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Life Health > Annuities > Fixed Annuities

New York Close to Fixing State's Charitable Gift Annuity Glitch

By Allison Bell

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What You Need to Know

  • A charitable gift annuity offers a client a way to convert one large gift into a stream of income payments.
  • Most states have used rate guidelines developed by a gift annuity group.
  • In 2020, New York state tried to go its own way.

New York state lawmakers have approved a bil that could help clients there make more use of charitable gift annuities.

Members of the state Assembly recently voted 145-0 to pass 02683 and send it on to Gov. Kathy Hochul for her signature. The state Senate passed the bill by a 60-1 vote in May.

The bill would change state rules, adopted in 2020, that regulate how charities in the state set charitable gift annuity payout rates.

The American Council on Gift Annuities has been lobbying to change the rules, arguing that they lower the rates New York state charities can offer on gift annuities and hurt the charities’ ability to compete with charities in other states.

What It Means

Charities based in New York state may soon be able to pay your clients more attractive rates on gift annuities.

Charitable Gift Annuities

A client who wants a charitable gift annuity makes a large payment to a charity. The charity then sends regular payments to the donor and keeps any assets left over when the donor dies.

The gift annuities council has recommended that issuers set the payout rates to make the amount left over, or “target residuum,” equal to about 50% of the original gift amount.

Most states use rate guidelines developed by the council.

The New York Rate Rules

In 2020, the New York State Department of Financial Services developed a set of payout calculation rules that required charities to set gender-specific rates and update the rates every three months.

“The constant adjustment of rates and the gender specificity of those rates increase the costs and complexity to charities,” according to the gift annuities council. “This caused confusion and disruption to charities and donors.”

Financial services regulators and lawmakers in New York accepted a gift annuities council proposal to shift to using unisex rates and a simpler method for calculating the maximum allowable rates.

The New York Bill

S02863 was introduced by state Sen. Neil Breslin, D-Albany, N.Y., chairman of the Senate Insurance Committee.

If Hochul signs the bill, it will take effect 90 days after the signing.

A view of Manhattan, from Midtown looking west toward the Hudson River. Credit: ALM

Allison Bell

Think_Allison

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