Gift Annuity Reserves - State Method

The Gift Annuity Reserve report summarizes the calculated reserve amount required to cover payment obligations for each of the gift annuities included in the report. You can save the Reserve amount computed for each gift in the gift's Reserve Amount field if you wish.

This report is designed to let you calculate and analyze the reserve requirement for a specific group of gift annuities, such as the annuities included in a particular annuity pool or issued in a particular state, or for your entire gift annuity program. It is also suitable for submission to any state that you indicate must be satisfied by the report (see notes for more discussion).

1. Click Compliance > Gift Annuity Reserves - State Method in the Menu Bar.

2. Enter the calculation, selection, and sorting information required to produce the report. Enter a custom filter to select a specific group of gift annuities. There is help available on each field.

See Notes below regarding reserve calculations for commuted payment gift annuities and flexible gift annuities. Also see Notes for special issues regarding Arkansas reserve calculations.

3. Click OK to view the report. If you see an error log, see Notes below, especially State interest rate not found.

4. Do the following, as needed:

5. Click $image\closebox.gif$ to close the report

6. Do one of the following:

Click "Save New Values in Each Gift Record" to save the reserve amount computed for each gift in the report in the gift's Reserve Amount field, and then click OK.

The Reserve Amount field appears on the Details tab in the Gift Information. The valuation date for the liabilities will be saved in the Reserve Date field for each gift, as well.

Click "Save New Values in Each Gift Record and in the Historical Value Table" to save the reserve amount in both the gift's Reserve Amount field and as a historical reserve value, and then click OK.

The Reserve Amount field is displayed on the Details tab in the gift's Gift Information window. The valuation date for the liabilities will be saved in the Reserve Date field for each gift, as well.
Click "Do not save new Reserve amounts" and then OK, or click Cancel if you do not wish to save the reserve amounts or valuation date from the report.

7. Click $image\closebox.gif$ to close the Gift Annuity Reserves page.

Notes:

· For a gift to be included in the calculations, the following must be true in addition to any selection criteria entered:

Gift Date is less than or equal to Valuation Date

Gift Status is Current or Gift Status is Finished/Severed and Account Closed Date is greater than or equal to Valuation Date

Person Status of at least one associated person is Current/Missing or Person Status of at least one associated person is Deceased and Date of Death is greater than Valuation Date

· If you elect to satisfy more than one state with a single reserve report, GiftWrap calculates the reserve requirement of each contract using the lowest applicable reserve percentage and the most conservative applicable mortality table among the selected states. By conservative, we mean the mortality table that generally predicts the longest life expectancy at each age. GiftWrap consults the State Reserve Percentage Table and the Standard State Reserve Mortality Table to determine the reserve percentage and mortality table to use for each gift.

Arkansas reserve calculations
For many years, Arkansas regulators have accepted reserves computed using standard actuarial valuation methods, an interest rate of 6%, and the 1983 A mortality table for all gifts. An actuary's signature has not been required. As of 2007, Arkansas has begun requiring a more formal approach. State regulators have described for us three options for computing an acceptable reserve amount. See Arkansas reserve calculations in Gift Annuity Reserve Calculations Explained for details.

· State interest rate not found
If you see an error window that lists "No <year> state interest rate found . . ." for one or more gifts, you may need to update your State Reserve Percentages table with interest rates that apply to your most recent gifts.

State reserve percentages for the year usually become available in the late summer or early fall of each year. Prior to then, you can use the previous year's rates to compute reserves for gifts made in the current year. GiftWrap makes this choice for you automatically if rates for the previous year are available in the State Reserve Percentages table. The error message will indicate whether GiftWrap has the previous year's rate to use.

For on-demand clients, PG Calc will keep this table current with the latest state rates. For enterprise clients, PG Calc will provide instructions on how to update this table whenever new state rates become available.

· Required surplus
Some states require the charity to maintain a surplus above and beyond the computed reserve amount. You can include this surplus in a final total at the end of the report. Note that the reserve and surplus should be listed separately on the form that is submitted to the state along with the GiftWrap reserve report. This way, the person who reviews the form and reserve report will understand what he or she is reviewing. See Gift Annuity Reserves calculations explained for additional information.

· Sometimes, a charity will want to compute reserves for its deferred gift annuities only. This is easy to do using a custom filter.

Select all deferred gift annuities
The custom filter below selects gifts that are deferred gift annuities, whether or not the annuity is still in deferral.

gift.subtypeid = 7

Select all deferred gift annuities still in deferral
The custom filter below selects gifts that are deferred gift annuities where the annuity is still in deferral.

gift.subtypeid = 7 AND gift.FirstPaymentDate > 'mm/dd/yyyy'

where mm/dd/yyyy is the date one year after the valuation date for the reserve report.

· Reserve calculations for commuted payment gift annuities
The method for computing reserves for commuted payment gift annuities (CPGAs) depends on whether or not the annuitant has commuted the annuity payments as of the reserve valuation date. If the annuitant has not commuted the annuity payments as of this date, the reserve calculation is the same as it is for a standard deferred gift annuity and GiftWrap can perform the calculation correctly.

If the annuitant has commuted the annuity payments, however, the reserve computed using the standard deferred gift annuity approach will be insufficient. In this case, GiftWrap can compute the reserve amount based on the commuted payment amount and the start and end dates for the commuted payments.

Computing the reserve for commuted payment gift annuity

· Reserve calculations for flexible gift annuities
The method for computing for flexible gift annuities (FGAs) depends on whether or not the annuitant has elected an annuity starting date as of the reserve valuation date.

If the annuitant has elected a date of first payment as of this date, GiftWrap can perform this reserve calculation correctly as long as the elected date of first payment and the annuity rate that goes with it are entered in the Gift Information screen for the gift.

If the annuitant has not elected a date of first payment as of this date, the minimum reserve equals the highest reserve calculated among all of the individual elective combinations of dates of first payment and annuity rate. The New York Department of Insurance has made this approach an explicit requirement in its instructions on computing annuity reserves. In this case, the way to determine the minimum reserve for a flexible gift annuity with absolute certainty is to compute the reserve for a deferred gift annuity based on each elective date of first payment and annuity rate pair, determine the greatest reserve among the results, and then enter that elective start date and annuity rate in the General tab of the Gift Information screen for the gift. In many cases, the earliest date of first payment and annuity rate will result in the greatest reserve, but not all.

More details on computing the reserve for a flexible gift annuity

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

You can print the error log or save the log in a file that you can print or review later. Click Continue and go to the next step in the procedure.