Grandfathered Underfunding Solution Thread

All topics about cryopreservation costs, membership dues, etc.
paulwakfer

Grandfathered Underfunding Solution Thread

Post by paulwakfer » Sat Jan 14, 2012 3:07 pm

I have begun this new thread to place all such suggestions for solving the grandfathered underfunding problem in one place, as Admin wisely did for "Alcor Cost Savings". Would Admin please make this thread also a "sticky"?

Suggestions:

1) Immediately announce that grandfathering of cryorpreservation fees will not occur for all new members from this time on. These members will be required to purchase some form of funding indexed to the rate of inflation/cost of living increase and/or otherwise supply additional funding with Alcor as death beneficiary so that the total equals the amount of any future cryopreservation fee.

2) Possibly in addition to the above, one way to cap the underfunding liability would be to announce that all the cryopreservation funding of currently grandfathered members would cease grandfathering at the amount of the current cryopreservation fee. This would mean that all members would need to increase funding by the amount of increase from current to the next cryopreservation fee level whenever that occurs in the future. This underfunding cap would still be a reward for having joined early and paid many years of fees, yet would greatly limit Alcor's liability for all current members and could very likely be made up by future growth and volume savings - as was the original thinking and intention for the policy of grandfathering.

3) A weakening of 2) above, so as not to effectively break any promises (whether written or verbal), would be to cap the grandfathering as with 2) but instead at the amount of the next higher cryorpreservation fee. This would still cap Alcor's grandfathering liability, albeit at a somewhat larger amount than the proposal in 2) would. Such a policy might also encourage many fence-sitting people to become members before the next cryopreservation fee increase - thereby making up for some of the members being lost because of these new policies (as well as the horrendous yearly fees).
Note: This one is my favorite, since it effectively caps the grandfathered underfunding liability without any concern of lack of trust in Alcor due to broken promises (again, whether verbal or written).

4) Alcor should always publicize any changes to its cryopreservation fees at least 6 months ahead of making these changes mandatory, in order to provide sufficient time for members to increase their funding to the new amount.

5) Immediately change the wording in the Cryopreservation Agreement for the reason explained in another thread:
paulwakfer wrote: Brian, You and all other directors at Alcor need to be aware of a reasonable interpretation of this wording in Schedule A (bolding mine):

"All Members owe the cryopreservation minimum in effect at the time of membership approval for the elected method of cryopreservation, subject to the provisions of Section II, DUTIES OF ALCOR, Article 2, of the Cryopreservation Agreement."

This wording very clearly states that the amount needed to ensure a fully paid cryopreservation is the "minimum in effect at the time of membership approval for the elected method of cryopreservation" - which is the definition of "grandfathering" the minimum enrollment fee (as per definition in Merriam-Webster Unabridged). Unless the reader goes on to fully read the referenced Section II, Article 2, (which s/he might not because why would "DUTIES OF ALCOR" relate to the member's duty to pay more for hir cryopreservation?), I think that this will be the interpretation of most people.

southbay

Re: Grandfathered Underfunding Solution Thread

Post by southbay » Sat Jan 14, 2012 10:18 pm

The phrase "cap the grandfathering" is confusing as the grandfathering is actually a cap.

I believe Alcor should offer older members the following choices (or some combinations thereof)

a) Increase your insurance to cover a new estimated cost. This should pay for both suspension and standby fees.

b) Write a bequest in your will for (the difference between your insurance and the new cost) * bequest risk factor, where the risk factor is based on estimate of the failure to collect bequests. Risk factor can be reduced by producing sworn statements from all immediate family and other significant heirs.

c) If a full service cryopreservation is not doable for the provided insured funding, indicate that at Alcor's discretion a lower cost procedure may be done, including the potential of conversion of full body to neuro. Member preferences can be stated (ie. I would rather have full body freeze than neuro vitrify.)

Where possible, however, Alcor should attempt to keep the increment as low as it can afford, in order to do its best to honor the initial representations to early members that they were signing up to lock in a lower price. This may mean taking modest but withstandable losses on some of those members, making it up with donations or higher prices to future members, to some extent.

Standby fees should be abolished. Annual fees should be restored to the $360 level or lower. In addition, any bequest or new insurance over the actual cost of the member's suspension should be spent as directed by the member, including return to the member's estate (the default for anything above their original cost level), or diversion to special PCT for the member. (Overage from the bequest risk factor is not returned.)

A member can then examine their situation and decide what to do. Say they are in at $35K and the neuro price is set at $80K. They can see how much more insurance they can afford. Say they can afford $25K more (getting to $60K.) They can then bequeath $20K times the bequest risk factor. If that factor is 1.2, they would bequeath $24K. If the suspension, when done, costs $70K, $10K of the $84K would be directed as the member specified, or returned to their estate.

Alternately, they could say, "I have raised insurance to $60K. Give me the best suspension you can do for $60K."

The bequest risk factor would be based on historical failure rates at receiving bequests based on circumstances. Sworn declarations of agreement from all important heirs would lower that factor close to 1, though to keep it low requires that Alcor be informed on any changes to the will or heirs. If heirs will not sign on, the factor may be much higher. (Though in general non-signon by parents who will likely predecease the member should not be as big a worry. Non-signon by spouse or children is a bigger worry, siblings are a moderate worry if childless.)

All the bequest stuff is complex and would not normally be recommended. The reason for it is that Alcor screwed up on pricing, and thus takes on the risk and complexity in order to make things better with members in the least painful way.


Over time, estimates of cost should be updated and members should be informed. It is understood that Alcor is not able to easily offer a lot of different levels of suspension quality, but it will have to offer at least 2 -- the best currently available, and one cheap enough to be afforded by the members who have elected this option. If few or no members elect this option, the need to offer a 2nd level of service can be avoided. If need be, the lower cost suspension may be contracted out to CI or another org.

paulwakfer

Re: Grandfathered Underfunding Solution Thread

Post by paulwakfer » Sun Jan 15, 2012 1:10 am

southbay wrote:The phrase "cap the grandfathering" is confusing as the grandfathering is actually a cap.
It would be more helpful if you would directly quote sections of text when you are replying. This forum has a quoting function and its use would very much prevent out of context quotes and the missing of important points and meanings during a reply. Such "in-line" response was the standard for years on the Usenet Newsgroups and was then viewed as the most clear, forthright and complete response method. It is only because of the use of so much email software and many forums/blogs, etc in recent years that either do not have or hide this in-line response capability, that its use and appreciation by so many has so terribly declined.

