Western Teamsters Welfare Trust

July 2, 2003

MEMORANDUM

TO: All Western Teamsters Welfare Trust Actives/Casuals and Retirees

FROM: Board of Trustees
Western Teamsters Welfare Trust

RE: Important News About the Retiree Plan

Establishment of a Retiree Pre-Funding Program
Change in the Annual Earnings Limitation

This letter concerns two important changes to the Western Teamsters Welfare Trust's Retiree Plan.

First, the WTWT Board of Trustees is pleased to announce the creation of the "WTWT Enhanced Retiree Pre-Funding Program" (Retiree Pre-Funding Program). The Retiree Pre-Funding Program will be effective September 1, 2003 and will allow employees participating in WTWT to pre-fund a portion of their Retiree Plan costs. The Retiree Pre-Funding Program will also allow current non-Medicare retirees who receive a subsidy from the Trust to continue to do so.

Second, the WTWT Retiree Plan has required retirees less than 65 years old who annually make more than $15,000 in compensation to pay the full cost of the Retiree Plan option they elect. Effective September 1, 2003, this annual earning limitation has been increased to $25,000 per year. These two changes are discussed below.

THE RETIREE PRE-FUNDING PROGRAM

Background Information
The 2003 - 2008 National Master Freight Agreement and Western States Supplements and the most recent Car Haul Agreement provide for collectively bargained funds to be used to pre-fund a portion of the cost of retiree coverage. With the relentless increases in the cost of retiree medical coverage, the Board of Trustees of WTWT believes that the pre-funding of retiree medical costs is of paramount importance. As a result, the Board of Trustees of WTWT has adopted the Retiree Pre-Funding Program. All participating employers and unions in WTWT will be required to participate in the Retiree Pre-Funding Program. The newly negotiated funds will be added to current WTWT Retiree reserves and a negotiated portion of the current monthly employer contribution paid on each Active Employee and will be placed in the Retiree Pre-Funding Program. These funds will be used to subsidize the cost of the Retiree Plan coverage pursuant to the formula set forth on page 3 of this letter.

How the Program Works - Eligibility
Eligibility to participate in the Retiree Pre-Funding Program is the same as for the WTWT Retiree Plan itself. With some over simplification, these rules require that you retire from a current contributing employer, receive a Teamster's pension, have had contributions made to the WTWT for at least 60 of the 84 months immediately preceding your retirement date and apply to the WTWT Retiree Plan in a timely manner (within 60 days of your retirement date).
Individuals who are not eligible for the WTWT Retiree Plan will not be eligible for the Retiree Pre-Funding Program. Additionally, retirees who must pay the full cost of the Retiree Plan (i.e. employees of withdrawn employers, retirees who annually receive more than $25,000 in compensation from gainful employment and retirees who are already Medicare eligible) will not receive any subsidy from the Retiree Pre-Funding Program.

How the Program Works - Credits
There are two types of credits under the Retiree Pre-Funding Program. The first is for past service. This credit is based on your service with WTWT participating employers prior to August 1, 2003. All non-Medicare retirees who retired before August 1, 2003 who are eligible for a reduced rate under the WTWT Retiree Plan will receive 10 years of past service credit at $30 per year (or $300 per month) from the Retiree Pre-Funding Program. This credit will be applied to the cost of the WTWT Retiree Plan. As noted above, retirees from employers that no longer contribute to WTWT, retirees who exceed the annual income threshold and Medicare eligible retirees will not receive any credit.
Employees with a retirement date on or after August 1, 2003 will receive credits both for past service (e.g. years worked with WTWT employers before August 1, 2003) and a credit for future service based on years worked with WTWT employers after August 1, 2003. The credit for service before August 1, 2003 ("past service") will be based upon 50% of the employee's years with a WTWT employer to a maximum of 10 years. The value of each year of this service credit will vary depending on if the employee retires before age 57 or after. Employees who retire at age 57 or later receive a greater credit.
Additionally, employees who retire on or after August 1, 2003 will receive credits for future service. An employee will receive one year of future service for each 12 months of contribution made to WTWT on his behalf beginning with August 2003. Again, the value of the service earned on or after August 1, 2003 ("future service") will also vary depending on if you retire before age 57. Employees who retire on or after August 1, 2003 and are 57 or older will receive a greater credit.

