Historical Overview
The Return-of-dues program which was started in 1980, forty years after the association was organized, may have been well intentioned but it was never well thought-out!
When the true actuarial costs of the program were exposed in 1998, we were forced to make immediate changes to it. In fact, the program has been modified at least five times since that time to limit its huge financial liabilities on the association. Following extensive research, we discovered that no other trade association, at least in the U.S., has ever had a program like this – for obvious reasons. The estimated pay-out costs in 2010 was in excess of $60,000 and growing, the actuarial calculations that year put the liability at over $2-million.
The financial burden was clearly unsustainable and we were forced to make numerous changes to the program that would limit its liability to the organization. This was discussed at the Executive Committee meeting in November 2010, and recommendations were brought to the attending Board and members in good standing for a vote the following day at the Annual Board Membership Meeting. The entire detailed motion is on the following page for your review. It was read out loud to all in attendance at the meeting, and the vote was unanimous to adopt all the amendments as stated.
All existing members were grandfathered in and the maximum annual liability was set at $30,000. The exact language is, “Commencing in fiscal year 2011-2012, and for all fiscal years thereafter, the total payment for all benefits and program liabilities paid in a single fiscal year shall not exceed $30,000. If the total for all benefits and program liabilities in any single fiscal year exceeds $30,000, the benefits shall be paid out proportionally to all eligible beneficiaries, in a total amount not to exceed $30,000, after which their benefits shall be deemed paid in full.” This will mean that all death claims will be paid-out proportionally at the end of each fiscal year, or after June of each year.
All new WSTA/CDTOA members, beginning November 13, 2010, will not be eligible for this grandfathered program, and of course existing members may opt out at any time if they choose.
If you know the history of this program for our association, you will agree that it had served the members for many years, but it had become totally impractical. We have changed the Membership Investment Application form and removed all information from the website, magazine, and all printed materials.
Board Motion to Modify & Freeze CDTOA/WSTA Return-of-dues Program
Effective November 13, 2010
- Findings – The CDTOA/WSTA Board of Directors and Membership hereby finds that the program of returning dues to members upon their death (“The program”) is an unfunded liability that represents an ongoing and unsustainable drain upon the resources of the Association. The Board further finds that for fiscal year 2010-2011, the program will result in the payment of over $50,000 in claims, the equivalent cost of at least one full-time employee. The Board further finds that the costs of continuing this program will continue to increase each fiscal year unless the program is modified to limit the exposure of the Association.
- Board Action – Effective immediately (11-13-2010), the program of CDTOA/WSTA returning dues upon death is hereby amended as follows:
- No new members shall be admitted to the program.
- All current members in good standing that are currently eligible for the program will stop accruing benefits under the program.
- The accrued benefits of current members shall be frozen, and those members shall be entitled to their current accrued balance upon death, provided they remain in good standing until their death and otherwise continue to meet the requirements of eligibility for the program between now and the time of death. Nothing in this section shall be construed to alter the current annual reduction of an accrued balance commencing upon age 71, and that annual reduction shall continue in effect.
- The schedule for payment of benefits shall be modified as follows:
- Payments for all benefits and program liabilities in a fiscal year shall be made no earlier than 30 days after the conclusion of the fiscal year in which the program liabilities occurred.
- Commencing in fiscal year 2011-2012, and for all fiscal years thereafter, the total payment for all benefits and program liabilities paid in a single fiscal year shall not exceed $30,000. If the total for all benefits and program liabilities in any single fiscal year exceeds $30,000, the benefits shall be paid out proportionally to all eligible beneficiaries, in a total amount not to exceed $30,000, after which their benefits shall be deemed paid in full. For fiscal year 2010-2011, the total payment for all benefits and program liabilities paid after November 13, 2010, the total payment for benefits and program liabilities paid for the remainder of the 2010-2011 fiscal year shall not exceed $20,000. If the total for all benefits and program liabilities incurred between November 13, 2010 and the end of the 2010-2011 fiscal year exceeds $20,000, the benefits shall be paid out proportionally to all eligible beneficiaries, in a total amount not to exceed $20,000, after which their benefits shall be deemed paid in full.
- The Executive Committee of the Association shall have the power to review the program annually and make any changes to the program in order to ensure the financial stability and viability of the Association.
Motion was voted on and unanimously approved by all board and attending members on 11-13-2010.
Also See Article by Rob McClernon, CDTOA/WSTA President in the December 2010 CTN magazine.
