Regulation of Charitable Gift Annuities
Degree of Regulation:
Issuance of charitable gift annuities is regulated under Maryland Insurance Code Sec. 16-114.
- In-state activity - charity must provide proof of activity in the state for 10 years
- Reserve fund - segregated reserve fund required; prudent investor rule
Actions Required for Exemption:
Application to the State Insurance Administration is to be made prior to the issuance of any annuity in the state. To register for a permit with the Insurance Administration, the charity must assert that it meets the above qualifications and provide supporting documentation, although no state form is provided. Permits to issue gift annuities are limited to educational or religious organizations, Maryland hospitals, or community foundations. “Educational organization” does not simply mean a university, college, or school – an organization with an educational component to its mission may receive a permit. The requisite in-state activity must be related to the category under which an organization applies, e.g., a charity applying as an “educational organization” must provide proof of 10 years of educational activity in the state. A community foundation may be granted a permit after five years of existence provided that it maintains 100% of admitted assets of contributions made to the community foundation. There is no need to have an ongoing physical presence in the state (such as an office).
Disclosure and Agreement Content Requirements:
The charity must provide the following state-required disclosure language, either in a separate disclosure signed by the donor or included in the signed annuity agreement itself:
“Payments made under charitable gift annuities are backed solely by the full faith and credit of the issuing organization and are not insured or otherwise guaranteed by any government entity.”
The annuity agreement must also include an indication that Maryland law will govern.
Organizations must maintain a segregated fund with assets at least equal to adequate reserves on its outstanding gift annuity agreements. If the organization reinsures its annuity contract, this reserve requirement can be reduced.
Investment of the segregated reserve fund is subject to the prudent investor standard.
An annual report on the reserve fund is required.
Submission Deadline - Annual report - due 90 days after the end of the charity’s fiscal year.
Failure to comply with any of the statutory requirements may result in the charity receiving a cease and desist order or the suspension or revocation of the permit.
Links to State Regulations Pages:
Insurance Department Contact Information:
Maryland Insurance Administration
200 St. Paul Place, Suite 2700
Baltimore, MD 21202