MERP WSCFF’s Medical Expense Reimbursement Plan for Retirees Presented by: DiMartino Associates Karni Adamson karni@dimarinc.com Becky Wallen becky@dimarinc.com 206/623-2430 800/488-8277 Spring 2016

MERP Medical Expense Reimbursement Plan through a Retiree Medical Trust (RMT) Reimburses you – for your lifetime – for: Premiums for medical, dental, vision, long term care coverage for you and your family (spouse/domestic partner and IRS dependent children) Other medical, dental and vision expenses (that aren’t covered by insurance) for prevention, diagnosis, and/or treatment of a medical situation for you and your dependents. (Defined by IRC 213(d).)

Status of MERP 129 participating locals (over 6,700 members) 111 in Washington 14 in Idaho 2 in Alaska 2 in Montana Fund balance is over 70 million and growing by approximately $675,000 each month Approximately 450 retirees are currently accessing benefits

Who controls MERP? WSCFF Benefit Trust Board of Trustees The Board of Trustees is made up of 9 fire fighters all from separate participating locals on staggered terms 6 are elected at WSCFF Annual Convention Brian Hurley- Tumwater Jeff Wainwright – Spokane Co. FD #8 Matt Frank– Tacoma Fire Fighters Craig Soucy – Renton Fire Fighters Kenny Stuart – Seattle Fire Fighters Brian Murphy – Anchorage Fire Fighters 3 are appointed by the WSCFF Kelly Fox Greg Markley Ricky Walsh

Components of MERP Participation Contribution Amount TAX FREE The Board of Trustees may adjust the components of this Plan. This is only a summary of the plan and does not replace the specifics of the plan document. Participation Contribution Amount TAX FREE Eligibility for Benefit Active Service Credit and Unit Multiplier Reimbursable Expenses Receiving your Benefit TAX FREE Duration of Benefits

Contribution Amount Minimum Contribution is $75/month; Locals can increase their contribution amount in MERP 33 Locals have increased their monthly contribution into MERP since 2009 New contribution amount must be a multiple of $25; and there is no maximum contribution amount limit Contribution amount is the same for all in the bargaining unit

How Is My Retiree Benefit Determined? When you retire, your benefit will be based on the total number of Active Service Units (ASU) you’ve accrued during your career You receive 1 ASU for each $25 contributed on your behalf into the Trust Example: $100/month contribution = 4 ASU / month The higher the contribution amount and the longer you contribute, the higher your retiree benefit

What Is The Unit Multiplier (UM)? UM is actuarially determined based on contributions to the plan, investment income, administrative expenses and demographics. This amount may change over time. Your Active Service Units (ASU) multiplied by a Unit Multiplier (UM) = Your Monthly Benefit for reimbursable expenses at retirement

Determining Your Benefit Effective 7/1/15, the Unit Multiplier is $0.41 Fire Fighter #1 - $75 contribution for 11 years $75 = 3 ASU per month X 12 X 11 years = 396 ASU 396 X .41 = $162.36 monthly benefit Fire Fighter #2 - $75 contribution for 11 years; Local votes to increase contribution to $200 and FF contributes this for 4 years; 15 total years of contributions 3 X 12 X 11 years = 396 ASU 8 X 12 X 4 years = 384 ASU 396 + 384 = 780 total ASU X .41 = $319.80 monthly benefit Fire Fighter #3 - $75 contribution for 11 years; Local votes to increase contribution to $200 and FF contributes this for 14 years; 25 total years of contributions 8 X 12 X 14 years = 1,344 ASU 396 + 1,344 = 1,740 total ASU X .41 = $713.40 monthly benefit

Contributions vs. Benefit Payout Based on the .41 Unit Multiplier, it will take very close to 5 years of accessing your full monthly benefit amount for you to receive all your contributions back in benefit payout. FF #1 contributed $9,900 and receives $162.36 in monthly benefits: 9,900 / 162.36 = 61 months FF #2 contributed $19,500 and receives $319.80 in monthly benefits: 19,500 / 319.80 = 61 months FF #3 contributed $43,500 and receives $713.40 in monthly benefits: 27,900 / 713.40 = 61 months * Does not apply to converted sick leave

