All Boats Were Lifted: 2024 Another Strong Year for Traditional Investments
Last year at this time, we were talking about how well traditional investment portfolios had done in 2023. After a truly disastrous performance in 2022, the stock market came roaring back in 2023, and the bond side held its own. Long-term performance averages seemed reliable again, and investors regained their confidence. So how did traditional investment portfolios do in 2024? As it turns out, they did quite well. Roughly speaking, the investment performance for traditional investment portfolios in 2024 was a repeat of the robust performance in 2023. Let’s take a look at some of the details.
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GiftWrap Quick Tip: Correcting Form 1099-Rs for Gift Annuities for Prior Tax Years
From the Blog: New York Annuity Rates Will Remain Below ACGA Rates Through at Least 6/30/2025
When Is the Best Time for QCD/RMD Marketing?
PGM Anywhere Is Set Up to Use the Current ACGA Rates
Don’t Rush to Transmit 1099-R File to IRS
There’s a Better Way for 1099-Rs
eRate Refresh
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GiftWrap Quick Tip: Correcting Form 1099-Rs for Gift Annuities for Prior Tax Years
For charities who sponsor gift annuities, there are always corrections for the year just ended after the Form 1099-Rs have been sent out. But occasionally there are corrections going back to prior years, typically due to the delayed notifications of the deaths of annuitants.
After processing the death of an annuitant in GiftWrap, and after confirming the necessary adjustments to payment and tax rows, the GiftWrap user can go to the “1099 Tax” tab in GiftWrap’s green top menu and select “Print 1099-R Forms.” From there, the GiftWrap user will indicate the correct tax year and enter the specific Person Key for the deceased annuitant. The last step is to check off the box “These are Corrected Returns.”
If the organization has already transmitted the 1099-R information to the IRS, the corrected information also must be sent to the IRS. After producing the corrected form for the annuitant (or estate thereof), the next step is to click on the “Create IRS 1099 File / Upload File” tab. The GiftWrap user will need to specify again the correct year and will need to check the box “This is a file of corrected returns.” In addition, the box for “Prior Year Data” needs to be checked. Further, because there is no option for entering a person key, the GiftWrap user will need to insert the following custom filter: “person.personkey = ####.”
From the Blog: New York Annuity Rates Will Remain Below ACGA Rates Through at Least 6/30/2025
New York maximum one-life annuity rates for gift annuities issued to New York donors from January 1, 2025 through June 30, 2025 declined slightly from the maximum rates that were applicable the previous six months. However, the new rates remain well above the rates suggested by the American Council on Gift Annuities (ACGA), as do all two-life rates and all one-life and two-life deferred annuity rates we have reviewed. In summary, charities can offer the current ACGA rates to all New York donors through at least June 30, 2025 without running afoul of New York’s maximums.
We are often asked when a charity should market Qualified Charitable Distribution (QCD) opportunities to donors, especially when donors want to offset their Required Minimum Distribution (RMD) with a QCD. The simple answer is: anytime is a good time to promote QCDs. However, there is a seasonality to when donors take their RMDs. Understanding these patterns can help charities time their outreach for maximum impact.
IRA custodians and trustees must send RMD notices to plan participants by January 31 each year. This notice informs IRA owners of the amount they need to withdraw for the year. After the owner of a traditional IRA reaches age 72, the custodian will notify them of their required withdrawal to avoid a 25% excise tax on any missed distribution in a year during which they will turn age 73 or older.
Some IRA participants take their RMD soon after receiving the notice by making their withdrawal sometime in late January through the end of April, either because they need the funds or want to reinvest them elsewhere. Others wait until later in the year to maximize tax-free growth within the IRA. These individuals may delay taking their RMD until well into the fourth quarter.
Marketing QCDs during these two periods can effectively reach donors interested in making such gifts. It is important to remember that if a donor wants to use a QCD to offset their RMD, they must complete the QCD before taking the RMD. If the donor takes the RMD early in the year, a QCD made later in the same year will not offset the tax owed on the RMD.
PGM Anywhere Is Set Up to Use the Current ACGA Rates
When we create a PGM Anywhere account for a client, we set up the software to use the annuity rates currently suggested by the American Council on Gift Annuities (ACGA). To see whether your account is still set up this way, open Customize > Calculation Options > Gift annuity rate table. If this setting is “ACGA rates effective on date of gift,” then PGM Anywhere will always default to the appropriate ACGA rate based on the gift date and age(s) of the annuitant(s). You can override this default rate by changing the value in the Annuity rate (% or $) field when you select or edit a gift annuity in the Gift Options screen.
If your charity offers annuity rates from a past ACGA rate table, you can set up PGM Anywhere to always use rates from that table by choosing it in the Customize > Calculation Options > Gift annuity rate table menu and then clicking Save. We have a few clients who don’t follow the ACGA rates. In these cases, we have created custom rate tables for them to use. Contact support@pgcalc.com or call us at 888-474-2252 if you want us to create a custom annuity rate table for you (fee applies).
Don’t Rush to Transmit 1099-R File to IRS
It’s typically a relief to anyone involved in the administration of charitable gift annuities (CGAs) to have sent the Form 1099-Rs to all the annuitants by January 31. That’s the biggest part of the tax reporting requirements for CGAs. But the information for all the 1099-Rs still needs to be sent to the IRS electronically by March 31 (or by February 28 for the small number of organizations who are still permitted to send the information on paper).
In some cases, there is a temptation to rush to that second step – thinking that once the actual forms have gone out, it’s good to get the information to the IRS as quickly as possible. But we always urge charities not to rush the process, especially with larger gift annuity programs. Inevitably, there will be forms marked “return to sender” because of previously unknown address changes. There will also be notifications of deaths, and some adjustments may be necessary in the areas of payments and tax reporting.
Every situation is unique, but we generally recommend waiting until a date between March 1 and March 15 to submit the electronic file to the IRS. That way, individual forms can be revised without needing to submit a “corrected return” to the IRS. When corrections are made to an individual form before the electronic file is sent to the IRS, technically speaking, it is not a “corrected return.” That label is only used after the initial tax reporting information has already been supplied to the IRS.
There’s a Better Way for 1099-Rs
If you maintain your CGA program in house, you’ve just cleared the first hurdle of the tax season: printing and mailing 1099-Rs for all your annuitants. If you’d like this to be your last year getting papercuts in order to meet the January 31st deadline, and not worry about electronic filing next month, PG Calc’s Gift Administration team can assist you with a Basic Service plan (we also have a Payments Plan that includes paying your annuitants too).
Basic Service includes:
Maintaining biographical and gift information
Printing and mailing the 1099-Rs to annuitants
Electronically filing the 1099-R information with the IRS
Researching deceased annuitants daily using death verification services
Tracking the current value of assets backing each annuity contract (quarterly), which is essential to knowing how much to remove from the pool when an annuity terminates
Providing one each of the following annually: FASB liability report, State Reserve report, Cash-Flow Projections, Gift Years Remaining, and Overview and Statistics reports.
Pricing is based on the volume of gifts. For more information or a price quote on our Basic or Payments Services, please reach out to info@pgcalc.com.
PG Calc • 129 Mount Auburn Street • Cambridge • MA • 02138