In any case, my usage of "cap the grandfathering" was merely a short form for "cap the grandfathering liability", a meaning which I made abundantly clear within my text.
southbay wrote:I believe Alcor should offer older members the following choices (or some combinations thereof)

a) Increase your insurance to cover a new estimated cost. This should pay for both suspension and standby fees.
This is already "offered" and, in fact, has always been greatly encouraged. OTOH, standby fees are highly different for each member and, IMO, it is not correct to charge each member the same amount. This part of the fee is what needs to have a geographical variation. If the member does elect to move close to Alcor if and when s/he becomes terminal, then that fee should be greatly reduced. Furthermore, since the chances of anyone under 40 dying in such a manner as to be able to have a standby are very slim, the CMS portion of the cryopreservation funding should be greatly reduced for them. (IMO, because of our excellent health and our constant working to keep it so, this also applies to me and Kitty, ages 73 and 66, respectively.)
southbay wrote:b) Write a bequest in your will for (the difference between your insurance and the new cost) * bequest risk factor, where the risk factor is based on estimate of the failure to collect bequests. Risk factor can be reduced by producing sworn statements from all immediate family and other significant heirs.
Good idea and such bequests, even of overfunding, should be encouraged as the norm. (I and Kitty plan to leave the entire amount of our assets to Alcor and/or our Patient Advocate.) However I see the calculation of such a risk factor as being highly problematic and not something that Alcor will want to do (and I can't say that I blame them, the courts being as unpredictable as they are). I think that it would take many years and many dozens of patients doing this before any confidence in such risk factor calculations could be assured.
southbay wrote:c) If a full service cryopreservation is not doable for the provided insured funding, indicate that at Alcor's discretion a lower cost procedure may be done, including the potential of conversion of full body to neuro. Member preferences can be stated (ie. I would rather have full body freeze than neuro vitrify.)
I agree with this. My only comment is that it is Alcor's (and my) experience that most whole body members find the neuro option to be highly unacceptable. So conversion to neuro is not an option for most of them. In a real sense, they would rather die than be cryopreserved as neuro! This makes no sense to me, but that is the only logical conclusion to make from their attitude.
southbay wrote:Where possible, however, Alcor should attempt to keep the increment as low as it can afford, in order to do its best to honor the initial representations to early members that they were signing up to lock in a lower price. This may mean taking modest but withstandable losses on some of those members, making it up with donations or higher prices to future members, to some extent.
Agreed.
southbay wrote:Standby fees should be abolished. Annual fees should be restored to the $360 level or lower.
Strongly agree with both of these. In fact, only if some annual fee reduction is forthcoming will I and Kitty be paying this year's fees (though from our end everything else will remain in effect).
southbay wrote:In addition, any bequest or new insurance over the actual cost of the member's suspension should be spent as directed by the member, including return to the member's estate (the default for anything above their original cost level),
I don't agree with this last (about the default). The cryopreservation funding minimum is just that, a minimum necessary to hopefully ensure the patient's cryopreservation, continued care into the far future and eventual restoration to functional life. If there is any additional money bequested to Alcor then that should all be kept to more certainly ensure that the patient does eventually get restored to life. Once the patient is legally dead and cryopreserved it rationally cannot be of any benefit to hir that hir money goes to some relatives or other heirs.
southbay wrote:or diversion to special PCT for the member.
Alcor's current PCT arrangement makes such separation of funding virtually impossible. This is the sort of individuality which is better handled by either the Alcor Model Revocable Asset Preservation Trust or the Patient Advocate approach.
southbay wrote:A member can then examine their situation and decide what to do. Say they are in at $35K and the neuro price is set at $80K. They can see how much more insurance they can afford. Say they can afford $25K more (getting to $60K.) They can then bequeath $20K times the bequest risk factor. If that factor is 1.2, they would bequeath $24K. If the suspension, when done, costs $70K, $10K of the $84K would be directed as the member specified, or returned to their estate.
Except for the last ("returned to their estate"), this all sounds very reasonable, but I think it is far too complex for Alcor to do for every member, particularly if they are trying to cut manpower and membership maintenance costs (and I would tend to agree with them on this). For one thing this "risk factor" will be no where near a constant over time and would need to be continuously monitored.
southbay wrote:Alternately, they could say, "I have raised insurance to $60K. Give me the best suspension you can do for $60K."
Again this sound very reasonable, but it is very hard for a small org doing very few cryopreservations yearly to even determine. Much later when cryopreservations are much more frequent and numbers of members much larger it may be reasonable and possible to offer different quality levels of cryopreservations for different prices.
southbay wrote:The bequest risk factor would be based on historical failure rates at receiving bequests based on circumstances.
Of course, but as I stated above, there won't be adequate historical information relative to this for many decades yet to come.
southbay wrote:Sworn declarations of agreement from all important heirs would lower that factor close to 1, though to keep it low requires that Alcor be informed on any changes to the will or heirs.
Experience has shown that members do not keep Alcor informed about such changes (it appears that very few members even read the newsletters or Cryonics mag). So Alcor would have to put staff time into monitoring this for every member.
southbay wrote:If heirs will not sign on, the factor may be much higher.
It is my understanding that this is the case for many, if not most members. It certainly is the case for me and Kitty. We have not even asked our children or siblings to "sign on" to acceptance and non-interference with our cryopreservations.
southbay wrote:(Though in general non-signon by parents who will likely predecease the member should not be as big a worry. Non-signon by spouse or children is a bigger worry, siblings are a moderate worry if childless.)
By far the biggest concern is a spouse who is not a cryonicist - a recent example is the Marce Johnson case. In fact, I think that any cryonicist whose spouse is not and who really wants to be assured of possible life in the future should very seriously consider divorce from that spouse and Alcor should strongly warn such potential members of the risk involved, using historical examples.
southbay wrote:All the bequest stuff is complex and would not normally be recommended. The reason for it is that Alcor screwed up on pricing, and thus takes on the risk and complexity in order to make things better with members in the least painful way.
I don't agree that Alcor "screwed up on pricing", since I think the original grandfathering idea was totally reasonable as a marketing approach to get the organization started and growing. It is only that it is now time to cease that approach and to cap the liability. I think that my proposals do so adequately and without the complexity of your bequest risk factor idea, and my proposals should therefore also enable a reduction in staff and/or other operating costs.
southbay wrote:Over time, estimates of cost should be updated and members should be informed. It is understood that Alcor is not able to easily offer a lot of different levels of suspension quality, but it will have to offer at least 2 -- the best currently available, and one cheap enough to be afforded by the members who have elected this option.
I agree that it should be reasonably possible for Alcor to offer two cryopreservation quality options. That could be another alternative to the future increased funding needed by every member under my liability capping proposals.
southbay wrote:If need be, the lower cost suspension may be contracted out to CI or another org.
Makes no sense to me. Such members would be better to simply leave Alcor and contract with CI.

