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Update on the Greater Pennsylvania Carpenters’ Medical Plan (07-13-2020)
As the Trustees of the Greater Pennsylvania Carpenters’ Medical Plan, we work hard to provide you and your families with the comprehensive, high quality healthcare benefits you need and deserve at costs that are affordable for you, as well as our contributing employers and the Plan. That’s not always easy to do when healthcare and prescription drug costs keep going up and the regulations that cover our Plan keep getting more and more complicated. On top of that, the volatility of the stock market has a big impact on our investments. Finally, the number of hours you work is very important—the more hours you work, the more contributions we receive.
Our Plan had a great year in 2019. Our investments performed well and our expenses, including the claims we paid out, were manageable. That has our Plan in a strong position right now. With the COVID-19 health emergency impacting all of us, the timing could not have been better.
The Trustees took action to help our participants weather the pandemic. We decided to reduce costs for participants during the pandemic by making the following Plan changes.
- Actives covered in the Plan on April 1 will receive free coverage between July 1, 2020 and September 30, 2020. The cost to the Plan is approximately $19 million.
- Dollar Bank charges are being reduced by 10% for all actives for the quarter beginning October 1, 2020. The cost to the Plan is approximately $2 million per quarter.
- Effective January 1, 2021, the plan will increase your Medical Dollar Bank’s limit from $18,000 to $20,000. Effective January 1, 2022, the limit will increase to $22,000. The cost to the Plan is approximately $7.5 Million.
These changes will cost the Plan approximately $21 million in 2020. We are glad that we have the resources right now to make these changes for you. But we still have to be careful with how we manage and spend the Plan’s assets, particularly in light of the potential negative impact of COVID-19. It’s important that you understand how the Plan works and why it’s important that everyone has coverage.
On an annual basis, projections are prepared to forecast income, expenses and reserves of the Plan. The chart below shows how much we expect to spend in 2020 compared to what we spent in 2019. The projection assumes the following:
- One quarter of free coverage for actives from July 1 to September 30, 2020
- Reduction of dollar bank charges for all actives for the quarter beginning October 1, 2020
- Reduction of work hours by 10% due to COVID-19
The Plan assets come from two sources: contributions and investments. In your collective bargaining agreement, your employer agreed to contribute to the Plan for every hour you work so you can have health care coverage. The Plan invests those contributions so they can grow over time. Whereas wages provide income for you and your family, contributions provide health insurance for all members and their families.
Claim costs can be $50 or $500,000, and the amount of claims we pay during the year varies just as much. The Plan relies on contributions to pay claims when members get sick or hurt.
Major medical expenses like surgeries, chronic conditions and childbirth can affect anyone. Even if you don’t use your health care coverage now, it’s the Plan’s job to prepare for unexpected circumstances. The only way to protect all members—active and retired—and their families is to pool contributions together.
Because the pandemic kept some of our active participants at home, the Plan has fewer contributions to invest. The market has also gotten worse. We’re fortunate to have money in reserve to pay claims, but 2020 will be a worse year for us than 2019. That’s another reason your contributions are so important—the Plan’s reserves are meant for recessions and reductions in work hours like we’re experiencing during the pandemic.
We are happy to report that the Plan design we have put in place is working. Despite the reduction in hours and contributions, the volatility of the stock market and the increasing costs of care, we were in a position to make Plan changes to help you during this crisis.
Frequently Asked Questions
Q: How does my Medical Dollar Bank Work?
All hourly contributions go to the Plan. Money in your Medical Dollar Bank exists to provide you with a “currency” to use for “purchasing” benefits from the Plan. Dollar Bank Accounts allow you to “spend what you have today” on premium options or “save for a rainy day” (such as a period of under-employment) by choosing more basic options and saving your account surplus for future use.
Dollar Bank Accounts are Plan assets that remain in trust and are invested based on the Plan’s investment policy and Trustee decisions. They are “notional” accounts and are not considered “the participant’s money.” This means that your Dollar Bank Account balance is not a vested benefit and is not portable. You will not receive a distribution of the account when you lose eligibility.
Q: Why does the Medical Dollar Bank have a maximum? What happens when I reach the maximum?
It’s important that the Plan has enough assets on hand in the event of significant claim expenses, a dramatic reduction of work hours, investment losses, or all of the above. Once you’ve reached the maximum (currently $18,000 and increasing to $20,000 in 2021 and $22,000 in 2022), contributions in excess of the cap are invested in the Plan’s reserves.
Q: How does the Medical Dollar Bank maximum help me?
The only way to protect all members is to use excess contributions from healthy participants and spend the reserves on those who need it. If you incur a major medical expense, other members’ excess contributions will pay for your claim.
Q: Can I waive coverage?
Yes. During the open enrollment period in October, you have the option of selecting between three plans or opting out. If you opt out, 50% of future contributions will be credited to your Dollar Bank until you reach the Dollar Bank maximum. Contributions not credited to your Dollar Bank will go in the Plan’s reserves. If you waive medical and prescription drug coverage, you will not be eligible for the death benefit, accidental death and dismemberment benefit, disability credits or the weekly disability benefit (sick pay).
Notarization of Savings Withdrawal Applications (04-13-2020)
Due to the current Coronavirus pandemic, some members are reluctant to travel to or are having difficulty getting access to a notary.
To adapt for this current situation, after consultation with Legal Counsel, attached is a form that the Annuity/Savings Plan will accept while the current situation continues.
NOTE THAT THIS DOCUMENT REQUIRES SUBMISSION OF A GOVERNMENT ID, PA DRIVERS LICENSE WOULD WORK, FOR THE PARTICIPANT, SPOUSE AND BOTH WITNESSES.