Regulation of Charitable Gift Annuities
Degree of Regulation:
Issuance of gift annuities is regulated under California Insurance Code Sections 11520-11524.
- Years of operation – 10 years active operation
- Gift annuity-specific registration – submit detailed application
- Reserve fund/investment restrictions – segregated reserve fund required; investment restrictions
- Board resolution – required
- Annual and Quarterly reporting - required
Actions Required for Exemption:
Application is to be made to the Department of Insurance prior to issuance of any gift annuity in the state. A charity that has issued gift annuities without having first obtained an exemption must include, with the application, information about those annuities and about its reserve fund.
Application filing fee - $4,233
Fee for out-of-state charities that need to designate in state agent for “service of process” - $72
Fee for each new CA agreement - $60 (payable in quarter when entered into; discounts for 10 or more agreements)
Disclosure and Agreement Content Requirements:
The following disclosure language is required in the annuity agreement, in at least 12 point, boldface type and on the same page and in proximity to the donor's signature:
"Annuities are subject to regulation by the State of California. Payments under this agreement, however, are not protected or otherwise guaranteed by any government agency or the California Life and Health Insurance Guarantee Association."
The annuity agreement must include the following:
- The value of the property to be transferred;
- The amount of the periodic annuity benefits to be paid;
- The manner in which and the intervals at which payment is to be made;
- The annuitant’s nearest age at the time of the agreement (date of birth is insufficient)
- California law must govern the agreement.
- The effective date of the agreement.
- The donor must sign the agreement.
Other Required Disclosures
Marketing materials must include the above disclosure language, as well as a disclaimer stating that no legal advice is provided and individuals should seek the advice of their own legal counsel.
The required Reserve Fund is to hold reserves only for an organization's California annuities, is to be segregated from other assets of the organization and is to be held in trust (in a separate "CA CGAs only" Trust Account). The segregated fund must maintain a balance at least equal to the reserves present value of annuity liabilities and must be calculated using California’s proscribed mortality table and rate of interest. In determining the reserves amount, a deduction is permitted for any portion of the gift annuities properly reinsured. However, any gift annuity agreements so reinsured require the charity to file a copy of the reinsurance contract and execute a written agreement with the annuitant that if the charity is unable to make annuity payments, the re-insurer will directly pay the annuitant.
Investment limitations are imposed on the reserve fund, , with equities allowed to comprise up to 50% of the reserve fund, and mutual funds allowed within that 50%. ), A charity may seek special written consent of the Commissioner to invest the segregated California annuity fund in other investments.
Once a permit has been obtained, a charity must file a detailed annual report on its CA reserve fund each year. This filing renews the charity's Certificate of Authority and requires very detailed information to be submitted regarding the charity's financials and gift annuity program.
A charity must also file information each quarter on any new California annuities it has issued (using CA form), but copies of the agreements need not be submitted. The reports inform the State about any new California gift annuities issued. Each 4th quarter report requires a statement certifying all the agreements reported as issued that year comply with California law.
Annual Statement - within 120 days of the charity's year end (fiscal or calendar, whichever the charity elected in applying for the Certificate of Authority).
Quarterly reports - filed no later than 30 days after each calendar quarter to the Department of Insurance's office in Los Angeles.
Annual filing fee - $136. (Note: In addition, a charity may also be invoiced for time spent by the Department in reviewing the annual statement.)
Links to State Regulations Pages:
Insurance Department Contact Information:
Gayle Freidson, Attorney III
California Department of Insurance
45 Fremont Street, 24th Floor
San Francisco, CA 94105
Phone: 415) 538-4418
Phone: (800) 967-9331
Fax: (415) 904-5729