CHARITABLE GIFT ANNUITIES (1-2016) Sponsored CGA Program for Non-Profit Organizations “The Gateway to Greater Giving Opportunities”
Many nonprofit organizations are unable to offer charitable gift annuities in Hawaii because the financial requirements to legally register and offer them locally is prohibitive. As one of its philanthropic services, the Hawaii Community Foundation (the Foundation) can partner with agencies wishing to offer gift annuities as a tool to build their endowments. How the Program Works First, the Foundation and the agency would enter into a Memorandum of Understanding which outlines the terms and conditions of the program. Once executed, the agency is officially a sponsored agency and may refer its donors to establish gift annuities with the Foundation. A donor of the sponsored agency may enter into a gift annuity contract with the Foundation ($50,000 minimum). The Foundation assumes all fiduciary obligations with respect to the payment of the annuity to the annuitant(s). Through the Foundation’s program administrator, payments are made to up to two annuitants for their respective lives. The Foundation currently charges a 1.80% annual administrative fee against the existing value of the annuity assets: 0.80% goes to the program administrator for its investment management and related services and 1.0% goes to the Foundation for its administrative costs. The fee will be taken from the annuity assets, and does not need to be paid by the sponsored agency. The Foundation will allocate 10% of the assets remaining at the end of the annuity for its charitable annuity reserve fund. All fees and costs associated with the program are subject to change without prior notice. The donor will designate the nonprofit organization or organizations that it wants to benefit (i.e., the sponsored agency), and the remainder of the annuity will be distributed to the designated organization(s) when the annuity terminates as identified below. When creating the annuity, the donor will have 2 choices for distribution of the assets remaining when the annuity terminates (after the 10% allocation mentioned above): 1. 90% Endowment Option. If the donor has identified that s/he wants to create a permanent fund to support the designated organization(s), ninety percent (90%) of the remainder will go in a designated fund(s) for its support. The fund(s) will be maintained at the Foundation, and will produce a perpetual income stream to the agency which will be paid annually. 2. 50% Outright Grant Option. If the donor has identified that s/he is not interested in endowment building, but instead wants the designated organization(s) to receive an outright grant, the amount that the sponsored agency will receive will be smaller than the endowment alternative. Forty percent (40%) of the remainder will be allocated to the Foundation’s discretionary fund and used for unrestricted purposes. The Foundation will distribute the remaining fifty percent (50%) to the organization(s) as designated by the donor in the annuity contract.
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Who Might Be Interested In This? This service is part of the Foundation’s efforts to help nonprofits build capacity and is intended to aid organizations in their sustainability efforts through creating permanent endowments. It may be ideal for nonprofits who are working towards this goal in a number of situations: (1) those wishing to testmarket gift annuities without going through the licensing process; (2) those with small constituencies that may produce too few annuities to justify getting a license; (3) those approached by a donor about an annuity that have not yet secured a license; and (4) those finding that their organization is not currently equipped to manage the fiduciary responsibilities or satisfy the state requirements of offering gift annuities. The Hawaii Community Foundation currently administers more than 600 funds with a combined value of more than $570 million. If you have further questions, please call and ask for the Philanthropy Department at 808-566-5521.
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