OLR Research Report

September 29, 2010




By: Robin K. Cohen, Principal Analyst

You asked for a summary of state law governing continuing care retirement communities (CCRC).


CCRCs are retirement communities that offer older people residential living and various health care services for an extended period of time, or in many instances, the balance of their lives. They generally require a very large upfront payment from residents when they enter into “life care” contracts for these services, along with a monthly maintenance fee. In return, the CCRC is expected to provide most or all of the care that residents may need as they age and their health status changes.

CCRCs in Connecticut are regulated primarily by the Department of Social Services (DSS). (The Department of Public Health (DPH) licenses any health care facility located in the community, such as a nursing home.) Connecticut's law requires CCRCs to disclose to both prospective residents and DSS detailed financial information to ensure that people entering into contracts do so with complete and accurate information about the CCRC's financial health. This includes financial statements and lists of the goods and services to be provided. The law also specifies what the contracts must contain, including provisions governing cancellations and refunds.

The CCRCs must provide a separate statement to prospective residents expressing that a continuing care contract is a financial risk.

In addition to providing the above statements, CCRCs must report annually to DSS, including any information on rates, health utilization, and occupancy.

CCRCs must establish two separate escrow accounts, generally with Connecticut banks. The first holds the entrance fees and the second holds reserve funds. CCRCs must have at least a year's worth of reserves to cover debt service.

In addition to receiving the disclosure statements and reviewing them to ensure they comply with the law's requirements, DSS (1) meets with companies interested in establishing CCRCs or buying existing ones and (2) investigates complaints filed against CCRCs. It may also place a CCRC in receivership, when necessary.


CCRCs provide housing and various levels of health-related services to residents under a contract effective for at least one year. CCRCs are not licensed under federal or state law, but they must register with DSS, which has primary responsibility for overseeing them. Also, DPH must license any health care facilities located within the communities. By law, a continuing care advisory committee, appointed by the DSS commissioner, must help DSS with its oversight responsibilities. But according to DSS' Gary Richter, this committee has been disbanded.

The major regulatory provisions pertaining to CCRCs address (1) financial disclosures, (2) continuing care contracts, (3) reporting requirements, (4) escrow accounts, and (5) DSS' oversight and investigatory authority.


State law requires CCRCs to register with DSS and submit an extensive financial disclosure statement, along with proof they have set up the required escrow accounts (see below) and paid the required fee, before they can offer or enter into continuing care contracts or change ownership (CGS 17b-521). Before entering into contracts or allowing money to be transferred to them, they must give the prospective resident

or that person's legal representative a financial risk statement, as well as a copy of the financial statement. Both must be easy to read and understand (CGS 17b-522).

Financial Risk Statement

The financial risk statement must indicate that:

1. a continuing care contract is a financial investment and that the resident's investment may be at risk;

2. the provider's ability to meet its contractual obligations depends on its financial performance;

3. the resident should consult an attorney or other professionals with knowledge of CCRCs before signing the contract; and

4. DSS does not guarantee the investment's security (CGS 17b-522).

Contents of Financial Disclosure Statement

Some of the more significant information the financial disclosure statement must contain includes:

1. criminal and other information on the provider, its officers, directors and others;

2. a description of the provider's experience or other designated manager's experience managing CCRC contracts or similar contractual arrangements;

3. a list of the goods and services provided or proposed at no extra charge, including the extent to which medical or nursing care or other health-related benefits are furnished;

4. how earned interest on entrance fees or other deposits held in escrow is disposed of;

5. a statement of a resident or nonresident surviving spouse's rights;

6. a statement that the entrance fee or other asset transfers may have significant tax consequences and that the person considering making them should consult a qualified advisor;

7. provisions the provider has made to ensure that it has adequate funds to fulfill its contracts with residents;

8. audited and certified financial statements of the provider and proforma income statements for the facility covering specified periods;

9. a description of entrance fees and any periodic charges and a record of increases in these amounts during the previous seven years; and

10. for each CCRC facility, the total actuarial value of prepaid healthcare obligations the provider assumes under the contracts as calculated on an actuarially sound basis using reasonable assumptions for morbidity and mortality (CGS 17b-522).

DSS Compliance Review

DSS must acknowledge in writing its receipt of the statement within 10 business days, indicating (1) whether it meets the law's requirements and (2) the amount of the registration fee due. Until providers are notified to the contrary, they can conduct business using the disclosure statement as submitted if DSS does not respond within this timeframe. At any time after the commissioner accepts the filed statement, he may review or investigate the information contained in it to determine its accuracy and completeness. The regulations specify what occurs when there are discrepancies in the statements (CGS 17b-521; Conn. Agency Regs., 17b-533-2).

Delivery of Statements to Prospective Residents. Providers must deliver the disclosure statements to the prospective resident no more than 60 nor less than 10 days before a contract is executed. Likewise, they must deliver a revised and up-to-date statement within this same timeframe before the prospective resident occupies the facility. If there are no revisions, they must inform the residents of such.

The prospective resident must sign and date both statements before a contract can be executed or money is transferred, and his or her legal representative must acknowledge reviewing both the statements and the contract. The provider must keep these signed statements on file for the duration of the contract (CGS 17b-522).

CCRCs that enter into contracts (1) without first delivering a disclosure statement or (2) that rely on a disclosure statement that omits a required material fact or is otherwise misleading, are liable to the person signing the contract for damages and repayment of all fees, less the reasonable value of care and lodging provided before this act occurs. Any lawsuit must be brought within six years from the date the contract is executed (CGS 17b-529).


