From the State of Iowa

Had a few thoughts I wanted to share concerning the sad state of the MEBA Medical Plan and am requesting Walter Fletcher to, go ahead and put them on the "Geezer Group"and Mrad Blog web site under my name and if anyone wants to communicate with me personally, have them post their comments along with their email address and I will gladly respond to any and all comments received.



Because of a recent family crisis I have not had a chance to write to the Department of Labor, but I am not complacent and DO NOT expect anyone else to "take care of me!" Because I live in the upper Midwest, it is difficult and also cost prohibitive for me to attend monthly union meetings or even the annual MEBA Christmas party, but if there's anything I can do to contribute to the cause - just let me know!
Like it or not, ALL active members will eventually face the day when it becomes more and more difficult to traverse steep engine room ladders, it becomes harder and harder to get out of bed and report forwatch as working odd hours both day and night starts taking its toll, or they will simply decide they are tired of going to sea and put in for retirement. Figures published in the latest annual report from headquarters indicate employer contribution rates are not keeping up with inflation, the MEBA Medical Plan is rapidly losing funding and by now anyone who hasn't spent the past several years living under a flatrock or on some remote desert island should realize that the MEBA Medical Plan is in SERIOUS trouble and given the present circumstances, simply cannot nor will not last forever; even the most uninformed members must understand that if the union is allowed to sell off all of it's assets and spend the money for medical benefits, legal fees, or whatever, and distribution rates continue to exceed annual income,eventually there will be nothing left. There were many worthy suggestions for maintaining the solvency of the MEBA Medical Plan posted on the "Geezer Group" web site in the past few weeks; however, it doesn't seem like most of our information is reaching the active membership; Internet postings are an excellent means of communication but as suggested in a recently posted Telex Times article, a serious marketing campaign to distribute what most of us consider is relevant information pertaining to retirement issues is needed.
Slick publications gracing the coffee tables in all our union halls have already convinced most of the active members that if they "just keep going to sea, don't worry about a thing, pay their dues and keep their mouth shut, they will be taken care of" - unfortunately, as many retirees have recently discovered, that's not always the case. Why not publish our own information and tell "the rest of the story?" If everyone on the "Geezer" list contributed to the cause, we could afford to publish and distribute a two to four page pamphlet outlining retiree grievances and what we believe are viable solutions to the Medical Plan dilemma - we need to win over as many of the active members as possible- after all, they are the ones who will be working under future contracts and voting in upcoming elections. If the MEBA continues to maintain the status quo and we can convince active members to visualize what may become of them after they finally decide to "pull the plug," they might actually start asking their elected officials serious questions about the future of the MEBA Medical Plan and introduce resolutions for change at upcoming union meetings. Maybe it's also time for those of us who graduated from the "holy of holies" to close ranks, join the Calhoon Alumni Association, and make plans to attend the annual crab fest/beer bash and fortieth reunion at Easton this summer; we wouldn't necessarily have to ruin the festivities by picketing the event, but we could sow a few seeds of discontent among fellow alumni who are still active members by distributing information and openly discussing what we consider to be the abysmal treatment of retirees by the MEBA. We have only a few months to get organized - do you think any of our fellow Calhoon alumni would be interested?
Stuart Mackey
Book #M 8809
Retired 4/1/96

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MEBA versus Medical Costs: Clash of the Titans

For the year 2004, last year final numbers are available, growth in drug sales was 8.2%, growth in payments to physicians rose 9%, and hospital spending grew 8.6%.
These numbers reflect a steady trend since 2000.
What does this mean to the MEBA Medical Plan?
It means the end of the MEBA Medical Plan as we know it is close at hand!!!


