Serving the Philanthropic Community Since 1927

Suggested Maximum Gift Annuity Rates, Quality Training Opportunities, and Consumer Protection Advocacy

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Below is a list of frequently asked questions.  If you can't find what you are looking for in the list, please contact us.

  1. What type of organization is ACGA?
    The American Council on Gift Annuities is a qualified nonprofit association of organizations whose goal is to promote philanthropy, primarily by means of the charitable gift annuity.

  2. What is a charitable gift annuity?
    A gift annuity is a contract under which a charity, in return for a transfer of cash or other property, agrees to pay a fixed sum of money for a period measured by one or two lives. A person who receives payments is called an "annuitant" or "beneficiary". The contributed property becomes part of the charity's assets, and the payments are a general obligation of the charity. The annuity is backed by all of the charity's assets, not just by the property contributed.

  3. How does ACGA promote philanthropy?
    ACGA's primary focus is the publication of suggested gift annuity payout rates. The Council retains the services of an actuarial firm to advise and consult on matters pertaining to life expectancies and related matters. These suggested rates have been recognized, not only by charities and donors, but also by state insurance departments and the Internal Revenue Service as being actuarially sound and in the best interests of all parties involved. In addition, the Council provides educational and research services, along with information about legislation affecting gift annuities.

  4. What is the history of ACGA?
    The Council was formed in 1927 as the Committee on Gift Annuities for the purpose of providing educational and other services to American charities regarding gift annuities. During the early 1920s the charitable gift annuity became a popular method of raising funds for charitable institutions. In that period, each organization determined its own set of gift annuity rates. It soon became clear that organizations were competing with one another, offering more attractive rates, and in effect, diminishing the charities' residuum. The Committee on Gift Annuities was established in part to study and recommend the range of rates that would provide benefit to both the charity and donor, thus steering donors to give based on the cause of the charity rather than competitive payout rates. In addition, the Committee studied the form of contracts, the amount and type of reserve funds needed to fulfill the charity's obligation, and legislation affecting gift annuity programs.

  5. Who supports ACGA?
    The Council is supported by its member organizations. Many of these organizations have been involved with ACGA since its early days. Many more have come on board since then, realizing that the work of the Council is worth more than the annual membership fee.

  6. How can my organization become a member?
    Click here to see "How To Join ACGA".

  7. What are the benefits of membership?
    Your organization will be kept abreast of any changes to suggested gift annuity rates. You will be alerted to proposed legislation that may affect gift annuities, and you will be made aware of changes in state regulation of gift annuities. You will receive advance notification of the Council's biennial Conference on Gift Annuities, and, because your organization is a member, all attendees from your organization will be entitled to a discounted registration fee. You will join together with similar organizations to share information regarding gift annuities and other planned gifts.

  8. How often are these rates changed?
    A Gift Annuity Rates Committee, comprised of members of the Council's Board of Directors reviews the rates on a regular basis. If the committee determines that changes are advisable, these changes are proposed to the entire Board for approval.  The Board prefers to change rates infrequently in order to avoid disrupting the activities of charities and their vendors.  Although changes may be made at any time if economic conditions warrant, a formal announcement of whether rates will change has traditionally been made every year in the spring.  Schedules are re-published as of July 1 of each year.

  9. What rates are effective now?
    The most current rates are shown here.

  10. When does ACGA hold conferences?
    Conferences are held on a biennial basis, that is, every other year. Click here to learn more about our upcoming conference!

  11. How are suggested gift annuity rates established?
    The Rates Committee develops its schedule of suggested maximum rates by first targeting a residual gift to the charity equal to 50% of the funds transferred under the contract in nominal dollar terms.  The Committee and its actuaries then use a set of assumptions for annuitant mortality, expenses, and investment returns to identify for each age a tentative rate which will produce the targeted nominal residual gift.   Finally, we determine whether the present value of the residual gift to charity, using the tentative gift annuity contract rate, is at least 20% of the funds transferred to the charity under the contract.  If the tentative rate produces a present value in excess of 20%, the tentative rate becomes the final published rate for that age.  If the tentative rate produces a present value of less than 20%, the rate is lowered until the present value threshold is reached.

    A similar process is used to suggest rates for two-life gift annuities.  More information about the mortality, expense, and investment return assumptions may be found in the latest version of the ACGA Rates Paper.

