ZELJKO LUKIC - Mason Tenders' District Council Welfare Fund, Fall 2011

MASON TENDERS’DISTRICT COUNCIL TRUST FUNDS

Employee Benefits Analysis: Part I and IIDepartment: Risk management and Insurance

Case Study: Mason Tenders’ District Council Welfare Fund

Document Owner: 912827396

Project: RMI 3501, Fall 2011

Professor: Dr. Drennan

TABLE OF CONTENTS

Employee Benefits Analysis: Part I, II, and III 1

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LOSS EXPOSURE MATRIX ………………………………………………………………….3

PROFILE ……………………………………………………………………………………….4Mason Tenders’ District Council Welfare Fund………………………………………………...4

ELIGIBILITY…………………………………………………………………………………...4Eligibility Requirements for Collectively-Bargained Employees……………………………….4

OVERALL MEDICAL EXPENSES …………………………………………………………...5Managed Choice Plan……...………………………………………………………………….5-7Traditional Choice Plan……………………………………………………………………….7-8

DENTAL CARE BENEFITS ………………………………………………………………….. 7Dental Traditional Choice……………………………………………………………………..7-9Dental Preferred Provider Organization (PPO)……………………………………………….....9

VISION CARE BENEFITS ………………………………………………………………….9-10

DISABILITY……………………………………………………………………………………10Weekly Accidents and Sickness Benefits / Short Term Disability Benefits…………………....10

DEATH ……………………………………………………………………………………...10-11Death and gravesite benefits ………………………………………………………………...10-11

RETIREMENT…………………………………………………………………………………..11Defined Contribution Plan……………………………………………………………….......11-12Defined Benefit Plan…………………………………………………………………………12-13

OTHER EXPOSURES ………………………………………………………………………….13 Legal Services…………………………………………………………………………………..13 Education ……………………………………………………………………………...........13-14Work/Life …………………………………………………………………………………...13-14Vacation ………………………………………………………………………………………...14Apprenticeship Training Program ................................................................................................14


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LOSS EXPOSURE MATRIX

Employee Needs, Goals, or Exposures to Loss

Covered Coverage/Benefits Provided

Medical ExpensesOverall Medical Expenses Yes Aetna Open Access Managed Choice Plan

Aetna Traditional Choice Plan

Dental Yes Aetna Dental Indemnity PlanAetna PPO Dental Plan

Vision Yes Aetna (included in medical plan)Prescription Drug Yes Aetna (included in medical plan)Retiree Health Care Yes Aetna Traditional Choice Plan, Medicare,

COBRADisability LossesNon-occupational Short-term Yes STD, 401 (k) plan, Weekly Accident and

Sickness, OASDI, AD&DNon-occupational Long-term Yes OASDI, Pension, 401 (k)plan, AD&DOccupational Short-term Yes OASDI, AD&D

Worker’s CompensationOccupational Long-term Yes 401(k) , Pension, OASDI, Worker’s

Compensation, AD&DIn Case of DeathNon-Accidental, Non-Occupational Yes Death, 401(k) plan, OASDI, PensionAccidental Death Yes Death, AD&D, 401(K) plan, PensionOccupational Death Yes Death , 401(k) plan, OASDI, Pension,

Worker’s CompensationRetirement Yes 401 (k) plan, Pension, OASDIUnemployment Yes Unemployment insurance under the state of NY

Other Exposures

Legal Expenses Yes Prepaid Immigration Legal Services Educational Assistance Yes Scholarship for Eligible Dependents

Work/Life Yes Alcohol and Drug Assistance ProgramVacation Yes Paid Vacation

Apprenticeship/Training Programs Yes Apprenticeship Program


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PROFILE

Mason Tenders’ District Council Welfare Fund (the “Welfare Fund” or “Fund ”) is a multi-

employer labor-management trust fund established in 1970. The Fund is maintained and operated

according to collective agreements between contributing employers and the Mason Tenders’

District Council of Greater New York on behalf of Local Unions Nos. 78 and 79 of the Laborers

International Union of North America, AFL-CIO. The Welfare Fund covers all eligible members

of Local Unions Nos. 78 and 79. The Fund also covers full-time salaried employees of The

Mason Tenders’ District Council Trust Funds, The Mason Tenders’ Council Fund of Greater

New York, The Local Unions Nos.78and 79 of the Laborers’ International Union of North

America, AFL-CIO, and The New York State Laborers’ Health and Safety Trust Fund who work

in the geographic region of the Mason Tenders’ District Council Welfare Fund.

