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MASON TENDERSDISTRICT COUNCIL TRUST FUNDS

Employee Benefits Analysis: Part I and II

Department: Risk management and Insurance Case Study: Mason Tenders District Council Welfare Fund Document Owner: 912827396 Project: RMI 3501, Fall 2011 Professor: Dr. Drennan

Employee Benefits Analysis: Part I, II, and III

2 TABLE OF CONTENTS LOSS EXPOSURE MATRIX .3 PROFILE .4 Mason Tenders District Council Welfare Fund...4 ELIGIBILITY...4 Eligibility Requirements for Collectively-Bargained Employees.4 OVERALL MEDICAL EXPENSES ...5 Managed Choice Plan....5-7 Traditional Choice Plan.7-8 DENTAL CARE BENEFITS .. 7 Dental Traditional Choice..7-9 Dental Preferred Provider Organization (PPO).....9 VISION CARE BENEFITS .9-10 DISABILITY10 Weekly Accidents and Sickness Benefits / Short Term Disability Benefits....10 DEATH ...10-11 Death and gravesite benefits ...10-11 RETIREMENT..11 Defined Contribution Plan.......11-12 Defined Benefit Plan12-13 OTHER EXPOSURES .13 Legal Services..13 Education ...........13-14 Work/Life ...13-14 Vacation ...14 Apprenticeship Training Program ................................................................................................14

Employee Benefits Analysis: Part I, II, and III

LOSS EXPOSURE MATRIX

Employee Needs, Goals, or Exposures to Loss Medical Expenses Overall Medical Expenses Dental Vision Prescription Drug Retiree Health Care Disability Losses Non-occupational Short-term Non-occupational Long-term Occupational Short-term Occupational Long-term In Case of Death Non-Accidental, Non-Occupational Accidental Death Occupational Death Retirement Unemployment Other Exposures Legal Expenses Educational Assistance Work/Life Vacation Apprenticeship/Training Programs Yes Yes Yes Yes Yes Prepaid Immigration Legal Services Scholarship for Eligible Dependents Alcohol and Drug Assistance Program Paid Vacation Apprenticeship Program Covered Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Coverage/Benefits Provided Aetna Open Access Managed Choice Plan Aetna Traditional Choice Plan Aetna Dental Indemnity Plan Aetna PPO Dental Plan Aetna (included in medical plan) Aetna (included in medical plan) Aetna Traditional Choice Plan, Medicare, COBRA STD, 401 (k) plan, Weekly Accident and Sickness, OASDI, AD&D OASDI, Pension, 401 (k)plan, AD&D OASDI, AD&D Workers Compensation 401(k) , Pension, OASDI, Workers Compensation, AD&D Death, 401(k) plan, OASDI, Pension Death, AD&D, 401(K) plan, Pension Death , 401(k) plan, OASDI, Pension, Workers Compensation 401 (k) plan, Pension, OASDI Unemployment insurance under the state of NY

Employee Benefits Analysis: Part I, II, and III

PROFILE Mason Tenders District Council Welfare Fund (the Welfare Fund or Fund) is a multiemployer 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, AFLCIO, 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, 2011, the Welfare Fund offers

Employee Benefits Analysis: Part I, II, and III

5 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 Employees 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 in order to receive medical coverage. Recipients of Disability Pensions are not required to make any contribution to the Fund

Employee Benefits Analysis: Part I, II, and III

6 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 innetwork 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 $2025copay 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 outof-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 reimbursed 80% after the deductible. Prescription drugs administered while in the hospital are covered as hospital expenses.

Employee Benefits Analysis: Part I, II, and III

7 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 Employees 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 noncontributory 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 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

Employee Benefits Analysis: Part I, II, and III

8 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 nonpreferred 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 Funds 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 pays 100% for preventive services with no deductible, 80% of basic services (root canals, fillings, nonsurgical extractions) after deductible, 50% of major dental services (crowns, inlays, gold fillings)

Employee Benefits Analysis: Part I, II, and III

9 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 dentists 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 Funds 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.

DISABILITY LOSSES Weekly Accidents and Sickness Benefits / Short Term Disability Benefits

Employee Benefits Analysis: Part I, II, and III

10 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 nonoccupational 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 employees 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 Funds assets. Through Union Plus Insurance, employees are offered supplemental Accidental Death and Dismemberment at no 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

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11 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 Funds 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. 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.

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12 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 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

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13 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 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

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14 which negatively affect their health and work place productivity. The program is provided on noncontributory 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.

MASON TENDERSDISTRICT COUNCIL TRUST FUNDS

Employee Benefits Analysis: Part III

Department: Risk management and Insurance Case Study: Mason Tenders District Council Welfare Fund Document Owner: 912827396 Employee Benefits Analysis: Part I, II, and III 14

15 Project: RMI 3501, Fall 2011 Professor: Dr. Drennan

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

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16 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/Communication7-8 Education/Training ...............................................................................................................8-9 Recommendations9 Conclusion ..9-10

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

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17 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 plans 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

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

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18 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 Funds 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 Funds 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

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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 hes 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- toactive 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

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20 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 Funds 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 Funds 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

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 Funds 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.

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The Patient Protection and Affordable Care Act (ACA)

Issues, Concerns, and Considerations Asked about the Reform Acts 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 Funds stop-loss insurance coverage. He mentions that the Fund has received a waiver extension form concerning the ACAs rules on restricted annual 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

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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 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

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23 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 employees 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 samegender 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 reforms 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 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

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24 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 and reduce individual information requests would improve efficiency and cost-effectiveness of their benefits administration functions.

Conclusion

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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 Funds 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.

Works Cited www.ambest.com

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