Legislature(2001 - 2002)

03/14/2001 03:20 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 121-CHARITABLE GIFT ANNUITIES                                                                                            
Number 0165                                                                                                                     
CHAIR  MURKOWSKI announced  that the  committee would  first hear                                                               
HOUSE  BILL  NO.  121,  "An  Act  relating  to  the  issuance  of                                                               
qualified charitable gift annuities."                                                                                           
CHAIR MURKOWSKI, speaking  as the sponsor HB  121, explained that                                                               
the bill  adopts language used  in 30 states  regarding qualified                                                               
charitable gift annuities.  This  legislation makes it clear that                                                               
[charitable  gift annuities]  are not  "insurance business,"  but                                                               
are exempt from  regulation by the Division of  Insurance.  There                                                               
are certain notice requirements that  have to take place in order                                                               
to be  a qualified charitable  gift annuity organization;  one is                                                               
notifying  the division  that the  organization  has a  qualified                                                               
charitable gift annuity plan.                                                                                                   
Number 0243                                                                                                                     
CHAIR MURKOWSKI  said [notification]  has to  be given  within 90                                                               
days  of  issuing  the  first   qualified  gift  annuity.    [The                                                               
legislature]  is   saying  that  even  though   the  Division  of                                                               
Insurance  is  not doing  the  regulating,  [the division]  still                                                               
needs  to know  who is  operating a  qualified gift  plan in  the                                                               
CHAIR MURKOWSKI referred  to an article from  the newspaper about                                                               
Providence Health  Systems' operating  a gift  annuities program.                                                               
This  is a  contractual relationship  between the  donor and  the                                                               
charitable  institution;  an agreement  is  reached  in which  an                                                               
amount is  gifted to an  [institution] and the charity  will give                                                               
the [institution] a fixed annuity  over a lifetime period.  Based                                                               
on age and  whether payout begins now or is  deferred, the amount                                                               
received will vary somewhat, she explained.                                                                                     
Number 0361                                                                                                                     
CHAIR  MURKOWSKI  referred  to   a  handout  that  describes  how                                                               
charitable  gift annuities  work.   She  said  Jerome Selby  from                                                               
Providence  Alaska Foundation  had  contacted  her and  indicated                                                               
that  there are  several entities  in the  state operating  these                                                               
plans;  what  "they"  are seeking  through  this  legislation  is                                                               
recognition of  how exemptions are  treated through  the Division                                                               
of Insurance.                                                                                                                   
Number 0539                                                                                                                     
FRANK   MINTON,  Vice   President,  American   Council  of   Gift                                                               
Annuities, via  teleconference, said he  is a volunteer  for this                                                               
organization,  and  is  president  of  Plan  Giving  Services,  a                                                               
consulting  firm   that  works  with  charities   regarding  gift                                                               
MR. MINTON said  the American Council of  Gift Annuities concerns                                                               
itself with  charities that issue  gift annuities  throughout the                                                               
United  States.   In  this  role,  he  worked with  the  National                                                               
Association  of Insurance  Commissioners in  the adoption  of the                                                               
model exemption  Act, which  was subsequently  circulated amongst                                                               
the states.   To date about  30 states have adopted  some version                                                               
of the  Act.  It enables  charities to offer gift  annuities with                                                               
the assurance  that it is approved  by the state.   It allows the                                                               
state  to protect  its consumers  by having  only charities  that                                                               
have been  in existence  a certain  number of  years, and  have a                                                               
certain amount  of unrestricted assets  to issue  gift annuities,                                                               
and it doesn't impose burdensome requirements on the charity.                                                                   
Number 0635                                                                                                                     
MR.  MINTON   said  there   were  a   few  states,   before  this                                                               
circulation, that  had adopted more heavy  regulations; there are                                                               
a handful  of states,  like Alaska, that  have not  yet addressed                                                               
the  subject  of gift  annuities.    Several  of those  are  also                                                               
considering the model exemption Act.                                                                                            
CHAIR  MURKOWSKI referred  to the  consumer protection  aspect of                                                               
the  bill.     To   be  a   qualified  charitable   gift  annuity                                                               
organization under HB 121, an  organization has to have a minimum                                                               
of $300,000  in unrestricted cash  or cash equivalents,  and must                                                               
have been in continuous operation for  the last three years.  She                                                               
asked  if these  are  standard requirements  within the  industry                                                               
that all charitable gift annuities [organizations] have to meet.                                                                
Number 0724                                                                                                                     
MR.  MINTON  responded that  charities  have  been offering  gift                                                               
annuities for  over 100 years.   Default on a charitable  gift is                                                               