ELIGIBILITY

Eligibility Requirements for Collectively-Bargained Employees (“Union Members”)

For the medical coverage, eligible employees are defined as employees who worked for

contributing employers at least 400 hours during the prior six-month period ending either on

April 30 or October 31. The coverage continues during the entire six-month period for which an

employee is eligible, even if he or she is no longer actively working. Eligible dependents of

covered employees are also covered by the Welfare Fund. Eligible dependents are defined as a

legal spouse, unmarried children, and unmarried children incapable of self-sustaining

employment because of physical or mental disability. In addition, any stepchildren, foster

children, and children for whom eligible employees assume a legal obligation may also be

covered. Effective January 1, 2008, the Fund has decided to offer coverage for same sex-gender

spouses who are legally married and their eligible dependent children. Also, effective January 1,


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2011, the Welfare Fund offers coverage to employees’ children until they reach age 26

regardless of their martial status, student status, employment status, or financial dependency on

the eligible employees. Under certain conditions, coverage may be extended for qualified

dependents up to age 31.The same eligibility requirements apply to dental, vision, and

prescription plans.

OVERALL MEDICAL EXPENSES

The Welfare Fund offers one of two Aetna USHealthcare plans to its employees, retirees, and

their eligible dependents. Managed Choice Plan is available for an active employee or a retiree

under age 65 who live in an area where a Managed Choice network is available or; Traditional

Choice Plan which is available if there is no Managed Choice network where an active employee

or an eligible retiree age 65 or older lives.

Open Access Managed Choice Plan (POS)

Manage Choice Plan is available for an active employee or a retiree under age 65 who lives in

an area where a Managed Choice network is available, and they meet the eligibility requirements

of the Fund. An eligible employee is the employee who works at least 400 hours for an employer

that contributes to the Fund on the employee behalf pursuant to the terms of a collective

bargaining agreement. An eligible retiree is the retiree who remains a union member and is a

pensioner under the Employee’s Pension Fund and was eligible for benefits from the Fund as an

active employee during at least seven of the last ten calendar years immediately before the

retirement. The plan is administered and maintained by Aetna USHealthcare. Managed Choice

Plan is self-funded and provided to eligible employees on a non-contributory bases. However,

the coverage for eligible retirees (not Medicare eligible) is provided on a contributory bases.

Retirees are required to make additional monthly contributions of $50, 00 per month to the Fund


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in order to receive medical coverage. Recipients of Disability Pensions are not required to make

any contribution to the Fund for their medical coverage. Dependants of eligible employees or

retirees are also covered under the plan. When enrolled in Managed Choice Plan, participants in

the plan select a primary care physician from Managed Choice network directory or participating

physician. However, at the point of service, participants have two choices. They can choose to

see their primary physician and receive in-network care or they can obtain care from the health

care provider of their choice and receive out- of- network care. How much the plan pays depends

on whether participants use in-network or out-of-network care. When participants use in-network

health care services, the plan does not charge deductible and offers life time limit of 2,000,000

per each covered participant. The plan offers 100% coinsurance for networks providers and the

participants are required to pay $20-25copay for certain services. If the care is not available from

network specialist, a primary care physician would refer participants to an out-of-network

specialist. In this case participants would still receive reimbursement based on the in-network

benefits. If participants choose to see an out-of-network provider without referral from primary

care physician, the annual deductible for each covered individual is $200 and $400 for all

covered family combined with annual out-pocket-limit of $1,500 for individual and $3,000 for

family. The plan pays 80% of reasonable and customary charges (UCR) for most out-of-network

covered medical expenses. Prescription drugs are included in the plan.

