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Retirement Or Owner's Income

December 21, 2008

Last Revised:  May 23, 2012 4:50 PM

Referred From

This page is mostly a first and second dynamic orientation, related to Karl Loren and Jean Ross (Loren C. and Bonnie J. Troescher) and related to their retirement and the succession of management and ownership of Vibrant Life from them to Clifford Woods.

This subject of "the amount of money paid for 'owner's past contributions' (retirement pay) or the "amount of pay for any new owners" (profit share) and must start with a reference to the LRH Policy, Production And One's Standard Of Living," quoted here and excerpted below.

Corrected gross income divided by staff has to be at least 5X the cost of the standard of living of the individual staff member for that standard to be barely maintained. This does not mean staff pay should be 1/5 of that figure. It means that all the things (pay included) that go into maintaining their welfare and work environment would ave to be covered by 1/5 of that figure. A fairly efficient and prosperous org with a hatted, industrious, gung-ho staff can very easily maintain quite acceptable standards at 1/10 that figure. The actual cash value of every piece of work done by a person can actually be calculated. It is intricate and tricky to do and much subject to over- and underestimation but it can be done. If is not vital to do this but one might just be curious about it. If so, do it for yourself. Thus VFPs can be priced against what they bring in as part of the overall scene even when they seem indirect. All the above figures are very rough and subject to variation but this gives you some idea of what is meant by "excess" in that law.

That policy does not mention "retirement income" paid to a previous employee.

It is interesting to note that the Church, with most of its ever-hired-staff still working, few of them retired, there are few staff who are not currently contributing to the current products of the Church.

Generally, those on retirement pay do not contribute to the current VFPs of any organization.

Thus, Vibrant Life, looking at the "retirement" of the founders and owners, has a situation not found much in the Church -- specifically because Vibrant Life has not grown to a size where the "retirement" pay of ANY staff member could be a trivial cost of operations.

Further, the money to be taken as "retirement" by Karl and Jean is a continuation of what they took as income while they were both actively creating VFPs for the Company. Presumably there will now be much less of this personal production of VFPs by them.

Other LRH Policy does mention taking money out of CGI for various types of reserves. If the money that should have been placed in those various types of reserves is accepted as a source for "owners' profits and/or retirement pay," then the violation of the above LRH Policy may not exist, but then the Company would not have had reserves -- as it has not.

No matter what the source of the money taken by Karl and Jean, salaries, reserves or other, it has been more than enough to emasculate money for new staff and for marketing.

During most of these past 25 years I have personally violated this vital LRH Policy by taking out of the Company as much money as I felt I needed to maintain our standard of living, even when that amount caused "total salary" [assuming profit share should be included in "salary"] to be higher than 20% of the CGI. For lack of money to spend on marketing or OTHER staff, it became necessary for ME to do the work of the money not spent on marketing or other staff members.

While I worked extra hours to make up for this taking of money for myself, that is not a viable way to expand -- and, indeed, Vibrant Life has not reached the sales volume that it should with a product as good as it has -- and with published pages as useful as they are.

It thus becomes necessary for ME, in retirement, to either accept whatever money will not violate that LRH Policy, and/or to continue contributing VFPs to the Company to warrant my retirement income -- allowing some reasonable royalty, or license fee paid to me for the continued use of my copyrighted materials, original formulas and signed business contracts of value.

(I suspect that, in the Church, book sales are not part of Org income, and that book sales income includes not only the cost of printing more books, but some royalty payment to LRH, or wherever LRH may have designated these payments to go. VL does NOT have anything comparable to income from "sale" of Karl's writings.)

The excerpt quote of the LRH Policy shown in red, above, suggests that it might be possible to place a figure on the value of the continuing contribution of:

• materials already published (and copyrighted) by Karl as well as
• new material to be researched and written about and
• similar valuation of any original or
• revised formulas or
• past, or
• future long term business relationships having a continuing reliance on Karl and Jean.

The SOLUTION that the new management must find is that: the "owner's" income (whether indicated as "retirement income" or "(new or old) owner's profit income" must somehow stay within some acceptable rule in alignment with "Production and One's Standard Of Living."

