Gift Annuity Returns: A Tale of Two Rates
Published by
Edie Matulka
on
Most organizations that issue charitable gift annuities utilize the rates suggested by the American Council on Gift Annuities (ACGA). Thus, when the ACGA makes an announcement about the rates, as it did during its conference a few weeks ago, it is of great interest. (For the record, the ACGA announced that its current schedule of suggested rates will continue unchanged. For more information on the new rates, visit the ACGA’s website at www.acga-web.org.)
However, there is another time when a charity is particularly interested in what may happen with the ACGA rates. . . and that is when the organization is preparing to reprint or update its gift annuity marketing pieces generally, or perhaps do a large CGA-focused mailing. No one wants to invest funds in material that ends up out-of-date shortly thereafter.
Understanding ACGA’s review process may help alleviate some of those timing concerns. The ACGA Board meets twice a year, in the fall and spring. Historically the rates have been reviewed by the Rates Committee in advance of the spring meeting, with a recommendation on any action brought to the full Board. Should a change be decided on, the new rate schedule would have an effective date of July 1.
Over the last ten years or so, there have been two instances when new rate schedules were announced other than in the spring – in October 2002, with a new schedule to go into effect January 1, 2003, and in December 2008, with a new schedule to go into effect February 1, 2009. Not surprisingly given what was happening in the financial world at the time, in both of those instances the rates were reduced. Certain assumptions underlying the rates, particularly the investment return, are reviewed on an ongoing basis, while other assumptions (such as mortality tables) receive a more detailed review annually.
Since there is generally a span of 2+ months between adoption of a new rate schedule and its effective date, there shouldn’t be a concern about the rates changing immediately after a gift annuity marketing piece has been sent out. However, it’s probably best to hold off on bulk printing of long-term pieces in the spring, at least until after the ACGA board has met.