STAND. COM. REP. NO. 386-04
Honolulu, Hawaii
, 2004
RE: H.B. No. 2762
H.D. 1
Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twenty-Second State Legislature
Regular Session of 2004
State of Hawaii
Sir:
Your Committee on Consumer Protection and Commerce, to which was referred H.B. No. 2762 entitled:
"A BILL FOR AN ACT RELATING TO CHARITABLE ANNUITIES,"
begs leave to report as follows:
The purpose of this bill is to allow more local charities to use gift annuities as a means of raising funds by amending the requirements with which a charity must comply before it may issue a gift annuity.
Testimony in support of this bill was provided by Myerberg Shain & Associates. The Insurance Division of the Department of Commerce and Consumer Affairs (DCCA) opposed the measure.
Your Committee finds that under current law, a charity must meet the following five conditions before it may issue a gift annuity:
(1) Have tax exempt status with the Internal Revenue Service;
(2) Have conducted business in Hawaii for at least ten years;
(3) Maintain a net worth in Hawaii of at least $5,000,000;
(4) Maintain a separate annuity fund with at least one-half of the value of the annuity; and
(5) Be certified by the DCCA as being in compliance with the preceding four requirements.
This bill removes the requirements that a charity maintain a net worth in Hawaii of at least $5,000,000, and a separate fund containing one-half of the value of the annuity. They are replaced with the requirement that the separate fund contain a nonspecific amount sufficient to pay the charity's annuities.
Your Committee finds that the Insurance Division expressed concerns about the effect of these amendments on consumer protection. However, the Insurance Division agreed it was possible to draft a bill that would allow Hawaii's smaller, local charities to use gift annuities, while maintaining or even enhancing the safeguards for donor-annuitants.
This optimism was borne out, as the Insurance Division and the proponent of this bill were able to develop a proposed draft that has been adopted by your Committee. As amended, this bill:
(1) Reduces the $5,000,000 requirement to $100,000;
(2) Requires segregated assets in a Hawaii financial institution sufficient to cover the cost of the annuity based on acceptable actuarial standards, plus an additional 10 percent or $100,000, whichever is greater;
(3) Provides that the first page of any gift annuity prominently disclose that the gift annuity is not an insurance product and neither subject to insurance regulation nor protected by a guaranty fund; and
(4) Maintains the other requirements of the current law.
Technical, nonsubstantive amendments were also made for clarity and style.
Your Committee finds that this draft allows smaller charities to use gift annuities, but with appropriate safeguards for donor-annuitants.
As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2762, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2762, H.D. 1, and be referred to the Committee on Finance.
Respectfully submitted on behalf of the members of the Committee on Consumer Protection and Commerce,
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____________________________ KENNETH T. HIRAKI, Chair |
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