almost unheard of, he said, and  he had no firsthand knowledge of                                                               
any  charity that  has ever  failed to  fulfill its  obligations.                                                               
The  practice of  nearly  all  charities is  to  keep the  entire                                                               
contribution in  reserve, and to  make the gift  annuity payment;                                                               
then  use for  charitable purposes,  whatever is  left (indisc.).                                                               
He  said  charities  further provide  (indisc.)  by  keeping  the                                                               
contribution  in reserve  to  back the  payment.   Consumers  are                                                               
further  protected   because  the   charity's  assets   back  the                                                               
annuities.   He  remarked that  this is  one of  the reasons  for                                                               
requiring the charity to have  the minimum amount of unrestricted                                                               
MR.  MINTON illustrated  with an  example.   He  said if  someone                                                               
contributed  $10,000 for  a gift  annuity with  Providence Alaska                                                               
Foundation, and for whatever reason  the entire $10,000 (indisc.)                                                               
from  making   the  payment,  then  Providence   would  still  be                                                               
obligated to  continue making  those payments,  backed by  all of                                                               
its assets.  The annuitant  (indisc.) the general creditor of the                                                               
Providence Alaska Foundation.                                                                                                   
Number 0874                                                                                                                     
REPRESENTATIVE ROKEBERG  asked why $300,000 in  unrestricted cash                                                               
or cash equivalents is required.                                                                                                
MR.  MINTON stated  that the  purpose is  so there  is a  certain                                                               
amount of  unencumbered assets to  assure that the  charity would                                                               
be able to  make the payments in the event  that the reserves are                                                               
MR. MINTON referred  to page 1, AS 21.03.021, lines  11-12 of the                                                               
bill.    He   noted  that  it  says   "aiding  and  strengthening                                                               
educational institutions".   He pointed  out that the  issuers of                                                               
gift  annuities are  not just  educational institutions,  but are                                                               
other  types of  charities  as well,  like hospital  institutions                                                               
such as Providence Alaska Foundation.   He suggested changing the                                                               
word "educational institutions"  to "charitable organizations" so                                                               
there isn't an implied restriction.                                                                                             
Number 1028                                                                                                                     
JEROME  SELBY, Providence  Alaska Foundation,  Providence Medical                                                               
Center, said Providence  supports the bill and would  like to see                                                               
it  adopted because  it would  do  two major  things for  Alaska.                                                               
First,  it  gives  a  "light  of day"  test  to  charitable  gift                                                               
annuities  so   that  things  are   above  board  and   there  is                                                               
registration with the state.   Second, it gives people confidence                                                               
that  when working  with an  organization, in  effect, they  know                                                               
whether  it  is a  legitimate  organization  because it  has  the                                                               
state's seal of approval.                                                                                                       
MR. SELBY  said while  "we" are asking  to be  regulated, "we're"                                                               
willing  to  do  this  because   it's  an  appropriate  level  of                                                               
regulation; it isn't onerous and unreasonable.                                                                                  
Number 1164                                                                                                                     
REPRESENTATIVE ROKEBERG  asked Mr.  Selby if  he could  point the                                                               
committee to  [where it  refers to the]  regulation in  the bill,                                                               
because it seems  to him that the bill refers  to the "type size"                                                               
of a warning.  He asked what other steps constitute regulation.                                                                 
MR.  SELBY  said  in  order  for an  organization  to  offer  the                                                               
annuities legitimately,  it has to  notify the state  Division of                                                               
Insurance that it is in  the business of offering charitable gift                                                               
annuities.    It   has  to  pass  the  scrutiny   level  that  an                                                               
organization  is  a "501C3."  The  check  by  the state  is  very                                                               
minimal, but the  process of getting registered in  the state has                                                               
value, he remarked.                                                                                                             
Number 1245                                                                                                                     
REPRESENTATIVE ROKEBERG  said: Unless there is  a[n] authority to                                                               
create  regulation   or  something,  or  there   is  an  existing                                                               
regulatory scheme in  place that the Division  of Insurance does,                                                               
... other than  the fact that if  the division saw fit  to see if                                                               
their  notice provisions  were in  conformance with  the statute,                                                               
there is  no regulation.  He  asked Mr. Selby if  he would change                                                               
his  advertising or  marketing of  annuities to  reflect a  state                                                               
approval if this bill passes.                                                                                                   
Number 1285                                                                                                                     
MR. SELBY responded in a negative way.   He said that is not what                                                               
"we" are  seeking.  He  explained that it would  require everyone                                                               
to make the disclosure statement.                                                                                               
