Benefit Funds News

A publication of the New York City District Council of Carpenters Benefit Funds
Fall 2011 Message from the Executive Director
Welcome to the inaugural issue of Benefit Funds News. It is a privilege to take this opportunity to introduce myself as the new Executive Director of the Benefit Funds. I came on board on July 1, 2011, and I have spent the last few months getting familiar with all of the Funds operations and working with the Boards of Trustees and the Fund Office staff to institute various changes. Our goal is to improve all facets of the Funds operations so that the Fund Office can best serve you and your families. Although I am new to the Carpenters Funds, I am not new to employee benefits or to Taft-Hartley benefit funds. In fact, I have spent the last 35 years working in the employee benefits field. I began my career in employee benefits at George Buck in 1977 in New York. I then spent 10 years first as the Assistant Administrator and later as the Administrator of the ACTWU Health Plan and 14 years as the Director of Employee Benefits at the National Railway Labor Conference in Washington, DC, three years as the Benefits Director for the State of Maryland, and, most recently, I served as the Fund Director at Painters District Council #30 in Illinois. In addition, I am originally a New Yorker and my family and I are delighted to be home again. The Boards of Trustees are launching this newsletter to communicate with you and your families about your welfare, pension, vacation and scholarship benefits. As we explore ways to provide you and your families with the highest level of service, please feel free to let us know your suggestions on how to accomplish this goal. You can contact us at suggest@nyccbf.org. Our doors are open and we want to hear from you. There have been several changes among the staff as we strive to improve for your benefit. You can see the bios of some of the new employees on page 2 of this newsletter. In addition, this newsletter covers the Dependent Audit, changes to the Medicare-Eligible Retiree Prescription coverage and the Carpenters Assistance Program (CAP). It is our goal to keep you and your family informed of all the happenings at the Funds and all issues regarding your benefits. To that end, we are working on improving the Funds website, https://www.nyccbf.com. In addition, we plan to issue this newsletter two times a year. We welcome any suggestions you have on topics that you would like to see covered in an upcoming newsletter. We greatly value your participation in the Funds and we are here to serve you. On behalf of the Board of Trustees and the Fund Office staff, we wish you and your families a joyous holiday season. Best wishes, Joseph Epstein Executive Director

Staff Changes
Three individuals have recently joined the senior management team of the Benefit Funds. They are Ralph Chetcuti as the Human Resources Director, Jennifer Gordon as Project Manager and Laura Kalick as the Benefits Director. They each have extensive experience in their respective areas of responsibility. Ralph has been involved in human resources, benefits and labor relations for a number of years. He has served as a Trustee on several Taft-Hartley plans. Ralph held several different positions while working at The New York Times. He has also worked at The New York Racing Association, HOP Energy and Newmark Knight Frank. Jennifer Gordon, as Project Manager, will be responsible for the overall direction, testing and implementation of a new benefits administration system. Prior to joining us, she worked for the TeraThink Corporation, where she managed a large modernization program for the Department of Defense in Washington, DC. Laura Kalick has considerable experience in benefits and benefits administration. She will oversee the dayto-day operation of the Funds Office. She has held similar positions with the Summit Medical Group, Verizon and Ingersoll-Rand. Also, Luke Powers was recently promoted to the new position of Director of Contractor Accounting. In this role, Luke will be responsible for overseeing audits, evaluating discrepancies, collections and arbitrations.

Are Your Dependents Eligible?

The Trustees of the Welfare Fund strive to provide the highest quality benefits for you and your family while protecting the long-term financial health of the Welfare Fund. To that end, the Trustees authorized a project to make sure that only eligible individuals are enrolled in our health plans. A program to verify eligibility for all enrolled dependents began in August and is scheduled to end in November. By now, you should have provided documentation of your dependents eligibility to Secova by fax to 888-290-1523 or by mail to Secova Service Center, P.O. Box 1901, Wall, NJ 07719-9966. If you havent yet responded, please do so by the end of November to ensure coverage for you and your enrolled dependents continues without interruption. Your eligible dependents are your: Legal spouse (or registered domestic partner, if you work for the City of New York); Biological child, step child, or adopted child under age 26; Disabled child older than age 26; Dependent parent(s) who live with you provided that you cover no other dependents. Please contact Secova at 877-652-0379 if you have any questions.

