W Brother Glenn suggested that we discuss life memberships, and it is something that has been on my mind for awhile too, so I’m pleased to take him up on it.
In Washington, life memberships are a fairly new thing, having come about within the past few decades. Has having life memberships available in your Lodge been a good thing for your Lodge or bad?
Our Code sets the minimum amount that a Lodge can charge for a life membership, and while some Lodges charge more, many do not. Is that minimum amount enough? How much should a life membership cost in order to be a good deal for both the Lodge and the Mason?
How much would you be willing to pay for a life membership?
In theory, when a Lodge increases annual dues, it makes sense to increase life membership fees as well. Does your Lodge do this?
In Washington at least, Masons pay Lodge dues, and also Grand Lodge Fees. Many life members have claimed that when they purchased their life memberships they were under the impression that they would never have to pay anything again, even though our Code separates these two things. This has resulted in a situation in which many Lodges pay the Grand Lodge Fees for their life members instead of passing this cost along to those individuals. Should this remain the case? Is there any reasonable argument for Lodges to be expected to pay this fee on behalf of life members?
A timely topic, as I’m debating whether to pay for a year or for a lifetime.
I have heard that lifetime memberships are better for the Lodge because of how the investment returns are distributed. Perhaps someone can explain that.
Human Nature is always in search of a bargain. The argument goes, if a lodge raises it's dues to more realistic amounts, it starts making life memberships the more attractive option. While in the long run life memberships will provide to the lodge far more money than just paying dues, short term the annuity GL pays to each lodge doesn't come close to the annual dues a member pays. Thus, both have to rise in order to benefit the lodge.
But humans, being frugal, would look for other ways to save money. Say two lodges within a district offered different life membership fees and dues. One lodge was twice as expensive as the other. If a brother was a member of the more expensive lodge and wanted to get a life membership, he could simply join the other lodge, buy a life membership, demit, and transfer his life membership back to his first lodge. There is nothing technically wrong with what that brother did, but it's not very ethical.
As far as the benefits of life memberships, as I said, it's a gift that keeps on giving long after that brother passed away. Our lodge is financially well off, and ended up last year buying all active members in good standing a life membership. With over 130 members, the annual disbursements from GL should cover our annual assessment. GL has the life memberships in a lump investment account, and pays out annually a fraction of that based on market returns on that investment back to each lodge based on the number of life memberships each lodge has. As I mentioned, it's not nearly as much as annual dues, but over time it's a huge benefit to the lodge.
Lodges should not be, however, relying solely on annual dues to operate, as members can remove that revenue stream with a life membership. Hall rentals, Petition fees and fund raisers should be the bigger slice of the money pie.
So, are life memberships good or bad for the fraternity? Lots of pros and cons on each side.
When Lodge sold its building, it took some of the proceeds and purchased Life Memberships for all PMs. So that built up our Life Membership fund quite well. We have since the given the outgoing WM a Life Membership. The returns of this has been paying the GL fees each year with a little left over.
I have life membership in the American Legion and VFW but in Maine Grand Lodge doesn't have life membership. That has come up in the past and been rejected. Massachusetts has life membership and chartered 13 of Maine lodges until 1820 when Maine became a state. The reasoning I can't say for sure, but I believe the biggest issue was that life membership would be the same for every lodge.
Reading Brother Geiss's reply I can understand why.
I can see two sides whether it is good or bad. The good part a lodge can plan ahead and know how much money it has to work with. On the bad side is two fold. From a lodge perspective the Craft has enough dues paying members already and we need members at meetings . On Grand Lodge side the Grand Secretary and Grand Treasure have more paperwork to account for.
As a Lodge Treasurer and recovering CFO I must emphatically insist that Life Memberships are a very bad idea. They create the illusion that a Brother is making a life long commitment but in reality they're often purchased to enable a Brother to dodge a life long commitment. From a business model standpoint, the idea of the using the annual yield from a long term investment to fund current operating costs is very ill advised, as is committing funds to a long term vehicle with no hope of converting the funds to liquid assets if and when needed. Last and not least, the fee established by Grand Lodge is woefully inadequate to achieve returns that offset the true cost of membership.
