Report Title:

Charitable Annuity; Nonprofit Organization

Description:

Allows more local charities to raise funds through the issuance of gift annuities by reducing the net worth requirement and increasing the reserve requirements (HB2762 HD1).

HOUSE OF REPRESENTATIVES

H.B. NO.

2762

TWENTY-SECOND LEGISLATURE, 2004

H.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to charitable annuities.

 

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

SECTION 1. Section 431:1-204, Hawaii Revised Statutes, is amended to read as follows:

"§431:1-204 Life insurance defined. (a) Life insurance is insurance on human lives and insurance appertaining thereto or connected therewith.

(b) For the purposes of this code, the transacting of life insurance includes [the granting of annuities and endowment benefits, except for annuities which are provided by a nonprofit organization or a nonprofit educational foundation for a public educational institution under a charitable gift annuity agreement with a donor; additional]:

(1) Additional benefits in event of death or dismemberment by accident or accidental means; [additional]

(2) Additional benefits in event of total and permanent disability of the insured; and [optional]

(3) Optional modes of settlement of proceeds.

[For purposes of this section, "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.

For the purposes of this section, a "nonprofit organization" means an organization that meets all of the following requirements:

(1) 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;

(2) Has conducted business in the State continuously for at least ten years;

(3) Has a net worth in the State of not less than $5,000,000;

(4) Maintains a separate annuity fund with at least one-half of the value of the annuity; and

(5) Has filed a statement on forms that may be prescribed by the department of commerce and consumer affairs which certify compliance with this section; provided that the statement shall be filed on an annual basis in accordance with rules adopted by the department of commerce and consumer affairs."]

(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 issued by a nonprofit educational foundation or a nonprofit organization that:

(1) Has conducted business in the State continuously for at least ten years;

(2) Maintains a net worth in the State of not less than $100,000;

(3) Annually files a statement that certifies compliance with this section on forms as may be prescribed by the department of commerce and consumer affairs;

(4) Maintains segregated assets in a Hawaii 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 and a surplus of ten per cent of such reserves or the amount of $100,000, whichever is higher, which assets shall be segregated as separate and distinct funds, independent of all other funds and shall not be applied to the payment of the debts and obligations of the nonprofit organization other than its annuity agreements. In determining the reserves of the funds, a deduction shall be made for all or a portion of an annuity risk that is lawfully reinsured by an authorized reinsurer; and

(5) Prominently states on the first page of any annuity agreement that the charitable gift annuity agreement entered into by the nonprofit education organization or the nonprofit organization:

(A) Is not insurance under the laws of this State;

(B) Is not subject to regulation by the commissioner; and

(C) Is not protected by any state guaranty fund.

A charitable gift annuity agreement entered into by a nonprofit education organization or a nonprofit organization in noncompliance with the requirements of this subsection shall be subject to the life insurance provisions of this code.

For 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.