Prescription Drug Coverage for Medicare-Eligible Retirees

Beginning January 1, 2012, the Welfare Fund will provide prescription drug benefits to its Medicare-eligible retirees and dependents under a type of Medicare Part D program called an Employer Group Waiver Plan. You should have received a letter in the mail recently from Medco about this programand there will be more communications coming later this month and in December. The Part D prescription drug coverage provided by the Welfare Fund will be significantly better than Medicares standard Part D benefit; however, there may be changes in how some prescriptions are covered due to Medicare regulations. Medco will continue to administer Welfare Funds prescription drug benefits. No action is required on your part to be enrolled in the Welfare Funds Part D prescription drug plan. You should continue to use your current Medco ID card for all prescriptions filled before January 1, 2012. You will receive a new ID card in the mail from Medco to use starting on January 1, 2012.

Medcos Customer Service can assist you with questions about the Medicare Part D program as well as other prescription drug coverage questions you may have. Medco Customer Service representatives will be able to answer specific Part D questions beginning December 1, 2011. You may contact them at 800-311-2757, 24-hours a day, and 7-days a week. TTY/TDD users should call 800-716-3231. Customer Service is available in English and other languages.

CAP Corner
In efforts to support our members and your families, the Trustees felt we should have a program in place to assist the membership in any way possible. The Carpenters Assistance Program (CAP) has been created and implemented to do just that. Members needs, whether pertaining to benefits, the District Council or obtaining other outside resources, can be assessed and addressed through this program. The Carpenters Assistance Program is dedicated to ensuring that every member is helped in the best way possible. Our goals are to educate you about your benefits and provide other resources that may be available in your communities for you and your families; to be a support system and to advocate on your behalf. For example, one of the biggest issues we encounter is members losing coverage due to lack of hours. We can assist members who are in this situation, and help them obtain medical coverage through other available resources. We also encourage members to have yearly physical exams that are available at the Funds Office at 395 Hudson Street. We are also concerned about the members financial health. We recently held a financial workshop where a representative from Prudential spoke about financial planning and answered members questions. We plan to hold more workshops in the near future and are looking into implementing some new classes at the Labor Technical College for apprentices, journeyman and shop stewards. We take great pride in the fact that we have been able to meet and assist so many of our members and plan on doing much more. If you have any suggestions for future workshops, please let us know.

Welfare Fund Focus

You may have heard that the Trustees have several benefit changes and participant cost-sharing measures under consideration. While this is true, you should know that the Trustees continually review and evaluate the Welfare Funds operations to ensure that it remains financially viable and can continue to provide health benefits to participants and their families in the years to come. As you may also recall, the Trustees have made changes in the past to help control costs, including higher office visit and prescription drug copayments. Although you receive a Summary Annual Report each year that includes basic financial information for the Fund, in light of poor economic and industry conditions as well as increasing health care costs, we believe it is important to give you more detailed information. Thats why we have developed the Frequently Asked Questions (FAQs) that follow in this newsletter to help you better understand the Funds financial status and why changes are under consideration, as well as clarify some of the rumors that have been circulating. We will continue to communicate with you as we weigh the various options. If we decide to make changes, well let you know about them, how they will impact you, and what you will need to do to make the most of your benefits. Our goal is to be as transparent and informative as possible throughout this process. Please take the time to carefully read this newsletter. If you have questions, contact the Fund Office at 212-366-7300.
3

Frequently Asked Questions (FAQs) About the Welfare Fund

Q. Why is the Fund considering cost-control measures now? A. The Fund has not been immune to the economic problems plaguing our nation. Over the last several years, the combination of fewer big construction projects and an increased presence of non-union contractors in our area has reduced the number of jobs for Carpenters. The result: an increased unemployment rate, an overall reduction of man-hours worked by participants, and a decline in the Funds contribution income. Q. Doesnt the increase in contributions over the years offset the increase in costs? Is the hourly contribution rate sufficient to cover the actual cost of benefits? A. Unfortunately, increased costs outpace the rise in contributions. It currently costs the Fund $9.67 per hour to provide health and welfare coverage to active participants and $4.98 per hour to provide health and welfare coverage to retirees. That is a total of $14.65 per hour to provide benefits to our participants. In other words, it costs $3.40 more per hour to provide coverage to participants than the hourly employer contribution rate ($11.25). Q. Can you describe how man-hours and contribution income have changed over the last few years? A. There are currently 11,727 active Outside and Shop Carpenters participating in the Fund. This is a 14% decline since last year, and more than a 20% decline since 2009. This decline may well continue in 2012 and 2013 unless the economy rebounds soon. In the fiscal year that ended June 30, 2009, our participants worked a total of 21 million man-hours. Results for the fiscal year that ended June 30, 2011 indicate that participants worked a total of 15.7 million man-hours, a reduction of approximately 5.3 million man-hours since 2009. During this same period, employer hourly contribution rates increased from $10.25 per hour in 2009 to $11.25 per hour in 2010 and 2011. As shown in the chart below, the increased contribution rate does not compensate for the loss in man-hours. In fact, total contributions have declined by more than $38 million, or 17.5%, since 2009.
Fiscal Year (7/1 6/30) 2009 2010 2011 Man-Hours Worked 21,304,440 16,705,813 15,673,508 Employer Contribution Rate $10.25 11.25 11.25 Total Employer Contributions $218,370,510 187,940,396 176,326,965