southbay (damn, how I hate addressing people by a pseudonymous username rather than a real personal name),
Please be assured that in spite of my critiques, I really do appreciate that you have taken the time and given some detailed and intelligent thought to these important matters. I am highly concerned that so few other members of Alcor are even registered for these Forums and far less are contributing any ideas to solve these important problems. With no one objecting, the board is likely to take the approach that "silence denotes consent" (which is perhaps why board members have stopped responding to our posts and questions). However, I am convinced that this assumption would be a grave mistake on the part of the board and that they will see a disastrous drop in membership if they enact their stated most likely changes. As is usual, few people will ever say anything but in the end they will act to let their spending/contracting choices speak for them.

southbay

Re: Grandfathered Underfunding Solution Thread

Post by southbay » Sun Jan 15, 2012 6:43 pm

The reason for returning excess to the estate of a member is to actually increase the funding amounts. People are less afraid of putting in a high amount if they know the excess will actually come back to their heirs. If the excess will not come back to your heirs, you have to try to be more accurate about dividing things up. That way you can put in a high number, know Alcor doesn't get more than that, but also know that if it is more than needed, your heirs get it.

The only real issue, as I pointed out elsewhere, is there will be a tendency for an organization in this situation to consciously or unconsciously make the procedure cost the full amount. You need checks and balances to reverse that.

Alcor has indeed made an error in their pricing. They made majorly incorrect estimates of both the cost of cryopreservation, the cost of standby and the fees required to run the org. Let's look at an example case. A person signing up in the mid-90s in their 30s would have been told the price was $42,000 for neuro and $76,000 in fees presuming 6% interest and 45 more years of lifespan -- this amount being in 2040 dollars.

Now the price is $80,000 in suspension, plus $43,000 for the first 15 years at $360 (it was more complex than this) plus $63K for the next 30 years at $800 or $186,000 vs $118,000 if I've done this right. That's a pretty major increase -- almost 60%. So I count offering it for $118K and then saying it's going to cost $186K as screwing up the pricing.

Now this is not simply to whine about the higher price, or a lack of realization that the mistakes were made and that we must move forward. It is outlined as a reason to justify Alcor taking the risk hit on switching to bequests and indeed for Alcor to work to lower the price. The members did nothing wrong here.

As to how to calculate a risk factor on bequests, I understand this is difficult. Still, some number can be estimated. I actually think that getting sign-off from heirs is easier if you have this risk factor. Why? You tell the heirs, "You think it's nuts, but I am doing this. It turns out that if you guys don't all sign on, I have to give them $30,000 extra -- that comes out of your pocket -- to cover the risk they have to take that you might dispute it. If you do sign on now, then there is less risk penalty, then it goes to you rather than into a penalty fund." In this case the only rational thing to do is to either sign on, or to make a secret plan to contest the will and hope to get all the cryonics bequest. You can then make a judgement about whether they are just being crazy irrational or plan to betray you, and you might decide to reduce them in your will. Don't disown them entirely, of course, that makes it much easier for them to challenge the will.

An heir interested in maximizing their inheritance with no concern for the interests of their relative would make a judgement of how likely it was they could win the whole thing, and unless they judged that to be high, they would sign the waiver. An heir who cares about you would sign the waiver. To help things, as Alcor built a body of cases showing Alcor victories, you could show them this, and alter their thinking.

paulwakfer

Re: Grandfathered Underfunding Solution Thread

Post by paulwakfer » Wed Feb 15, 2012 9:29 pm

When I started this thread (on Jan 14, 2012) I made the following critical suggestions (moderately edited/enhanced/explained below).
Since I have had no response I have serious doubts that anyone in Alcor management has read and/or understood them. I am therefore formally requesting CEO Max More to bring them to the attention of the Board before it makes a decision on the grandfathering issue.
1) Immediately announce that grandfathering of cryorpreservation fees will not occur for all new members from this time on.

2) Require all new members to purchase some form of funding indexed to the rate of inflation/cost of living increase and/or otherwise supply additional funding with Alcor as death beneficiary so that the total is equal to or greater than the amount of any future cryopreservation funding within one year of any change to that fee.

3) Possibly in addition to the above, for those who are already members, cap the underfunding liability in a less abrupt/harmful manner by:

a) announcing that all the cryopreservation funding of currently grandfathered members would cease grandfathering at the amount of the current cryopreservation fee. This would mean that all members would need to increase funding by the amount of increase from current to the next cryopreservation fee level whenever that occurs in the future. This method of underfunding cap would still be a reward for having joined early and paid many years of fees, yet would greatly limit Alcor's liability for all current members and such liability could very likely be made up by future growth and volume savings - as was the original thinking and intention for the policy of grandfathering.

Here is the math detail for how this would work:
Neuro members who began at $35k, $41k and $50k would all now be accepted as already being funded at $80k and would only be required to make up the difference from $80k as the neuro funding fee rose above $80k. If the number of neuro members funded at $35k, $41k and $50k is: a, b and c, respectively, then the total neuro underfunding liability would thus never be higher than:
NL = a($80k-$35k) + b($80k-$41k) + c($80k-$50k), a currently exactly computable amount.

