State RCV Calculations

The reasonably commensurate value, or RCV, is a measure of the present value of a life annuity. A number of states require charitable gift annuity contracts to state explicitly the RCV of the annuity defined in the contract. As of October 2019, these states are:

North Dakota
Tennessee
Washington

The RCV is computed once as of the date of gift. It does not need to be recalculated annually over the life of the annuity.

RCV Calculations for North Dakota, Tennessee, a nd Washington
North Dakota, Tennessee, and Washington all accept a gift annuity's investment in contract as the reasonably commensurate value of the gift.

The liabilities displayed in the FASB Liability report are equal to the investment in contract as long as:

1) You use the same mortality table as used to compute the charitable deduction (currently 2000CM)

2) You use the same interest factor as was used to compute the charitable deduction (the IRS discount rate).

To compute RCVs for one or more gift annuities that are acceptable in North Dakota, Tennessee, and Washington,

1. Create complete gift records for the gifts for which you want to compute RCVs. Be sure to enter the IRS discount rate used to compute each gift's charitable deduction.

2. Choose Compliance > FASB Liabilities in the Menu Bar.

3. Enter selection criteria that define the group of gift annuities for which you wish to compute RCVs.

If you wish to compute the RCV for a specific gift annuity, enter it's Gift Key in the Gift Key(s) area. The Gift Key is shown in the upper right corner of the Gift Information page for the gift.

4. Mark Use each Gift's IRS Discount Rate and choose 2000CM as the Mortality Table.

5. Click OK to view the report. If you see an error log, see Notes below.

The Liability amount shown in the far right column of the report is the reasonably commensurate value that you can include in the annuity contract. Write down this number (or print the report) so that you can enter it in the RCV field for the gift.

6. Click OK with "Do not save new FASB Amounts" marked. (This way, you won't store an RCV value in the gift's FASB Amount field.)

7. Click $image\closebox.gif$ when done viewing the report to return to the FASB Liabilities screen.

8. Click Close.

RCV Calculations for California
California signed into law SB 271 on September 22, 2005. Among its provisions, it eliminates the requirement to compute an RCV for gift annuities funded on or after January 1, 2006. Read on for instructions on how to use GiftWrap to compute California RCVs for gifts funded prior to January 1, 2006.

California provides guidance on how to compute the reasonably commensurate value of a life annuity in the State of California Department of Insurance Bulletin 2004-2. Published in October 2004, this bulletin applies to all California gift annuities funded on or after January 1, 2005. It supersedes Bulletin 1991-6, which applied to all California gift annuities funded from January 1, 1992 through December 31, 2004.

The reasonably commensurate value in California is calculated as 115% of the net single premium based on the Annuity 2000 Table and 4.5% annual interest for gift annuities funded on or after January 1, 2005. Prior to that, California required use of the 1983 A table and 6% annual interest.

Computing a California RCV using GiftWrap
You can use the Gift Annuity Reserves report to compute the net single premium based on the Annuity 2000 Table and a 4.5% interest rate. Just add 15% to the result to compute the RCV for California.

Important: Use the Gift Annuity Reserves report to compute California RCVs for 1-life and 2-life immediate payment gift annuities only. You must contact the State of California Department of Insurance to get a computation of the RCV for a deferred gift annuity. If you own PG CalcPlanned Giving Manager software, you can compute California RCVs for immediate payment and deferred gift annuities in Program 1, Basic Gift Illustrations.

To compute RCVs for one or more gift annuities that are acceptable in California:

1. Create complete gift records for the gifts for which you want to compute RCVs.

The Date of First Payment for each gift must be the first day or last day of a standard calendar period so that the reserve calculation uses a Modal Adjustment. If you find it necessary to change the Date of First Payment for a gift for the purposes of the RCV calculation, be sure to change this date back to its correct value after running the Gift Annuity Reserves report.

2. Choose Compliance > Gift Annuity Reserves - Custom Method in the Menu Bar.

3. Enter selection criteria that define the group of gift annuities for which you wish to compute RCVs.

If you wish to compute the RCV for a specific gift annuity, enter it's Gift Key in the Gift Key(s) area. The Gift Key is shown in the upper right corner of the Gift Information page for the gift.

4. Mark Specify Table in the Mortality Tables area and choose Ann2000.

5. Mark Use One Rate of Return in the Interest Rates area, then enter 4.5.

6. Click OK to view the report. If you see an error log, see Notes below.

7. Multiply the Reserve amount shown in the far right column of the report by 1.15. The result is the reasonably commensurate value that you can include in the annuity contract. Write down this number so that you can enter it in the RCV field for the gift.

8. Click $image\closebox.gif$ when done viewing the report to return to the Gift Annuity Reserves screen.

9. Click OK with "Do not save new FASB Amounts" marked. (This way, you won't store an RCV value in the gift's FASB Amount field.)

10. Click Close.

To record an RCV for a gift

1. Open the Gift Information window for the gift whose RCV you have just computed. $image\chiclet.gif$ How?

2. Click the Details tab and enter the RCV you have just computed in the RCV field.

Notes:

· If you see an error log, fix the errors it identifies, then run FASB Liabilities or Gift Annuity Reserves - Custom Method again.

To print the error log, click the Print button, then click the OK button in the standard Windows Print dialog box. Alternatively, you may save the log in a file that you can print or review later. When done, click the Cancel button.