Gift Annuity Rates
(Added 7/9/2009)
In these poor economic times, I am trying to distinguish my charity from others, and the way I want to do that is by offering higher rates for gift annuities than other programs offer. That is, I'd like to offer more than the maximum rates than what the American Council on Gift Annuities recommends. It would be modest; something along the lines of one- or two-tenths of a point higher. I assume you'd be against this, but why? If it brings more money to my charity, what's the harm?
Oh, let me count the ways. Since you assume I'm against it, something inside you must be telling you something's wrong. One tenth. Two tenths. It doesn't matter. It's not the amount it's the idea.
Your first stop is learning the legal restrictions in your state. California has strict rules regarding these matters and although many states do not require this, in yours you must apply to have a higher rate structure approved.
But that's just the law. Ethics is a higher calling. There's a reason that the ACGA has recommended rates since March 24, 1927 (back then it was the Committee on Gift Annuities). Not only did charities need to band together on collecting investment and actuarial advice, they also wanted to ensure that nobody offered an economic advantage to donors at the expense of charitable intent; that is, a central idea behind the rates is to emphasize the donor's connection with the charity's mission by taking the financial factor (advantage) out of the equation. (Does the term Texas Lawsuit ring any bells? If it doesn't I'd recommend learning about it.)
But let's say, for argument's sake, that you get the legal green light and offer higher annuity rates. What will you have done? You will simply have acknowledged that your mission isn't worthy enough to stand on its own. It needs an artificial boost. You want an advantage that others don't have. One of the key elements in the ethical decision-making process is determining whether you are making an exception for yourself. I had this discussion with someone back in the mid-1990s, the high-flying, there's nothing-but-up investment days; he said his charity was able to invest better than everybody else. Right.
I'd bet that the charities that routinely offer higher rates than the recommended maximum don't have very good programs and that their gift annuity pools are not very healthy. (I'd like to see a study on this.) When charities are worried that the current system, with a legitimate structure, isn't enough to keep some annuitant pools from going below zero, offering more, especially now, will only exacerbate the issue.
Ours is a community of charities, not a dog-eat-dog world. If you want to distinguish your charity, distinguish your mission.