What is a Fraternal Benefit Society?

Fraternal benefit societies are membership groups that unite individuals with a common bond, provide them the ability to secure their families’ financial security through a variety of life insurance and investment products, and form one of the nation’s most effective and efficient volunteer networks, delivering billions of dollars of direct financial aid and community service to those who need it most.

Fraternals exemplify the “take care of your own” spirit that helped build America. The common bond between members can be based on religious beliefs, gender, occupation, ethnicity, or shared values. In addition to financial services products, these unique organizations offer members a variety of benefits, such as scholarships, educational programs, travel opportunities and discount programs.  Fraternals’ community service activities – both the financial contributions they make to worthy organizations and the structure for the volunteer efforts carried out by their members – are funded by the proceeds generated by the sale of life insurance and other financial services products to members.  Because fraternals are “owned” by the members who share a common bond, these charitable activities benefit organizations that mirror the values of the fraternal.  The result is “altruism with accountability” since the fraternal must operate responsibly manner to both protect its members financial security and to fulfill its social mission.

Many societies have their roots as mutual aid organizations—founded to serve the needs of immigrants and other underserved groups before the days of government and employer-based health care and retirement programs. Today’s fraternals are focused on serving the needs of others in the communities where their members live and work.  Because members are organized into local chapters, fraternals are uniquely positioned to deliver meaningful community services in their own “back yard.”  While fraternals provide significant volunteer support to nationally recognized programs such as Habitat for Humanity and Special Olympics, their most important contributions are made to local groups that couldn’t survive without their support, including food banks, battered women’s shelters, veterans and military organizations, and victims of natural disasters.

All fraternal benefit societies must comply with state and federal regulations, with regard to their financial services, and must be licensed by the insurance department of the state or states in which they operate. Fraternal benefit societies are recognized as 501(c)(8), not-for-profit fraternal organizations, by the Internal Revenue Service.  According to a 1993 Treasury Department study, the many charitable and benevolent activities of the fraternal benefit system – estimated to be over $2 billion annually – would be severely curtailed if the 100-year-old fraternal tax exemption were repealed.  Clearly, fraternals continue to deliver significant value to their members, the hundreds of charitable organizations that benefit from the financial and volunteer support, and American taxpayers more than a century after they were created.