Gift Annuity Requirements
Puerto Rico, a "registration" territory, regulates the issuance of charitable gift annuities under Puerto Rico Statutes Title 26 Secs. 4201-4210. Charities must obtain a special license from the Insurance Commissioner of Puerto Rico before issuing charitable gift annuities to Puerto Rican donors. Failure to comply may result in suspension or revocation of the special license by the Commissioner.
To qualify, applying charities must have been active for at least five years, be duly registered with the Department of Insurance (see last paragraph) and maintain a segregated reserve account fund.
Application ProcessTo register for a special license with the Department of Insurance of Puerto Rico, the charity must submit a detailed application. The charity must provide corporate documents, a determination letter of its tax-exempt status from the IRS, evidence that it has been duly registered in the Department of Insurance of Puerto Rico, the most recent certified financial statement, sworn statements by each director denying any conviction of bankruptcy and any felony or crime implying moral turpitude, samples of all gift annuity agreements, proof the charity is a member of the ACGA and a schedule of maximum annuity payout rates. Foreign charities must provide a certificate from the state of origin evidencing their gift annuity program is authorized or that the state law does not regulate the gift annuity area. If the charity has an existing gift annuity program, a certificate from the governing authority that either: (i) the issuance of gift annuities is regulated in the jurisdiction and the charity's program is in compliance or (ii) the issuance of gift annuities is not regulated in the jurisdiction.
The annuity agreements must contain specific information such as the value of property, annuity amount and payment frequency, annuitants' age, the present value of the annuity benefits as of the creation date based on valuation standards set by the Commissioner (the benefits shall not be less than 15% of the original donation).
Any solicitation, negotiation, acquisition or subscription of the annuity agreements must be done only by the charitable organization directly (not agents or other intermediaries). The charity must submit a list of all the charity's personnel involved in the solicitation, negotiation, obtaining and subscribing to annuity contracts to the Commissioner certifying those listed have the necessary training and knowledge to complete the tasks. Changes to the list must be reported within 15 days.
Disclosure LanguageThe agreement must also include the following disclosure:
"The payments made under the annuity contract are solely guaranteed by the full faith and credit of the organization; are not guaranteed or insured by an insurer; are not protected in any way by surety associations; and are not backed in any way by the Government of Puerto Rico."
Reserve RequirementsThe segregated fund must maintain the sum of its reserves (present value of all outstanding gift annuities) plus a minimum surplus of 10% of its reserves. In determining the reserves amount, a deduction is permitted for any portion of a gift annuity properly reinsured (through insurance companies authorized to issue in Puerto Rico). The segregated account is subject to the same investment restrictions as are provided to life insurance companies authorized under the laws of the territory. Any foreign charity that is properly authorized to invest its funds pursuant to the laws of the state in which it is incorporated is deemed in compliance.
Annual Filing RequirementsOnce a permit is granted, Puerto Rico requires annual filings submitted to the Department of Insurance of Puerto Rico before March 31. These filings renew the special license each year by submitting the charity's annual report with information on the financial condition of the segregated fund.
Oficina del Comisionado de Seguros de Puerto Rico (Office of the Insurance Commissioner of Puerto Rico)
B5 Calle Tabonuco Suite 216
Guaynabo, PR 00968-3029