This email is in response to ODV 29210 (from Mark Tharp) and ODV 29214 (from Bud Hippisley) related to life membership. While both of those emails pertain to the payment plan on life memberships, the underlying issue has to do with the notion of life memberships in general. Below, I have provided an email I sent to ODV in September related to life membership. When it comes to many, many things, I defer to the Board. While I have been a ham for over 50 years, I am not a Director and I do not need to face an election by the membership every three years. However, when it comes to money or fiscal risk or accounting, I believe my background and experience can help inform the discussion. Let me summarize my email from three months ago. If the ARRL encourages or supports Life Memberships, we are accepting three risks. 1 – Longevity risk 2 – Investment risk 3 – Inflation risk Details for each risk are in my September email below. I have no problem whatsoever if the Board determines that it is appropriate to accept those risks. That is a prerogative of the Board. In my view, the Board must determine the proper course of action with a clear understanding of the benefits and risks of the final choice. For the fiscal future of ARRL, it must be an informed decision. K7GM Frederick (Rick) Niswander, PhD, CPA, CGMA Professor of Accounting Bate 3110 East Carolina University Greenville, NC 27858 ODV: From a fiscal perspective, I urge the Board to tread very carefully with respect to changes in the Life Membership program. My concern applies to the current LM structure, or a revised structure which would be a reduced rate, or one that is actuarially-based. When we accept a life membership, especially an actuarially-based LM, we are taking on three risks. One risk is longevity risk. In effect, we assume that we will, at worst, “break even” with life expectancy of the member. If a LM is expected, on average, to live 20 years, our risk is if he or she lives longer. If the life is shorter, we benefit. Our challenge is that WE are accepting the actuarial risk. We are then acting as a life-insurance company. That is not our business. Another risk is investment risk. With a LM, we assume that we will invest the lump sum and get returns which will pay for the costs needed to service a member AND cover inflation. We have historically done reasonably well with that, particularly in the last 10 years or so. However, it is highly likely that investment returns in the next 10-20 years will be nothing close to the returns in the last 10-20 years. So, our assumption is highly likely to be not met. I cannot emphasize enough that it is highly likely that future returns will be materially lower than past returns. The final big risk in inflation risk. It is related to investment risk and return, but it is a bit different as well. With a LM we assume inflation in our cost structure will be offset by increases in the investment of the LM lump-sum. With our current pricing structure we implicitly assume we will earn 4% a year to cover the annual cost of a membership. Then you need to add a number for inflation which has recently been running in the 2% range. So, we need to earn 6% just to tread water. Any increase in that inflation rate will be problematic unless it is accompanied by a corresponding increase in the earnings rate. That does not always happen (think the Great Recession when inflation was 4-5% and returns were big negative or the early 1980s when inflation almost hit 15% in the midst of two back-to-back recessions). Again, we are the ones that will accept that risk by accepting a life membership. These risks cannot be eliminated. They can only be mitigated. To do so, the LM price needs to be increased, probably on the order of 50%+, which likely makes it uneconomic and unappealing. The greater the increase, the more mitigation. My final point is a reiteration of Howard’s comments related to the notion that dues do not cover the cost of member services. If we take actions to increase LM’s based on dues that are arguably low to begin with, we are just compounding our problem for years and years to come. Frederick (Rick) Niswander, PhD, CPA, CGMA Professor of Accounting Bate 3110 East Carolina University Greenville, NC 27858