Louis A Kent John Trepp Chief Actuary President

2. Partnering with JWOD and Benefit Design Challenges Louis A Kent John Trepp Chief Actuary President FCE Benefit Administrators Tasks Unlimited December 6, 2004 11:30

3. About The JWOD Program The Javits-Wagner-O’Day (JWOD) Program creates jobs and training opportunities for people who are blind or who have other severe disabilities. Its primary means of doing so is by requiring Government agencies to purchase selected products and services from nonprofit agencies employing such individuals. As a result, JWOD employees are able to lead more productive and independent lives.

4. What Does This Mean for You? • The Contracting Officer • Bulk of workload associated with adding services to the Procurement List is performed by the Committee, NISH or NIB • Pre-established pricing • No reduction in government quality or delivery requirements • Reduced or eliminated solicitation development and re-competition requirements • Central points-of-contact, ease of administration, flexibility

5. What Does This Mean for You? • The Partnering Entity • JWOD is a mandatory source program (FAR 8.7) • Reduced or eliminated solicitation development and re-competition requirements. • Use of your expertise in more skilled job categories

6. What Does This Mean for You? • The JWOD Entity • JWOD is a mandatory source program (FAR 8.7) • Reduced or eliminated solicitation development and re-competition requirements. • Use of your expertise in more skilled job categories

7. What Does This Mean for You? • The Participant • Provides invaluable vocational opportunities that might not otherwise be available • Provides long-term, stable employment for people who have no other vocational options • Individuals can develop skills that prepare them to compete for other jobs outside of JWOD • Aids in the development of critical interpersonal skills

8. Partnering With JWOD “You will have no better day in your contracting career than when you award your first JWOD contract.” Mark Lumer, Principal Assistant Responsible for Contracting, U.S. Army Space and Missile Defense Command, Huntsville, Alabama (Taken from a presentation given by Greg Braniff, Business Development Manager, NISH South Region)

9. Benefit Design Issues • Often we see contractors who want to have a uniform benefit package for their employees and their subcontractors employees working on the same contract.

10. Benefit Design Issues • Reasons for a Uniform Benefit Package • Economies of Scale • Ease of intra contract mobility • Ease of explanation • Ease of fringe compliance • Reduction of employee dissatisfaction

11. Benefit Design Issues • Reasons for a NON-Uniform Benefit Package For JWOD participants • Different Medical needs • Different Dental needs. • Lifestyle Benefits • Appropriate benefits

12. Background • The Service Contract Act or Davis Bacon and Related Acts: • Set up a “Fringe Requirement” • Allows an Employer to pay his Fringe Requirement in Cash • Requires an Employer who pays his Fringe in Cash to pay Payroll taxes as part of G&A

13. The Desirability of Benefits • It cost $2.36 per hour to provide a Fringe Benefit Plan in 2004. • It cost as much as $2.83 to pay out that Fringe in Cash • This can translate to 5% of the direct labor budget (using $10.00/hr)

14. What Kinds of Benefits? • Statutory Benefits are not included • Permissible Benefits include: • Health (Medical, Dental, Vision) • Life (AD&D, Travel Accident) • Disability (Long Term, Short Term) • Retirement (401k) • Severance • Sick Pay

15. Why Health Insurance? • Quality of Life Benefit (Employees want it) • Difficult to get on a Non Group Basis • Easy target for Organizers • Lowers your Workers Compensation Costs

16. What’s Happening in Health Insurance? • Managed Care has worn off • An HMO may cost more than a PPO today • Rate Increases are in the double digits • Co-pays, Cost Share, Restrictive formularies are all on the rise • The Providers have organized to raise costs, and the Insurance Companies are raising their rates to make a profit.

17. San Francisco Chronicle • “Large employers in Northern California saw their average health care costs rise 12.3 percent in 2003, and they expect those costs to jump an additional 15.4 percent next year, according to a survey being released today by a human resource consulting firm. “

18. Fringe Increases vs. Health Inflation

19. Premiums vs. Fringe Budget

20. Shortfall In Fringe Budget

21. How does the cost vary by Location?

22. Are the Increases Region Specific?

23. What does this have to do with Gas Prices?

24. History of Trendby Funding Arrangement

25. Change In Health Premium by Type and Funding Arrangement

26. Is Self Funding the answer? • Un-funded plans and the Service Contract Act. • Does it make sense in your locations? • Are there other reasons for doing it?