REPRESENTATIVE  ROKEBERG  asked  Mr. Selby  if  more  traditional                                                               
annuities  are  bought  after  the assets  are  conveyed  to  the                                                               
charitable organization.                                                                                                        
MR.  SELBY referred  the  question to  Jon  Calder of  Providence                                                               
Alaska Foundation.                                                                                                              
JON  CALDER,  Providence  Alaska Foundation,  Providence  Medical                                                               
Center,  via teleconference,  responded  that Providence  manages                                                               
and   invests   the   asset  after   fulfilling   the   fiduciary                                                               
responsibilities.  He  reiterated that the purpose  [of the bill]                                                               
is to ensure  that [entities] are qualified to do  this, and have                                                               
notified the insurance commissioner when it is started.                                                                         
MR. CALDER  mentioned that  he had spoken  with Robert  Lowe from                                                               
the insurance commission,  that "they" fully agree  with this and                                                               
the Charitable Gift Annuities Exemption  Model Act ("Model Act"),                                                               
and that the "Super Model Act"  has been approved by the National                                                               
Association of Insurance Commissioners [NAIC].   It is one of the                                                               
first things to say that a  charitable gift annuity is not really                                                               
commercial  insurance; it's  for the  purpose of  having a  donor                                                               
make a gift and then realize income from that gift.                                                                             
Number 1423                                                                                                                     
MR.  MINTON  added  that  there are  some  charities  across  the                                                               
country  that   do  reinsure,  meaning  that   upon  receiving  a                                                               
contribution for  a gift  annuity it  takes a  portion of  it and                                                               
buys  an annuity  from  a licensed  insurance  company that  will                                                               
cover the obligation.   Having done so, [that  company] feels the                                                               
freedom  to spend  what is  left  for charitable  purposes.   The                                                               
overwhelming majority  of charities like  Providence self-insure,                                                               
meaning they  reserve the money  and keep  it in reserve  to make                                                               
the payments from that reserve.                                                                                                 
REPRESENTATIVE  ROKEBERG  asked  Mr.  Calder if  he  retains  any                                                               
actuarial consultants to establish these programs.                                                                              
MR. CALDER responded that  Providence's charitable gift annuities                                                               
go by the  rules and regulations of the American  Council on Gift                                                               
Annuities  that  set  the  actuarial rate  and  also  govern  the                                                               
formula  that is  used.   He  said when  he has  a gift  annuity,                                                               
Providence Health System  goes to the bank and  invests the money                                                               
by making  all of  the fiduciary  responsibilities to  the donor;                                                               
only after this is the money spent.                                                                                             
Number 1547                                                                                                                     
MR. MINTON  said charities do  not issue variable  annuities like                                                               
an insurance  company; these are  all fixed  pure-life annuities.                                                               
He  noted that  the  gift-annuity rate  offered  by charities  is                                                               
substantially  lower  than   commercial  rates;  therefore,  gift                                                               
annuities  don't really  compete with  commercial annuities,  but                                                               
are used by  people who want to  make a gift.  In  the process of                                                               
making  the  gift,  [the  organization]   gets  a  deduction,  in                                                               
addition to the life payments.                                                                                                  
REPRESENTATIVE ROKEBERG commented that  [the annuity] could be at                                                               
net present value  or a calculation that one  would actually have                                                               
a higher rate of return,  because of the tax deduction, depending                                                               
on [a company's] bracket and how it works out.                                                                                  
MR. MINTON replied  that typically, if a donor  gave $10,000, the                                                               
charitable deduction might be in  the range of $4,000, varying on                                                               
the age of the annuitant and  the annuity rate.  But somewhere in                                                               
the range of 40 or 50  percent of the amount contributed would be                                                               
a  charitable  deduction.   The  donor  has the  satisfaction  of                                                               
making a gift, and is getting  a payment lower than what it would                                                               
get  from an  insurance  company.   But  it  is  still getting  a                                                               
payment and a deduction, he explained.                                                                                          
Number 1640                                                                                                                     
CLAUDIA    BIEBER,   Alaska    Native   Heritage    Center,   via                                                               
teleconference, said  [the center] is a  developing organization,                                                               
and the  charitable gift  annuities program is  a viable  part of                                                               
long-term financial development  sustainability for the nonprofit                                                               
community in Alaska.  She spoke in support of the bill.                                                                         
Number 1679                                                                                                                     
GLORIA GLOVER,  Chief Financial Examiner, Division  of Insurance,                                                               
Department   of    Community   &   Economic    Development,   via                                                               
teleconference, stated that this  bill provides language allowing                                                               
certain  charitable  organizations  to  issue  certain  kinds  of                                                               