  12. What is the focus of the ACGA conference curriculum?
    At its biennial conference the ACGA seeks to offer education in three areas:
    * administration, practical considerations, and technical guidance for gift annuity programs
    * introductory education for new planned giving officers
    * continuing education for experienced planned giving officers
    The information for all three groups is not restricted to charitable gift annuities. Presentations are done by experts in the various fields that the ACGA has requested to make presentations, and offer the latest information relevant to the gift planning community.   Topics include CGA rates, state regulations, donor relations, life income vehicles, finance and legal considerations for gift planning programs among others.

  13. What are the steps in establishing a gift annuity program?
    The governing body of a charity interested in establishing a gift annuity program needs to first educate itself on the both the advantages and disadvantages of operating a charitable gift annuity program. There are legal responsibilities as well as staff responsibilities for marketing and handling agreements. Should the governing body determine that it will establish a gift annuity program the following steps must be taken:
  • determine the requirements in the states in which you wish to issue agreements. This generally includes the state in which you are domiciled as well as additional states where your supporters live. See the state regulations section of this web site. It may be that you determine to begin with a limited number of states.
  • Once you determined the states in which you will issue agreements, either contact the state licensing people yourself for information or contact an outside firm to have them guide you through the process. As the process is complicated, it makes sense to engage a firm to assist you.
  • determine whether your organization or an outside firm will manage the agreements and make reports.
  • determine a marketing plan, asking whether or not additional staffing is needed or how existing staff will be deployed.
  • whether you or an outside firm manages agreements and makes reports, you will need a software program to provide rate and charitable deduction information. There are number of them available.
  • while you are waiting for those states which require you to have a permit for you to issue agreements you can begin to formulate an advertising campaign to let your supporters know that you issue gift annuities.
  • with authority to issue agreements in hand, a plan to administer agreements, staff to market agreements and PR material to disseminate, you are ready to begin.

Click Here to see ACGA "Recommended Charitable Gift Annuity Best Practices"

14. What was the "lawsuit" all about?
A charity in Texas was sued by a grand niece of a donor to whom a charitable gift annuity was issued. There were other legal agreements that were involved that did not affect the ACGA. The suit was expanded to a class action suit that included all charities that used the suggested rates of the ACGA. Named defendants included the ACGA as well as the charities of all those serving on the Board of the ACGA. It was a federal case in which restraint of trade was claimed. Those charities that used the rates were accused of joining together to illegally lower the rates to the detriment of the donors.

15. How was the lawsuit resolved?
After several negative rulings against the defendants, it became clear that the charities needed assistance. An appeal was made to Congress. After significant hard work by a number of individuals and organizations, Congress passed a law exempting charities from the restraint of trade law. The charities appeared before the Fifth Circuit Court of Appeals and appealed the District Court rulings. The Fifth Circuit said the new law did not exempt the charities from the restraint of trade charge. Congress again was approached and passed a second law. The Supreme Court then sent the case back to the Fifth Circuit, which sent it back to the District Court. The District Court judge eventually issued a ruling in favor of the defendants.
There were a number of issues that were also dealt with during the process that affected charitable gifts and the entire text and ramifications of the Philanthropy Protection Act of 1995 should be examined for the legal rulings.

16. What has become of ACGA since the lawsuit?
While there have been some operational changes that have occurred due to the lawsuit, for the most part the ACGA has weathered the storm quite well. ACGA continues to suggest gift annuity rates and hold educational conferences. In fact, the conferences have changed from triennial to biennial. They now have expanded the topics covered and there is further discussion regarding what other services the ACGA can offer to charities.

17. What is the relationship between floating monthly IRS rate (i.e., the Charitable Federal Mid-Term Rate or CFMR) and gift annuity rates?
The Charitable Federal Mid-Term Rate (CFMR) is used to calculate allowed charitable deductions for federal tax purposes, but is not used in developing the ACGA’s suggested rate schedule.  Nonetheless, the CFMR and gift annuity rates will tend to vary with one another over time.  For example, if the CFMR were to decrease dramatically over the course of a year, it is likely that the ACGA’s suggested rates would also decrease.

We encourage gift planners always to verify that new gift annuities will produce the required minimum charitable deduction of 10% of the value of the funds transferred.  The ACGA’s suggested rate schedules typically result in deductions that pass this test; however, in declining interest rate environments (which results in declining CFMRs), it is possible that the suggested payout rate might need to be lowered to meet the 10% minimum requirement.  This is particularly true for contracts that make payments to younger annuitants.