A little history is in order.
In 2001 the Plan ended the year with a surplus of 42.8 million dollars as compared to the estimated surplus for 2005, as quoted in the MEBA Benefit Watch Publication, of 32.5 million dollars. This is 10.3 million over 4 years or 2.58 million a year loss. But hold on to your hats folks because you have to factor in the 7.5 million that was transferred from the Reallocatable Fund in 2003 and 2004. The actual reserve for the Plan at the end of 2005 should be 25 million for a 17.8 million loss from 2001 through 2005 at 4.45 million a year, if you factor out the 7.5 million transfered from the Training Fund. That's an 11% per year loss in Plan reserves that the Davis administration covered up by the transfer of the 7.5 Million dollars. Since both the Training and Medical Plans are defined contribution Plans this is perfectly legal according to ERISA laws.
The Medical Plan has basically three components.
1. Revenue from contributions, either by contract or retiree assesment.
2. Revenue from assets stocks, bonds, funds, etc.
3. Expenses. Payments to Plan participants, insurance providers, and administration costs.
Current revenue for the year 2005 is estimated to be 23 million from contract companies and from retirees at 4.4 million. Add in 5.1 million in securities and we have our reserve of 32.5 million. Now expenses for 2005 were 23.9 million estimated payment to active members and 16.8 million to retirees for a total of 40.7 million as compared to 25 million in 2001. That is a 12% per year increase in medical expenses paid out by the Medical Plan between 2001 and 2005. These numbers are important because they are going up at a rate of 8% per year nationwide yet at a rate of 12% in the MEBA Plan. Why are our Plan costs so high? The responsibility for this falls squarely on the shoulders of the Plan Administrator and Plan Trustees.
Fast forward to the year 2010.
Employer contributions are now up to 29.67 million based on the DoL Medical component for COLA that is built into current contracts that triggers every January 1st. This has averaged 4.4% since the year 2000. The retiree contribution is now a fixed 9.2 million based on Plan changes that became fully in effect 2-1-2006. Now really hold on to your hats. The 23.9 million payed to active member claims in 2005 has now reached 35.12 million while the 16.8 paid to retirees is now 24.68 million using the current inflation rate of 8% in Medical expenses nation wide compounded from 2005 to 2010. If we were to use the actual MEBA inflationrate of 12% you would not only have to hold onto your hat but tighten the screws that hold your head on too.
So we have revenue of 38.87 million and expenses of 59.80 million dollars in payments for 2010.
But what about the reserve of 32.5 million in 2005. Well that has slowly decreased over the 5 years of this example so that by the end of 2010 we are looking at a 2 million reserve in the Plan. (This should be -5.5 million. Remember the 7.5 transfered from the Reallocable Fund)
This does not factor in the administration cost 17.5 million from 2005 to 2010, payments made to providers and other carriers or the value of Plan stocks and funds. So the actual deficit could be worse but for the purpose of this exercise we intentionally left those figures out just to show the basic change in contributions versus expense and it's effect on Plan reserves. That reserve has decreased and gone into the red because Plan assets are going out at an inflation rate of 8% per year in this example while income is only coming in at a COLA increase of 4.4% a year.
I am sure Davis, AON Consulting, Bob Leef, Lucille Hart, and Allen Szymczak can provide the Trustees with a more detailed and acurate accounting projection then what I have presented here.
Their comments of "catostropic failure and bankruptcy" are still prophetic.
The assertations by Union Representatives that the recently enacted changes to the Medical Plan, that took full effect 2-1-2006 will provide a strong and stable Plan well into the future are preposterious.
In fact they knew in 2004 that the increases enacted in 2003 were insufficient but instead of acting then they transfered 7.5 million in order to artificially inflate the Plan to help insure their reelection.
The future ends in 2010!

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AMO v MEBA

What are the implications of the AMO lawsuit against the MEBA? What if AMO should win?

The Davis Administration would no doubt like the ordinary MEBA Members and Retirees to believe that an AMO win of the lawsuit against the MEBA is well beyond the realm of the remotest possibility.



And indeed if the January 20, 2005 Telex Times is to be believed then, why not? But the important bits that were left out of the TT were the 2 lawsuits that AMO won. It is with this evidence, which has withstood the previous legal tests that the AMO will march into Court.

