It has changed its name and redefined its constituency, and yesterday the organization formerly known as the American Association of Retired Persons announced that it would spin off a range of lucrative products and ventures to a new subsidiary, AARP Services Inc.
The subsidiary is AARP's latest response to the challenges of a future that will be shaped by aging baby boomers, who so far have shown far less interest than their parents in joining an organization most commonly associated with seniors.
But the move also addresses tax problems that AARP has faced since the late 1980s. At issue has been which of the nonprofit organization's very profitable programs should be taxed and to what extent. Last month, according to Executive Director Horace Deets, AARP and the Internal Revenue Service settled their dispute when the government accepted a $52 million payment for the years 1994 through 1998.
AARP Services, which will market and manage programs offering everything from health, life and home insurance to investment funds, prescription drugs and discounted motel rooms, will be a taxable entity with $20 million to $30 million in annual revenue. But the royalties that AARP receives from allowing its name to be attached to those programs will remain nontaxable -- a sum of more than $170 million a year.
"Our name's worth a lot," said Steve Zaleznick, the newly appointed president and chief executive officer of the subsidiary company.
Although just 44, Zaleznick has worked for AARP for two decades, including nine years as its general counsel. His is the generation AARP must attract in coming decades if it is to continue being a business force to be reckoned with, as well as a powerful presence and lobbying voice in Washington and state capitals. And to that end, it has been remaking itself in myriad ways.
In November, the association formally became four initials. "AARP is the name," Deets stressed yesterday. "It's not an acronym." The change allowed it to drop the word "retired," which officials feared was alienating many working people -- especially those now turning 50 and suddenly eligible for membership. Only about a quarter of that group are signing up, compared with nearly twice that in years past.
In addition, no longer does AARP describe itself as "dedicated to helping older Americans achieve lives of independence, dignity and purpose." Its latest fact sheet identifies it as "the nation's largest organization of midlife and older persons" and talks about "shaping and enriching the experience of aging for our members and for all Americans."
That leads to sometimes jarring images: The current issue of AARP's Modern Maturity magazine, for example, offers still-glamorous model Cheryl Tiegs on its cover. Many pages inside are ads for two-wheel scooters and retirement communities.
"We've got a lot of challenges," Zaleznick acknowledged yesterday during a meeting with reporters at which he and Deets discussed the subsidiary's direction.
Zaleznick said the new company will aim at greatly increasing AARP's presence on the Internet and making its Web site more interactive -- allowing the association "to become much more personal" to its 33 million members. He plans new products and programs, in part through "highly, highly informative" financial and investing education services for members online.
Both he and Deets, who will sit on the subsidiary's board of directors, insisted that AARP Services' profit motives and margins will not change the mission of the parent organization.
"That's going to be our job, to make sure that doesn't happen," Deets said.