Q. Why not just increase the employer hourly contribution rate? A. A contribution rate of $11.25 per hour is already substantial and represents over 13% of your total hourly compensation. Increasing the employer contribution rate is not the solution. In fact, it may be counter-productive to improving the employment situation. Because it is in everyones interest that our union employers remain competitive with non-union employers, we must start with controlling our costs. Q. How much does it cost to cover an active participant and his/her family? A. The premium equivalent cost to the Fund of your benefits (based on the Funds COBRA Continuation Coverage rates) is $500.55 per month, or $6,000 per year, for individual coverageand $1,351.51 per month, or $16,200 per year, for family coverage. These rates are high, but they are much less than what it would cost to purchase similar coverage on your own. Because of the size of the Fund, it can negotiate the best possible rates. If you tried to purchase similar coverage on your own through an insurance company, you would have to pay whatever the insurance company demandedwhich would likely be a lot more than what your coverage costs the Fund.

Q. How many retirees are there, and how much does it cost to cover a retiree and his/her family? A. There are approximately 6,700 retirees covered by the Plan. It costs approximately $1,525 per month, or $18,300 per year, to cover an early retiree, i.e., a retiree between the ages of 55 and 64 and his/her dependents. For retirees and dependents who are age 65 and over and who get primary benefits through Medicare, the cost is approximately $626 per month and $7,512 per year. Benefit expenses for retired participants make up approximately 31% of the Funds total annual benefits expense, averaging $72.9 million for fiscal years 2009, 2010 and 2011. Retiree expenses have a significant impact on the Funds overall operating results. Q. Are any contributions made to the Welfare Fund for retirees? A. The employer contribution rate is for both active and retiree benefits. There is no separate contribution for retiree benefits, and retirees do not pay a contribution or premium for their benefits. Q. How does the reduction in the number of active employees affect the Fund? A. The reduction in the number of active participants in the Fund means that expenses are spread over a smaller number of participants. Therefore, even though the size of the overall group has declined, the cost per active participant increased 10.5%. Q. Are there other external factors impacting the Funds expenses? A. As everyone knows, health care is very expensive, and costs increase every year at a steep rate. Medical costs have been increasing about 11% per year since 2007 for multiemployer health plans such as this Fund. In addition to the general increase in health care costs each year, the Fund has made a number of legally required benefit changes. For example, as required by the Patient Protection and Affordable Care Act (health care reform), we have extended coverage for eligible dependent children to age 26 at no cost to the participant or dependent. Additional changes will be required next year in order to comply with the Mental Health Parity and Addiction Equity Act. Simply stated, these changes cost money. Q. Since the Funds contributions are not sufficient to cover expenses, how does the Fund make up the difference? A. The Fund also relies on investment income that may be earned annually to make up the difference between employer contributions and the actual cost of providing benefits. The chart below shows how our expenses have outpaced our total income in recent years and how stock market volatility has affected our bottom line.
Fiscal Year Ending June 30, 2009 $218,370,510 ($9,908,952) $10,849,232 $219,310,790 $240,913,409 ($21,602,619) Fiscal Year Ending June 30, 2010 $187,940,396 $23,536,048 $15,195,081 $226,671,525 $241,368,123 ($14,696,598) Fiscal Year Ending June 30, 2011 $176,326,965 $26,113,262 $15,050,113 $217,490,340 $238,490,190 ($20,999,850)

Total Employer Contributions Investment Returns Other Income* Total Income Total Expenses OPERATING DEFICIT

* Includes COBRA premium payments, Association premium payments and City contributions.

