S5213-2011 - NY Senate Open Legislation - Relates to investments by charitable gift annuity corporations or associations

Relates to investments by charitable gift annuity corporations or associations.

Sponsor: SEWARD / Co-sponsor(s): MARTINS / Committee: INSURANCE
Law Section: Insurance Law / Law: Amd S1110, Ins L

S5213-2011 Actions

Jan 4, 2012: REFERRED TO INSURANCE
Jun 24, 2011: COMMITTED TO RULES
Jun 6, 2011: ADVANCED TO THIRD READING
Jun 2, 2011: 2ND REPORT CAL.
Jun 1, 2011: 1ST REPORT CAL.901
May 3, 2011: REFERRED TO INSURANCE

S5213-2011 Meetings

Insurance: Jun 1, 2011

S5213-2011 Calendars

Active List: Jun 13, 2011 , Floor Calendar: Jun 2, 2011 , Floor Calendar: Jun 6, 2011 , Floor Calendar: Jun 7, 2011 , Floor Calendar: Jun 13, 2011 , Floor Calendar: Jun 14, 2011 , Floor Calendar: Jun 15, 2011 , Floor Calendar: Jun 16, 2011 , Floor Calendar: Jun 17, 2011 , Floor Calendar: Jun 21, 2011 , Floor Calendar: Jun 22, 2011 , Floor Calendar: Jun 23, 2011 , Floor Calendar: Jun 24, 2011

S5213-2011 Votes

VOTE: COMMITTEE VOTE: - Insurance - Jun 1, 2011

Ayes (15): Seward, Flanagan, Golden, Grisanti, Lanza, Larkin, LaValle, Martins, Saland, Young, Breslin, Diaz, Espaillat, Kennedy, Smith
Ayes W/R (2): Kruger, Peralta

S5213-2011 Memo

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.

S5213-2011 Text

 S T A T E   O F   N E W   Y O R K
 
                                          5213
 2011-2012 Regular Sessions
 I N  SENATE
 May 3, 2011
 
 Introduced  by  Sen.  SEWARD -- read twice and ordered printed, and when
 printed to be committed to the Committee on Insurance
 

AN ACT to amend the insurance law, in relation to investments by  chari
 table gift annuity corporations or associations
 

THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM
 BLY, DO ENACT AS FOLLOWS:

 

Section 1. Subdivision (b) of section 1110 of the  insurance  law,  as
 amended  by  chapter  419  of  the  laws  of 2001, is amended to read as
 follows:

 (b) Every such domestic  corporation  or  association  shall  maintain
 admitted  assets  at  least  equal  to the greater of (i) the sum of its
 reserves on its outstanding agreements, calculated  in  accordance  with
 section  four  thousand  two  hundred  seventeen  of this chapter, and a
 surplus of ten per centum of such reserves, or (ii) the  amount  of  one
 hundred thousand dollars. In determining such reserves a deduction shall
 be  made for all or any portion of an annuity risk which is reinsured by
 a life insurance company authorized to do business in  this  state.  The
 required  admitted  assets  shall  be  invested  in  accordance with the
 prudent investor standard as defined in section 11-2.3 of  the  estates,
 powers and trusts law and shall not be subject to the investment limita
 tions  set  forth  in  this  chapter. Such assets shall be segregated as
 separate and distinct funds, independent of  all  other  funds  of  such
 corporation  or  association,  and shall not be applied to pay its debts
 and  obligations  or  for  any  purpose  except  the  aforesaid  annuity
 benefits;  PROVIDED  HOWEVER,  THE CORPORATION OR ASSOCIATION MAY INVEST
 AND MANAGE THE ADMITTED ASSETS IN COMBINATION WITH OTHER ASSETS  OF  THE
 ORGANIZATION, PROVIDED FURTHER, THAT THERE IS A SEPARATE CUSTODY ACCOUNT
 FOR THE INTEREST OF THE ADMITTED ASSETS IN ANY SUCH COMBINED FUND.
 

S 2. This act shall take effect immediately.
 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
 [ ] is old law to be omitted.
 LBD11425-01-1

S5213-2011: Relates to investments by charitable gift annuity corporations or associations