For MEBA Members to rule out an AMO win is probably not wise.

So let’s look at the liability that the MEBA has in real terms:

First of all, there’s a loss of wages to the Members who crossed over from AMO to the MEBA. Is the MEBA liable? Well, probably not as these people could have all left Interlake in order to stay with AMO. But then those who did leave their jobs, were compensated under the Arbitration which was a result of the AMO win against Interlake.

Then there’s the question of lost dues to AMO. This would be the higher of whatever the AMO dues were or MEBA dues are, minus the cost of representation. Since AMO did and still does have the infrastructure in place to represent these Members, it might have been less costly for AMO to represent the Interlake Members than the MEBA. It is likely that the AMO would be entitled to compensation of the difference between the dues revenue and the incremental representation cost.

Then we get to the Plans.

As far as the Medical Plan goes, AMO lost Employer contributions but at the same time reduced its liabilities. Just what this difference amounts to would have to be determined.

Then there are Employer and Employee contributions to Training and various Pension plans. Again the difference between reductions in contributions against reduced future liabilities would have to be taken into account.

Then there are the legal fees that AMO wishes to recover. Would these include the entire amount AMO has expended in its effort to make good the loss of the Interlake contract?

Presumably the AMO is interested in obtaining these losses for the length of the Interlake-MEBA Contract or ten years. In its article in the Jan 20, 2005 AMO mentions a figure of $60 million, to be followed up by punitive damages. This is probably one of those “lawsuit demands”
In reality it approximates the total value of the contract including pay to Members. Clearly the AMO would not be entitled to that.

But then again, we have to consider that AMO in its lawsuit against Jerry Joseph established a value on its trade secrets. $8 million. Were these secrets really that valuable or even unique? What AMO does is essentially the same as the MEBA. How many different ways are there to run a Maritime Union?

By establishing that the knowledge of one man was worth $8 million, it may be possible to extrapolate that the loss of 100 members for a period of ten years is worth $60 million.

Then all that remains is to hash over the methodology followed by Davis in obtaining the Interlake contract for the punitive award.

So in the worst case how will the MEBA pay for this?

The MEBA Medical Regulations contain provisions that outline the powers given to the Trustees to modify the Plan. (Article 19).

The MEBA Pension regulations have a similar provision.

From the MEBA Pension Regulations (Page 63):

“11.02 Amendment

The Trustees are authorized, in their sole and absolute discretion, to amend or modify these Regulations by resolution duly adopted at any time in accordance with the Trust Agreement, including, but not limited to, any change in benefit amount, types of benefit, and conditions of eligibility and payment. No amendment or modification may reduce any benefits rights or reduce any early retirement benefit or retirement type subsidy or eliminate an optional method of benefit payment with respect to benefits which have accrued prior to amendment, so long as Plan assets are available for payment of such benefits.”

The rules are more limiting than the Medical Plan, but none the less allow benefits to be reduced. That means that a lawsuit settlement against the Pension Plan of a sufficient size could have the effect of reducing pensions. If the funding level were to drop below "fully funded" as a result of a lawsuit payout in the case of the AMO suit were to trigger mandatory employer contributions, the Trustees might act to reduce pension benefits forward.

Perhaps even something like this: prior to (date) pension benefits will accrue at 2-2/3 percent per year, afterwards 1 percent.

The effect of reducing pensions from the date forward would bring the Plan to "fully funded" status without employer contributions.

Members who still hope to obtain their pension may wish to consider such an eventuality.

But there is a way to get AMO to drop the lawsuit.

But then we would have to ask the question: “What’s more important to Davis, his ego or your pension?”

And what would happen to the MEBA-Interlake relationship as a result of an AMO win or withdrawal?

In the end, the biggest effect of this lawsuit could be that if AMO wins, AMO will be able dictate the terms of a merger with MEBA.

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