From: Lee Pruitt
Sent: Monday, November 24, 2008

Subject: RE: Short Term Disability Plan

Brother Pinson:

I have been asked to respond to your e-mail below.

First let me thank you for the opportunity to answer your questions concerning the National Short Term Disability Plan. The National Plan from the beginning required that an engineer who is injured on duty is required to pay back to the plan all benefits received from the Plan. After the first 3 years the Plan was in effect we had to lower the benefits from $402.00 to $362.00 a week account the experience of the plan was so high. More people were using the benefits than the premiums were able to cover. The last year experience was not much better and the benefit was going to decrease once again. An audit of the Plan indicated that the on job injuries represented 19% of the claims at 35% of the cost of the Plan. Please keep in mind that the National Plan only receives $40.00 per engineer per month and that it is frozen at $40.00. The National does not have the ability of increasing the $40.00 to cover the increase in the cost of the Plan when the premium needs to be increased therefore the National can only decrease the benefits to meet the experience of the Plan.

It is important to remember from the beginning of the Plan on duty injuries were to be paid back to the Plan once a FELA settlement was reached. Moreover it was the engineers choice to accept the benefits and pay them back or decline the benefits much the same as the choice to be made with this Plan to either opt in or out. Several problems were inherent with the Plan as it existed the most important being the ability to recover the benefits paid once the engineer made a settlement with the railroad. Many times by the time a settlement is made and all the deductions were made the engineer was not left with much money. The benefits received were taxable since the premium was paid with pre-tax income and reimbursed to the Plan with non-taxable income causing the engineer to make claim with the IRS for a refund of taxes paid.

The changes in the Plan were made to keep the benefits as high as possible. Still giving the engineers an option for on the job injury coverage with a premium as low as possible for that coverage. All engineers will still be covered for off the job disabilities as in the past with a benefit increased from $362.00 to $402.00 per week with the option to purchase the on the job disability coverage that will not have to be paid back and will not be subject to income tax since the premium is paid with after tax income. In addition the new Plan provides for $50,000.00 of Accidental Death and Dismemberment(AD&D) included in Plan A and if the engineer elects to keep the coverage for Plan B an additional $50,000.00 AD&D for a total of $100,000.00 AD&D coverage.

In response to your question concerning “Wasn’t part of the original premium supposed to be held for future increases?” The money in the Trust was accumulated to be able to self insure if needed or the group becomes uninsurable. The National Agreement providing for the $40.00 does not have a snap back clause to give the engineers back the wage increase the $40.00 represents. Therefore the money in the Trust is an insurance that the engineers will have some type of Short Term Disability Plan if we become uninsurable. This meets the fiduciary responsibilities of the Trustees to be able to provide the insurance not to subsidize the premiums. Even if we were to subsidize the premiums it would not take long to bankrupt the Trust even if the subsidy was only $8.00 per insured. For example, we insure approximately 16,000 engineers a month and if the premium were to go up by just $8.00 the following scenario would occur; $8.00 times 16,000 equals $128,000.00 per month times 12 months equals $1,536,000.00 per year. Currently there is approximately $3,000,000.00 in the Trust and as you can readily see it would take less than 2 years to bankrupt the Trust. The Trust needs the $3,000,000.00 to cover insurance and reinsurance costs if we were to be placed in a position to self insure. The above example using $8.00 is a realistic example of what the Trustees were facing to keep the past Plan and still have the engineers refunding benefits paid when injured on duty and keeping the $362.00 a week benefit.

It was decided to have engineers opt-out rather than opt-in because the Trustees were concerned that engineers would look at the letter set it aside, thinking it was just another insurance come on, get injured on the job and not realize they were not covered for the injury on duty. Realizing this method would be very controversial to say the least by requiring the opt-out form there would be no question that the engineers knew what they were opting out of. The ability to opt-in and out is no different than before as the engineer made a decision to take the benefits and pay them back later or not take the benefits it was a decision after the injury. The difference now requires a predetermined decision by paying for Plan B with the benefit not having to be paid back or taxed. Whether or not an engineer finds a different Policy they wish to purchase or simply wish to opt-out they may do so at any time by completing the opt-out form and giving it to their secretary/treasurer and opt back in during an open enrollment period planned to be in the fourth quarter of each year.

I sincerely hope that this answers some of your concerns and you can better explain to your engineers the Plan and make informed decisions.

Fraternally,

E. L. Pruitt

BLE-T

Vice President

12265 Home Port Drive

Maureapas, LA 70449

1-225-698-3858

epruitt@eatel.net

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Subject:

Dear Mr Rodzwicz,

Just wanted to let you know that way the international has handled the Short Term Disability increase is not going over well with the rank and file membership. How does Met Life justify a $23 increase for the same benefits in which we were paying $40. Wasn’t part of the original premium supposed to be held for future increases? The lack of communication as to why ,and the fact that you open your letter with “We are pleased to announce a number of changes to the BLET Short-Term Disability Plan effective Jan 1, 2009.”I am sorry, but coming from a Div. Pres. For nearly 20yrs., this one is even hard for me to defend.

Kent B. Pinson

BLET Division 236 - President