annuities without regulation  by the Division of  Insurance.  She                                                               
said  organizations  issuing  annuities  that  do  not  meet  the                                                               
definition of  a qualified  charitable gift  annuity must  have a                                                               
certificate of authority to operate in Alaska.                                                                                  
MS. GLOVER  noted that the  Division of Insurance is  proposing a                                                               
bill that includes the charitable  gift annuity language from the                                                               
model bill.   She  went on  to describe  the differences.   House                                                               
Bill 121  places the  majority of  the language  in Section  3 of                                                               
[Title]  21, whereas  the [Division  of Insurance's]  bill places                                                               
language in Section 89, for  miscellaneous provisions.  She added                                                               
that  HB  121 addresses  the  conflict  of  the exclusion  in  AS                                                               
21.03.021 for  the educational institutions, while  the [Division                                                               
of Insurance's] bill does not.                                                                                                  
MS.  GLOVER remarked  that  she is  concerned  with the  proposed                                                               
change to  AS 21.03.021 [page 1,  line 11 of the  bill], changing                                                               
"educational  institution" to  "charitable  organizations".   She                                                               
explained that it is [the  Division of Insurance's] view that the                                                               
educational  institution would  continue  to be  exempt from  all                                                               
insurance  regulations,  including  the charitable  gift  annuity                                                               
provision.    Therefore,  the  change may  create  a  problem  in                                                               
enforcing the bill.                                                                                                             
Number 1786                                                                                                                     
CHAIR MURKOWSKI  stated that  she was  not certain  why expanding                                                               
the  bill  to  reference  charitable  organizations  would  cause                                                               
MS. GLOVER replied  that the current language in  AS 21.03.021 is                                                               
clear that  it exempts  educational institutions  completely from                                                               
Title 21.   She said  she does not think  the language in  line 8                                                               
would add  the requirement for  charitable organizations  to meet                                                               
the new  notice requirements that  HB 121 includes.   She thought                                                               
[educational institutions] would be exempt from even HB 121.                                                                    
MS. GLOVER  continued on pointing out  other differences [between                                                               
HB  121  and  the  Division  of Insurance's  bill,]  soon  to  be                                                               
introduced.   One  is that  HB 121  includes the  confidentiality                                                               
provision that  is not in the  model.  It makes  confidential any                                                               
information received  by the division  or any penalty  that might                                                               
come out of these provisions.                                                                                                   
CHAIR MURKOWSKI asked if Ms.  Glover sees that as problematic for                                                               
the division.                                                                                                                   
MS.   GLOVER  responded   that   she  has   concerns  about   the                                                               
confidentiality  that prevents  [the] penalty  provision, because                                                               
the other provisions appear to be public information anyway.                                                                    
Number 1927                                                                                                                     
MS. GLOVER stated  that there has been an  amendment proposed for                                                               
Section 5,  line 17, to  make the section  more clear as  to what                                                               
notice  is required.   The  amendment would  say that  the notice                                                               
must  confirm  compliance  with  AS  21.03.070  (b)  and  (c)  by                                                               
removing  the  word  "comply" and  adding  the  words  "[confirm]                                                               
compliance".    Amendment  1, 22-LS0258\C.1,  Bannister,  3/9/01,                                                               
     Page 4, line 17:                                                                                                           
          Delete "comply"                                                                                                       
          Insert "confirm compliance"                                                                                           
REPRESENTATIVE ROKEBERG asked  if Ms. Glover had  said this would                                                               
be  without  regulation  and  would   certify  the  authority  to                                                               
MS.  GLOVER replied  that  she would  agree;  this only  provides                                                               
notice  to  the  Division  [of Insurance]  about  the  activities                                                               
occurring.   She remarked  that the division  would not  agree to                                                               
this registration approach.                                                                                                     
Number 1994                                                                                                                     
REPRESENTATIVE  ROKEBERG asked  if  the  National Association  of                                                               
Insurance  Commissioners   (NAIC)  or   a  provision   under  the                                                               
insurance code would prohibit mentioning any kind of authority.                                                                 
MS. GLOVER answered that she doesn't know of any prohibition.                                                                   
REPRESENTATIVE ROKEBERG suggested that  [the committee] amend the                                                               
bill to  say [that  an organization]  couldn't advertise  that it                                                               
had  been certified  by the  State  of Alaska,  to not  misinform                                                               
investors  and  donors; then  [for  the  committee] to  create  a                                                               
regulated type of investment vehicle.                                                                                           
CHAIR MURKOWSKI asked  Mr. Minton if other states  have some kind                                                               
of disclosure.                                                                                                                  
