zeljko lukic - mason tenders' district council welfare fund, fall 2011
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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
1
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
Employee Benefits Analysis: Part I, II, and III 2
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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
Employee Benefits Analysis: Part I, II, and III 3
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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
Employee Benefits Analysis: Part I, II, and III 5
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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.
Employee Benefits Analysis: Part I, II, and III 14
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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
Employee Benefits Analysis: Part I, II, and III 15
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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
Employee Benefits Analysis: Part I, II, and III 16
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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
Employee Benefits Analysis: Part I, II, and III 21
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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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