Prescription Drug Benefits are bundled with the medical plan, so employees are not able to opt

out of the coverage offered. The Plan covers generic and brand-name prescription drugs 100%

after $5 copay for generic drugs and $15 copay per prescription in retail pharmacies. The plan

also offers a mail-order service for maintenance drugs at 100% after $10 copay for generic drugs

and $30 copay for brand name drugs. Drugs received from out-of network providers are


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reimbursed 80% after the deductible. Prescription drugs administered while in the hospital are

covered as hospital expenses.

Traditional Choice Plan

An employee or a retiree age 65 or older can enroll in Traditional Choice Plan if they live

outside of the Aetna USHealthcare Managed Choice Network, and they meet the eligibility

requirements of the Fund. An eligible employee is employee who works at least 400 hours for an

employer that contributes to the Fund on the employee behalf pursuant to the terms of a

collective bargaining agreement. An eligible retiree is retiree who is a pensioner under the

Employee’s Pension Fund and was eligible for benefits from the Fund as an active employee

during at least seven of the last ten calendar years immediately before the retirement. Dependants

of eligible employees or retirees are also covered under the plan as long as they remain eligible

dependents. Traditional Indemnity Plan is administered and maintained by Aetna USHealthcare.

The AM Best rating for Aetna is “A”. The plan is self-funded and provided to eligible employees

on a non-contributory bases. However, the coverage for eligible retirees (Medicare eligible) is

provided on a contributory bases. Retirees are required to make additional monthly contributions

of $25, 00 per month to the Fund in order to receive medical coverage. Recipients of Disability

Pensions are not required to make any contribution to the Fund for their medical coverage. The

Traditional Choice Plan allows eligible participants to select any provider when they need care.

However, participants are required to pre-certify certain kinds of medical care to Aetna

USHealthcare. For instance, participants need to pre-certify any inpatient hospital admission to

receive the highest level of benefits. If they do not pre-certify, their reimbursement will be

reduced by $200 penalty. The maximum amount that the plan pays for covered medical expenses

is $2,000,000 for each covered individual during his or her lifetime. The annual deductible for


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each covered individual is $200 and $400 for all covered family members combined. Once the

annual deductible is met, the plans pays 80% of the reasonable and customary charge for most

covered medical expenses. Each covered individual has a separate out-of pocket limit of $1,500 a

year. The out of pocket limit for all covered family members is $3000 a year. The plan pays

100% of covered expenses (subject to reasonable and customary limits) after the individual or

family out-of-pocket limit is reached. Prescription drugs are included in the plan.

Prescription Drug Benefits are bundled with the medical plan, so employees are not able to opt

out of the coverage offered. The Plan covers generic and brand-name prescription drugs 100%

after $5 copay for generic drugs and $15 copay per prescription dispensed by a licensed

pharmacist. The plan also offers a mail-order service for maintenance drugs and pays 100%

covered expenses after $10 copay for generic drugs and $30 copay for brand name drugs. Drugs

received from a non-preferred pharmacy are reimbursed 80% after the deductible for retail.

Prescription drugs administered while in the hospital are covered as hospital expenses.

Dental Traditional Choice Plan

The Fund offers Dental Traditional Choice mandatory coverage that is self-funded and

administered through Aetna USHealthcare Dental. The plan is non-contributory, and the

eligibility requirements for the dental plan are the same as those for the medical plan. Under the

Fund’s dental plan there is no network of dentists. However, before starting a course of treatment

expected to be $150 or more, a selected dentist must submit anticipated charges and the proposed

course of treatment to be determined by Aetna. The eligible participants and covered dependants

have a $3,000 dental allowance per calendar year, with a deductible of $100 per individual and

$200 per family. In addition, there is a $3,000 Orthodontia benefit per lifetime for each covered

person. Benefits paid by the plan depend on the type of service preformed. For instance, the plan


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pays 100% for preventive services with no deductible, 80% of basic services (root canals,

fillings, non-surgical extractions) after deductible, 50% of major dental services (crowns, inlays,

gold fillings) after deductible, and 80% of the reasonable and customary charges for orthodontic

services with no deductible. Participants are required to pay the dentist for the dental procedure

in full, and than submit a claim form for the reimbursable amount.