Number 2037                                                                                                                     
MR.  MINTON  answered  that  it  is common  for  states  to  have                                                               
language  stating that  this is  not backed  by any  guaranteeing                                                               
association.   He stated  the he believes  [HB 121]  provides for                                                               
that as well.                                                                                                                   
REPRESENTATIVE  ROKEBERG  stated  that  this  is  an  unregulated                                                               
certification, and he  is concerned that any  consumer would find                                                               
comfort in the  fact that this is now regulated,  when in fact it                                                               
CHAIR  MURKOWSKI remarked  that  Representative  Rokeberg made  a                                                               
good point.   She  added that  it is not  entirely clear  to what                                                               
extent  the  state's   notice  requirement  constitutes  anything                                                               
beyond notice, versus a registration or certification.                                                                          
Number 2114                                                                                                                     
MR.  MINTON  read to  the  committee  language that  most  states                                                               
require as  a disclosure.  He  noted that it is  a statement from                                                               
Colorado, but similar language would  be found in all states that                                                               
have adopted this model Act.  He read:                                                                                          
     This annuity is not issued  by an insurance company nor                                                                    
     regulated by the Colorado Division  of Insurance and is                                                                    
     not   protected  by   any  state   guarantee  plan   or                                                                    
     protective associations.                                                                                                   
CHAIR  MURKOWSKI said  that  is very  similar  to the  disclosure                                                               
[language] on  page 2, lines 8-11,  which reads in part:  "not an                                                               
insurance policy in  this state, is not subject  to regulation by                                                               
the division, and is not protected  by the Alaska Life and Health                                                               
Insurance Guarantee Association".                                                                                               
REPRESENTATIVE ROKEBERG  clarified that some type  of prohibition                                                               
in  utilizing   any  type  of   certification  in  the   form  of                                                               
advertising to the  public is needed.  It clearly  states [in the                                                               
bill]  that  the  contract  would   say  it  is  not  subject  to                                                               
regulation by the division, he pointed out.                                                                                     
CHAIR MURKOWSKI asked Representative  Rokeberg if his point would                                                               
be,  for  instance,  that Providence  Alaska  Foundation,  on  an                                                               
advertisement, wouldn't be  able to say, "Certified  by the State                                                               
of Alaska."                                                                                                                     
REPRESENTATIVE  ROKEBERG answered  affirmatively.   He asked  Ms.                                                               
Glover if the  director or anybody in her division  looked at the                                                               
current practice of  the sale of annuities, and  whether there is                                                               
concurrence with the statute now.                                                                                               
Number 2207                                                                                                                     
MS. GLOVER  responded that  [the Division  of Insurance]  has not                                                               
taken an active role in reviewing  these kinds of annuities.  She                                                               
explained that  whenever it receives questions  regarding whether                                                               
these can  be issued in  Alaska, [the Division of  Insurance] has                                                               
responded  that  those  entities  must  be  licensed  as  annuity                                                               
insurance companies in order to operate here.                                                                                   
REPRESENTATIVE ROKEBERG  stated that if [entities]  are marketing                                                               
and  are self-insured,  then they  are  marketing annuities,  and                                                               
should be conforming with [Alaskan] statutes.                                                                                   
MS. GLOVER responded that she does not disagree.                                                                                
CHAIR  MURKOWSKI,  referring  to  Amendment 1,  stated  that  the                                                               
clarifying language that's attached  [notifies] the division that                                                               
there's been notice to the donor.                                                                                               
REPRESENTATIVE HALCRO made a motion  to adopt Amendment 1.  There                                                               
being no objection, Amendment 1 was adopted.                                                                                    
Number 2294                                                                                                                     
REPRESENTATIVE  ROKEBERG  made  a   motion  to  adopt  conceptual                                                               
Amendment 2 that  would prohibit [a company from  using the state                                                               
certification] in marketing or advertising.                                                                                     
REPRESENTATIVE  HALCRO suggested  prohibiting  the  use of  state                                                               
certification as a  marketing tool for some kind  of a guarantee.                                                               
He added  that on  the other side,  the organization  should have                                                               
the ability to say, "Yes, we are registered with the state."                                                                    
REPRESENTATIVE ROKEBERG said not in the advertising.                                                                            
REPRESENTATIVE HALCRO  agreed, but  said if [an  organization] is                                                               
going to participate in one  of these programs, it will certainly                                                               
want some reassurances.                                                                                                         
REPRESENTATIVE ROKEBERG  remarked that  these are not  subject to                                                               
regulation  by   [the  Division  of  Insurance].     Also,  there                                                               
shouldn't be any  kind of comfort for the investor  that there is                                                               
