Davis 2-06-2006 Memorandum

MEMORANDUM

To: ALL MEMBERS

From: Ron Davis, MEBA President

Date: February 6, 2006

Subject: MEDICAL PLAN CHANGES DISCUSSION

At the October 2005 Trustee meeting significant changes were made to the Medical Plan. The Board of Trustees faced very painful choices as we worked to fulfill our obligation to the participants and ensure the Plan’s future, Each of the twelve Trustees had a different opinion about the recommended changes presented by the Plan’s consultant and which changes to make.



Much discussion took place because of these differences. This discussion followed prior meetings in which the Trustees were not able to reach an agreement on any changes. Without agreement, action at earlier Trustee Meetings was not possible. According to the Medical Consultant’s projections presented at the October meeting, the Medical Plan had reached a critical stage and for the first time the Trustees were told that the Medical Plan could face bankruptcy in just a few short years due to the projected escalating costs of medical despite the fact that the employers are now contributing more than $26 million per year. A compromise among the Trustees was finally reached. None of the Trustees are totally satisfied with the ultimate compromise that was reached and each would have made different choices if they could have acted alone. I can assure you that extensive research, thought and discussion were undertaken before these changes were made. The Union Trustees especially recognize the hardship placed on the retirees and are trying hard to find a better solution that will be agreeable to the Employer Trustees. These changes have created a tremendous hardship on many retirees.

Specifically, raising the non~ Medicare eligible retirees (under age 65 with dependants to $700/month has been particularly devastating for many retirees as this can represent more than 25% of their pension.

At this juncture, and before the Trustee Meetings that will take place later this month, I am asking the membership to assist us and provide feedback on the following:

If the retiree dependant coverage was lowered to $450/month, the medical plan would need to make up that money in some manner. (Approximately $1.6 million per year)

There are numerous ways to accomplish this such as
• Reducing benefits for retirees;
• Reducing benefits for retirees and active members;
• Having a monthly contribution from all active participants of the medical plan;
• Having a monthly contribution from all active participants with dependants of the medical plan;

If active member participants were to subsidize this retiree cost there are several ways to do this such as:

• if we were to charge all active participants of the Medical Plan a percentage of their base salary it would be approximately 1.1 %
• If we were to charge only active participants with dependants in the Medical Plan it would be approximately:
o Single members participating in the MEBA Medical Plan $0
o Active Members with one dependant $60/month
o Active Members with more than one dependant $120/month

We as a Union brotherhood have come to a time of reckoning. A look back in history will remind us that many of today’s Retirees were the ones who chose to give up personal raises as Active Members, agreeing that this money instead go into the Pension Plan. Those of us who follow in their footsteps now reap the benefits of these sacrifices. As you know, the Pension Plan has been fully funded since 1986, and no Employer contributions into the Pension Plan have been required since that time, instead, such, amounts have been channeled into better wages and increased MPB contributions. It is now time to decide if we, the Active membership, are willing to make a small sacrifice and help our MEBA Retirees maintain a level of medical benefits at a more modest cost.

The Union Trustees are evaluating these options and there is no certainty that any additional changes will he made to the Medical Plan at the February Trustee Meeting. Much will depend on the Employer Trustees. I, however, would appreciate any and all feedback from the membership on the above possibilities. Written comments, ideas or suggestions should be sent to Allen Szymczak at the Plans office in Baltimore,

I ask the chairman of the meetings to now open the floor for discussion on this matter and please provide me feedback on the result of these discussions.