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Charitable Gift Annuities in Difficult Economic Times

During trying economic times, with wide swings in the stock market, many charities look to review the risks associated with their charitable gift annuity programs. The American Council on Gift Annuities endorses regular reviews of gift annuity programs, while emphasizing the long-term nature of charitable gift annuities.

During a called meeting of the combined Executive and Rates committees, it was agreed that the regular semi- annual review of the recommended rates would take into special consideration the current economic situation. The Rates Committee will bring a recommendation to the ACGA Board for action at its November 17th meeting. In anticipation of that meeting, the Rates Committee will conduct its regular review of the rates schedule along with the assumptions underlying the rate calculations. Although any changes to the schedule of rates recommended by the ACGA usually become effective on July 1st, if an interim adjustment is deemed necessary, that action can be taken. The board will decide whether an interim change in suggested rates needs to take place given current economic conditions. The ACGA will announce the results of this assessment subsequent to its November board meeting. A review of the current assumptions can be found at www.acga-web.org.

Charitable gift annuities are long-term agreements between a charity and an annuitant, spanning the life of the annuitant. Given the potentially long time span of an annuity agreement, the ACGA recommends not overreacting to short-term economic news. It encourages charities to review their gift annuity pool asset allocations, in consultation with investment managers, as compared to the asset allocation in the ACGA model portfolio in order to assess the risk inherent in each charity’s gift annuity pool. It also encourages a close look at the reserve requirements for gift annuity pools in your state to make sure that adequate reserves are being held.

We look forward to sharing the results of our review in mid November.