Degree of Regulation: Issuance of gift annuities in the state is regulated under California Insurance Code Sections 11520-11524. A charity must have been in active operation for at least 10 years, and a detailed application must be submitted. A segregated reserve fund, held in trust, is required, as is a board resolution.

Notification/Contact with State Regulators: 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.

Disclosure Language Required: Beginning January 1, 2006, 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."

Further Details: 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 separate "CA CGAs only" Trust Account). Investment limitations are imposed on the reserve fund, though the restrictions have been eased by legislation passed in 2004 and 2005, with equities now allowed up to 50 percent of the reserve fund, and mutual funds (equity or bond funds up to 50% of the reserve fund), as well as stocks listed and traded on the NYSE, AMEX and NASDAQ exchanges) being allowed without the need for advance approval from the Department of Insurance. Once a permit has been obtained, a charity must file a detailed annual report on its CA reserve fund each year. 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.

In addition to the disclosure language noted above, and besides information about the property transferred and the payment amount and frequency, the annuity agreement must include the annuitant's nearest age at the time of the gift and be signed by the donor.

There is an application filing fee of $3,599, and a fee of $61 for out-of-state charities that need to designate an in-state agent for "service of process". Other fees include $117 for annual renewal of the permit, and $60 for EACH new California agreement, with discounts for more than ten (10) agreements.

Links to State Regulations Pages:

1) For suggested sample Board Resolution, click here.

1) For copy of CA statute (11520-11524): http://www.leginfo.ca.gov/cgi-bin/displaycode?section=ins&group=11001-12000&file=11520-11524.

3) Annual report forms: http://www.insurance.ca.gov/0250-insurers/0300-insurers/0100-applications/financial-filing-notices-forms/2006/grants-and-annuities/index.cfm

California Insurance Department Contact Information:

Carol Harmon, Senior Staff Counsel
California Department of Insurance
45 Fremont Street, 24th Floor
San Francisco, CA 94105
Phone: 415-538-4420
Phone: (800) 967-9331
Fax: 415-904-5729
E-mail: harmonc@insurance.ca.gov