We've all heard that the Life Member fund is professionally managed and therefore likely is invested in safer assets and generates better returns than individual Lodges might achieve on their own. I'm sure that was true decades ago but not today. Now every brokerage has very affordable programs for small investors to safely invest. If a Lodge is fortunate enough to have idle funds it's pretty simple use such programs to fund long term needs. But short term needs should come from building earnings (if any), dues, and donations.
Business models and return calculations aside, the Life Membership program has created a cultural flaw for our Fraternity. Lodges throughout our jurisdiction have run up against financial problems and Life Members may likely take the attitude that it's not their problem, after all they bought a life membership. This is a cultural problem that's not going to go away as long as any Life Members are alive, but we can start to fix the problem by abolishing the program right away.
The problem with Life Memberships is inter-woven with dues that are too low and Lodges that stay in existence out of habit with no regard to their financial viability. As a Fraternity we're leaving a lot of money on the table or flushing it down the drain by taking a less than a complete and objective view of our financial health
I did an analysis of the life membership finances at my Lodge a while ago. I figured out that at the cost of my life membership several years ago ($450) and the usual return it would take my Lodge it would take over 40 years after my death for the Lodge to make back the amount they spent in Grand Lodge fees on my membership. Once I figured that out, I began to donate to cover the extra cost.
The Lodge has since raised its dues to $100, with a life membership fee of $2,000 for 18-35 year olds, and ratcheting down from there to $1,000 in the eldest bracket. At those rates, the Lodge stays positive consistently (assuming no big changes in fees, returns, etc.). A bunch of the older Brothers in the Lodge said "at those rates no one will ever buy a life membership." Sure enough, we have sold 2 in the 3 years since, while in the 3 years prior to the change we had not sold any.
Life memberships, no matter the fee charged by the Lodge, can benefit the Lodge in the reaaaaaallllllly long term, if the Lodge survives that long. But while the Lodge waits to make up that difference a lot can happen. I know a Mason who has been heard saying that 'the only good life member is a dead life member.'
I personally am in favor of charging the Grand Lodge annual fees to the member, whether they are life member or not. But I am in the minority at my Lodge on this one...
I was about to write a long financial explanation on why life memberships are a bad idea unless you are a massive political lobbying organization that uses membership numbers as political clout in swaying congressional votes like the NRA or the Sierra club. However, I see that Br. Gebhart beat me to it.
I realize I am very late to this conversation, but wanted to share how the perpetual member system works in Louisiana, and while I think it is more sustainable than what I have seen as the setup in Washington why it’s still a bad deal for most Lodges.
In Louisiana the amount for a perpetual membership is set 20x lodge dues plus grand lodge per capita. So using nice round numbers if your lodge dues are $20 and GL fees are $10 you would pay $600 for a perpetual membership. Each year thereafter, assuming the perpetual member fund made at least 5% interest (after management fees were deducted) the lodge would receive $20 and the GL $10 for that member. If the fund made less than 5% that amount would be prorated by the short fall (in theory, for many years it was paid out at 5% regardless of return which resulted in a net decrease in the fund balance for a few years before this was corrected), any return of the fund >5% up to a certain number (which escapes me right now, I believe it’s 7.5%) would be reinvested into the fund to strengthen it and potentially allow 5% level payments in down years, and above that number would be paid out to lodge and GL on the same ratio as the base 5%.
In theory this sets up a well conceived program for maintaining things over time, however, if your Lodge dues were $20 with a $10 GL fee in ~1993 when the program started and a large number of your members bought them, the Lodge (and GL) are locked into that income level. I know of a Lodge that was formed by the merger of 3 Lodges, they bought every member at that time a perpetual membership (at what was honestly a very low dues rate), since then the Lodge has not grown much and so they are locked into an income level from ~25 years ago with no ability to adjust for inflation, any raising of dues would only hit 10-15 people, while the other 300 members continue to coast along in their perpetual membership and care little for the financial woes of the Lodge.
The GL of Louisiana has tried several times to correct the program to have the 20x multiplier be based on a sliding scale (similar to an actuarial table) based on the members age and number of years of membership, or another idea was just make it 50x minus the number of years of good standing, but in no case less than 20x.
