Charitable Gift Annuity Suggested Rates Reduced

Charitable Gift Annuity Suggested Rates Reduced

December 30, 2008

The American Council on Gift Annuities has given us something to think about in the opening days of the new year. There will be a Charitable Gift Annuity rate reduction effective February 1st. The formal ACGA message is below.

Notwithstanding this rate reduction, I believe our recession creates opportunities for gift annuities and other life income plans, such as the Charitable Remainder Trusts, as well as other giving vehicles. I’ll say more about this in the next issue of The Martignetti Report.

For our clients offering CGAs, we will discuss the implications of the American Council’s action for your program in early January, including what the underlying assumptions are and whether implementation before February 1 is appropriate. The new rate tables are not yet available.

For those with whom we are not engaged, I welcome the opportunity to discuss your CGA program. If you don’t have one, we can explore whether a program makes sense for your organization, as well as the suitability of other types of planned gifts.

Our recession creates considerable opportunities to help your donors and your organization.

Here is the American Council on Gift Annuities’ announcement. The ‘CFMR’ to which it refers is more commonly known as the ‘IRS discount rate.’ This rate changes monthly and in January will be at a historic low. The 2.4% rate had the effect of disqualifying CGAs for donors at young (for CGA) ages, under the Internal Revenue Code. The low discount rate, in part, dictated the CGA rate reduction. Low investment returns also contributed. The announcement:

The Board of Directors of the American Council on Gift Annuities (ACGA), at a called meeting on December 29, 2008, approved a recommendation from the Rates Committee to reduce the expected return assumption from 5.75% to 5.25%. A new rate schedule is being developed reflecting this change and will be released no later than January 15, when the actuarial work is complete.

It is anticipated that the recommended rates will be lower by .4% to .7% at each age with a maximum rate of 9.5% at ages 90 and above. The new rates will qualify at all ages at a CFMR of 2.4% or above. The new rate recommendation will be effective on February 1, 2009.

I look forward to discussing opportunities with you.

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