27. Un-funded plans and the Service Contract Act. • Since the Fringe is on a Per Employee Per Hour basis, only Actual Expenditures may count. • An Independent Trustee using a Non-Reversionary Exclusive Benefit Trust. • Some reasonable Relationship between Contributions and Benefits.

28. Does it make sense in your locations? • Are there Carriers “buying market share”? • Do you have enough Employees to make it work, at least as a Stop Loss Insured Plan? • Do you want a uniform benefit package across State/Jurisdictional lines?

29. Are there other reasons for doing it? • Uniform Plans • Good Experience helps Stabilize Premiums • Avoid expensive State Mandates • Part Timer Plans • Creative Plan Designs

30. Creative Plan Designs • Primary Care Plans • Catastrophic Plans • HRA/HDHP Concepts • Designs for JWOD Participants

31. JWOD Participants • May already have health coverage provided. • Retirement Benefits should reflect a shorter life expectancy • May have special needs not normally included in standard health programs.

32. Conclusions • There are no easy answers • You have to design with the Fringe Budget in Mind… a Three Year Contract needs a Three Year Design. • If it were easy, everyone would be doing it and making money.

33. Tasks Unlimited Building Services • Tasks Unlimited Building Services is a Minnesota not-for-profit organization that exists solely to provide employment for people with serious mental illness. Although a few non-disabled individuals are employed by TUBS, 90+% of the labor performed by TUBS is performed by its 180 disabled employees.

34. Tasks Unlimited Building Services • The most common employee benefit is health insurance, and for years, we searched for a way to provide basic health insurance for TUBS workers. The cost was problematic, but ultimately moot. Due to the nature of the TUBS workforce, no carrier doing business in Minnesota would take our business. Seeking basic health care, we even obtained, from the State Insurance Commissioner, a waiver exempting any company providing coverage to TUBS employees from the requirement that the coverage include mental health services – but still no takers.

35. Tasks Unlimited Building Services • This problem was solved by the Federal Work Incentive Act of 1999, which included a provision known as the “Medicaid Buy-In.” The Medicaid Buy-In allows states to create an option for disabled workers, whose income exceeds Medicaid eligibility limits, to purchase Medicaid with a monthly premium. Minnesota adopted this provision immediately (other states have subsequently). Previously, only 10 to 15% of TUBS workers were covered by Medicaid, but under the buy-in, 90 to 95% are now enrolled. Their premiums are based on a sliding scale, typically between $75 and $125 per month. This is an excellent value since Medicaid covers their antipsychotic medications, which frequently cost $100 to $500 per month. And it pays for other health care besides.

36. Tasks Unlimited Building Services • Problem with Retirement Plans 403(b) and the Disabled • Short life Expectancy • The Condition itself • The Drugs taken for the condition • Losing Medicaid Eligibility and Health Coverage.

37. Tasks Unlimited Building Services FCE, from California, helped TUBS create a custom package which included “supplemental” dental and optical benefits, and a wellness program provided by Colbert and Associates. A few of our workers utilize the dental and optical benefits, but the wellness program has been the big story. Employees were skeptical when we initiated the program in January of 2001, but they now view the wellness program as a primary advantage of employment with TUBS. We are forced, by popular demand, to enroll all TUBS employees in Wellness, even those where the contract revenue doesn’t quite cover our costs

38. Tasks Unlimited Building Services • Each enrolled employee is eligible to meet with a Wellness Counselor (provided by a local organization) twice a year for the purpose of creating an Individual Wellness Plan -- a set of personal wellness goals.

39. Tasks Unlimited Building Services • Weight Management • Stress Management • Alcohol/Tobacco Management • Strength & Cardiovascular Training • Mental Health Management

40. Tasks Unlimited Building Services • Initial Resistance to change • Grown to 90% with a wellness plan • Majority participating in the incentive program • Positive measurable claims. • Increased Health Awareness

41. Tasks Unlimited Building Services • Assessment of the Impact of the Wellness Plan