The law specifies certain provisions that a CCRC contract must contain. This includes provisions governing contract cancellations or rescissions, circumstances under which refunds are made or charges adjusted, and provisions dealing with residents who experience financial difficulties (CGS 17b-523).

Contract Rescissions and Cancellations

The contract must specify the terms and conditions under which a resident or provider can cancel it and the conditions for refunding any portion of the entrance fee if the contract is cancelled or the resident dies before or after occupying the unit.

The contract must state that the resident may rescind it by notifying the provider within 30 days after it is executed. When this occurs, the provider must return any money or property transferred minus (1) costs the provider incurred for services that the resident requested under the contract and (2) a reasonable service charge of up to $1,000 or 2% of the entrance fees, whichever is more.

The contract must also state that it is automatically cancelled if the provider is notified by certified or registered mail that (1) after the 30-day period but before the individual occupies the unit, the resident died or is otherwise precluded from occupying the unit or (2) the resident dies before care commences. In either case, the resident or legal representative must receive the same refund less costs described in cases where a contract is rescinded. If the contract includes occupying a unit and the unit was actually available for occupancy, the provider also deducts a prorated monthly charge for the unit.

When Construction of Facility Has Not Begun

The contract must specify that if construction of the facility has not begun, it may not commence until at least half the units have been presold and the provider has received a minimum of 5% of the entrance fee or $10,000, whichever is less, from each purchaser. (This does not apply to contracts for at-home continuing care.).

Opportunity for Ongoing Care When Resident Experiences Financial Problems

The contract must indicate the circumstances under which ongoing care and shelter promised in the contract either in a facility or at home will be provided if the resident experiences financial problems.

Making the Unit Available to Others

The contract` must include the conditions under which a provider can offer a living unit to a different or new resident other than when the original resident dies.

Adjusting Charges

The contract must indicate how the provider can adjust periodic charges or other recurring fees and any limitations on these adjustments. If there are no limits, the contract must include a clear statement that these increases can be made at the provider's discretion.


Annual Reports

The law requires providers annually to file with DSS financial and actuarial information for each CCRC they operate in the state. The DSS commissioner prescribes the information, which must include:

1. financial statements; rate schedules; occupancy, turnover, and utilization rates; the number of health care admissions and permanent transfers; and a statement of source and application of funds for the five-year period beginning with the year of initial filing or any subsequent filing;

2. the basis for amortization assumptions for the provider's capital costs; and

3. the residents' average age for the next five years.

Providers must make the information in these reports available to residents for viewing during regular business hours and, when requested, provide residents with a copy of the most recent filing with DSS. They must notify residents, at least once a year, of these rights (CGS 17b-527).

Additional Reports

After operating for a year, providers must additionally provide a revised disclosure statement to DSS, including financial statements for their most recently ended fiscal year, their most recent entrance fees, occupancy and other charges, and verification of the maintenance of the escrow accounts. They also must file a narrative describing any material differences between (1) the pro forma income statement filed and actual results of operations during the most recently concluded fiscal year and (2) any estimates or projections made in the initial disclosure and the actual results. After this, providers must submit additional disclosure statements only if they are necessary to prevent a statement from containing a material misstatement of fact or from omitting a material fact required to be stated therein (CGS 17b-528; Conn. Agency Regs., 17b-533-7).


Entrance Fees

Providers must establish escrow accounts with banks or trust companies to hold all or some of the entrance fees that they receive on behalf of a resident before the resident may actually occupy the CCRC unit.

The law specifies how these funds may be released. If the fee applies to a previously occupied unit, the fee must be released to the provider when the unit is ready for the new resident, or it must be returned to the resident or his or her legal representative (as allowed by the contract provisions described above) if the agent has received written demand for its return.

If the fee applies to a living unit not previously occupied, it must be returned to the resident or representative (when allowed by the contract) in the same manner as the previously occupied units. Otherwise, it is released to the provider provided certain conditions exist related to financing of the CCRC (CGS 17b-524).

Reserve Funds

The law requires providers to establish and keep current escrow funds to hold a portion of the entrance fees. The portion must be sufficient to cover (1) all principal and interest, rental or lease payments due during the next 12 months for any first mortgage loan or any other long-term financing for the facility and (2) total operating costs for a one –month period, less the debt service for (1) above and capital expenditures.

The escrow agent may release up to 1/12th of the required principal balance of funds held in escrow no more than once a month when the provider requests such. The DSS commissioner can authorize additional funds' release if the provider applies for it and gives the reasons for it and a plan for replacing the funds within one year (CGS 17b-525).

Providers whose CCRCs were operating or under construction on January 1, 1987 are exempt from the reserve requirements (CGS 17b-534).


The law allows the DSS commissioner to conduct investigations, inquiries, and investigatory hearings that he deems necessary. The law permits him to notify the attorney general's office to request legal action to compel compliance if he determines that a CCRC's financial and actuarial information will not be accepted for filing. He also can apply to the Superior Court to compel cooperation.

If, after an investigation, the commissioner finds that a violation has occurred, he can ask the attorney general to request an injunction against the provider, and the court can issue one. The commissioner can also ask the attorney general to seek restitution or damages.

Anyone who willfully and knowingly violates the CCRC law faces a fine of up to $10,000, one year imprisonment, or both (CGS 17b-531; Conn. Agency Regs., 17b-533-8).