In order to properly make lifetime memberships work they need to be robust enough to survive inflation, and indexed to a brothers age on a sliding scale (and some have mentioned).
In Hawai`i we offer life memberships at the blue lodge level. Usually about 21 times annual dues, decreasing with age. Those funds are set aside in a Life Membership fund, and the expectation is that the income and growth from those investments will cover future dues for the Brother. Once that Brother passes, the funds remain and continue to grow.
A timely topic, as I’m debating whether to pay for a year or for a lifetime.
I have heard that lifetime memberships are better for the Lodge because of how the investment returns are distributed. Perhaps someone can explain that.
Human Nature is always in search of a bargain. The argument goes, if a lodge raises it's dues to more realistic amounts, it starts making life memberships the more attractive option. While in the long run life memberships will provide to the lodge far more money than just paying dues, short term the annuity GL pays to each lodge doesn't come close to the annual dues a member pays. Thus, both have to rise in order to benefit the lodge.
But humans, being frugal, would look for other ways to save money. Say two lodges within a district offered different life membership fees and dues. One lodge was twice as expensive as the other. If a brother was a member of the more expensive lodge and wanted to get a life membership, he could simply join the other lodge, buy a life membership, demit, and transfer his life membership back to his first lodge. There is nothing technically wrong with what that brother did, but it's not very ethical.
As far as the benefits of life memberships, as I said, it's a gift that keeps on giving long after that brother passed away. Our lodge is financially well off, and ended up last year buying all active members in good standing a life membership. With over 130 members, the annual disbursements from GL should cover our annual assessment. GL has the life memberships in a lump investment account, and pays out annually a fraction of that based on market returns on that investment back to each lodge based on the number of life memberships each lodge has. As I mentioned, it's not nearly as much as annual dues, but over time it's a huge benefit to the lodge.
Lodges should not be, however, relying solely on annual dues to operate, as members can remove that revenue stream with a life membership. Hall rentals, Petition fees and fund raisers should be the bigger slice of the money pie.
So, are life memberships good or bad for the fraternity? Lots of pros and cons on each side.
When Lodge sold its building, it took some of the proceeds and purchased Life Memberships for all PMs. So that built up our Life Membership fund quite well. We have since the given the outgoing WM a Life Membership. The returns of this has been paying the GL fees each year with a little left over.
I have life membership in the American Legion and VFW but in Maine Grand Lodge doesn't have life membership. That has come up in the past and been rejected. Massachusetts has life membership and chartered 13 of Maine lodges until 1820 when Maine became a state. The reasoning I can't say for sure, but I believe the biggest issue was that life membership would be the same for every lodge.
Reading Brother Geiss's reply I can understand why.
I can see two sides whether it is good or bad. The good part a lodge can plan ahead and know how much money it has to work with. On the bad side is two fold. From a lodge perspective the Craft has enough dues paying members already and we need members at meetings . On Grand Lodge side the Grand Secretary and Grand Treasure have more paperwork to account for.
As a Lodge Treasurer and recovering CFO I must emphatically insist that Life Memberships are a very bad idea. They create the illusion that a Brother is making a life long commitment but in reality they're often purchased to enable a Brother to dodge a life long commitment. From a business model standpoint, the idea of the using the annual yield from a long term investment to fund current operating costs is very ill advised, as is committing funds to a long term vehicle with no hope of converting the funds to liquid assets if and when needed. Last and not least, the fee established by Grand Lodge is woefully inadequate to achieve returns that offset the true cost of membership.
We've all heard that the Life Member fund is professionally managed and therefore likely is invested in safer assets and generates better returns than individual Lodges might achieve on their own. I'm sure that was true decades ago but not today. Now every brokerage has very affordable programs for small investors to safely invest. If a Lodge is fortunate enough to have idle funds it's pretty simple use such programs to fund long term needs. But short term needs should come from building earnings (if any), dues, and donations.