Editing note (02/16/2012): I had misstated the historical funding minimums and have corrected them above.

I don't know all the historical fees for whole body, but similar calculations can be made for those to arrive at the liability limit for whole body members, WBL.

b) A weakening of a) above, so as not to effectively break any promises (whether written or verbal), would be to stop the grandfathering in a similar manner to a), but instead at the amount of the next higher cryorpreservation fee (I will assume it is $90k). This would still limit Alcor's grandfathering liability, albeit at a somewhat larger amount than the proposal in a) - total neuro liability would be NL + (a+b+c+d)($90k-$80k), where d is the number of neuro members funded at $80k. Such a policy might also encourage many fence-sitting people to become members before the next cryopreservation fee increase - thereby making up for some of the members being lost because of these new policies (as well as the horrendous yearly fees).
Note: This one is my favorite, since it effectively limits the grandfathered underfunding liability without any concern of lack of trust in Alcor due to broken promises (again, whether verbal or written).

4) Alcor should always publicize any changes to its cryopreservation funding fee at least one year ahead of making the change mandatory on current members, in order to provide sufficient time for members to increase their funding to the new amount.

5) Immediately change the wording in the Cryopreservation Agreement for the reason I explained in another thread:
Brian, You and all other directors at Alcor need to be aware of a reasonable interpretation of this wording in Schedule A (bolding mine):

"All Members owe the cryopreservation minimum in effect at the time of membership approval for the elected method of cryopreservation, subject to the provisions of Section II, DUTIES OF ALCOR, Article 2, of the Cryopreservation Agreement."

This wording very clearly states that the amount needed to ensure a fully paid cryopreservation is the "minimum in effect at the time of membership approval for the elected method of cryopreservation" - which is the definition of "grandfathering" the minimum enrollment fee (as per definition in Merriam-Webster Unabridged). Unless the reader goes on to fully read the referenced Section II, Article 2, (which s/he might not because why would "DUTIES OF ALCOR" relate to the member's duty to pay more for hir cryopreservation?), I think that this will be the interpretation of most people.
I am particularly unhappy that no one appears to have read and/or understood my original suggestions, because I consider this - especially now with my elaborations here - to be the most important and helpful suggestion for the benefit of Alcor that I have made so far. In my considered opinion, it is a fully practical solution to the Underfunding Problem which greatly lessens the harmful effects on Alcor of its necessary termination of member grandfathering.
Last edited by paulwakfer on Fri Feb 17, 2012 12:31 am, edited 1 time in total.

bwowk
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Re: Grandfathered Underfunding Solution Thread

Post by bwowk » Thu Feb 16, 2012 2:02 am

For reference, the exact amount of underfunding of whole body and neuro members was given in the inflation article of last year.

http://www.alcor.org/Library/html/Cryop ... ation.html
As of August, 2011, 944 members were signed up in expectation of Alcor performing cryopreservations costing $141.6 million as measured by 2011 funding minimums. 533 members were signed up for whole body cryopreservation, and 411 members were signed up for neuropreservation. The total cryopreservation funding of those members was $122.2 million, a funding shortfall of $19.4 million. This net $19.4 million shortfall consists of the total underfunding ($32.6 million due to 641 under-minimum funded members) adjusted for the total over-minimum funding ($13.2 million due to 229 over-minimum funded members). Most of this over-minimum funding was from 173 members signed up for neuropreservation with $9.7 million in funding greater than minimum. The distribution of members with funding below and above minimums is shown in Figs. 2 and 3 for neuropreservation and whole body members. 197 neuropreservation members were underfunded with underfunding totaling $5.6 million. In 2011, as a group, neuropreservation members were not underfunded. Underfunding is a much more serious problem for whole body members. 444 whole body members were underfunded with underfunding totaling $27 million. The problem is worsened by the fact that Alcor has failed to increase whole body minimums sufficiently to keep pace with inflation over the past two decades, so another increase in whole body minimums is necessary soon.
If we grandfather neuro members to present minimums, we'd have a $5.6 million shortfall to make up. It's possible it could be bridged by case overfunding and bequests during the remaining life expectancy of underfunded members, but the cash squeeze in between unpredictable windfalls could be tight. This is especially so because bequests are often directed to specific purposes such as PCT that couldn't be used to pay for upfront costs of underfunded cases. If whole body and neuro members were treated equally under such a plan, making up the $27 million shortfall of underfunded whole body members would be even more difficult.

I think many board members still have an open mind about the issue, so the reiteration of your suggestion (which I mentioned to the board in general terms when you first made it) is appreciated. Perhaps Max can email your exact text to the board.

paulwakfer

Re: Grandfathered Underfunding Solution Thread

Post by paulwakfer » Thu Feb 16, 2012 3:07 pm

bwowk wrote:For reference, the exact amount of underfunding of whole body and neuro members was given in the inflation article of last year.

http://www.alcor.org/Library/html/Cryop ... ation.html
As of August, 2011, 944 members were signed up in expectation of Alcor performing cryopreservations costing $141.6 million as measured by 2011 funding minimums. 533 members were signed up for whole body cryopreservation, and 411 members were signed up for neuropreservation. The total cryopreservation funding of those members was $122.2 million, a funding shortfall of $19.4 million. This net $19.4 million shortfall consists of the total underfunding ($32.6 million due to 641 under-minimum funded members) adjusted for the total over-minimum funding ($13.2 million due to 229 over-minimum funded members). Most of this over-minimum funding was from 173 members signed up for neuropreservation with $9.7 million in funding greater than minimum. The distribution of members with funding below and above minimums is shown in Figs. 2 and 3 for neuropreservation and whole body members. 197 neuropreservation members were underfunded with underfunding totaling $5.6 million. In 2011, as a group, neuropreservation members were not underfunded. Underfunding is a much more serious problem for whole body members. 444 whole body members were underfunded with underfunding totaling $27 million. The problem is worsened by the fact that Alcor has failed to increase whole body minimums sufficiently to keep pace with inflation over the past two decades, so another increase in whole body minimums is necessary soon.
I knew this existed, but it gave no stats on the numbers in each category of initial funding, so I did not look at it again. The total of funding as a whole calculated via my method would be the amount of overfunding of neuros minus NL, which should equal the $9.7M - $5.6M given above.
bwowk wrote:If we grandfather neuro members to present minimums, we'd have a $5.6 million shortfall to make up.