Dental Preferred Provider Organization (PPO)

In addition to Dental Traditional Plan, the Fund offers non-mandatory Dental Preferred

Provider Organization coverage that is administered through Aetna’ Dental PPO Network. The

dental plan is non-contributory and the eligibility requirements for the dental plan are the same

as those for the medical plan. If eligible dentist choose a PPO dentist, the dentist’s fees are

subject to discounted network fees and participants do not have to submit a claim form to Aetna

because Aetna will reimburse the dentist directly.

Vision

Under the Fund’s vision coverage plan, eligible employees and retirees can receive a vision

care from any optometrist or ophthalmologist. For each 12-month benefit period, the coverage

pays certain vision services except for lenses for aphakic due to cataract surgery that is covered

under the Medical plans. The vision coverage is available with or without a prescription for new

lenses and/or frames or contact lenses during each twelve- month benefit period. The plan is self-

funded and provided on a non-contributory bases.


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DISABILITY LOSSES

Weekly Accidents and Sickness Benefits / Short Term Disability Benefits

The Weekly Accidents and Sickness Benefits are provided by the Fund on non-contributory

bases for all active employees. Payments are made to employees when they are disabled by a

non-occupational accident or sickness. Payments begin 8th day for accident due to injury or

illness, for a maximum of 26 weeks. The amount of benefits is equal to the New York statutory

benefit (STD) amount of 50% of employee’s average weekly earnings, up to a maximum of $

170 a week. Pregnancy is covered like any other off-the-job illness and paid in accordance with

the above provision and in accordance with New York state laws and regulations. Employees are

eligible for coverage on the date they complete four consecutive weeks of employment

concerning the benefits provided by the Fund. However, under New York State Disability

Benefits Law Section 207, an employee is eligible to receive disability benefits immediately after

the first day of employment.

IN CASE OF DEATH

Death, Accidental Death and Dismemberment (AD&D)

The Fund provides Death benefits on a non-contributory basis to participants who worked 400

hours in covered employment in the prior six-month period (either May 1st-Octobar 31st or

November1st- April 30th). In the event of death from any cause, the eligible participants are

entitled to death benefits equal to $20,000. Furthermore, if death is result of an accident, the

death benefit is increased to $40,000. Also, covered retirees (in good standing) who are receiving

Pension Benefits are also entitled to receive Death Benefits based on their date of birth and date

of initiation. The benefits are self-insured and provided from the Fund’s assets. Through Union

Plus Insurance, employees are offered supplemental Accidental Death and Dismemberment at no


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charge up to $20,000. This AD&D insurance coverage will pay in addition to above mentioned

Death benefits. Union Plus Insurance also offers additional Life and AD&D insurance for

employees (“union members”) at low group rates. Union Plus Insurance is underwritten by

Hartford Life and Accident Insurance Company, which has an AM Best Rating of “A”, or

excellent.

RETIREMENT

Defined Contribution Plan (401 (k))

Employees are automatically eligible to participate in the Defined Contribution Plan if they

work in a job covered by a collective bargaining agreement under which a contributing employer

is required to contribute to the Fund on employees’ behalf. The participation begins as of the first

day on which a contributing employer makes contribution. According to the Fund’s policy,

employees are neither required nor permitted to contribute to the Fund. The amount of benefit to

which participants are entitled depends upon the hourly contribution rate remitted to the Fund on

participants’ behalf by their Employer and the average number of hours participants actually

work per week. The current hourly contribution rate is $5.50 per hour. The value of account for

each participant is always 100% vested. However, there are some limitations on when money

may be withdrawn from the account. For instance, participants may receive payment of 100% of

their account balance when they retire at age 65, or if participants stop working and no

contribution have been made to the Fund on their behalf for at least 12 consecutive months, or if

they become totally and permanently disabled. In addition above mentioned limitations, there are

certain circumstances under which participants are allowed to make withdrawals while still

working.


