Lawmakers push for stricter oversight of retirement communities

Aerial view of many buildings surrounded by trees and green which is the Aldersgate retirement community, a continuing care community in Charlotte

By Cristina Bolling

For years leading up to 2023, the financial situation at the Aldersgate retirement community in east Charlotte was quietly deteriorating, and neither state regulators nor residents grasped the magnitude of what was happening.

Entrance fee refunds that were due to former residents or their estates were going unpaid.

A new nonprofit entity was created — outside the purview of regulators — that was controlling how Aldersgate was being run.

Residents and prospective residents weren’t getting the full picture of how Aldersgate’s financial health was crumbling.

By the time August 2023 rolled around, the situation was so severe that the N.C. Department of Insurance, which regulates the financial side of continuing care retirement communities (CCRCs) like Aldersgate, declared Aldersgate at risk for becoming insolvent and made the unprecedented move of issuing an “order of supervision.”

Now, legislation is working its way through the N.C. General Assembly with new rules about financial reporting, transparency and more. If it passes, it would help prevent another Aldersgate-type situation from happening, according to state officials and leaders within the retirement community industry.

Senate Bill 105 is sponsored by Republican Sen. Todd Johnson, who represents Cabarrus and Union counties, and it was the result of a 20-member task force of state regulators, leaders of CCRCs across the state, industry professionals and CCRC residents. (House bill 357 is a companion bill in the House.)

Much of the work on the issue predates the Aldersgate situation — similar legislation was introduced two years ago and passed through the N.C. Senate but failed in the N.C. House — but some details in the bill were prompted by what happened at Aldersgate, said deputy insurance commissioner Jeff Trendel.

“Some of [the changes] were inspired by Aldersgate, and things that we’ve learned,” Trendel told The Charlotte Ledger in an interview on March 20.

Since August of 2023, The Ledger has been following the saga at Aldersgate, one of Charlotte’s oldest and best-known retirement communities, as state authorities placed it under financial supervision, residents worried about its future and new leadership worked to turn around its finances. Aldersgate’s interim CEO told The Ledger this month that its board plans to vote on an “affiliation” with another entity next week, which if approved would improve the community’s finances.

Aldersgate’s plight has been closely watched by other retirement communities and their residents, and it has received national attention as a cautionary tale of how prospective residents should vet the places where they plan to spend their retirement years. The turmoil and turnaround have received almost no other local media attention.

Here are five key highlights of what the bill would do:

◼️Boost financial reporting: CCRCs would be required to turn over financial statements quarterly to the N.C. Department of Insurance — not annually, as they are now. Currently, CCRCs include financial statements in the disclosure statements they’re required to update annually for the public. But quarterly reporting to the state would allow regulators to spot financial trouble earlier.

◼️Beef up what goes into the disclosure statements that the public can view. CCRCs are required to provide prospective residents with a document that gives an overview of how the community is structured, its services, fees, who the leaders are and a snapshot of its finances.

The new bill spells out some more specific requirements that must be in the disclosure statements, including any plans for expansions or renovations and eight key financial metrics or ratios.

◼️Alert residents and the NCDOI if communities are failing to pay out entrance fee refunds. Most people who move into CCRCs pay large entrance fees with the promise that a percentage of the fees will be paid back to the resident or their estate when the resident moves out or passes away.

In the case of Aldersgate, some former residents or their estates weren’t being paid back, or were being paid back late, because of the community’s financial trouble. The new bill would require CCRCs to notify NCDOI and residents within 10 days if they become more than 30 days past due on entrance fee refunds.

◼️Require CCRCs to be transparent about who’s in charge. In the case of Aldersgate, the community’s administration and board of directors created a separate nonprofit outside of NCDOI supervision called Aldersgate Life Plan Services (ALPS) that acted as a parent company to the Aldersgate community.

New legislation would require CCRCs to alert NCDOI when there are changes in bylaws or other organizational documents. For example, Trendel said he was aware that ALPS existed, but not that the Aldersgate bylaws had changed “where all of the control was being given to ALPS.”

Under the proposed legislation, state regulators would need to be looped in when a community is considering making a change like that one.

Stability ‘until the day they put us in the box’

Skip Kingan, president of the North Carolina Continuing Care Residents Association (NorCCRA) and a resident of a CCRC in Durham, said stability and transparency have been top priorities for NorCCRA members who’ve been watching or involved in drafting the legislation.

NorCCRA members were part of the 20-person task force that worked on the new bill.

“We’ve all kind of dedicated our remaining lives to living in a continuing care community, and that is something that we wanted to reinforce — that the continuum of care would always be there,” Kingan said.

“With all the different models that are showing up these days, it’s very important that somebody moving into a CCRC can expect to be taken care of from the day he moves in until the day they put us in the box,” he said. “This statute reinforces that.”

Tom Akins, president and CEO of LeadingAge North Carolina, a nonprofit membership association of about 50 nonprofit retirement communities across the state, said one of the best things to come of work on the new legislation was the unity it brought between CCRC leaders, residents and regulators.

LeadingAge of North Carolina and NorCCRA are in talks to work together on a primer for residents and prospective residents about how to read CCRC disclosure statements, which can be long and hard to navigate.

“I think there’s some unplanned benefits out of this whole process, and that’s certainly one of those,” Akins said.

An attempt to get caught up

The new rules are long overdue, said Kingan, Akins and Trendel.

Current regulations governing CCRCs were created in the 1980s, when the retirement home landscape in Charlotte and across the state was much simpler, and mostly made up of mission-driven, church-affiliated nonprofits on single sites.

But as the demand for senior living options grew due to increasing life expectancy and an aging population, private investment surged. For-profit companies recognized the financial potential of offering independent living, assisted living, and skilled nursing services under one roof.

Today, CCRCs operate on a much larger scale, incorporating luxury amenities, diverse service models, and high-end real estate developments to attract affluent retirees.

Even nonprofit retirement communities often have parent-subsidiary relationships these days, Trendel said, with a larger nonprofit organization owning or overseeing multiple CCRCs. This shift mirrors trends in the for-profit sector.

“The organizational structures have gotten much more complicated,” Trendel said. “The industry has evolved, but our laws didn’t really evolve with it. So this was our attempt to get things caught back up.”

Cristina Bolling is managing editor of The Charlotte Ledger: cristina@cltledger.com

This article is part of a partnership between The Charlotte Ledger and North Carolina Health News to produce original health care reporting focused on the Charlotte area.

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