2006 Retiree MIP Overview October 2006 Rajiv Nundy & Kent Humphries HR Compensation Management

2 Agenda  Retiree Medical Insurance Program – Key features and recent changes  Recent Retiree MIP financial status  Prescription Program  Cost of the Rx program  Medicare Part D

3 Retiree MIP – Key Features  The Retiree MIP is a self insured program which provides comprehensive medical, dental and prescription coverage  Funding is shared between the Bank and retirees – you pay 25% of contributions but close to 40% overall when including deductibles, coinsurance and co-payments.  The Retiree MIP is a PPO – Preferred Provider Option – type of plan. If you choose an in-network medical or dental provider, you will have lower out of pocket costs and the Plan will also benefit from savings  The Retiree MIP is a self-insured program; Aetna, Van Breda and Pharmacare are administrators – they are required to process claims in accordance with the MIP Plan design. The contract is designed with financial incentives to encourage administrators to pay claims promptly and accurately  If you have a permanent non US address you also have a choice, once per year in December, to choose between Aetna and Van Breda as your administrator. The Plan design is essentially the same, but network savings are higher with Aetna if most of your medical treatment takes place in the US

4 Retiree MIP - recent changes  Recent Changes:  Increased overall contributions May 1, 2006 – 10.8% (third increase in three years – in aggregate 30% increase)  Implemented three tier premium based on Single, Dual and Family coverage - (600 plus family coverages )  Last increase in deductible and co-pay was Jan 1, 2003  Effective Jan 1, 2007 increase deductibles $50 for Medical Dental and Rx  Increase out-of-pocket $250 for Medical and Rx  History of Changes since 1991:  Average annual rate increase of 5.2% over the period and 7.7% over the more recent period

5 Medical, Dental and Prescription costs

6 Summary of recent financial  Most of this increase is due to :  increased utilization:  Increase in number of hospital admissions, inpatient surgeries and ER visits  Increase in average length of hospital stay  Increase in catastrophic claims ( over $50,000 from 24 to 40 claimants in 2005)  price increase:  Lower in-network hospital discounts  cost shifting to plan – lower out-of-pocket costs to retirees  partially offset with increase in network usage and increased Medicare COB savings

Prescription Program

8 Prescription Cost and Utilization Statistics

9 Medicare Part D  Medicare Part D was introduced in Jan 2006 – you were advised not to enroll  The Bank’s Plan is deemed Actuarially Equivalent and therefore qualifies for subsidy for those Medicare eligible participant who do not enroll in Part D – subsidy is estimated at approximately of $600 per enrollee in 2006 – total subsidy is projected at over $1.2 million annually in 2006  subsidy is calculated at 28% of the eligible charges between $250 and $5,000, so the maximum subsidy is capped at $1,330 per enrollee  The subsidy will be credited to the RMIP and would therefore benefit both retirees and the Bank under the existing cost sharing arrangement of Retiree and Bank of 25% and 75% respectively  RMIP members will receive a letter from the Bank confirming that the RMIP provides “Creditable Coverage” – no later than November 15, This will be provided each year no later than end of November  If you lose RMIP coverage, because you elect to end your RMIP coverage, or because you cease to be eligible for it ( e.g. if you divorce a Bank Group retiree), then you may be able to enroll in Medicare D later. The letter of Creditable Coverage from the Bank’s MIP will confirm that you had prior RMIP coverage and this will avoid you paying a Medicare D premium penalty in the future.

10 Medicare Part D vs Retiree MIP Rx Benefits MEDICARE  Deductible $250  Medicare pays 75% for claims between $250 and $2,250  Medicare pays 0% for claims between $2,250 and $5,100  Maximum Annual Deductible and Copay is $3,600 ( True out-of-pocket)  Catastrophic coverage begins after $5100 of annual expenses submitted – Medicare pays 95% thereafter  Premium is $420 per participant per year Retiree MIP  Deductible of $50, increase to $100 in 2007  Brand co-pay is 20% Preferred and 30% non- Preferred and Generic co- pay is 0%  Maximum annual Out-of- pocket Deductible and Copay for Individual is $1,000, increase to $1,250  Catastrophic coverage begins after approximately $4,800 (increase to $5,850)of annual expenses submitted – Bank pays 100% thereafter  Premium is 25% of annual cost – approx. $320 per year