Details on Amendment to Tennessee Gift Annuity Law

Certain aspects of Tennessee’s gift annuity law, relating to reserve fund requirements and submission of annual financial information, were amended effective April 16, 2012 (Public Chapter No. 743, House Bill 3781).  Read the full text.

Previously a charity was required to maintain a separate “Tennessee only” reserve fund for annuities issued in Tennessee on or after January 1, 2009.  While a charity may continue to hold such a state-specific fund, it now has the option to hold reserves for those Tennessee annuities in its larger “multi-state” reserve fund. When registering in Tennessee, a charity should indicate which option it is selecting. If a charity has already registered, and is holding a Tennessee-only reserve, it must obtain permission from the Department of Commerce and Insurance if it wishes to now move the Tennessee reserves into its “multi-state” reserve fund.

Regardless of which option is selected, the fund in which the Tennessee reserves are held must comply with one of Tennessee’s reserve methodologies.

The options for determining the required reserve have been expanded by the recent amendment. A charity may elect to hold: 100% of the annuity contribution in reserve; 110% of the reserve liability calculated in accordance with its state’s standard valuation law; or, as newly added, 110% of the reserve liability calculated using the Annuity 2000 table and an interest rate of five percent. Use of either of the calculation methodologies requires having an actuary’s verification.

The final change adds the possibility for obtaining an extension of time for submitting audited financial statements to the state. On an annual basis, charities must file either unaudited financial information verified by 2 officers, or a copy of the audited financial statement. The filing deadline for the verified financial information has always been 120 days from a charity’s fiscal year end, but with the department having authority to extend that date. The deadline for submission of the audited financials has been, and continues to be, 150 days after fiscal year end, but the recent change now gives the department the authority to extend that date, where previously no such authority existed.