group policy was of questionable benefit to members, considering the substantially greater premium costs to the Plan.

Individual policies also resulted in much greater commissions being paid to the insurance agency. Compensation to the insurance agency on individual policies purchased by the Plan during the first 2 years is estimated at about $800,000. GAO estimates compensation to the agency would have been about $10,000 for the same amount of group term insurance. (See p. 12.)

--Aside from the form of insurance

provided, including life insurance of any type as a part of the benefit structure of a severance plan is of interest.

Insurance protection was not specifically required by the agreement between the union and the employers. Local 295 members had already been provided life insurance coverage under the Group Welfare Fund.

It would seem that, if additional insurance coverage were desirable, it would have been more logical to provide it through the Group Welfare Fund.

--The Plan, itself, was named as beneficiary of policies purchased during the first 2 years. Certain policies were issued without a consent agreement or an application signed by the insured persons. (See p. 17.)

--Trustees were not paying members' beneficiaries full proceeds of the life insurance policies purchased on members' lives. If a member died before age 55, his beneficiary received about

74 percent of the face value. (See p. 18.)

Was the Plan Properly Funded?

A test commonly used for determining soundness of financing of an employee benefit plan (such as the Local 295 Plan) is simply to determine whether the plan will be able to pay benefits provided under its terms.

To pass this test, the plan's present value of expected future receipts together with its assets must be equal to or greater than the present value of benefit payments and expenses expected to be paid in the future. In addition, at no point in the future should the fund's cash position be projected as negative.

By applying the above criteria to the Plan, as it operated during the first 16 months, GAO calculations show that, if the Plan were terminated on November 30, 1973, the expiration date of the present union-management agreements:

--It could not have been expected to have sufficient assets to pay benefits as they were determined during the first 16 months.

It could not have been expected to be able to pay such benefits immediately because its earnings would not have been sufficient to offset expenditures made for insurance premiums, administrative expenses, and benefit payments.

--It would have taken from 15 to 20 years before its earnings would have put it, if terminated, in a position to immediately pay termination benefits (contributions made on member's behalf,