The "QUICK" calculation, based on past money taken by Karl and Jean, is simple:

Karl and Bonnie's "retirement income" should be $15,000 per month (weekly equivalent of about $3,500) even though, for now, that may violate the above LRH principle, with Clifford Woods taking over the long-term Karl Loren Hat of working extra and long hours (as well as Karl continuing to do the same) to increase the VSD to the point where the monthly $15,000 taken out for Karl's retirement is NOT a drag on other needed uses of that VSD to allow the Vibrant Life expansion to proceed along more normal lines.

(Now having removed the most likely source of "held down stats" with Tim's departure and with the debugging of the NNCF line by Cliff, there is every reason to believe that we can increase VSD steadily with our present staff, including newly-hired Barbara.)

(Given that, lately, VSD has been low, Karl has been taking out less than his usual retirement/owner's income. When VSD is $15,000 per week, "some" calculation of acceptable retirement payment of $15,000 per month has seemed possible.)

Given that 20% of CGI, with considerations on percentage of VSD made up of product cost, and that VSD should be virtually the same as GI, and that CGI will be very close to GI, then this would mean that ($15,000 times 4 1/3 weeks per month means VSD of $75,000 per month would allow the indicated retirement pay to Karl, and additional VSD would then be necessary to cover any staff members, including, at this writing (December 29, 2008, with Tim's departure and Barbara's arrival), total salaries (currently and prospectively about $500, 500, 750, rounded upwards to about $2,000 per week , or about an additional $10,000 weekly VSD to cover the salaries now current (including Luis' expected increase). (These figures can be revised to make for a more useful figure.)

Thus, VSD of about $120,000 per month would cover the desired retirement income for Karl and Bonnie, plus the present staff and, further, allow a standard 20% of CGI for marketing expenses.

First Phase Target

THAT LEVEL, $120,000 PER MONTH VSD, IS THE FIRST PHASE TARGET FOR GETTING KARL AND JEAN'S RETIREMENT INCOME OF $15,000 PER MONTH TO BE WITHIN SOME ACCEPTABLE FORMULA ALIGNED WITH LRH, PRODUCTION AND ONE'S STANDARD OF LIVING.

That level of monthly VSD would standardly provide for $24,000 per month for salaries. If Karl and Jean take all of their retirement income from the 20% allocated for "salaries," that would mean $9,000 left for the three present staff members. Since they are currently taking about that much in salaries, it would be possible, for the first time, for a full 20% allocation ($24.000 per month) of the total VSD/CGI for marketing.

FURTHER increases in VSD, none of that then allocated for Karl and Jean, would allow for increased staff salaries or for hiring new staff as well as even further increase in marketing expenses.

("Marketing expenses" can certainly be defined to include trips to India to set up new arrangements, not so?).

It will be up to Clifford Woods how much of any newly available CGI after these needs are met, can be used for his own salary increase.

Achieving monthly VSD of $120,000, or the weekly equivalent of $25,000 per week is, then, the target for the present staff, with marketing expenses reaching 20% of CGI and more marketing expense being available when and to the extent that VSD rises above $25,000 per week on an extended trend line.

As an incentive to future owners, and even for the increases in retirement pay, as an increase as Vibrant Life continues beyond $120,000 per month there should be formula to lay out the percentage (such as 10% of the new CGI added for retirement pay and 10% of the new CGI for bonus for prospective owner, Clifford Woods) (or some flat amount) of that further increase that will accrue to retirement income or other special allocation.

Presumably all and any retirement income will no longer be payable at the time of the death of the last surviving spouse of Karl and Jean. This means that the new owner will receive, whether called an "inheritance" or not, an "increase-certain" in profit payments, given the life expectancy of Karl and Jean.

The above covers the VSD target for handling Karl retirement income, and further VSD increase to allow additional staff hiring.

As a subject still subject to discussion and negotiation, it is at this level of $120,000 VSD per month, percentages of OWNERSHIP could logically start being transferred from Karl and Jean to the new owner, presumably Clifford Woods. I suggest that Clifford hire his own lawyer to convert this writing, as it may be revised, into a legal agreement for the transfer of ownership of Vibrant Life from the present owners to him. This call on outside expert assistance for him should also include his hiring a tax attorney, or accountant to review the tax status of Vibrant Life, and Karl's plans for revising the structure and ownership of Vibrant Life in ways that would be comfortable for Clifford to assume, or change.