Which should be able to be made up by the $9.7M overfunded neuros.
bwowk wrote:It's possible it could be bridged by case overfunding and bequests during the remaining life expectancy of underfunded members, but the cash squeeze in between unpredictable windfalls could be tight.
I don't see why bequests should be needed when there is already more than sufficient neuro overfunding. I think that possibility of mismatches and consequent "cash squeeze" can be well analyzed by examining the ages of those neuros who are underfunded versus those who are overfunded. If the underfunded group are substantially older than the overfunded group, then I agree that there may be a problem.
bwowk wrote:This is especially so because bequests are often directed to specific purposes such as PCT that couldn't be used to pay for upfront costs of underfunded cases.
Just so your meaning of "upfront costs" is clear (Kitty did not get it until I explained), I am assuming that you mean the sum of costs of CMS plus transport/perfusion/cooldown/human remains disposal - all the immediate out-of-pocket costs incurred by a neurocryopreservation. But then I ask: if the PCT is "fat" from bequests, then why not direct all of the funds of an underfunded case to the upfront costs? - after all, the PCT doesn't have any knowledge of or "care" where the money comes from since it is a big collective pot, unlike "upfront costs".
bwowk wrote:If whole body and neuro members were treated equally under such a plan, making up the $27 million shortfall of underfunded whole body members would be even more difficult.
I agree. So perhaps the only answer for whole body members is to say (in effect): "We are very sorry guys/gals but we really misjudged the funding that would be needed for WB and you will all now be required to either increase your funding to the current (and future) WB minimum OR change your cryopreservation type to neuro". But at least my plan would prevent a large proportion of the 197 underfunded neuro members from being highly upset, asking for return of their many years of high dues (obtained under false pretenses) and leaving for CI.

In the meantime, please remember that I am working diligently to attempt to find ways to lower costs, particularly with respect to liquid nitrogen. I also spent many hours reviewing and commenting on Ralph Merkle's high important draft paper "The allocation of long term storage costs among patients at Alcor" which shows that Alcor has got itself in this overall underfunding problem by its practice of having far too small funding minimums for whole body (and slightly too much for neuro) for all of its existence, thereby artificially encouraging whole body signups and discouraging neuro signups (which is the very opposite of what really should be done). I really do not want Alcor to lose a lot of members, which I am very concerned will happen if current plans are adopted. Perhaps that is why I am not as "light" about all these issues as Max would have me be.
bwowk wrote:I think many board members still have an open mind about the issue, so the reiteration of your suggestion (which I mentioned to the board in general terms when you first made it) is appreciated.
Thanks for noting/understanding my original suggestion and mentioning it to the board. Perhaps with my current elaborations it will be more fully understood by the other board members.
bwowk wrote:Perhaps Max can email your exact text to the board.
Since the board meeting at which the final decision on this issue is apparently due to be made is only 16 days away, if Max does not respond by the end of today with a promise to do just that, then I request that you please do so. Since there are no email addresses available for board members, I can only send it to those whose email addresses I happen to know and by Forums PM to those others who are registered on the Forums. If I do not hear from either of you by tonight, I will use whatever methods I can to get my plan to the other board members.

Michael R Seidl
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Re: Grandfathered Underfunding Solution Thread

Post by Michael R Seidl » Fri Feb 17, 2012 12:33 pm

Mr. Wakfer:

Addressing a couple of your questions and suggestions, briefly:
paulwakfer wrote:1) Immediately announce that grandfathering of cryorpreservation fees will not occur for all new members from this time on. These members will be required to purchase some form of funding indexed to the rate of inflation/cost of living increase and/or otherwise supply additional funding with Alcor as death beneficiary so that the total equals the amount of any future cryopreservation fee.
Your suggestion, if adopted, would create the impression that Alcor presently grandfathers its members. It does not. You will note the introductory paragraph of Schedule A to the suspension agreement, which says that Alcor may change its funding minimums upon 90 days written notice. Article II, Section 2, of the cryopreservation agreement provides the same authority in the Agreement itself. Alcor would be ill-advised to make a statement that grandfathering "will not occur . . . from this time on" as it would create a suggestion that Alcor presently grandfathered.
paulwakfer wrote:2) Possibly in addition to the above, one way to cap the underfunding liability would be to announce that all the cryopreservation funding of currently grandfathered members would cease grandfathering at the amount of the current cryopreservation fee.
Same response as above. Also, while this would "cap" the liability, it would not address the liability. Failure of Alcor to address the liability puts at risk its members currently in suspension and Alcor's future operations. Cap and ignore (not that I'm suggesting you're saying ignore) is not a responsible solution.
paulwakfer wrote:A weakening of 2) above, so as not to effectively break any promises (whether written or verbal), would be to cap the grandfathering as with 2) but instead at the amount of the next higher cryorpreservation fee.
Same response as above.
paulwakfer wrote:Alcor should always publicize any changes to its cryopreservation fees at least 6 months ahead of making these changes mandatory, in order to provide sufficient time for members to increase their funding to the new amount.
As above, Schedule A and the Agreement already require 90 days notice. I'm sure the board would entertain a longer period. However, 90 days seems like a substantial and reasonable period for a member to make other arrangements. Alcor bears the risk, of course, if the member dies in that period. What is your rationale for 6 months as opposed to 90 days (effectively doubling the risk period for Alcor)?
paulwakfer wrote:Immediately change the wording in the Cryopreservation Agreement for the reason explained in another thread:
I understand your suggestion but believe it is mistaken. An axiom of contract interpretation is that an interpreter must give meaning to all provisions of an agreement. The Agreement and Schedule A, as noted above, permit Alcor to increase funding minimums upon 90 days notice. In citing the provision you do and suggesting it needs change, you do not give effect to the other provisions. Moreover, the provision you cite is necessary for an effective agreement--it provides, in sum, that a member who provides the funding required at the time of the agreement is a member and will continue to be a member until (among other things) (a) Alcor gives 90 days written notice of a funding increase and (b) the member fails to provide additional funding in accordance with that notice.

