicle is brought to the dealership for service?" The commenter then asks "If one of the proposed notices is not adequate, may the dealership post an additional notice informing a customer that a concealed handgun is to be removed when the concealed handgun is in a motor vehicle and that vehicle is at the dealership for service?" RESPONSE: The department cannot provide a definitive opinion regarding the adequacy of the notice described above, as that is a matter within the purview of the Attorney General and is an issue that will be determined on a case-by- case basis as violations are prosecuted in local courts. In addressing the adequacy of such notices, however, the department emphasizes that sec.6.5 of the rules provides only sample language that may be used by a public or private employer to prohibit persons who are licensed to carry from carrying a concealed handgun on the premises of the business. The department believes it is possible for public or private employers to tailor notices to reflect the policy they have formulated to restrict persons who are licensed to carry from specific locations on the premises of the business. However, because of the variety of fact specific situations that may arise, the department also believes it is impracticable to formulate multiple samples into the rule. COMMENT: A comment was received which asked if hospitals required to post signs could place such signs in a conspicuous manner clearly visible to the public from outside or immediately inside each public entrance and not at hospital employee and delivery service entrances. The commenter indicates that an administrative and financial burden is created by having to place signs at other than public entrances and is unnecessary. RESPONSE: The department differs with this construction of the Concealed Handgun Statute (Texas Civil Statutes, Article 4413(29ee)), sec.31. The department is of the view that the Legislature intended that all entrances have signs at those facilities where signs are required. The Legislature has settled on a policy that would provide notice in a manner so as to alert all possible persons that no handguns would be permitted in the facility, unless the license holder has written authorization of the hospital (sec.31, supra, and Article 46.035(b)(4), Penal Code). Under these circumstances, the department is of the view that the language of sec.6.4(c) of the rules carries out the legislative mandate. Subchapter A. General Provisions 37 TAC sec.sec.6.1-6.5 The new sections are adopted pursuant to Texas Civil Statutes, Article 4413(29ee), sec.22, which authorize the department to adopt rules to administer this article. Authority to adopt by rule specific forms, fees and procedures, is provided under Article 4413(29ee) as follows: application request form, sec.6(a); form of license sec.6(e); application for modified license, sec.10(b); renewal application form and renewal fee, sec.11(b); procedure for renewal by mail, sec.11(d); minimum standards for handgun proficiency, sec.16(a); establishment of continuing education course, sec.16(c); record keeping responsibilities of certified handgun instructors, sec.16(i); fee for handgun proficiency certificate, sec.17(a); and retraining course for certified handgun instructors, sec.17(d). Authority for the department to adopt rules for local law enforcement to report concealed handgun incidents is provided by Texas Government Code sec.411.047(b). sec.6.3 Correspondence. (a) Addressed to the department. Except as otherwise provided, applications and correspondence not relating to requests for hearings should be mailed to the department at the following address: Texas Department of Public Safety, Concealed Handgun Licensing Unit, Post Office Box 15888, Austin, Texas 78761- 5888. A request for hearing and all correspondence relating thereto should be mailed to the department at the following address: Texas Department of Public Safety, Legal Services - Concealed Handgun Section, Post Office Box 15327, Austin, Texas 78761-5327. (b) Addressed to applicant, license holder, or certified instructor. Notice will be mailed to the address currently reported to the department by an applicant, license holder, or certified instructor as the correct address. For the purpose of any notice required by the Act, the department will assume that the address currently reported to the department by the applicant or license holder is the correct address. (c) Notice. Written notice meets the requirements under this Act if the notice is sent by certified mail to the current address reported by the applicant or license holder to the department. If a notice is returned to the department because the notice is not deliverable, the department may give notice by publication once in a newspaper of general interest in the county of the applicant's or license holder's last reported address. On the 31st day after the date the notice is published, the department may take the action proposed in the notice. sec.6.5. Notice Optional on Other Premises. (a) Notice. A public or private employer may prohibit persons who are licensed to carry from carrying a concealed handgun on the premises of the business. (b) Text. The sign may state that it is prohibited to carry a handgun on the premises. The following are samples of text which may be used: (1) "Possession of a handgun under