2. A residential health care facility shall not be required to segregate a security deposit held on behalf of a resident on the effective date of this act from other funds used to operate the facility if the facility complies with the requirements set forth in subsections a. through c. of this section.
a. The residential health care facility shall pay the resident interest on the security deposit equal to the average rate of interest paid by State or federally chartered banks, savings banks or savings and loan associations located in the municipality in which the residential health care facility is located and insured by an agency of the federal government, in an account bearing a variable rate of interest which shall be established at least quarterly, which is similar to the average rate of interest on active interest-bearing money market transaction accounts paid by a bank or association, less an amount not to exceed 1% per annum of the security deposit for the cost of servicing the security deposit account. The residential health care facility shall obtain the interest rate to be paid on the security deposit at least quarterly by contacting at least three banks or associations in the municipality in which the facility is located, and shall document each call with the name of the bank or association called, the person contacted at the bank or association, the rate of interest quoted and the type of account to which the interest rate applies.
b. The residential health care facility shall notify the resident in writing that the facility will be holding the security deposit, the amount of the security deposit and the initial interest rate to be paid on the deposit. If the residential health care facility fails to so notify the resident in writing within 30 days after the effective date of this act, the resident may give written notice to the residential health care facility that the security money shall be applied on account of payments due or to become due from the resident, and thereafter the resident shall be without obligation to make any further security deposit and the residential health care facility shall not be entitled to make further demand for a security deposit.
c. The residential health care facility is entitled to receive as administration expenses, a sum equivalent to 1% per annum thereon or 12.5% of the aggregate interest yield on the security deposit, whichever is greater, which is in lieu of all other administrative and custodial expenses associated with the resident's security deposit account. The balance of the interest or earnings paid to the account shall belong to the resident and shall be permitted to compound to the benefit of the resident, or be paid to the resident in cash, or be credited toward the payments due on the anniversary of the resident's admission to the residential health care facility in accordance with the terms of the contract or agreement. The residential health care facility shall provide the resident with a quarterly statement of his security deposit account showing the security deposit balance, the interest rate paid on the security deposit, the amount of interest earned and any deductions made from the account.