NY DFS Examination Finds Form Filing Violation at Northwell Health Foundation Gift Annuity Fund

Key Takeaways

• The New York Department of Financial Services' examination of Northwell Health Foundation's Segregated Gift Annuity Fund (period 2020–2024) identified a violation of Section 1110(a) of the New York Insurance Law due to the use of unfiled gift annuity agreement forms, along with a governance gap in that the board of trustees had not formally approved the Fund's Investment Policy Statement.
• These findings highlight ongoing document-control and governance risks for charitable annuity issuers subject to DFS oversight, underscoring the need for rigorous form-filing discipline and board-level approval processes.

Deep Dive

This examination report illustrates the continued regulatory scrutiny DFS applies to charitable gift annuity funds operating under special permits from the Superintendent. Although the Fund's overall financial condition appears sound—admitted assets grew from USD $8,273,180 in 2019 to USD $9,296,174 in 2024, with the annuity fund balance maintaining a surplus above the minimum required fund balance—the examiner identified a specific compliance failure involving the use of gift annuity agreement forms that did not match those filed with the Superintendent. This is a direct violation of Section 1110(a) of the New York Insurance Law, which mandates that all agreement forms used with annuitants be pre-filed with the regulator.

The root cause appears administrative: the Fund attributed the discrepancy to an erroneous "21" prefix added to form numbers, resulting in 9 of 14 sampled newly issued annuities (64%) using incorrect form identifiers across three form variants. While this may seem like a clerical issue, it represents a systemic control gap—nearly two-thirds of the sample was affected, suggesting inadequate form-version control and quality assurance in the annuity issuance process. The examiner has directed immediate corrective action requiring the Fund to use properly numbered forms going forward.

A secondary governance finding involves the Investment Policy Statement (IPS), which had not been formally approved by the board of trustees, despite statutory requirements under New York Estate Powers and Trust Law § 11-2.3(b)(3)(A) and Not-for-Profit Corporation Law §§ 552(e)(2) and 552(f) mandating a board-adopted investment strategy and written policy. This finding points to a lapse in board oversight documentation, even if the underlying investment strategy (93.28% equity allocation) may otherwise be reasonable.

Notably, the Fund successfully remediated both prior-report recommendations (annual statement accuracy and general ledger reconciliation), demonstrating a track record of responsiveness to regulatory feedback. Compliance teams at similar charitable annuity issuers should treat this report as a reminder to: (1) conduct periodic reconciliation of all active agreement forms against those on file with regulators; (2) ensure board minutes document formal approval of investment policies and any material amendments; (3) implement version-control safeguards for template documents used in annuitant-facing agreements; and (4) prepare for the next DFS examination cycle by proactively auditing form inventories. While no monetary penalty was issued, repeated form violations could escalate regulatory consequences in future examinations, and the governance gap around IPS approval poses fiduciary and reputational risk if left unaddressed.

Source: New York Department of Financial Services