I recently went through upgrading 2 smart phones.........
It is true that you can no longer use the upgrade of a NON-smart phone to receive a subsidized smart phone.....you would have to upgrade to a data plan on your flip phone under contract...typically 2 years......$30 x 24 = $720
So, yes the Costco rep is correct......
What I did was.....like sch911 describes.....I bought 2 smart phones on Craigslist.......one was brand new never activated and the other was an assurance replacement for a cracked screen.....in both cases, I met the seller at a local Verizon store and had the Verizon rep check them for functionality and where or not they were stolen or had a prior balance.....buying on Craigslist is not for everyone but for me it worked out fine......