Socialism: pay capital accounts on a fixed schedule so they stay clear of pension law

Co-Authored-By: Claude Opus 5.5 <[email protected]>
Claude-Session: https://claude.ai/code/session_01QWPs69B8nQZjtPEUXMKzZx

JoshHeaps.Net/Content/Socialism/the-long-run.md

@@ -46,7 +46,7 @@ The horizon problem bites when the members voting today pay for an investment wh
 
 **1. The reserve.** At least 30% of every year's profit goes into the co-op's permanent reserve (see [Member Capital Accounts](capital-accounts.md#where-each-years-profit-goes)). No current member can ever take that money home, so paying for the line this way doesn't cut our machinist's share this year. (The line's cost still counts against profit a little each year, as point 3 explains.) The reserve is money that already belongs to the co-op's future, and it gets spent on the co-op's future.
 
-**2. Members' accounts.** Money members leave in their [capital accounts](capital-accounts.md) isn't lost when they leave. It's paid back to them with interest. So if the co-op keeps more of this year's profit in members' accounts to pay for the new line, the machinist gets her money back when she retires. Her real cost is the wait, and the risk that the co-op fails.
+**2. Members' accounts.** Money members leave in their [capital accounts](capital-accounts.md) isn't lost when they leave. It's paid back to them with interest. So if the co-op keeps more of this year's profit in members' accounts to pay for the new line, the machinist gets her money back, by default five years later, whether or not she's still there. Her real cost is the wait, and the risk that the co-op fails. Five years is shorter than most machines last, so for long-lived investments this helps less than it would if accounts were held until members left. Federal pension law is why they aren't ([Member Capital Accounts](capital-accounts.md#why-not-pay-it-out-when-you-leave)).
 
 **3. Spreading the cost over time.** A business doesn't count the whole price of a machine as a cost in the year it's bought. It spreads the cost over the machine's working life. A $2 million line that lasts 20 years counts as $100,000 of cost a year. This is called *depreciation*, and it's how ordinary accounting already works. The profit split is based on profit after depreciation, so the machinist isn't charged for the years after she leaves. The bank does the same with repayment: loans for buildings and long-lived equipment are paid back over the asset's working life, up to 25 years for real estate, the same limit the SBA's main loan program uses ([SBA, types of 7(a) loans](https://www.sba.gov/partners/lenders/7a-loan-program/types-7a-loans)).
 
@@ -77,7 +77,7 @@ That leaves four ways the horizon problem can still get in.
 **3. Development projects can be spread out, like machines.** A co-op can designate a specific development project *before* it starts spending on it: designing a new product or a better production process, or building software. For the profit split only, its cost is then spread over up to five years, the same way a machine's is.
 
 - **Only real development qualifies.** It has to meet the test international accounting standards already use to decide when development creates a real asset: it's technically doable, the co-op intends to finish it and can, and it's likely to earn money ([IAS 38](https://www.ifrs.org/issued-standards/list-of-standards/ias-38-intangible-assets/)). Those standards specifically exclude training, advertising and start-up costs, and so does this rule. Those stay costs of the year they're spent.
-- **The people who chose it carry the risk.** If a project is abandoned or written down within five years, the cost that hasn't yet been charged comes out of the capital accounts of the people who were members when it was designated, including former members whose payouts haven't been made yet. Payouts take up to five years anyway, so the money is usually still there. That makes the rule useless for pushing costs onto the next group of workers.
+- **The people who chose it carry the risk.** If a project is abandoned or written down within five years, the cost that hasn't yet been charged comes out of the capital accounts of the people who were members when it was designated, including former members whose payouts haven't been made yet. Each credit waits three to seven years before it's paid, so much of the money is usually still there. That makes the rule useless for pushing costs onto the next group of workers.
 - **Limits.** The total cost still waiting to be charged can't exceed half of the co-op's average profit over the last three years, measured before any spreading. Only co-ops with an independent audit can use the rule, and the auditor checks each open project every year.
 - **It only changes how costs are divided between this year's members and future ones.** It doesn't touch the co-op's tax return or its reports to the bank. The co-op publishes both numbers side by side.