(With the present income tax reporting expectation, Karl now anticipates "declaring" that some part of the total ownership by Karl (1% of the General Partnership) and Jean (same percentage) be transferred to Clifford so that Clifford, as of the tax report scheduled to be done for the April 15, 2009 date, would be shown as an actual existing general partner in that General Partnership -- to the extent, probably, of 0.5% that being the same given to Maia at one point. This means that Cliff would get a Schedule K1 for the year 2008 and continuing. Much more work needs to be done with the new LLC structures -- but the VL General Partnership tax return will be filed -- as an IRS - allowed LLC structure, the long-ago formed Delaware LLC, Vibrant Life LLC will replace the existence of the VL "California partnership.")

There are tax considerations to be researched, but it should be possible for Clifford to be "earning" current partnership interest in the form of his "sweat equity" to be converted into actual percentage ownership when that sweat equity has proven to create a named, higher level of steady VSD on an upward trend. The objective here will be to research and find how that sweat equity interest can be converted into actual percentage ownership without unnecessary tax consequences to Clifford.This research into the tax considerations can and will take into account that there will not be any inheritance tax benefits to anyone since Karl and Jean have no intentions to pass any aspect of VL worth to anyone eligible for "inheritance tax treatment."

Complications of this simple formula involve these areas:

I have disputed most of my credit card debt. The result of this has been a considerable reduction in the money I had needed to meet the previous monthly card payments. That information is here. One of the expected consequences of that dispute has already been a drastic reduction in the credit rating score for Karl and Jean. Karl has a plan for further handling of the credit rating score. This should not affect Vibrant Life, but it will affect Karl and Jean.

I thought to sue my former landlord for breach of contract, did a poor job as an in pro per attorney and face, as of December 2008, the possibility of a court judgment against me. Details are mostly elsewhere, but the reference here will alert anyone reading this page to this potential financial demand. This should not affect Vibrant Life, but it may affect Karl and Jean.

I believe that the VL move to a Limited Liability Company, and all the other many changes in legal structure, including movement of the income to Nevada, away from California, are vital to continue. For now that will most probably require Karl's personal work and some new expenses.

I have long admired the way LRH did many things, including how he set up "Author's Services" to support his work as an author. I would like to think that my FUTURE contributions to Vibrant Life will seem real enough that additional money from Vibrant Life can be allocated for establishing and funding an "Author's Support Service," dedicated to facilitating Karl's personal continuing production of research, writing and publishing of subjects of value to Vibrant Life (and mankind).

If, at the sole discretion of the new owners, they decide to set up an amount of money in a "memorial trust" with "John Smith" as the beneficiary, being a person born at some time after the death of Karl Loren, that trust could be funded and the trustee of that trust empowered to "recognize" "John Smith" by criteria established and held in confidence by the Trustee.

During any time period when money paid to Karl and Jean , for the sake of logic, may have needed to be taken from VL money that would otherwise have gone into Company Reserves, the personal decisions by them to build-up out of their income from VL, Karl and Jean's ADEQUATE PERSONAL RESERVES (money used for their personal reserves, not used for their current standard of living) can reach a point where there is no further need by Karl or Jean to have ANY ownership or control over Vibrant Life. This would be a point at which absence of any money from Vibrant Life would not disrupt their standard of living.

"Adequate Personal Reserves" for Karl and Jean are the amount needed to maintain their then-standard of living (not less than $15,000 per month), based on an actuarial life expectancy -- based on their then-age, either of them living.

(Factors which could affect a "then-standard" of living include inflation, future Bridge needs, health care -- all subject to discussion and agreement.)

Karl and Jean are ready to put into legally binding language that any of the above page including such "personal reserves" at the time of the death of the last surviving of them, shall revert to Vibrant Life Company Reserves, for use as per standard LRH Policy for Vibrant Life.

That point, or earlier, is the point at which prospective new owner, Clifford Woods, takes over complete ownership and control of Vibrant Life. It is anticipated that, at that time, there would be no strings of any kind, no restrictions on the complete and total exercise of full ownership by Clifford Woods, including his power to sell his ownership to another, or change it in any way.

 Official

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