authority of Texas Concealed Handgun Permit Law, Texas Civil Statutes, Article 4413(29ee), is prohibited in this building." (2) "Possession of a handgun under authority of Texas Concealed Handgun Permit Law, Texas Civil Statutes, Article 4413(29ee), is prohibited beyond this point." (c) Spanish Text. The notice may also be posted in Spanish as follows: (1) "No se permite posser armas de fuego en este edificio bajo authoridad de la Ley de Permisos para portar armas de fuego en el Estado de Texas, Texas Civil Statutes, Article 4413, (29ee)." (2) "De este lugar en adelante, no se permite poseer armas de fuego bajo authoridad de la Ley de Permisos para Portar Armas de Fuego en el Estado de Texas, Texas Civil Statutes, Article 4413 (29ee)." This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 14, 1995. TRD-9516467 James R. Wilson Director Texas Department of Public Safety Effective date: January 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 424-2890 Subchapter B. Eligibility and Application Procedures 37 TAC sec.sec.6.11-6.21 The new sections are adopted pursuant to Texas Civil Statutes, Article 4413(29ee). Authority to adopt by rule specific forms, fees and procedures, is provided under Article 4413(29ee) as follows: application request form, sec.6(a) ; form of license, sec.6(e); application for modified license, sec.10(b); renewal application form and renewal fee, sec.11(b); procedure for renewal by mail, sec.11(d); minimum standards for handgun proficiency, sec.16(a); and application fee for active or retired judicial officer, sec.30(d)(4). Authority to adopt a system to implement staggered and evenly distributed license expiration dates is granted by Senate Bill 60, 74th Legislature, 1995, Chapter 229, sec.8(b). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 14, 1995. TRD-9516468 James R. Wilson Director Texas Department of Public Safety Effective date: January 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 424-2890 Subschapter C. Procedures on Denial of License 37 TAC sec.6.31, sec.6.32 The new sections are adopted pursuant to Texas Civil Statutes, Article 4413(29ee) sec.22, which authorize the department to adopt rules to administer this article. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 14, 1995. TRD-9516469 James R. Wilson Director Texas Department of Public Safety Effective date: January 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 424-2890 Subchapter D. Time, Place, and Manner Restrictions on License Holders 37 TAC sec.sec.6.41-6.47 The new sections are adopted pursuant to Texas Civil Statutes, Article 4413(29ee) sec.22, which authorize the department to adopt rules to administer this article. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 14, 1995. TRD-9516470 James R. Wilson Director Texas Department of Public Safety Effective date: January 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 424-2890 Subchapter E. Enforcement Procedures 37 TAC sec.sec.6.51-6.54 The new sections are adopted pursuant to Texas Civil Statutes, Article 4413 (29ee) sec.22, which authorize the department to adopt rules to administer this article. Authority for the department to adopt rules for local law enforcement to report concealed handgun incidents is provided by Texas Government Code, sec.411.047(b). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 14, 1995. TRD-9516471 James R. Wilson Director Texas Department of Public Safety Effective date: January 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 424-2890 Subchapter F. Suspension and Revocation Procedures 37 TAC sec.sec.6.61-6.63 The new sections are adopted pursuant to Texas Civil Statutes, Article 4413(29ee), sec.22, which authorize the department to adopt rules to administer this article. Authority for the department to adopt rules for local law enforcement to report concealed handgun incidents is provided by Texas Government Code, sec.411.047(b). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 14, 1995. TRD-9516472 James R. Wilson Director Texas Department of Public Safety Effective date: January 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 424-2890 Subchapter G. Certified Handgun Instructors 37 TAC sec.sec.6.71-6.96 The new sections are adopted pursuant to Texas Civil Statutes, Article 4413(29ee) sec.22, which authorize the department to adopt rules to administer this article. Authority to adopt by rule specific procedures is provided under Article 4413(29ee) as follows: record keeping responsibilities of certified handgun instructors, sec.16(i); fee for handgun proficiency certificate, sec.17(a); and retraining course for certified handgun instructors sec.17(d). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 14, 1995. TRD-9516473 James R. Wilson Director Texas Department of Public Safety Effective date: January 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 424-2890 Subchapter H. Information and Reports 37 TAC sec.sec.6.111-6.119 The new sections are adopted pursuant to Texas Civil Statutes, Article 4413(29ee) sec.22, which authorize the department to adopt rules to administer this article. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 14, 1995. TRD-9516474 James R. Wilson Director Texas Department of Public Safety Effective date: January 8, 1996 Proposal publication date: October 17, 1995 For further information, please call: (512) 424-2890