ACGA suggested annuity rates effective 7/1/01
The tables below display the maximum payout rates that the American Council on Gift Annuities suggest charities should offer their gift annuity donors for gifts made on or after July 1, 2001. These rates are used as guidelines by members of the ACGA for offering annuity rates to potential donors. The rates are actuarially determined with the goal of having at least half of the gift asset passed on to the charity (the residuum).
Interest factors for computing deferred annuity payout rates
Two tables of interest factors for computing maximum deferred gift annuity payout rates appear below. One is for use in all states other than New York and New Jersey. The other is for use in New York and New Jersey only. The table assumes a whole number of years from the date of gift to the annuity starting date. For the first time, the ACGA suggests that fractional years of deferral be taken into account in computing the interest factor.
One-life rates
Two-life rates
Two-life table (continued)
Recalculation factors for deferred annuity rates
Factors for use in states other than New York and New Jersey
A deferred interest factor is used to calculate the maximum deferred gift annuity rates suggested by the American Council on Gift Annuities for all states except New York and New Jersey. The maximum deferred gift annuity rate equals the suggested rate from the one-life or two-life table for the age(s) of the annuitant(s) on the annuity starting date multiplied by the deferred interest factor determined as follows:
For deferral periods of 20 years or less, the factor equals 1.0575 raised to the exact number of years from the date of gift to the annuity starting date. If the first payment is deferred for more than 20 years, the following interest rates should be used for the years beyond 20:
Deferral period Interest rate
20+ - 25 years 5.50%
25+ - 30 years 5.25%
30+ years 5.00%
The suggested effective date for these factors is July 1, 2001.
The table of interest factors below shows the factors applicable for whole years of deferral.
Example
Joe Donor funds a deferred gift annuity on 1/15/2002 that will make its first quarterly payment on 3/31/2012. Payments are made at the end of each period. Joe will be the sole annuitant and was born on 6/20/1947. To compute the payout rate to offer Joe based on the ACGA's recommendations that went into effect on 7/1/2001:
1. Determine Joe's age on his closest birthday to 1/1/2012, the annuity starting date for an annuity that pays quarterly, starting on 3/31/2012. Joe's closest birthday to 1/1/2012 is 6/20/2012 and he will be 65 on that birthday. The unadjusted ACGA rate for a single 65 year-old is 6.7%.
2. The number of years from the date of gift, 1/15/2002, to the annuity starting date, 1/1/2012, is:
351/365 + 9 + 1/365 = 9.9644 years
The interest factor suggested by the ACGA for 9.9644 years of deferral is:
((1.0575) ^ 9.9644) = 1.7456
3. 6.7% x 1.7456 = 11.6955%. After rounding to the nearest 0.1%, the payout rate suggested by the ACGA for Joe's deferred gift annuity is 11.7%.
Factors for use in New York and New Jersey
The ACGA released separate recommendations for computing recalculation factors for deferred gift annuities that must comply with the maximum rates set by New York and New Jersey. These factors are identical to the factors for use in other states for deferral periods up to 20 years. For deferral periods of over 20 years or more, however, the factors for use in New York and New Jersey are lower than in other states. At these longer deferral periods, therefore, the maximum rates allowed in New York and New Jersey are lower than the ACGA's suggested maximums for all the other states.
If the deferral period is 20 years or less, the ACGA recommends compounding 1.0575 for the exact number of years from the date of gift to the annuity starting date, just as it does for all other states. If the deferral period exceeds 20 years, however, the ACGA recommends compounding 1.0525 for all years of deferral, including the first 20.
The table of interest factors below shows the factors applicable for whole years of deferral.