In the fiscal years ending June 30, 2009, June 30, 2010, and June 30, 2011, the Funds expenses exceeded its income. Due to the Funds investment losses in the fiscal year ending June 30, 2009, the operating deficit for that year was worse than the deficits for the fiscal years ending June 30, 2010 and June 30, 2011, even though there was approximately $36 million more in employer contributions in 2009 than the average contributions in 2010 and 2011. In those three years, the Funds total income did not cover its expenses which remained steady at approximately $240 million. Therefore, to the extent that contributions and investment income fall short of expenses, we are forced to spend our reserves. These reserves have built up over the years when employment was strong and contributions exceeded expenses.
5

Q. It seems that investment returns can have a positive or negative effect on the Funds assets. Can you give some more detail on how the Fund is invested? A. The Fund maintains about 10% of its assets as liquid assets and works with a variety of investment managers who have broad exposure to different market segments in order to achieve consistent returns by building a diversified portfolio across asset classes. These include domestic and international equity securities, fixed income securities and alternative investments. Q. What does the future look like for the Fund? A. Based on estimates prepared by the Funds consultant and actuary, if man-hours remain at 16 million man-hours per year and the hourly contribution rate stays at $11.25, the Fund is projected to run deficits of $42 million in 2012, $60 million in 2013 and $84 million in 2014. These projections do not tell the complete financial picture for the Fund, however, because they do not take into account potential investment gains or losses. As you can see in the chart above, investment returns for fiscal years 2009, 2010 and 2011 were dramatically different. Because no one can predict investment results, actual results often vary widely from projections. The difference between projections and actual results is due to the fact that the Funds actuary does not factor in anticipated investment gains or losses when developing projections. The Fund currently has approximately one year of reserves. This refers to the level of net assets at year-end compared to the following years projected operating expenses. However, with projections anticipating future operating deficits, the Funds reserves may decline to less than a months reserve by June 30, 2014. Q. Is there anything I can do to use my benefits wisely and help control Fund costsand my own out-of-pocket costs as well? A. Here are some examples of how you can help control costs: Visit network doctors instead of out-of-network providers. Opt for generic medications over brand-name drugs when possible. Fill prescriptions for maintenance medications by mail order instead of at a retail pharmacy. Quit smoking. Limit emergency room visits to true emergencies. Take advantage of preventive benefits like annual physical exams and diagnostic screening tests. Eat healthy and exercise.

Q. What are the Trustees doing to strengthen the Fund? A. We want the Fund to continue to provide you with valuable benefits while preserving the Funds future financial stability and controlling costs to you, your employers and the Fund. Over the last few months, we have been exploring a wide array of cost-control measures and will continue to do so. We have already put into place some cost-control measures. For example, the Fund is currently conducting a dependent eligibility verification to make sure that only eligible dependents are covered by the Fund, and we are confident that this verification project will result in savings to the Fund. Effective January 1, 2012, the Fund will implement a new Medicare Part D retiree prescription drug plan that will save the Fund money, while offering Medicare-eligible retirees the same level of benefits as under the current Plan. (Medicare-eligible retirees will receive separate notices about the new prescription plan.) The Fund is also participating in the Early Retiree Reinsurance Program that is part of the Affordable Care Act. Unfortunately, we also have to consider benefit changes and sharing a portion of the costs with participants. Such measures might include imposing a deductible for in-network benefits, increasing the out-of-network deductible, increasing co-payments, adding in-network co-insurance, modifying benefits and coverage levels, changing eligibility rules, and restructuring retiree benefits. We are very aware of how difficult it is to make ends meet in these uncertain economic times and we know that such changes will carry a financial impact. While we do not want to do anything to make these times more difficult than they already are for our participants, we all have to be aware that, without a significant increase in man-hours, changes may be necessary to preserve the Fund. We will continue to analyze various options and the impact of various changes on you and the Fund. Whether we make any changes in the foreseeable future will depend on the various factors discussed throughout these FAQs. Please read this newsletter carefully to better understand the state of your Welfare Fund.

New York City District Council of Carpenters Benefit Funds 395 Hudson Street New York, NY 10014

U.S. POSTAGE PAID NEW YORK, NY PERMIT No. 1 ZIP CODE 10001 (for placement only)

Mr. Tom Smith (for placement only) 123 Spruce Street Tumbleweed, TN 12345

Welcome to the first issue of Funds Newsletter Read inside to learn about your benefits and whats happening at your Benefit Funds.