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INTRODUCTION TO HSA LTD TRUSTS

INTRODUCTION TO HSA LTD TRUSTS A primer for HSA members covered by the Paramedical Professional Bargaining Association Collective Agreement April 2005. What is LTD?. Long Term Disability is insurance against wage loss should you become ill or disabled and unable to work.

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INTRODUCTION TO HSA LTD TRUSTS

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  1. INTRODUCTION TO HSA LTD TRUSTS A primer for HSA members covered by the Paramedical Professional Bargaining Association Collective Agreement April 2005

  2. What is LTD? Long Term Disability is insurance against wage loss should you become ill or disabled and unable to work.

  3. What is a “contribution rate?” The percentage that is deducted from regular pay in order to provide the necessary funds to sustain LTD benefits. Current rate: 3.0%

  4. What does “off-set” mean? Additional negotiated wage increase, designed to be applied directly to fund the LTD plan.

  5. What is “unfunded liability”? The amount by which the liabilities of a plan exceed plan assets, at a given date.

  6. Prior to 1986, employer-paid plan 1986 contract negotiations: HSA assumed responsibility for LTD, Accidental Death and Disability and Life Insurance benefits Negotiated 1.6% off-set LTD deduction set at .8% Where did it begin?

  7. Established 1989 HSA solely responsible Off-set increased from 1.6% to 2% LTD contribution rate set at 1.0% Under-funded at onset Formal trust

  8. 1991 Negotiations: 1991: Offset set at 2.4% 1992: Offset set at 2.3% By 1995: LTD contribution rate 1.75% Context: Offset has positive impact on other benefits, i.e., pension, overtime, call-back rates Rate Increases

  9. 1995: Benefit limited to 85% of earnings 1998: Discontinued Accidental Death and Disability and Life Insurance Context: Unfunded liability at $13.4 million. Benefit Changes

  10. 1998 Negotiations: One-time injection of $6 million for LTD conditional on second plan being established, and that benefits taxable Context: Wage guidelines; health restructuring and downsizing; increase in plan usage New revenue… second plan

  11. July 2002: Contribution rate increased to 2.25% July 2003: Contribution rate increased to 3.0% Context: Unfunded liability at $12.5 million. Increase covers cost of benefits and begins to address unfunded liability Rate increases

  12. 2004: Investments improve – 11% growth Unfunded liability growth slowing Rate increases having effect

  13. Trust Assets and Liabilities(Combined) 6 million 3.0% 2.25% benefits

  14. Reduced benefits Increased contribution rates Negotiations Steps taken to reduce liability

  15. Next step: streamline trusts Effective April 1st, 2005 the LTD Plan #2 Benefits will be converted to non-taxable. • Same net benefit based on basic (i.e., single) tax bracket • More than $2 million projected in savings for the trust

  16. Plan Booklet Plan benefits are not outlined in the Collective Agreement Separate plan booklet will be mailed to all HSA members covered by the PPBA Collective Agreement

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