11/01/03 - Rate Increase For 2004 and "Service-Based" Subsidy

To help preserve retiree coverage as a benefit, the Board of Trustees elected to change the way retiree medical coverage is subsidized. As you may know, retiree medical coverage has traditionally been subsidized by working carpenters – sometimes by as much as 50%. Two years ago, the Board directed the plan to cap the subsidy at 25%. This 25% subsidy was provided to all retirees uniformly in each of the past two years. Now, the Board of Trustees is implementing a “service-based” subsidy.

A “service based” subsidy means the actual cost of retiree medical coverage will be reduced by a subsidy that is based not uniformly as in the past but by the total number of hours of covered service you worked under the Carpenters Health and Security Plan of Western Washington prior to your retirement. Reciprocal service and post-retirement service do not count toward this total. Specifically, your monthly contribution rate will equal the actual cost of retiree medical coverage less a “service-based” subsidy of between 0% and 25%, depending on the total number of hours you worked under the Carpenters Health and Security Plan of Western Washington prior to your retirement.

For those of you who are already covered under retiree medical covereage, your subsidy level will be phased in over the next three years. This phase-in period was designed to lessen the financial impact for those of you who will receive less than a 25% subsidy. The chart on page 3 shows the subsidy levels for the next three years for each of six work categories. Again, we will provide you with your total number of hours in the next few days.

As you can see from this chart, all retirees and their families covered under the plan received a 25% subsidy from the plan in 2003 (the subsidy was even higher in previousyears). This subsidy will remain at 25% for those retirees who had 55,000 or more covered hours under this plan during their careers. However, the subsidy will be reduced over the next three years for retirees who had less than 55,000 covered hours.

If you currently have retiree medical coverage, a letter will be mailed to you during the week of November 3, 2003 listing the total number of hours you worked under this plan prior to retirement, your 2004 subsidy level based on those hours of work, and your new monthly contribution rate effective in December 2003 for January 2004 coverage.

The following is an overview of how the new “service-based” subsidy works:

• The eligibility rules for this plan did not change. A retiree must have 7,500 hours (for which employer contributions were received by the Carpenters Health and Security Trust of Western Washington) in the 120 months immediately preceding his or her retirement effective date to be eligible for this plan. However, the total number of hours contributed to this plan during your career as a carpenter will partly determine the monthly contribution rate you and your dependents pay for coverage.
• The new rates are based on the actual cost of retiree coverage less a specific subsidy. The size of the subsidy is based on the number of hours worked under the Carpenters Health and Security Plan prior to retirement (does not include reciprocal service or post-retirement service). The more hours you worked under the plan, the greater your subsidy (0% to 25%). For example, the rate for early retirees in 2004 who receive the full 25% subsidy is calculated as follows:
  
  Actual Cost - Subsidy = Monthly Contribution
  $595.00 x .75 (25% subsidy) = $446.00
  
  Similarly, the rate for early retirees in 2004 who receive the 15% subsidy is calculated as follows:
  $595.00 x .85 (15% subsidy) = $505.00
  
  The new rates for 2004 are presented on page 4.

• For those of you who are already retired or will retire prior to January 1, 2004, the subsidy level will be phased in over three years (2004- 2006). This is to lessen the financial impact for those of you who will receive less than the 25% subsidy. For those of you who retire on or after January 1, 2004, the subsidy level will not be phased in. You will immediately receive the 2006 subsidy level.
• The new “service-based” subsidy levels apply for retirees and dependents. It also applies to early retirees, Medicare-eligible retirees, the prescription drug supplement, and those of you covered by Secure- Horizons.
  
• The new monthly contribution rates will appear on the December 2003 billing or deduction from your retirement benefit for January 2004 coverage.
  
• The trust will review paid claims each year in October. We will then notify you in November of each year of your rate for the following year. This new rate will be effective on the first of the year but will be reflected in your December billing or deduction from your retirement benefit.
  
• For those of you who are still working, your total number of hours under the Carpenters Health and Security Plan of Western Washington will be listed on your Quarterly Benefit Statement beginning with the March 2004 statement. If you are working out of this jurisdiction but contributions are being transferred to this plan under “Money Follows the Carpenter,” these hours will count toward your total. Career hours for Lathers will also count toward this total.

The 2004 monthly contribution rates for those of you who are currently retired are presented below. Remember, you will receive a letter sometime during the first week of November confirming your total number of hours worked under the Carpenters Health and Security Plan and your new monthly contribution rate.