Degree of Regulation: Charitable gift annuities are exempt from insurance regulation under New York State Insurance Law Section 1110. To qualify for exemption, a charity must have been in continuous operation for at least ten years and a detailed application must be submitted. A segregated reserve account is required with a board resolution.
Notification/Contact with State Regulators: Application for a certificate of exemption must be made with the New York Insurance Department prior to a charity’s accepting its first gift annuity agreement. A charity with a new gift annuity program may apply immediately for a permit (and be subject to the reserve and annual reporting requirements noted below) or apply for a certificate of exemption provided that the organization’s minimum required reserves using the methodology described below do not exceed the $500,000 threshold.
Disclosure Language Required: None.
Further Details: New York no longer restricts the type of assets that can be contributed for a gift annuity, now allowing for contributions of “cash and other property.” (Change was effective July 2004.)
The Department of Insurance is increasing the reserves a charity must maintain to 115% of the current, statutory requirement, which is 110% of actuarially-determined reserves. (Click here for link to ACGA announcement on change. Beginning for 2008 reporting, the Department will phase in the 115% surplus requirement over a three-year period. Total minimum required reserves must be 105% of actuarially-determined reserves for 2008 reporting, 110% for 2009 reporting and 115% for 2010 reporting. (Click here for link to explanation on how to calculate new reserve.)
A charity which applies for a certificate of exemption (the organization’s minimum required reserves using the above methodology do not exceed the $500,000 threshold) does not need to file an annual report until it reaches the $500,000 threshold and applies for a permit. But, it must maintain assets that are at least 125% of the higher reserve requirement described above.
The reserve fund must be held by a bank or trust company. Assets in the annuity fund must be invested in accordance with the prudent investor standard, which is defined in the New York Estates, Powers and Trusts Law Sec. 11-2.3. An annual report on the segregated reserve fund is due by March 1 each year after a permit is obtained.
New York has very detailed requirements regarding the annuity agreement content and format (see link below to “Product Outline”). Among the requirements, the annuity agreement must include:
1. The age of the annuitant (date of birth is sufficient).
2. Description of the nature of the property (e.g. cash, negotiable securities, real estate).
3. A misstatement of age provision (providing for corrective action if the age of the annuitant is wrong);
4. New York law must govern the agreement.
5. If the power to revoke payments is included, it may only be exercisable by will.
6. Form number in the lower left corner.
New York prohibits the “College” or “Tuition” Gift Annuity (where life payments may be exchanged for equivalent payments to be made over a certain period of years) because state law specifies that the charity will not obtain full benefit of the charitable gift until the annuitant’s death.
Links to State Regulations Pages:
For Product Outline on gift annuity agreement content, click here.
Application for Charitable Gift Annuity Permit, click here.
Annual Filing Statement, click here.
New York Insurance Department Contact Information:
New York State Insurance Department
Life Bureau
25 Beaver Street, 3rd Floor
New York, NY 10004-2319
Phone: (212) 480-4659
E-mail: life@ins.state.ny.us