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Hardship Withdrawals are available to cover the cost of medical and/or dental expenses of $1000

or more, expenses for the cost of COBRA continuation of health coverage, expenses for the

payment of tuition and/or room and board fees for the post secondary education, and other

permitted costs. Two hardship withdrawals are permitted for educational expenses and one

hardship withdrawal for any other reason listed above.

In Service Withdrawals are permitted if participants participated in the Fund for at least five

years. Participants may receive one in-service withdrawal during each calendar year to pay

funeral expenses, private school education for dependant children, special education and

purchase a residence. For all Hardship and In-Service Withdrawals, the amount of a withdrawal

is limited to the amount of the expense plus mandatory Federal income taxes that are required to

be paid on the withdrawal. Employees may elect to have certain types of benefits transferred

directly from the Plan to an IRA or another eligible retirement plan that accepts rollover

distributions.

Defined Benefit Plan (“pension”)

Employees are automatically eligible to participate in the Defined Benefit Plan if they work in

a job covered by a collective bargaining agreement under which a contributing employer is

required to contribute to the Fund on employees’ behalf. The participation begins as of the first

day on which a contributing employer makes contribution. Employees are neither required nor

permitted to contribute to the Fund. The amount of benefits received is based on years of

“Credited Service” and the Accrual Rate” in effect at the date of the retirement. Currently, the

monthly benefit accrual rate per Service Credit is $12.5. Vesting Service used to determine

eligibility for all Plan benefits starting January 1, 1996 is one Service Credit for each 150 hours

of service, up to 10 per year. The Plan allows participants to have certain types of benefits


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transferred directly from the Plan to an IRA or another eligible retirement plan that accepts

rollover distributions.

Disability pension is available to eligible employees at any age if they had at least 8 years of

Vesting Services at the time of disability began or have received a Social Security award letter.

Preretirement Survivor Benefits

The plan also provides survivor income for an eligible spouse if a participant dies before

retirement, but after completing five years of Vesting Services, as long as the participant had

been married throughout the one-year period before the death.

OTHER EXPOSURES

Legal Services

Through NYC Central Labor Council, AFL-CIO in collaboration with The City University of

New York and its Citizen and Immigration project, the Fund provides employees with assistance

and consultation with an immigration attorney on any topic concerning naturalization, certificate

of citizenship, adjustment of status and other immigration related issues.

Educational Assistance

Sponsored by Mason Tenders’ District Council Scholarship Fund, the Fund provides the

children of eligible employees or retirees the scholarship awards of $3000 a year for a maximum

of four years at any accredited four year College or University in the United States. To qualify

for the competition the applicants must be either a dependent child of an employee who has

earned one pension credit in a calendar year 2011 or a dependent child of a retiree who was

receiving a pension from the Pension Fund during 2011. The Scholarship winners are selected

based on a high school academic record, extra-curricular activities, school recommendation and


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test scores. The program is provided on a non-contributory bases for eligible employees and

retirees.

Work/Life

Membership Assistance Program (MAP) is designed to help resolve alcoholic or drug related

problems by providing eligible employees with free voluntary and confidential assistance. The

goal of MAP is to assist employees and their family members in coping with any personal

concerns which negatively affect their health and work place productivity. The program is

provided on non-contributory bases for all eligible employees and their dependants.

Vacation

The Fund provides participants with vacation benefits. Contributions into Vacation Funds

normally represent employer contributions. Contributions are calculated based on a set hourly

rate. Benefits are paid on a predetermined schedule, usually annually. The participants receive an

amount equal to the contributions paid on their behalf during the period.

Apprenticeship Training Program

Apprentice Training Program offer specialized training to current participants of a trade and

unskilled future participants who want to learn the trade. Training Fund is funded by employers'

contributions based on set hourly contributions for work performed by current participants.

Apprentices do not pay for their training.