a state regulation, because there isn't any.                                                                                    
REPRESENTATIVE HALCRO  replied that  he understands,  but passing                                                               
this legislation basically places  an approval stamp stating that                                                               
it is all right to do this;  the average citizen is going to want                                                               
some kind of reassurance that this is all right.                                                                                
REPRESENTATIVE ROKEBERG  remarked that [the  committee] shouldn't                                                               
pass the bill, then.                                                                                                            
Number 2374                                                                                                                     
CHAIR  MURKOWSKI  asked Mr.  Selby  if  this were  passed,  would                                                               
[Providence  Medical  Center]   change  advertising  to  indicate                                                               
registration with the state.                                                                                                    
MR.  SELBY answered  that  [Providence  Medical Center]  wouldn't                                                               
change what it was doing;  it already has the disclaimer language                                                               
that states that it is not regulated  by the State of Alaska.  He                                                               
remarked that  Representative Rokeberg  has a  legitimate concern                                                               
that somehow  folks might try  to imply  that they are  backed by                                                               
the State of Alaska.  That's  counter to the purpose of exempting                                                               
these folks out in the first place, he said.                                                                                    
CHAIR    MURKOWSKI   remarked    that   she    appreciates   what                                                               
Representative Rokeberg is  saying and thinks that it  is fair to                                                               
have  some  type of  prohibition  on  the advertising  component.                                                               
This  is [just]  a  registration process  with  the [Division  of                                                               
TAPE 01-32, SIDE B                                                                                                              
Number 2481                                                                                                                     
CHAIR  MURKOWSKI  announced that  there  being  no objection  [to                                                               
conceptual Amendment 2], it was adopted.                                                                                        
Number 2466                                                                                                                     
REPRESENTATIVE  ROKEBERG  made  a   motion  to  adopt  conceptual                                                               
Amendment  3 striking  "may  not be  smaller"  and inserting  the                                                               
words "shall be larger" [from Section. 3, line 13].                                                                             
CHAIR MURKOWSKI asked if he just wants it to be apparent.                                                                       
REPRESENTATIVE  ROKEBERG  agreed that  he  just  wants it  to  be                                                               
apparent.   He said  it should  be bold, so  people make  sure to                                                               
read it.                                                                                                                        
REPRESENTATIVE  HALCRO  stated that  in  his  business there  are                                                               
certain requirements;  for instance when  using logos, it  has to                                                               
be a  [certain] percentage [size] so  the logo is visible  and is                                                               
standard.   He suggested that  it could be applied,  for example,                                                               
to say it  has to constitute at  least 5 percent of  the total ad                                                               
CHAIR  MURKOWSKI   remarked  that   this  doesn't  refer   to  an                                                               
advertising context, but to the document.                                                                                       
REPRESENTATIVE HALCRO  clarified that it  depends on how  big the                                                               
document is; it probably needs to be a decent-sized type.                                                                       
CHAIR MURKOWSKI asked  Ms. Glover if [the  Division of Insurance]                                                               
has a standard for disclosure requirements.                                                                                     
Number 2351                                                                                                                     
MS. GLOVER answered that [the  Division of Insurance] does review                                                               
and approve  policy language;  however, she is  not aware  of any                                                               
standard requirements for notices.                                                                                              
CHAIR  MURKOWSKI  said  she  has no  problem  with  the  language                                                               
stating "shall be  larger and in bold type," instead  of "may not                                                               
be smaller".                                                                                                                    
Number 2255                                                                                                                     
REPRESENTATIVE  KOTT asked  Providence [Medical  Center] what  is                                                               
currently being done.                                                                                                           
MR. CALDER  responded that the  notice in their documents  is the                                                               
same type size as the rest of the  document.  He said he would be                                                               
happy, however, to have it larger and in bolder type.                                                                           
Number 2146                                                                                                                     
CHAIR  MURKOWSKI  announced  that  there being  no  objection  to                                                               
conceptual Amendment 3, it was adopted.                                                                                         
Number 2134                                                                                                                     
REPRESENTATIVE  CRAWFORD  made  a   motion  to  adopt  conceptual                                                               
Amendment 4.  He referred  to AS 21.03.070, subsection (b), which                                                               
     When  entering  into  an   agreement  for  a  qualified                                                                    
     charitable  gift annuity,  the charitable  organization                                                                    
     shall  disclose   to  the  donor  in   writing  in  the                                                                    
     agreement that  a qualified charitable gift  annuity is                                                                    
     not an insurance  policy in this state,  is not subject                                                                    
