Loop holes in NYPMIFA?

If you are a New York charity struggling with NYPMIFA, here are two potential “loop holes” in the law.

Apparently, the 7% presumption of imprudence (based on a minimum of a 60 month rolling quaterly average) only applies to funds established after the act was passed in Sept. 2010.

What does it mean practically?  Well, the new definition of prudence found in NYPMIFA applies to ALL permanent endowments – so you still need to do the 8 factor analysis with a contenporaneous documentation of the decision making.

So, it means that if your non-profit finds it prudent, using the 8 factors, to spend over 7% of an old pre-NYPMIFA fund (which didn’t opt out of NYPMIFA – i.e. donor dead or friendly), then the spending is NOT presumed imprudent.  But, the AG could still find it to be imprudent – if the AG ever examines the situation.

The other “loop hole” is the minimum of a 60 month rolling average – again, for not exceeding the 7% presumption of imprudence.  What if a 10 year rolling average gives you more leeway?  Use it but the spending stills needs to be PRUDENT – as defined by the law.

Thanks to super attorney Jennifer Reynoso from Simpson Thacher who enlighted myself and several colleagues on this issue this week.

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