Report Title:

Charitable Gift Annuities; Annual Statement; Reserves

Description:

Clarifies filing deadline for annual compliance statement of charities that issue charitable gift annuities. Clarifies acceptable method for determining reserves on outstanding annuity agreements. Provides that no reserve surplus is required for portion of gift annuity that is reinsured. (SD1)

THE SENATE

S.B. NO.

693

TWENTY-THIRD LEGISLATURE, 2005

S.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO CHARITABLE GIFT ANNUITIES.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Section 431:1-204, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) For the purposes of this code, the transacting of life insurance includes the granting of annuities and endowment benefits, except for annuities that are provided under a charitable gift annuity agreement with a donor and issued by a nonprofit educational foundation or a nonprofit organization that has met the requirements of paragraphs (1) to (4).

A nonprofit educational foundation or nonprofit organization issuing charitable gift annuities shall:

(1) Meet the following requirements:

(A) The foundation or organization shall have conducted business in the form of program services or fundraising activities in the State continuously for at least ten years;

(B) The foundation or organization shall maintain a net worth in the State of not less than $200,000 in cash, cash equivalents, or publicly traded securities, exclusive of the assets funding any annuity; and

(C) The foundation or organization shall have filed an annual statement that certifies compliance with this subsection, on forms that may be prescribed by the department of the attorney general[;]. Each foundation or organization shall file its annual statement with the attorney general on or before March 15 of each year;

(2) Maintain segregated assets in a financial institution equal to at least the sum of the reserves on its outstanding charitable gift annuity agreements, calculated in accordance with [accepted actuarial standards,] mortality tables and discount rates to be determined by the commissioner of insurance, and a surplus of ten per cent of the reserves or the amount of $100,000, whichever is higher. The assets shall be segregated as separate and distinct funds independent of all other funds and shall not be applied toward the payment of the debts and obligations of the foundation or organization, other than with respect to the annuity agreements. The segregated assets shall not be considered in determining whether the foundation or organization meets the net worth requirement of paragraph (1)(B). In determining the fund reserves, a deduction shall be made, and no surplus shall be required, for all or any portion of an annuity risk that is lawfully reinsured by an authorized [reinsurer;] insurer;

(3) Invest and manage assets as would a prudent investor, taking into account the purposes, terms, and distribution requirements expressed in its governing instrument. To satisfy this standard, the fiduciary shall exercise reasonable care, skill, and caution; and

(4) Prominently state on the first page of a charitable gift annuity agreement that the agreement is not insurance under the laws of the State, is not subject to regulation by the insurance division, and is not protected by any state guaranty fund.

Upon the failure of a nonprofit educational foundation or nonprofit organization to comply with any of the requirements of paragraphs (1) to (4), a charitable gift annuity agreement issued by the foundation or organization shall be deemed life insurance and subject to the provisions of this code governing life insurance.

For the purposes of this subsection:

"Charitable gift annuity agreement" means a contract under which an individual transfers property to a charity, conditioned upon the right to receive a specific sum of money for life.

"Nonprofit organization" means an organization that has been granted tax exempt status as a charitable organization by the Internal Revenue Service pursuant to section 501(c)(3) of the Internal Revenue Code of 1986, as amended."

SECTION 2. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 3. This Act shall take effect upon its approval.