     to regulation by the division,  and is not protected by                                                                    
     the Alaska Life Health Insurance Guaranty Association                                                                      
     established under [AS 21.79.040].                                                                                          
REPRESENTATIVE CRAWFORD  stated that [a charitable  gift annuity]                                                               
is not  protected or under  oversight by anybody,  and Colorado's                                                               
language states  this as  well.   He added that  this might  be a                                                               
good disclosure [for Alaska to use].                                                                                            
CHAIR MURKOWSKI  said it was  her understanding, when  Mr. Minton                                                               
read the Colorado language, that it mirrored this.                                                                              
CHAIR MURKOWSKI  clarified that [a  charitable gift  annuity] may                                                               
not  be  protected  by  the  Alaska  Life  and  Health  Insurance                                                               
Guaranty, but there is an  underlying assumption [in the Colorado                                                               
language]  that  it  could  be   protected  by  something.    She                                                               
suggested that the  committee take that language and  adapt it to                                                               
Alaska.  She asked Mr. Minton if he would agree.                                                                                
MR. MINTON  replied that he  thinks substantively it is  the same                                                               
and that  the existing  language [in subsection  (b)] could  be a                                                               
little more inclusive.                                                                                                          
CHAIR MURKOWSKI  asked Mr. Minton  if subsection (b) is  the NAIC                                                               
MR.  MINTON responded  that it  is  the paragraph  from the  NAIC                                                               
model  statute.   He remarked  that  the state  is adopting  this                                                               
model statute  to come up with  its own disclosure language.   He                                                               
added that  he had read Colorado's  language but that all  of the                                                               
disclosure language is  substantially the same and  only varies a                                                               
little bit from state to state.                                                                                                 
Number 1968                                                                                                                     
MS. GLOVER stated that the [NAIC] model says:                                                                                   
     The  charitable  organization  shall  disclose  to  the                                                                    
     donor  in  writing in  that  annuity  agreement that  a                                                                    
     qualified  charitable  gift  annuity is  not  insurance                                                                    
     under  the laws  of this  state and  is not  subject to                                                                    
     regulation by  the insurance commissioner  or protected                                                                    
     by an insurance guaranty association.                                                                                      
CHAIR MURKOWSKI remarked  that it is pretty much what  is said in                                                               
subsection (b).   She asked Mr. Selby and Mr.  Calder if they had                                                               
any comment on this.                                                                                                            
MR. SELBY replied no, that he thinks  it is fine.  He stated that                                                               
he would agree  that if it stated, "regulation  by the division",                                                               
some folks might not understand  that it's the Alaska Division of                                                               
Insurance.   He suggested  that it  would be  clearer if  it said                                                               
"regulation by the Alaska Division  of Insurance".  He added that                                                               
the statement "not protected by  the Alaska Life Health Insurance                                                               
Guaranty  Association established  under  [AS 21.79.040]"  leaves                                                               
open the question  of whether there is anything  else that covers                                                               
it, and he  suggested that the committee use  lateral language or                                                               
say that it's not protected  by any insurance guaranty, including                                                               
the   Alaska   Life   Health   Insurance   Guaranty   Association                                                               
established under  AS 21.79.040.   He noted  that this  would not                                                               
change the intent of the disclosure statement.                                                                                  
CHAIR MURKOWSKI  suggested that if  it were  to say, on  line 10,                                                               
"is not protected by any  insurance guaranty including the Alaska                                                               
Health",  it  would  be  clear that  there  "isn't  anything  out                                                               
REPRESENTATIVE ROKEBERG said he thinks  that the bill states that                                                               
it  just has  to meet  the requirements  of [subsection  (b)], it                                                               
doesn't have to give them verbatim.                                                                                             
REPRESENTATIVE HALCRO  asked Ms. Glover whether  there is anybody                                                               
that people could turn to if there were a dispute.                                                                              
MS. GLOVER  answered that  with the  way this  is written  in the                                                               
exemption, [the  Division of Insurance] would  not have authority                                                               
to look into any kind of problems.                                                                                              
Number 1723                                                                                                                     
CHAIR  MURKOWSKI  announced  that  there being  no  objection  to                                                               
Conceptual Amendment  4, "making more clear  subsection (b) under                                                               
[AS.21.03.070]," it was adopted.                                                                                                
Number 1719                                                                                                                     
REPRESENTATIVE KOTT referred  to page 3, lines  9-10, which talks                                                               
about  confidentiality  of  the   information  received  by  [the                                                               
Division of Insurance].  He remarked  that his only concern is if                                                               
under [subsection (d) on page 2,  a person] had issued his or her                                                               
first annuity and as a potential  annuitant wanted to find out if                                                               