Business models and return calculations aside, the Life Membership program has created a cultural flaw for our Fraternity. Lodges throughout our jurisdiction have run up against financial problems and Life Members may likely take the attitude that it's not their problem, after all they bought a life membership. This is a cultural problem that's not going to go away as long as any Life Members are alive, but we can start to fix the problem by abolishing the program right away.
The problem with Life Memberships is inter-woven with dues that are too low and Lodges that stay in existence out of habit with no regard to their financial viability. As a Fraternity we're leaving a lot of money on the table or flushing it down the drain by taking a less than a complete and objective view of our financial health
I did an analysis of the life membership finances at my Lodge a while ago. I figured out that at the cost of my life membership several years ago ($450) and the usual return it would take my Lodge it would take over 40 years after my death for the Lodge to make back the amount they spent in Grand Lodge fees on my membership. Once I figured that out, I began to donate to cover the extra cost.
The Lodge has since raised its dues to $100, with a life membership fee of $2,000 for 18-35 year olds, and ratcheting down from there to $1,000 in the eldest bracket. At those rates, the Lodge stays positive consistently (assuming no big changes in fees, returns, etc.). A bunch of the older Brothers in the Lodge said "at those rates no one will ever buy a life membership." Sure enough, we have sold 2 in the 3 years since, while in the 3 years prior to the change we had not sold any.
Life memberships, no matter the fee charged by the Lodge, can benefit the Lodge in the reaaaaaallllllly long term, if the Lodge survives that long. But while the Lodge waits to make up that difference a lot can happen. I know a Mason who has been heard saying that 'the only good life member is a dead life member.'
I personally am in favor of charging the Grand Lodge annual fees to the member, whether they are life member or not. But I am in the minority at my Lodge on this one...
I was about to write a long financial explanation on why life memberships are a bad idea unless you are a massive political lobbying organization that uses membership numbers as political clout in swaying congressional votes like the NRA or the Sierra club. However, I see that Br. Gebhart beat me to it.
I realize I am very late to this conversation, but wanted to share how the perpetual member system works in Louisiana, and while I think it is more sustainable than what I have seen as the setup in Washington why it’s still a bad deal for most Lodges.
In Louisiana the amount for a perpetual membership is set 20x lodge dues plus grand lodge per capita. So using nice round numbers if your lodge dues are $20 and GL fees are $10 you would pay $600 for a perpetual membership. Each year thereafter, assuming the perpetual member fund made at least 5% interest (after management fees were deducted) the lodge would receive $20 and the GL $10 for that member. If the fund made less than 5% that amount would be prorated by the short fall (in theory, for many years it was paid out at 5% regardless of return which resulted in a net decrease in the fund balance for a few years before this was corrected), any return of the fund >5% up to a certain number (which escapes me right now, I believe it’s 7.5%) would be reinvested into the fund to strengthen it and potentially allow 5% level payments in down years, and above that number would be paid out to lodge and GL on the same ratio as the base 5%.
In theory this sets up a well conceived program for maintaining things over time, however, if your Lodge dues were $20 with a $10 GL fee in ~1993 when the program started and a large number of your members bought them, the Lodge (and GL) are locked into that income level. I know of a Lodge that was formed by the merger of 3 Lodges, they bought every member at that time a perpetual membership (at what was honestly a very low dues rate), since then the Lodge has not grown much and so they are locked into an income level from ~25 years ago with no ability to adjust for inflation, any raising of dues would only hit 10-15 people, while the other 300 members continue to coast along in their perpetual membership and care little for the financial woes of the Lodge.
The GL of Louisiana has tried several times to correct the program to have the 20x multiplier be based on a sliding scale (similar to an actuarial table) based on the members age and number of years of membership, or another idea was just make it 50x minus the number of years of good standing, but in no case less than 20x.
In order to properly make lifetime memberships work they need to be robust enough to survive inflation, and indexed to a brothers age on a sliding scale (and some have mentioned).
Anyway, appreciate the opportunity to share!
In Hawai`i we offer life memberships at the blue lodge level. Usually about 21 times annual dues, decreasing with age. Those funds are set aside in a Life Membership fund, and the expectation is that the income and growth from those investments will cover future dues for the Brother. Once that Brother passes, the funds remain and continue to grow.