Moving away from direct response, I would simply say that Alcor is faced with a very serious underfunding issue. One remedy would be to provide 90 days notice of increased minimum fundings--as permitted by the Agreement--and cancel everyone who does not provide increased funding. Alcor--concerned by the impact on its existing members outside the dewars as well as by the need to right-size funding and eliminate its deficit in order to protect its suspended members and members to be suspended in the future--has proposed to adopt a many layered plan, which encourages members to increase funding, provides the underfunding program that will permit underfunded members unable or unwilling to provide such increased funding to pay as small a fee as possible in order to avoid termination, and establishes a hardship fund to assist the members for whom that modest underfunding fee will be a hardship.

Your "solutions" to the underfunding problem are, in sum, a proposal to grandfather existing members and let someone else carry the burden, and they're based upon a fundamentally erroneous reading of the Agreement and Schedule A. Because you start from an incorrect premise--that existing members are grandfathered--all your "solutions" necessarily are flawed from the start, as they give effect to non-existent grandfathering and then look for another way to minimize underfunding or to pay for it. Moreover, your solution that suggests that Alcor ought to make up the difference by drawing on overfunded members penalizes those members who have had the foresight or wherewithal to provide excess funding. That solution would certainly seem inequitable to those members. And it seems inequitable to me. The best way to secure Alcor's future is not to rob Peter to pay Paul but to make sure that everyone provides for effective funding.

The current underfunding proposal still seems more equitable to me in all respects as it apportions costs to those who are underfunded, minimizes the out-of-pocket expenses, and provides for hardship exemptions.

Notwithstanding the foregoing, I share your apparent desire to give some sort of credit for long-term membership and continue to suggest that such issues--and not just financial hardship--should be a reasonable consideration for the administrators of the hardship fund.

Michael Seidl
(writing as a member and a member of the board; my opinions should not be attributed to other members of the board).

bwowk
Posts: 67
Joined: Tue Oct 04, 2011 11:09 pm
Relationship with Alcor: Board Member

Re: Grandfathered Underfunding Solution Thread

Post by bwowk » Fri Feb 17, 2012 2:50 pm

paulwakfer wrote:
bwowk wrote:If we grandfather neuro members to present minimums, we'd have a $5.6 million shortfall to make up.

Which should be able to be made up by the $9.7M overfunded neuros.
....

I don't see why bequests should be needed when there is already more than sufficient neuro overfunding. I think that possibility of mismatches and consequent "cash squeeze" can be well analyzed by examining the ages of those neuros who are underfunded versus those who are overfunded. If the underfunded group are substantially older than the overfunded group, then I agree that there may be a problem.
With significant remaining life expectancy, it's still a problem even if they are the same age. Overfunding decreases as costs rise with inflation, while underfunding remains constant under your proposal. The overfunded members eventually become minimally funded members, while the liability of previously underfunded members remains.
paulwakfer wrote:
bwowk wrote:This is especially so because bequests are often directed to specific purposes such as PCT that couldn't be used to pay for upfront costs of underfunded cases.
Just so your meaning of "upfront costs" is clear (Kitty did not get it until I explained), I am assuming that you mean the sum of costs of CMS plus transport/perfusion/cooldown/human remains disposal - all the immediate out-of-pocket costs incurred by a neurocryopreservation. But then I ask: if the PCT is "fat" from bequests, then why not direct all of the funds of an underfunded case to the upfront costs? - after all, the PCT doesn't have any knowledge of or "care" where the money comes from since it is a big collective pot, unlike "upfront costs".
We don't have the flexibility to do that. The disposition of funds above minimum is directed by the individual elections in each member's Cryopreservation Agreement.

paulwakfer

Re: Grandfathered Underfunding Solution Thread

Post by paulwakfer » Fri Feb 17, 2012 6:27 pm

Michael R Seidl:
Thank you for your response.
Below is my response inline to all of your points.
Michael R Seidl wrote:Mr. Wakfer:

Addressing a couple of your questions and suggestions, briefly:
paulwakfer wrote:1) Immediately announce that grandfathering of cryorpreservation fees will not occur for all new members from this time on. These members will be required to purchase some form of funding indexed to the rate of inflation/cost of living increase and/or otherwise supply additional funding with Alcor as death beneficiary so that the total equals the amount of any future cryopreservation fee.
Your suggestion, if adopted, would create the impression that Alcor presently grandfathers its members. It does not.
IMO, this is incorrect. The precedent of almost 40 years of doing so and multitudinous statements over many decades to that effect makes grandfathering the de facto policy of Alcor whether or not it has ever been directly stated in any signed agreement between Alcor and its members. Here are some of the statements re grandfathering made at the last minimum funding fee increase.

From Cryonics Vol 25:4 Nov/Dec 2004 Pg 24 "Comprehensive Member Standby" by Michael Riskin (Chairman of the Alcor Board at that time)

