Senate Bill S5213

                                BILL NUMBER:S5213

TITLE OF BILL:
An  act  to  amend  the  insurance  law, in relation to investments by
charitable gift annuity corporations or associations

PURPOSE:
To authorize  non-profit  corporations  and  associations  to  combine
charitable gift annuity reserve funds with other funds for purposes of
management and investment.

SUMMARY OF PROVISIONS:
Section  1  of  the  bill  would  amend  Insurance  Law  § 1110 (b) to
authorize charitable, non-profit corporations and associations to pool
charitable gift annuity reserve funds for purposes of  management  and
investment.

EXISTING LAW:
Section  1110 of the Insurance Law requires charities to have a permit
to issue gift annuities in New York. The statute further requires  the
size  of the annuity to be calculated so that, upon the donor's death,
the charity will have a reserve of at  least  equal  to  half  of  the
original  value of the gift. Charities issuing annuities must maintain
reserves that are invested using the prudent investor standard  so  as
to  protect  the  value  of  the donor's annuity. Finally, the statute
requires such reserves to be  "segregated  as  separate  and  distinct
              

funds," independent of other funds of the charity and can only be used
to pay annuity benefits.

JUSTIFICATION:
A  charitable  gift annuity is a contract pursuant to which a charity,
in return for a donor transferring a "gift" of cash or other  property
to  the  charity, agrees to pay a fixed sum of money over the lifetime
of the donor or his nominee. Upon  the  death  of  the  donor  or  his
nominee,  the  charity  may  use the remainder of the gift for its own
charitable purposes.

The purpose of this bill is  to  amend  the  "separate  and  distinct"
requirement  in existing statute which has been interpreted to require
that gift annuity reserves must not only be  segregated  by  custodian
accounts,  but  must  be invested in assets different from a charity's
other  assets.    However,  these  small,  segregated   reserve   fund
investments generally are outperformed by investment pools - which are
more  highly  diversified  and  have  less  administrative costs. As a
result, investment "pools" have the advantage of enhancing the  margin
of reserve to ensure payment of donors' annuities while simultaneously
increasing  the  value  of  the  reserve that ultimately inures to the
benefit of the charity.

Further,  this  bill  would  only  authorize  charities  to  pool  the
charitable   gift  annuity  reserves  for  management  and  investment
purposes and would not diminish the  individual  reserve  obligations.
Charities would continue to be required to separately hold and account
for  each  charitable  gift  annuity  reserve to ensure that each such
reserve has sufficient funds to pay  the  relevant  annuity  benefits.
This  approach  is  consistent  with accepted accounting and custodian


practices related to investment pools through  which  many  charitable
organizations manage and invest their endowments, annuities, and other
reserves.

LEGISLATIVE HISTORY:
This is a new bill.

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
This bill shall take effect immediately.