Report Title:

Charitable Gift Annuities; Nonprofit Organizations

Description:

Reduces minimum net worth requirement from $5 million to $100,000 for nonprofit organizations that issue charitable gift annuities. Requires segregation of assets required to pay annuities and disclaimers in annuity agreements. (SD1)

THE SENATE

S.B. NO.

3049

TWENTY-SECOND LEGISLATURE, 2004

S.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;] contracting to provide additional benefits in the event of death or dismemberment by accident or accidental means[; additional benefits in event of], or in the case of total and permanent disability of the insured[;], and further includes effecting 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 transaction of life insurance further 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 (3).

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.

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 State continuously for at least ten years;

(B) The foundation or organization shall have a net worth in the State of not less than $100,000; 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 commerce and consumer affairs;

(2) Maintain 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 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 towards the payment of the debts and obligations of the nonprofit educational foundation or nonprofit organization, other than with respect to the annuity agreements. In determining the fund reserves, a deduction shall be made for all or any portion of an annuity risk that is lawfully reinsured by an authorized reinsurer; and

(3) 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 (3), a charitable gift annuity agreement issued by the organization or foundation shall be deemed life insurance and subject to the provisions of this code governing life insurance."

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.