this was  really legitimate, [the  person's] only  recourse would                                                               
be to  go to the  [the Division of  Insurance].  But,  under this                                                               
provision,  [the Division  of Insurance]  could  not provide  any                                                               
information.    He  asked if  this  is  standard  confidentiality                                                               
language built into the NIAC model Act.                                                                                         
MS.  GLOVER  responded  that  there   is  not  a  confidentiality                                                               
provision  in  the  model.    He agreed  that  [the  Division  of                                                               
Insurance]  would   not  be  able  to   provide  any  information                                                               
regarding the notice on these types of entities.                                                                                
Number 1654                                                                                                                     
REPRESENTATIVE  HALCRO asked  Ms.  Glover if  there isn't  enough                                                               
information provided upfront before somebody gets involved.                                                                     
MS. GLOVER replied  that she would have no  problem providing the                                                               
information to [the Division of Insurance].                                                                                     
CHAIR MURKOWSKI stated that the  point behind the confidentiality                                                               
provision was that  what one didn't want a case  in which someone                                                               
gives   $10,000  to   one  organization,   and   then  a   second                                                               
organization, looking  for donors,  can call  up the  Division of                                                               
Insurance and get the donor's  name and number, and come knocking                                                               
on that person's door for more information.                                                                                     
CHAIR  MURKOWSKI  stated  that   she  is  concerned  with  having                                                               
information subject to disclosure.   She added that by having all                                                               
of the information in "DRG"  confidential, the consumer can't get                                                               
the information  about the charitable organization  that has been                                                               
registered or filed with the Division [of Insurance].                                                                           
REPRESENTATIVE  KOTT  stated  that   he  doesn't  see  where  the                                                               
charitable organization would have to  provide a person's name to                                                               
the division  because it is  not part  of the requirement  of the                                                               
REPRESENTATIVE  ROKEBERG stated  that he  agrees and  thinks that                                                               
[the committee]  could delete [subsection  (h), page 3,  lines 9-                                                               
Number 1546                                                                                                                     
CHAIR MURKOWSKI  asked Mr. Minton if  he had any comments  on the                                                               
confidentiality clause.                                                                                                         
MR. MINTON  responded that  he thinks it  is appropriate  for the                                                               
[Division  of Insurance]  to disclose  to  a donor  that a  given                                                               
charity has issued its annuities.   He added that he does not see                                                               
this paragraph prohibiting that kind of disclosure.                                                                             
Number 1513                                                                                                                     
REPRESENTATIVE KOTT  responded that  he thinks it  does [prohibit                                                               
that kind of  disclosure].  He made a motion  to adopt conceptual                                                               
Amendment 5, to delete page 3, lines 9-10 [subsection (h)].                                                                     
REPRESENTATIVE  ROKEBERG objected  and said  if the  [Division of                                                               
Insurance]  had  imposed  a  civil penalty  for  the  failure  to                                                               
properly  notice,  [the  division]  couldn't  tell  anybody  what                                                               
little activity "they" are doing.                                                                                               
Number 1477                                                                                                                     
REPRESENTATIVE ROKEBERG withdrew his objection.                                                                                 
REPRESENTATIVE  HALCRO added  that he  didn't know  what kind  of                                                               
liability the  state would have  if the division  had information                                                               
about a  particular charity that was  operating questionably, and                                                               
didn't provide that to consumers.                                                                                               
Number 1440                                                                                                                     
CHAIR  MURKOWSKI  announced  that   with  no  further  objection,                                                               
conceptual Amendment 5 was adopted.                                                                                             
Number 1431                                                                                                                     
REPRESENTATIVE  KOTT   made  a  motion  to   adopt  a  conceptual                                                               
amendment  by  deleting  "educational institutions"  on  page  1,                                                               
lines 11-12, and substituting "charitable organizations".                                                                       
CHAIR MURKOWSKI  remarked that when  Mr. Minton had  brought that                                                               
up with  her it  seemed to  make sense;  however, Ms.  Glover has                                                               
caused her to  question what the impact would be.   She suggested                                                               
that this  be looked at  when [the  bill] comes before  the House                                                               
Judiciary Standing Committee.                                                                                                   
[Therefore, the amendment was not addressed further.]                                                                           
Number 1337                                                                                                                     
REPRESENTATIVE KOTT made a motion to  move HB 121 as amended from                                                               
committee with  individual recommendations and the  attached zero                                                               
fiscal note.  There being  no objection, CSHB 121(L&C) moved from                                                               
the House Labor and Commerce Standing Committee.                                                                                

Document Name Date/Time Subjects