Pg 25:
In addition to the CMS charge of $10.00 monthly, we are
announcing an increase in the minimum funding requirements for
all applicants entering the sign-up process after December 31, 2004.
Current applicants must have completed the sign-up process by
December 31, 2004 to qualify for grandfathered rates. New
applicants (those who applied between October 1st, 2004 and
December 31, 2004) will then have until April 30, 2005, to complete
the membership application process, or the new minimums will
be applied. You will find the details of those changes in the
accompanying document that describes the exact nature of CMS
and how it will be funded.
Pg 26:
3) Effective January 1, 2005, new applicants will require higher
funding minimums of $80,000 for a neuro procedure and $150,000
for a whole-body procedure. Existing member funding minimums
will be grandfathered at their current rates. Current applicants must
have completed the sign-up process by December 31, 2004 to qualify
for grandfathered rates. New applicants (those who applied between
October 1st, 2004 and December 31, 2004) will then have until
April 30, 2005 to complete the membership application process, or
the new minimums will be applied.
4) New cryopreservation funding distribution payments will be
implemented to support CMS. Distributions to the CMS fund pool,
Patient Care Trust, and set asides for cryoprotection, cool down,
and long-term transfer expenses will be grandfathered to all
members as follows:
• $35,000
$3,000 to the CMS fund pool
$10,000 to the Patient Care Trust
$22,000 to cryoprotection, cool down, and long-term transfer
expenses
• $41,000
$5,000 to the CMS fund pool
$10,000 to the Patient Care Trust
$26,000 to cryoprotection, cool down, and long-term transfer
expenses
• $50,000
$5,000 to the CMS fund pool
$15,000 to the Patient Care Trust
$30,000 to cryoprotection, cool down, and long-term transfer
expenses
• $80,000 – New funding minimum for neuro procedure
$15,000 to the CMS fund pool
$25,000 to the Patient Care Trust
$40,000 to cryoprotection, cool down, and long-term transfer
expenses
• $100,000
$10,000 to the CMS fund pool
$40,000 to the Patient Care Trust
$50,000 to cryoprotection, cool down, and long-term transfer
expenses
• $120,000
$10,000 to the CMS fund pool
$60,000 to the Patient Care Trust
$50,000 to cryoprotection, cool down, and long-term transfer
expenses
• $150,000 – New funding minimum for whole-body
procedure
$15,000 to the CMS fund pool
$65,000 to the Patient Care Trust
$70,000 to cryoprotection, cool down, and long-term transfer
expenses
Pg 27:
11) The annual fees, minimum funding structure and allocations
to finance CMS are subject to change by the Board at any time. It
is understood that it is the Board’s intention to maintain the
grandfathered rates as long as possible.
If, as you maintain, Alcor could have announced on Jan 1, 2005 (or perhaps April 30, 2005) that 90 days hence all members would then be required to provide the current minimum funding, then Riskin's (and other Alcor signup inducement publications at the time) would reasonably be seen as a fraudulent attempt to get more members paying them more yearly fees.
Michael R Seidl wrote:You will note the introductory paragraph of Schedule A to the suspension agreement, which says that Alcor may change its funding minimums upon 90 days written notice. Article II, Section 2, of the cryopreservation agreement provides the same authority in the Agreement itself. Alcor would be ill-advised to make a statement that grandfathering "will not occur . . . from this time on" as it would create a suggestion that Alcor presently grandfathered.
I have no problem with it being worded differently to avoid any such legal suggestion, even though, as I have now made clear, such grandfathering has been the de facto situation since the creation of Alcor. My point in proposing such a statement was to avoid any possible misunderstanding by those newly signing up.
Michael R Seidl wrote:
paulwakfer wrote:2) Possibly in addition to the above, one way to cap the underfunding liability would be to announce that all the cryopreservation funding of currently grandfathered members would cease grandfathering at the amount of the current cryopreservation fee.
Same response as above.

The validity of which I reject for the same reasons given above.
Michael R Seidl wrote:Also, while this would "cap" the liability, it would not address the liability.

The liability was always planned/expected to be "addressed" by lowered costs, increased volume and overfunding/bequests. It is only because Alcor has not ceased this policy earlier that the liability has become as large as it has. Moreover, the vast majority of papers (over many many, years see the excellent article "FUNDING CRYONICS" by Carlos Mondragon in Cryonics Volume 13(3) MARCH, 1992 Issue 140) addressing the liability problem of grandfathering have mainly been concerned with its exponentially rising liability if it should continue. My approach makes the liability a set amount which will become an ever smaller portion of the PCT total funds as time goes on.
Michael R Seidl wrote:Failure of Alcor to address the liability puts at risk its members currently in suspension and Alcor's future operations.
Agreed, but one does not reasonably address a liability which has been ignored for many decades, by suddenly telling members who have been supporting the organization for decades with major yearly fees, that this has all been (in effect) a "con job" up to this time and now is the time to "pay up or else". In any case, for neuros, the overfunding of many is fully sufficient to currently make up the underfunding of the others.
Michael R Seidl wrote:Cap and ignore (not that I'm suggesting you're saying ignore) is not a responsible solution.
IMO, it is a much more responsible solution than is terminating members who kept the organization alive with their decades of yearly fees or making them pay even more yearly than the already very high fees.
Michael R Seidl wrote:
paulwakfer wrote:A weakening of 2) above, so as not to effectively break any promises (whether written or verbal), would be to cap the grandfathering as with 2) but instead at the amount of the next higher cryorpreservation fee.
Same response as above.
My same responses too. This "weakening" was only included as a thought to more strongly prevent members leaving and prevent concern about broken promises.
Michael R Seidl wrote:
paulwakfer wrote:Alcor should always publicize any changes to its cryopreservation fees at least 6 months ahead of making these changes mandatory, in order to provide sufficient time for members to increase their funding to the new amount.
As above, Schedule A and the Agreement already require 90 days notice. I'm sure the board would entertain a longer period. However, 90 days seems like a substantial and reasonable period for a member to make other arrangements. Alcor bears the risk, of course, if the member dies in that period. What is your rationale for 6 months as opposed to 90 days (effectively doubling the risk period for Alcor)?
My "rationale" was simply to ease the burden and give more time for securing increased funding, which can be a highly difficult process for many people depending on circumstances. Also, many members may not even notice the announcement of such a change for some time, so I think that 90 days is far too short for such an important and often difficult change.
As for "Alcor bears the risk, of course, if the member dies in that period", the answer to that is simply to announce the change sufficiently ahead of when the increased costs really do require it. This is always the standard method of reducing interim risk when price increases are announced with a grace period given - announce them in advance of absolute necessity.
Michael R Seidl wrote:
paulwakfer wrote:Immediately change the wording in the Cryopreservation Agreement for the reason explained in another thread:
Here is that wording and reasoning once again:
"All Members owe the cryopreservation minimum in effect at the time of membership approval for the elected method of cryopreservation, subject to the provisions of Section II, DUTIES OF ALCOR, Article 2, of the Cryopreservation Agreement."