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MASON TENDERS’DISTRICT COUNCIL TRUST FUNDS

Employee Benefits Analysis: Part IIIDepartment: Risk management and Insurance

Case Study: Mason Tenders’ District Council Welfare Fund

Document Owner: 912827396

Project: RMI 3501, Fall 2011

Professor: Dr. Drennan


15

TABLE OF CONTENTS

Introduction ………………………………………………………………………………….1-2

Overall Design Considerations in Employee Benefits………………………………………..2-3

Issues, Concerns, and Considerations in the Design of Health Benefits……………………..2-3

Aetna Manage Choice Open Access Plan………………………………………………….....3-4

Aetna Tradition Choice Plan………………………………………………………………….4-5

The Early Retiree Reinsurance Program (ERRP)………………………………………………5

Dental Traditional Plan vs. Passive Dental PPO……………………………………………….5

The Patient Protection and Affordable Care Act (ACA) ………………………………………6

ERISA ………………………………………………………………………………………..6-7

COBRA ………………………………………………………………………………………...7

Issues, Concerns, and Consideration in the Design of Other Non-Retirement Benefits ……….7

Administration/Communication………………………………………………………………7-8

Education/Training ............................................................................................................…...8-9

Recommendations………………………………………………………………………………9

Conclusion …………………………………………………………………………………..9-10


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Mason Tenders’ District Council Welfare Fund (the “Welfare Fund” or “Fund”)

Introduction

The Fund is a multi-employer labor-management trust fund located in New York City, NY.

The purpose of the Fund is to provide health and welfare benefits to eligible employees on whose

behalf employers contribute to the Fund in accordance with the terms of a collective bargaining

agreement (CBA) between the employers and the employees' union. The Fund was established in

1970. The Fund is maintained and operated according to collective agreements between

contributing employers and the Mason Tenders’ District Council of Greater New York on behalf

of Local Unions Nos. 78 and 79 of the Laborers International Union of North America, AFL-

CIO. The Mason Tenders’ District Council Welfare Fund is maintained and administered by a

Joint Board of Trustees consisting of equal numbers of Union Trustees and Employer Trustees.

Throughout this project, David Bugler helped me gather information and analyze the Welfare

Fund’ current benefits. David Bugler is a duly authorized designee who has the exclusive right

and power to interpret the terms of the plan and decide all matters arising under the plan.

Overall Design Considerations in Employee Benefits

The Welfare Fund is funded by contributions by employers that are signatory to the CBS and

income from investment of the plan’s assets. The Fund utilizes 501(c) (9) as their funding

vehicle. Employees are automatically eligible to participate in the plan if they work in a job

covered by a collective bargaining agreement under which a contributing employer is required to


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contribute to the Fund on employees’ behalf. The contribution is based on a measure of the

covered employees work. The contribution rate for all employees at a given benefit level is the

same. The employees are neither required nor permitted to contribute to the fund. Most

employees of the Mason Tenders District Council do physically demanding work. They work

outdoors in all weather conditions. Jobs like the removal of hazardous materials may expose

workers to harmful fumes, odors and chemicals. Construction workers also operate a variety of

equipment, dig trenches and place concrete and asphalt on roads. Workers in the construction

industry experience the highest rate of nonfatal injuries and illnesses. Keeping all of these factors

in mind, the Board of Trustees designed a healthcare plan that provides their employees with an

excellent package of benefits. Due to a high rate of nonfatal injuries and illnesses, the Fund

chose to offer Life, AD&D, and disability benefits. By providing them on non-contributory

basis, the board of trustees ensured that employees are provided with the necessary benefits.

