New fundraising scheme at OSU

[EggMcClone]

T. Boone Pickett has come up with a new scheme to raise $280 million for Oklahoma State.

Cowboys Athletics, Inc., took out a $20 million loan to pay a $357,000 premium for 28 OSU supporters who range in age between 65 and 85, each agreeing to make OSU athletics the beneficiary of a $10 million policy. The insurance company invests the $357,000 to turn a profit while the 28 supporters are living. Once all 28 OSU supporters die, the athletic department will have been paid $280 million.
"There is no financial obligation to the people who are supporting this,” said Craig Clemons, vice president of athletic development. "It doesn't detract from their personal life insurance policies for their families.
"Their asset is their health, not their wealth. It's rewarding that we have supporters who maybe can't write a seven-figure check but want to have this legacy.”

It seems like a pretty good deal and says that Texas Tech and UT are looking into a similar program. It's kind of an interesting article about a school finding a new way to raise money (as if having Pickett as a booster wasn't enough...). Although there are some questions about the tax-exempt status of schemes like this.

EDIT: Whoops, BenEClone beat me to this (Insurance - Creative Fundraising).

[tec71]

Here's a somewhat dark version of that. I had a friend who got cancer. He had to leave work. His work had provided term life insurance of about $130k free to him. He had the option to roll that over upon terminating his employment without an examination. Of course becuase of his age 65, the premiums were like $1200 per month. It had no disability value. The doctor gave him no more that 36 months to lieve. So he found a charity to put up the $1200 per month in return for him leaving them the death benefit. He had no one else to leave it to particularly. Frankly it came out of a discussion over a couple beers he and I were having. I jokingly offered to put up $1800 per month, $1200 to the co & $600 to him in return. We laughed about it. a week later it was a done deal with the charity.

[ISUboi12]

Maybe I am stupid but isn't there still a risk involved? Insurance premiums for a 10,000,000 policy for someone 70 years old is a million dollars a year. What happens if they live for ten more years?

[ISUboi12]

Nevermind, I get it.

[83Clone]

Originally Posted by EggMcClone

T. Boone Pickett has come up with a new scheme to raise $280 million for Oklahoma State.

It seems like a pretty good deal and says that Texas Tech and UT are looking into a similar program. It's kind of an interesting article about a school finding a new way to raise money (as if having Pickett as a booster wasn't enough...). Although there are some questions about the tax-exempt status of schemes like this.

EDIT: Whoops, BenEClone beat me to this (Insurance - Creative Fundraising).

Unless my math is way off, the premium is $357K each/year, or about $10MM . OSU has to pay interest on the loan, which at prime is over $1.6MM a year. If one of these dudes doesn't buy it in the first two years, the first $20MM is gone and they have to borrow more to keep paying the premiums.

All that asise, I can't see an 85 year old getting life insurance period, let alone at a premium less than 4% of the face amount, so I hope the NCAA has done theri due diligence to see that this is all above board.

[Dormeezy]

That sure sounds like a morbid practice.. kind of creepy...

[Wesley]

College Sports is now big business - life or death for some.

[Clonehomer]

I'm not a finance major, but I just don't see how this is going to work. Insurance companies are trying to make money. If they give out more than they receive in premiums and interest they lose money. Thus, they must be making more than the $280M from the investments. Therefore, why doesn't OSU cut out the middle man and invest that money on their own?

[Wesley]

Maybe they are picking bums off the street and they hope they kick the bucket early. Insurance money is tax free up to $2M?