What Credits Are Available
The chart below summarizes what credits are available to you. If you retire on or before August 1, 2003, the first line of columns underneath the headings applies to you. If you retire after August 1, 2003, the next three lines apply to you depending on your age when you retire and if you are Medicare eligible.

Classification Past ServiceCredit
(Years in WTWT Before 8/1/03) Future ServiceCredit
(Years in WTWT After 8/1/03) Availability of Credit Before
Medicare Eligibility Availability of Credit Upon
Medicare Eligibility

Non-Medicare Retired prior to August 1, 2003 All provided 10 years of past service @ $30.00 per year or $300 per month None Past Service Credit None

Retired on or after August 1, 2003 and prior to age 57 50% of past service up to a maximum of 10 years @ $30 per year All years earned after August 1, 2003 @ $30 per year All years of past and future service @ $30 per year All years of past and future service @ $15 per year(Past svc. subject to 10 year max.)

Retired on or after August 1, 2003 and after reaching age 57 50% of past service up to a maximum of 10 years of service @ $40 per year All years earned after August 1, 2003 @ $40 per year All years of past and future service @ $40 per year All years of past and future service @ $15 per year(Past svc. subject to 10 year max.)

Retired on or after August 1, 2003 and after becoming Medicare eligible 50% of past service up to a maximum of 10 years of service @ $25 per year All years earned after August 1, 2003 @ $25 per year ------ All years of past and future service @ $25 per year(Past svc. subject to 10 year max.)

Conditions Upon Receipt and Use of Credit
There are conditions upon the receipt and use of credits from the Retiree Pre-Funding Program, which should be noted:

The credits may be applied only towards the monthly self-payment required by the WTWT Retiree Plan. It may not be used for any other plan or health coverage.
If the Retiree does not qualify for or terminates his participation in the Retiree Plan, he loses his right to the credit.
Credits cannot be cashed out and are not subject to assignment, alienation, attachment, and garnishment.
Credits are not vested. The Board of Trustees reserves the right to change or modify the Retiree Pre-Funding Program and the WTWT Retiree Plan, as circumstances require.
The credits available under the Retiree Pre-Funding Program will not exceed the cost of the WTWT Retiree Plan option in which the retiree participates.
If your last employer no longer participates in WTWT or leaves WTWT after you retire, you will lose any credit for your years with WTWT prior to August 1, 2003 ("past service").
As noted above, retirees who must pay the full cost of the Retiree Plan (employees of withdrawn employers and employees who earn more than $25,000 will not receive any credit.
Spouses do not receive any credit unless the cost of the coverage option chosen is less than the available subsidy. If so, the rest of the retiree's monthly subsidy can be applied towards the cost of the spouse's coverage.

