AB 162

An annuity is an insurance contract under which the insurer agrees to pay the

person covered under the annuity (annuitant) periodic payments, starting

immediately or at a future date, for a set period of time or an indefinite period of time,

such as for the remainder of the annuitant's life. Annuities and their sale are

regulated by the office of the commissioner of insurance (OCI). This bill exempts

from all regulation by OCI a qualified charitable gift annuity, which is defined in the

bill as an annuity: 1) that is established under a transaction that is treated, for

federal income tax purposes, partly as a charitable contribution and partly as an

investment in an annuity contract, and 2) for which the obligation to pay is not an

"acquisition indebtedness" under a provision in the Internal Revenue Code. To meet

the second criterion just described, an annuity must be the sole consideration issued

in exchange for property, if the value of the annuity is less than 90 percent of the

value of the property; must be payable over the life of one or two individuals in being

at the time the annuity is issued; and must be payable under a contract that does not

guarantee a minimum amount, or specify a maximum amount, of payments and that

does not provide for an adjustment in the amount of the annuity payments by

reference to the income received from the transferred, or any other, property.

The bill requires that an agreement for a qualified charitable gift annuity

contain a disclosure statement that the annuity is not insurance, is not subject to

regulation by the commissioner of insurance (commissioner), and is not protected by

an insurance guaranty fund or association. The bill requires a charitable

organization that issues qualified charitable gift annuities to provide written notice

that satisfies specified requirements to the commissioner no later than the date on

which it executes its first qualified charitable gift annuity agreement after the

enactment of the bill. If a charitable organization does not comply with the

requirements under the bill, the commissioner may send the charitable organization

a letter demanding compliance and may order a charitable organization that does not

comply within 45 days after receiving such a demand letter to pay a forfeiture of up

to $1,000 for each qualified charitable gift annuity issued out of compliance.