Issues, Concerns, and Considerations in the Design of Health Benefits

For many years, the Fund has provided financial protection to its employees by providing

them with quality health and welfare benefits. Over the years whenever possible, the Fund has

improved and upgraded those benefits. However, in recent years health care costs have increased

at an extraordinary rate (between 9% and 14%). In addition to increased health care costs, the

Fund has been faced with reduction in the number of hours worked by eligible participants, as

well as a weak economy and poor financial market performance, which resulted in the Fund’s


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assets earning less income. This has created challenges for the trustees with respect to volatility

of funding. Because of these changes, the Fund has been forced to make some benefits changes

to ensure good coverage and continue benefits to the Fund’s participants and their families. For

the Fund, this has been handled by a combination of strategies designed to hold down costs,

including discounted networks, care and utilization management, disease management and

wellness programs

Aetna Manage Choice Open Access Plan

In an attempt to control and manage high healthcare costs, the Fund medical plan expended to

include Manage Choice Plan (POS) and manage care networks. However, the anticipation of

higher healthcare costs has led to an increase in physician co-payments when participants and

their dependents visit a participating network physician under Aetna Managed Choice Plan. In

addition, participants are required to pay 10% of the hospital costs, up to a maximum of $1000

per person per calendar year. David says that the Fund has regretted having to make these benefit

changes, and he’s hoped that these changes would be sufficient to stabilize the financial status of

the Fund. The Fund managed to save 10% and allocate the savings to be used toward the cost of

providing comprehensive health care benefits and improve overall benefits package.

Aetna Tradition Choice Plan

In addition to inflation and rising health care costs, increased longevity has substantially

increased the pool of retirees receiving health benefits leaving the Fund with higher retiree- to-


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active workers ratio (2 to 1). As a result of these changes, the Fund has been forced to make

some changes to retiree health care coverage. The eligibility requirements for retiree medical

coverage under Traditional Choice Plan have been reviewed and revised. The Fund has decided

to increase the period in which the retiree must have had active coverage. In addition, retirees are

required to make defined monthly contributions to the Fund in order to receive medical

coverage. In an attempt to control the cost of health care, David says that these two benefit

changes have been made to help protect the long-term financial soundness of the Fund. He states

that on average, the cost of health care for retirees (over age 65) was almost three times more

than for someone under 65.

The Early Retiree Reinsurance Program (ERRP)

Established by section 1102 of the Affordable Care Act enacted in 2010, ERRP has enabled

the Fund’s Board of Trustees to use reimbursements received from the program to offset

participants’ out-of pocket costs (contributions, co-payments, deductibles). David states that the

board of trustees also uses the Program reimbursements to reduce increases in the Fund’s own

costs for maintaining health benefits coverage. The Fund has also redesigned retiree prescription

drug coverage to take advantage of drug manufacturers’ discount on brand-name drugs filled in

Medicare.

Dental Traditional Plan vs. Passive Dental PPO


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The recent addition of a Passive Dental PPO Plan through Aetna has attracted a significant

number of participants. Since the network of participating dentists is convenient for most of the

eligible employees, the addition of the plan has turned out to be successful. The fund is able to

provide the same coverage at the lower price and manage the loss more efficiently. The Passive

Preferred Provider Organization (PPO) has been added to the Fund’s dental coverage as a

respond to an increase in utilization of dental care under Dental Traditional Plan which resulted

in an increase in a deductible to all eligible employees and retirees.

The Patient Protection and Affordable Care Act (ACA)

Issues, Concerns, and Considerations

Asked about the Reform Act’s requirements, David says that beyond structural and economic

issues mentioned above, the biggest impact will be the regulatory environment. The key issues

concerning the status of the Welfare Fund plan (grandfathered plan) and effective dates are very

ambiguous. He says that the Fund may be able to avoid a number of possible applications and

rules and other required changes like delayed effective dates until the expiration of the last

collective bargaining agreement. One of the rules under the ACA is that the Fund is required to

provide eligible employees with a variety of preventive services without cost sharing when those

services are obtained from a network provider. Making necessary plan changes to annual and

lifetime limits, and adding adult children to age 26 will add additional costs to the plan that was

already struggling in the current economic environment. Also, the added coverage requirements

of the ACA are expected to increase the Fund’s stop-loss insurance coverage. He mentions that

the Fund has received a waiver extension form concerning the ACA’s rules on restricted annual


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dollar limits until 2013. In addition, the Fund is also excluded from reporting the cost of

coverage on participants’ form W-2s until 2013. Creation of the state-based exchanges and the

so-called “free rider penalty” further complicates ability to predict how the Fund will respond to

these changes. In addition, the Fund is also required to revise their internal appeals process and

adopt a new external appeals procedure.

