Dennis Pierce General Chairman BNSF/BN Northlines/MRL 817.338.9010 |
Pat Williams |
Brotherhood of Locomotive Engineers
and Trainmen |
Austin
Morrison General Chairman BNSF/FWD.JTD.C&S 806.358.9025 |
Rick Gibbons General Chairman C&S BNSF/SLSF.MNA 4 17.887.5 267 |
Member AFL-CIO IBT Rail Conference |
ALL LOCAL CHAIRMEN-BNSF
May 16, 2005
File: Alt. Comp. Agr. Art II
Disability Insurance
Dear Sirs and Brothers:
This is in reference Article II of the December 23, 2003 BLET/BNSF “Alternative
Compensation Agreement”. As most of you know, Article II of the Alternative
Compensation agreement removed this property from the mandatory National
Disability Insurance program found in Article IV, Section 5 of the 2003 National
Agreement. Our on property agreement traded the full 3% value of the July 1,
2004 General Wage Increase for Profit Sharing. Conversely, the National
Agreement traded ½ of 1% of that same GWI to fund the National Disability
Insurance program. As the full value of that 3% GWI had already been traded on
our property, it was not available to be used to fund the $40.00 per month
contribution negotiated in the National Settlement.
For that reason, the on property agreement included language requiring the
Carrier to provide access to a voluntary on property group disability insurance
plan similar to the National Plan. While we know that the delays in implementing
this on property voluntary disability program have been frustrating, this letter
is to advise that we have finalized the disability offering and a direct mailing
with registration packet will be forthcoming to each qualifying engineer. We
have also attached printed flyers provided by the vendor selected to provide the
disability insurance offering. Please post and/or distribute the flyers so that
your membership is aware that the offering that they will be receiving by US
Mail is the offering described in our on property agreement. In addition, we
will be providing a current list of Local Chairmen to Woody Taylor of Railroad
Marketing. Woody has committed to make every effort to attend as many BLET
Division meetings during the open registration period, be they special meetings
or regular meetings, to directly discuss the program with your membership.
As you are sure to receive many questions concerning the disability insurance
offering, we will try to address a few of the key points.
The first issue is eligibility. As with our Flexible Spending Account (FSA)
offering in 2004, UTU was not agreeable that this offering be provided to any
employees holding engineer’s seniority who happened to be working in demoted
status at the point that eligibility was determined. For that reason, a cut off
process similar to the one used to determine eligibility for the FSA was used
for this offering as well. Accordingly, those who spent the preponderance of the
month of February working under the engineer’s agreement are eligible for the
offering. Whi1e BLET was open to offering this product to all who hold
engineer’s seniority, UTU insisted that this voluntary offering not be provided
to any employees working under their jurisdiction. While UTU is within its
rights to insist on that handling, we do not see that their position is in the
best interest of the involved employees.
One of the other issues that you will get questions on is the comparison between
the on property product and the national product. One of the key differences is
that the national disability plan is mandatory while the on property plan is
voluntary. While it is possible for this property to vote on a future trade of
GWI to fund access to the mandatory national plan, absent such ratification and
acceptance by the membership, the only plan available to our membership is this
self funded voluntary offering. There are several differences that come with a
voluntary offering, the first being the rate structure. Mandatory offerings such
as the national plan are inclusive of all eligible employees, healthy or
unhealthy. The resulting ratio of those paying premiums versus those filing
claims creates a self funded program that is more affordable than those plans
where participation is totally voluntary.
While the rates for a voluntary plan are traditionally higher than those found
in mandatory programs, the difference in tax consequences between the national
and on property program not only affect the premium rates, it also affects the
actual value of the benefit. The $40.00 paid by the railroad for those in the
national plan is paid as a “pre tax” premium. In other words, that $40.00 is
treated much like contributions to a Flexible Spending Account or 401(K), it is
not taxable as income. With $480.00 set aside as non taxable during any calendar
year in the national plan, the tax savings would be somewhere around $100.00 per
year. However, when the premiums for disability insurance are paid with pre tax
money in this fashion, the actual benefit payout becomes taxable income. For
example, while the pre tax premium could save the average employee $100.00 per
year, the $400.00 per week benefit becomes taxable income when the employee can
least afford it. Again depending on the involved employee’s tax rate, as much as
25% of the benefit could be lost to taxes.
Conversely, the on property program will be based on paying the premiums with
post tax money. While we will lose the benefit of approximately $100.00 per year
in tax savings as compared to the national plan, our benefits payout will be tax
free. While the national plans $400.00 per month could become $300.00 per month
after taxes, a $400.00 benefit under the on property plan will remain a $400.00
benefit. We only offer this explanation so that when your membership starts
comparing the on property offering to the national rates, they are aware of all
of the differences in what affects those rates.
In closing, Railroad Marketing has agreed to provide the membership with several
options when selecting their personal disability insurance policy. Waiting
periods, length of benefit payout, and amount of benefit payout are all flexible
in this offering. While Railroad Marketing has agreed to guaranteed access for
our eligible group, there will be a 12 month restriction on benefits for certain
pre existing conditions.
For that reason, Railroad Marketing has also agreed to provide various options
to address the handling of any pre existing conditions. Ultimately, each
employee can set up an individually tailored policy that best meets his or her
needs. In addition, Railroad Marketing is set up to allow for payroll deduction
of any and all premium payments. All in all, we feel that all of this combined
will provide the membership with voluntary access to disability insurance that
is of value.
Please distribute this information and add it to your Alternative Compensation
Agreement files. Please contact your respective General Committee Office or
Railroad Marketing if questions should arise.
Fraternally,
/s/ D.R. Pierce
/s/ P. Williams
BLET General Chairman
BLET General Chairman
/s/ A. Morison
/s/ RC Gibbons
BLET General Chairman
BLET General Chairman
cc: Steve Speagle, VP BLET
Woody Taylor, Railroad Marketing
Wendell Bell, BNSF
Enclosures