This wording very clearly states that the amount needed to ensure a fully paid cryopreservation is the "minimum in effect at the time of membership approval for the elected method of cryopreservation" - which is the definition of "grandfathering" the minimum enrollment fee (as per definition in Merriam-Webster Unabridged). Unless the reader goes on to fully read the referenced Section II, Article 2, (which s/he might not because why would "DUTIES OF ALCOR" relate to the member's duty to pay more for hir cryopreservation?), I think that this will be the interpretation of most people.
Michael R Seidl wrote:I understand your suggestion but believe it is mistaken.
I am not interested in your "beliefs", but only your considered convictions and your reasons for them.
Michael R Seidl wrote:An axiom of contract interpretation is that an interpreter must give meaning to all provisions of an agreement.
I am well aware of that. In my own enhanced version of "Valid Contract" - http://selfsip.org/solutions/NSC.html#contract - there is a necessity for an Arbitrator one of whose jobs is just that - to see that all parties to the Contract have the same understanding of it.
Michael R Seidl wrote:The Agreement and Schedule A, as noted above, permit Alcor to increase funding minimums upon 90 days notice.
But my point is that the current wording makes the Agreement self-contradictory. And, as I am sure that you are aware, a contradiction logically implies anything at all. I did not suggest a wording change before, because I left that up to the credentialed lawyers on the board, but here is a new wording that I think would suffice to remove any hint of inconsistency.

"All Members owe the cryopreservation minimum in effect at the time of membership approval for the elected method of cryopreservation, unless and until the end of the grace period for increases in such minimums, see the provisions of Section II, DUTIES OF ALCOR, Article 2, of the Cryopreservation Agreement for the conditions under which minimums may be increased."
Michael R Seidl wrote:In citing the provision you do and suggesting it needs change, you do not give effect to the other provisions.
Correct. Because on the face of it the wording that I cited is inconsistent with those "other provisions", and, furthermore to reiterate the interpretation problem: "why would "DUTIES OF ALCOR" relate to the member's duty to pay more for hir cryopreservation?"
Michael R Seidl wrote:Moreover, the provision you cite is necessary for an effective agreement--it provides, in sum, that a member who provides the funding required at the time of the agreement is a member and will continue to be a member until (among other things) (a) Alcor gives 90 days written notice of a funding increase and (b) the member fails to provide additional funding in accordance with that notice.
I did not suggest a removal of that "provision". It should be obvious that my rewording above provides that "necessity" that you seek and at the same time completely removes the effective inconsistency of different parts of the Agreement.
Michael R Seidl wrote:Moving away from direct response, I would simply say that Alcor is faced with a very serious underfunding issue. One remedy would be to provide 90 days notice of increased minimum fundings--as permitted by the Agreement--and cancel everyone who does not provide increased funding. Alcor--concerned by the impact on its existing members outside the dewars as well as by the need to right-size funding and eliminate its deficit in order to protect its suspended members and members to be suspended in the future--has proposed to adopt a many layered plan, which encourages members to increase funding, provides the underfunding program that will permit underfunded members unable or unwilling to provide such increased funding to pay as small a fee as possible in order to avoid termination, and establishes a hardship fund to assist the members for whom that modest underfunding fee will be a hardship.
Much as I dislike the entire concept of a collective "hardship fund" (I am only interested in helping individual others based solely on their merit rather than their need), I have no great problem with those methods being applied to any additional underfunding problems in the future incurred by current members.
Michael R Seidl wrote:Your "solutions" to the underfunding problem are, in sum, a proposal to grandfather existing members and let someone else carry the burden,
That criticism really stings me personally, because my entire life I have been strongly promoting the philosophy that each person must be fully responsible to pay his/her (hir) own way. My proposal in this instance only violates my fundamental personal philosophy because that is the way that Alcor has been behaving (with its pooled PCT funds) from its creation. I would far rather have each person's funding be kept completely separate for hir own life needs - as was the approach by CryoCare.
Michael R Seidl wrote:and they're based upon a fundamentally erroneous reading of the Agreement and Schedule A.
No. My proposals were and are not "based" upon the inconsistency in the Agreement (certainly not "a fundamentally erroneous reading") at all. I merely brought in that inconsistency to illustrate the harm (and possible grounds for lawsuit) that would be incurred if the Board continued on its present course.
Michael R Seidl wrote:Because you start from an incorrect premise--that existing members are grandfathered--all your "solutions" necessarily are flawed from the start, as they give effect to non-existent grandfathering and then look for another way to minimize underfunding or to pay for it.
As I have argued above, I reject the validity of your statement here.
Michael R Seidl wrote:Moreover, your solution that suggests that Alcor ought to make up the difference by drawing on overfunded members penalizes those members who have had the foresight or wherewithal to provide excess funding. That solution would certainly seem inequitable to those members. And it seems inequitable to me. The best way to secure Alcor's future is not to rob Peter to pay Paul but to make sure that everyone provides for effective funding.
Yes, and this part of my proposal pains me deeply, since it is contrary to the philosophy of my lifetime (74 years). However, as pointed out above, this "rob[ing] Peter to pay Paul" is the philosophical approach that Alcor has used since its inception, which is at least partly because that philosophy is so rampant and dominant in the current culture of society, being encouraged and fostered as it is by the machinery of the State.
Michael R Seidl wrote:The current underfunding proposal still seems more equitable to me in all respects as it apportions costs to those who are underfunded, minimizes the out-of-pocket expenses, and provides for hardship exemptions.
Except for the hardship fund idea, I totally agree. But that proposal is also so drastic a change (both monetarily and philosophically) that I am convinced Alcor will lose so many members that the entire plan will back fire and end up making the organization even worse off than my proposal for limiting the liability.

Perhaps what is needed is a poll of the membership in order to determine the effects of various proposals.
Michael R Seidl wrote:Notwithstanding the foregoing, I share your apparent desire to give some sort of credit for long-term membership and continue to suggest that such issues--and not just financial hardship--should be a reasonable consideration for the administrators of the hardship fund.
Good to see that we are at least in agreement on that much.
Michael R Seidl wrote:Michael Seidl
(writing as a member and a member of the board; my opinions should not be attributed to other members of the board).
Does that really need to be stated? Isn't it the obvious default?

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