Analysis of the New 2024 ACGA Annuity Rates

On November 22, 2023, the American Council on Gift Annuities (ACGA) informed its members that it would be increasing its suggested maximum annuity rates, effective January 1, 2024. The ACGA made its 2024 rates public earlier today, December 26. The 2024 rates replace the rates that became effective January 1, 2023. The ACGA’s decision to increase its suggested maximum gift annuity rates was triggered by the sharp rise in interest rates between May and November 2023. A net investment return assumption of 4.75% underlies the ACGA’s 2024 rates, an increase from 4.25%.

The ACGA’s 2024 rates are moderately higher than the 2023 rates.  For typical annuitant ages, 70 and older, the new single-life rates are 0.4% - 0.5% higher than the rates they replace and are capped at 10.1%. The previous cap was 9.7%. Two-life annuity rates are 0.3% - 0.4% higher at most joint ages, culminating in a cap of 9.9% (up from 9.5%).

The ACGA’s 2024 rates for deferred gift annuity rates are also higher. How much higher depends on the length of deferral. The ACGA has increased the annual compounding rate used in determining deferred annuity rates to 4.75%, up from 4.25%. As a result, the longer the deferral period, the greater the increase in the deferred annuity rate.

The higher 2024 ACGA rates mean that, compared to the 2023 ACGA rates, donors will receive greater payments and smaller charitable deductions, and leave less to charity when their annuities terminate.

ACGA Suggested Annuity Rates, Effective January 1, 2024

Samples of Increased Annuity Rates

The figures in the table below give you a sense of how the new rates and resulting charitable deductions will differ from the current rates and deductions over a range of common annuitant ages. They are based on a $10,000 immediate payment gift annuity that makes payments at the end of each quarter, and December 2023’s IRS discount rate of 5.8%.

Comparison of 2023 and 2024 ACGA Rates

Deferred Gift Annuity Rates Will Increase More Than Immediate Annuity Rates

The ACGA has increased the compound interest factor for computing deferred gift annuity (DGA) rates from 4.25% to 4.75%. As a result, the longer the deferral period, the greater the difference between the 2023 DGA rates and the 2024 DGA rates.

The figures in the table below show how the ACGA suggested rate for a DGA will change as the deferral period changes under the new schedule. The annuity amounts are based on a $10,000 gift.

2023 DGA Rates vs. 2024 DGA Rates

The ACGA’s 4.75% deferred interest factor is well below December’s 5.8% IRS discount rate. Deferred annuities that follow the ACGA rates should always have a charitable value over the required 10% so long as the IRS discount rate remains greater than 4.75%. Should you encounter a DGA that fails the 10% requirement, PGM Anywhere and PGM desktop can decrease the annuity rate for you, as needed, to meet this requirement. Be sure to disclose the reduction to your donor in this case.

Can a Charity Offer the New Higher ACGA Rates Before January 1, 2024?

A charity must file its schedule of maximum rates for annuities issued to residents of Alabama, Arkansas, California, Maryland, New Jersey, New York, and Washington. The charity cannot issue an annuity to residents of these seven states that exceeds the rates on file with state regulators. If a charity has previously filed an ACGA rate table, the state will generally assume that the charity will adopt any new ACGA schedule as of the ACGA’s stated effective date. (The ACGA sends copies of new rate schedules to the state insurance departments.) Any acceleration or delay in adoption would need to be specifically communicated to the state. In addition, it would violate New Hampshire law for a charity to issue annuities using the new ACGA rates before the rates become effective on January 1.

Maximum Annuity Rates for NY Donors

New York’s methodology for determining its maximum annuity rates changed, effective January 23, 2024. A new law regarding this methodology went into effect on that date. The intent of the revised methodology is to greatly reduce the likelihood that any New York maximum rate will be lower than the corresponding ACGA suggested maximum rate. In our testing, we have found no New York rates lower than their corresponding ACGA rates. Go here for more detail on New York’s new maximum annuity rates.

You can look up New York’s 1-life maximum annuity rates by going here and clicking the “Present Value of Immediate Annuities . . .” link. To compute the maximum allowable payout rate, divide the value in the maximum income column by 10 for the age and gender in question. If you need to know New York’s maximum annuity rate for a 2-life annuity or a 1-life or 2-life deferred annuity using the methodology in effect through January 23, 2024, fill out this form to request a calculation.

Conclusion

The ACGA suggested maximum annuity rates for immediate payment gift annuities will increase modestly at all ages, effective January 1, 2024. ACGA rates for deferred gift annuities will increase more significantly. The longer the deferral period, the greater will be the increase. For gift annuities issued to New York donors on or after January 23, 2024, New York’s maximum rates should cease to be a concern for organizations that follow the current ACGA rates. The increase in annuity rates should make gift annuities a little more attractive to donors who are interested in receiving fixed payments for life while supporting your organization’s mission.