ERISA

The trustees are bound by strict fiduciary rules of integrity and performance and are required

by both ERISA and the Taft-Hartley Act to act solely in the interest of plan participants. David

says that The Fund management is a serious responsibility, since vast sums of money may be

involved and benefits of thousands of people are at stake. Although the trustees may delegate

certain of their duties and functions, including management of plan funds, they bear ultimate

responsibility for all actions taken in their names.

COBRA

In order to comply with the Temporary Extension Act, the Fund extended the COBRA

coverage to those who were voluntary terminated from employment. The Fund also created a

new election period that applied to individuals who experienced a reduction in hours with a

subsequent involuntary termination of employment, and who did not make a COBRA election

based on the reduction in hours. David states that the board of trustees immediately reviewed the

new law to determine their obligation and avoid possible penalties. To avoid future implication


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and stay informed about further developments, the trustees rely on their legal counsel for

authoritative advice on the interpretation of the new law extending The COBRA premium

subsidy.

Issues, Concerns, and Consideration in the Design of Other Non-Retirement Benefits

Administration/Communication

In response to New York State law that permits same-gender couples to marry, the Fund has

decided to extend health care coverage under the Fund to same-gender spouses who are legally

married and their eligible dependent children. The fair market of health coverage is included in

the employee’s gross income and is taxable federally to the spouse –employee who receives the

benefits from the Fund. To determine if income needs to be imputed for purpose of state income

tax laws poses additional issues in complying with state laws. The New York State exempts

same-gender couples from New York taxes (state or city) on the value of health care coverage

provided to them even if included in taxable wages for federal income tax purposes. David states

that this change has increased administrative cost associated with enrolment process, a Form W-

2, communication materials and documentary evidence required to demonstrate a valid marriage,

including fees for attorneys for authoritative advice and interpretation of laws. With health care

reform’s requirements to cover adult children, the Fund has started examining their eligibility

provisions much more closely and performing eligibility audits to assure that only valid

dependants are covered.

In order to communicate the benefits and changes about the plan, the Fund implemented several

communication techniques. To reduce paper-based process of distributing SPDs, the Fund


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empowered their employees with Web-based self-service applications. Under the PPACA new

reporting requirements, the Fund submits to their employees additional reports, including their

claims, coverage history, plan administration and other COBRA, ERISA, and HIPAA required

documents.

Education/Training

One key consideration that the Board of the Trustees has taken into account is offering

mandatory Apprenticeship Training Program. Due to the high frequency of job-related injuries

combined with high severity, the Board has received some complains from contributing

employers regarding unskilled labor force. New employees are required to complete between 2

and 4 years of classroom and on-the job training. Apprenticeship programs are provided at no

cost for the employees.

Recommendations

“One size fits all” is a major obstacle in attracting highly skilled talent. In order to compete

with private-sector employers, the Fund needs to become more flexible and creative in designing

employee benefits. Large-scale changes and new laws demand effective and planned training for

the Fund administration to manage new programs effectively. In addition to implemented

methods of communication, using customized employee surveys can help determine benefits that

employees truly value. This can help in designing benefits package that fits employees’ needs

while remaining cost-effective. Creating a website to educate participants about their benefits


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and reduce individual information requests would improve efficiency and cost-effectiveness of

their benefits administration functions.

Conclusion

In the past two years, The Mason Tenders’ District Council Welfare Fund is being challenged by

the recent legislation and the difficult economic environment. However, the Fund’s long history

and a decade of long proven record of accomplishment of adapting successfully to a variety of

economic and political environment are likely to be continued in coming years. The Fund will

still play an important role in providing health and welfare benefits for their workers, retirees,

and dependents.


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Works Cited

www.ambest.com


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Documents

ZELJKO LUKIC - Mason Tenders' District Council Welfare Fund, Fall 2011