Examples
The Area Administrative Offices have received calls asking how the credits available from the Retiree Pre-Funding Program would apply in practice. The following are some examples of how the Retiree Pre-Funding Program will work. Please remember these examples are illustrations only.
Example 1 - Current Non-Medicare Retiree Eligible for Credit
You are a current non-Medicare retiree participating in the WTWT Retiree Plan. You retired January 1, 2001. Your last employer still contributes to the Trust so you are eligible for credits from the Retiree Pre-Funding Program.
You will receive a $300 per month credit, which will be applied against the monthly cost of the WTWT Retiree Plan option you choose. If you have a spouse, no credit is available unless the option you choose costs less than the $300 per month subsidy. If that is the case, any amounts left can be applied to your spouse's coverage.
Example 2 - Current Non-Medicare Retiree Who Is Not Eligible for Credit
You are a current non-Medicare retiree whose last employer preceding your Western Conference pension effective date is no longer contributing to the Trust. You will receive no credit from the Retiree Pre-Funding Program.
Example 3 - Future Non-Medicare Retiree 57 or Older Who Is Eligible for Credit
You retire on September 1, 2004 at age 59 and you meet the eligibility requirements for the WTWT Retiree Plan. You have at least 20 years of service with a WTWT employer so you are entitled to the maximum credit of 10 years for years prior to August 1, 2003 ("past service"). Each year receives a credit of $40 per year or a total of $400 per month. You also had 12 contributions made to the Retiree Pre-Funding Program after August 1, 2003 so you are entitled to one year of future service at $40 per month. When you begin paying for WTWT Retiree Plan coverage, you are eligible for a $440 per month credit from the Retiree Pre-Funding Program to be applied against the cost of the WTWT Retiree Plan.
Example 4 - Future Medicare Retiree Who is Eligible for Credit
You retire on September 1, 2004 at age 66 and meet the eligibility requirements for the WTWT Retiree Plan. You have at least 20 years of service with a WTWT employer so you are entitled to 10 years of past service. You also worked 12 months after August 1, 2003 with a WTWT employer. You will receive $25 per month for your 10 years of past service prior to August 1, 2003. You will also receive $25 for your one year of future service after August 1, 2003. When you begin paying for the WTWT Retiree Plan, you will receive a $275 credit from the Retiree Pre-Funding Program to be applied against the cost of the WTWT Retiree Plan.
CHANGE IN EARNINGS LIMITATION
Each year participants in the WTWT Retiree Plan who are less than age 65 receive an Annual Earnings Affidavit that must be completed in order to continue coverage under the WTWT Retiree Plan. Currently, if you receive more than $15,000 in a calendar year as compensation from gainful employment or services in any capacity you will be required to pay the "full" cost of the WTWT Retiree coverage for the next calendar subsequent year if you wish to continue participation. This same rule applies to the Retiree Pre-Funding Program. Please be advised that effective with calendar year 2003, this earnings limitation has been changed to $25,000 per year. If you have earned in excess of the new earnings limitation amount ($25,000) for calendar year 2003 you will be required to pay the "full" cost of the WTWT Retiree coverage and you will not receive any subsidy from the Retiree Pre-Funding Program during 2004. If your earnings drop back below $25,000 during calendar year 2004, you would again be eligible to pay the "standard" self-payment rates with the benefit of the subsidy from the Retiree Pre-Funding Program for calendar year 2005.
This earnings limitation is specific to the Western Teamsters Welfare Trust Retirees Health and Welfare Plan. It is not related to any employment or earnings restrictions that apply to your Western Conference of Teamsters Pension benefit. If you have separate questions regarding earnings limitation restrictions under the Western Conference of Teamsters Pension Plan, please call your Area Pension office.
OTHER ISSUES
Other Issues - HMO Options
The cost of the WTWT Retiree Plan depends on the type of coverage chosen. If there is an HMO option available where you live and you are already not a member, the Trustees encourage you to consider electing an HMO option upon entering the Retirees Plan or during the open enrollment period, as it can dramatically reduce the amount of your monthly self-payment.
Other Issues - Opt Out
The Board of Trustees also wants to remind you about the Trust's Suspension or Postponement provisions. The provisions are as follows:

You or your spouse may suspend or postpone your Retirees Plan coverage if you have other employment-related medical coverage. If you wish to suspend your Retirees Plan coverage, contact your Area Administrative Office for the necessary form. If you qualify, no self-payments will be required and no benefits will be provided while you have the other coverage. To reinstate coverage, you must notify your Area Administrative Office within 30 days of your other coverage ending. Your coverage during the postponement or suspension period prior to re-entering the WTWT Retirees Plan must be continuous. Proof of other employment-related coverage will be required when you re-enter the Retirees Plan.
Also, new retirees or spouses can make a one-time election to defer Retirees Plan participation until they are Medicare eligible. Under this option, there is no requirement that the retiree or spouse have other coverage. Please remember that once made, this choice is irrevocable, and you cannot resume participation in the WTWT Retirees Plan until you are Medicare eligible. If you wish more information or a form, contact your Area Administrative Office.

If you have questions, please contact your Area Administrative Office.

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