NEW Option: Accelerated Benefits Payments One-time choice at retirement to select a “Level Benefit” or one of three Accelerated Benefit options (1.5x, 2x, 3x) Accelerated Benefit will pay a larger benefit pre-65 years of age and a smaller benefit post-65 Age adjustment factor based on month of retirement to determine appropriate pre- and post-65 benefit levels

Accelerated Benefits Options Example: Employee participates in MERP for 15 years at $75/month. He is 55 years old and retires in June 2016. Option 1 – Level Benefit Constant Benefit Level = $221.40 *Default Option Option 2 – 1.5x Benefit Level Pre-65 Benefit Level = $257.45 Post-65 Benefit Level = $171.64 Option 3 – 2x Benefit Level Pre-65 Benefit Level = $280.27 Post-65 Benefit Level = $140.14 Option 4- 3x Benefit Level Pre-65 Benefit Level = $307.54 Post-65 Benefit Level = $102.51 Actuarial value of benefits is consistent regardless of option chosen

Eligibility for Benefits Participate in the Plan at least 5 years (60 contribution months) Cease working for the bargaining unit Attain age 53

What if I don’t have 5 years participation? You have the option to make additional 18 months of contributions under COBRA in order to get to the minimum 60 months of contributions. If you can’t get to 60 months, then: Take a “reduced benefit level” – access all the contributions you’ve made into the plan for reimbursement of expenses beginning right after separation.

Sick Leave Conversion into MERP As a local, you can choose to convert sick leave cash value tax free Local defines % of sick leave to convert, and then applies to all members with sick leave value when they separate service (or have yearly cash outs) The cost of sick leave conversion is determined by member’s age at time of conversion

Sick Leave Conversion into MERP Age at Time of Conversion Cost of One (1) Active Service Unit Up to and through age 40 $26.02 age 41 $27.84 age 42 $29.79 age 43 $31.88 age 44 $34.11 age 45 $36.49 age 46 $39.05 age 47 $41.78 age 48 $44.71 age 49 $47.84 age 50 $51.19 age 51 $54.77 age 52 $58.60 age 53 $62.70 age 54 $62.10 age 55 $61.46

Determining Sick Leave Conversion Fire fighter with $15,000 (tax free) of sick leave to convert into MERP and retires at age 53 $15,000 divided by $62.70 = 239 ASU This fire fighter receives 239 additional ASU from his sick leave cash value or another $97.99/month added on to the monthly lifetime benefit

Benefit Duration Plan was developed to provide fire fighters a benefit until death When a fire fighter dies at any age, spouse can access 50% of the benefit regardless of spouse’s age and until spouse is eligible for Medicare If you and your spouse die, eligible dependents would receive 50% of the benefit through age 25

How Do I Receive My Benefit? You must incur an expense and have proof of the expense Submit proof of expense to BSI via fax or mail You can batch your expenses and send in quarterly (for example) or submit them as they occur BSI will verify expense is eligible for reimbursement direct deposit to fire fighter’s account

Rollover of Expenses Once you begin accessing your benefit but in any particular month don’t use your entire monthly benefit, the leftover amount does not rollover. Conversely, if expenses exceed your benefit amount, then the expense DOES rollover to any subsequent month that you have leftover benefit amount to apply until expense is completely reimbursed, or firefighter dies.

What Happens If I Leave Employment At My Local? If you go to another local participating in MERP, your participation accrual continues If you go to another job (or another local not in MERP), your months/years of participation in MERP are frozen and you may access your benefit when you reach age 53 If you have less than 60 months in the plan, you may access your reduced benefit right after separation

Delayed Commencement of Benefit Available to FFs with 5 years participation in the plan when they separate service If FF who is otherwise eligible for a benefit, chooses to “delay” accessing their benefit for a full year, they receive another year of Active Service Units FF may delay - in full year increments - for as long as they desire

Note: This is only a summary of the plan and does not replace the specifics of the plan document.