New Jersey is requiring actuarial verification of state reserve reports as part of a charity’s gift annuity annual reporting if the charity offers flexible gift annuities (FGAs). If your charity has a pending application, you will need to add an actuarial verification of your New Jersey reserve calculations if you offer FGAs. Charities that are already registered in New Jersey will need actuarial verification of their state reserve report as part of their annual filings if they offer FGAs.
Veteran gift planners may recall actuarial verification was part of New Jersey’s annual reporting requirements over 10 years ago. However, New Jersey allowed a waiver if the charity could substantiate that they used an industry standard software to calculate their reserves, such as PG Calc’s GiftWrap. New Jersey has now decided that while a waiver of actuarial verification is available for immediate payment gift annuities and deferred gift annuities, they will not waive the requirement for FGAs, or as they are referred to in New Jersey’s guidance, “Flexible Contracts.”
The situation is confusing to any gift planner familiar with FGAs. After all, an FGA is simply a series of deferred gift annuities from which the annuitant can choose to receive income. Choosing one of the deferred annuities (i.e. electing one of the payment start dates) eliminates the other choices, and the annuity becomes fixed once a payment election date is confirmed. Yet New Jersey has taken the position that “Flexible Contracts” are riskier than their component deferred gift annuities. The guidance states, “Due to risk factors related to flexible contracts, the Commissioner will not waive the requirement for an actuarial opinion as to the adequacy of reserves on outstanding contracts for those organizations issuing flexible contracts.”
Charities engaging an actuary to verify their state reserve report should know that New Jersey has a required certificate of valuation which must be completed and attached to the statement of actuarial opinion and the reserve report. You can review the certificate of valuation here on their website: www.nj.gov/dobi/division_insurance/pdfs/cga_perapp.pdf.
Not every charity that offers annuities to donors in New Jersey offers “flexible contracts.” If you don’t offer FGAs, and you (or your gift administrator) use GiftWrap to create your State Reserve reports, you are covered by the existing waiver of the actuarial verification.
If you do determine you need actuarial verification of your New Jersey state reserve report, PG Calc offers a suite of services to assist with New Jersey regulations. Clients can choose the level of support that is most useful, from stand-alone actuarial verification of a state reserve report created by your gift administrator, to state registration and annual filing. Please reach out to info@pgcalc.com with any questions about these services.