P Supplemental COLA April 20, 2005

Today’s Discussion What is it? Who gets it? Funding Trend Options

Purchasing Power Year 1 2 3 4 5 Benefit $1,000 $1,030 $1,061 $1,093 1 2 3 4 5 Benefit $1,000 $1,030 $1,061 $1,093 $1,126 $1,159 Inflation 4.0% COLA 3.0% COLA Bank 0.0% 1.0% 2.0% 5.0%

Purchasing Power Lost Retirement during twelve-month period ended April 1 Accumulated COLA Bank April 1, 2005 Accumulated COLA Bank April 1, 2004 1973 or earlier 69.5% 71.5% 1974 69.0% 71.0% 1975 66.0% 68.0% 1976 59.0% 61.0% 1977 52.0% 54.0% 1978 49.5% 51.5% 1979 45.0% 47.0% 1980 38.5% 40.5% 1981 33.0% 35.0% 1982 21.0% 23.0% 1983 11.0% 13.0% 1984 8.5% 10.5%

Purchasing Power Lost

Purchasing Power Supplement Retirement during twelve-month period ended April 1 Excess COLA Bank 2005 Excess COLA Bank 2004 1973 or earlier 44.5% 46.5% 1974 44.0% 46.0% 1975 41.0% 43.0% 1976 34.0% 36.0% 1977 27.0% 29.0% 1978 24.5% 26.5% 1979 20.0% 22.0% 1980 13.5% 15.5% 1981 8.0% 10.0%

Funded Percentage – Purchasing Power Benefits As of June 30 2002 2003 2004 PVB $ 26.5 $ 35.4 $ 30.1 Actuarial Assets $ 6.4 $ 4.0 $ 2.1 Unfunded Projected Liability $ 20.1 $ 31.4 $ 27.9 Funded Percentage 24.0% 11.3% 7.1%

Funded Percentage as of 6/30/2004 – Non-Valuation Benefits $ in Millions Purchasing Power Benefits Retiree Health Benefits Total Non-Valuation Benefits PVB $ 30.1 $ 88.3 $ 118.4 Actuarial Assets $ 2.1 $ 72.7 $ 74.8 Unfunded Projected Liability $ 27.9 $ 15.6 $ 43.5 Funded Percentage 7.1% 82.3% 63.2%

Funded Percentage – Non-Valuation Benefits

Some Options Examples of choices designed to show range of possibilities There are many combinations and other variations that could be added if desired by the Board

Option 1 Stop payments when reserve is depleted Projected August 2005

Option 2 Transfer assets from Non-Valuation Retiree Health Reserve. Fully fund Purchasing Power COLA Transfer Amount: $30.2 million

Option 3 Transfer assets from Non-Valuation Retiree Health Reserve. Continue current benefit amount for those who are currently receiving it until they all die. Estimated Transfer amount: $11.9 million

Option 4 Transfer assets from Non-Valuation Retiree Health Reserve. Continue current benefit amount for those who are currently receiving it for 2-3 years. Transfer Amount: Approx. $1.8 million per year

Questions