Information provided by the New York State Insurance Department for expenses incurred by New York welfare and pension funds jointly administered by union and management show that administrative costs in 1970 averaged about $25 per member for welfare plans and about $20 per member for pension plans. Comparing these average costs with the Plan's cost shows that the Plan was subject to very heavy administrative charges with costs per member being about four times as great as costs for other funds in New York.

CHAPTER 5

CONCLUSIONS AND COMMENTS ON CHANGES MADE TO

THE PLAN IN 1973

The Plan was not originally formulated or administered in the best interest of the members.

--Too small a proportion of the Plan's income was
being returned to the members.

--Other funding media existed which would have enabled the trustees to reduce expenses and therefore either pay higher benefits to the members or reduce contributions required from the employers.

It appears that it is the trustees' primary responsibility to insure the interests of the employees and that the trustees did not have sufficient knowledge to design their own plan or to effectively evaluate the plan which was developed for them. In early 1973 the trustees dismissed the administrator and made the following changes in the Plan.

--Of the $40 weekly contributions to be made by the
employers for each member, only $4 will be applied
to life insurance. A separate insurance fund was
established. The balance, or $36, will go into a
fund for paying severance benefits. The severance
benefits are basically unchanged although the more
economical funding medium will presumably allow
larger severance benefits based on the share accounts
in the future.

--A single group term insurance contract, effective
March 1, 1973, was purchased and the individual
whole-life policies were dropped.

--Under the group insurance policy, each member is
covered for $30,000 plus accidental death and
dismemberment.

--No agent or broker was involved in the purchase of the group term insurance policy, thereby eliminating

the large-scale commissions of individual whole
life policies.

--The proceeds of the insurance will go directly to
the deceased member's beneficiary without discounting.

We believe that these changes improve the Plan. Although we have not made financial projections of the effects of these recent changes, we believe that they will improve the soundness of the fund and, in the long run, will result in greater benefits to the total membership of the Plan.

CHAPTER 6

SCOPE OF STUDY

Our study included an evaluation of the actuarial soundness of the Plan and of the appropriateness of the funding media used. It was directed primarily to determining if the Plan's funding and benefit provisions were structured in the best interest of the Plan members.

We reviewed available documentation on the Plan and its administration, including:

--The collective bargaining agreement between Local 295 and the several employers of Local 295 members.

--Plan rules and regulations.

--Agreement and declaration of trust establishing the
Plan.

--A copy of a booklet describing the Plan and a copy of a leaflet listing questions and answers about the Plan.

--Copies of the minutes of trustees meetings for the
period January 1971 to February 1973.

--A report prepared by Lawrence R. Schiff, Associate
of the Society of Actuaries, dated June 11, 1971, on
the projected cash flow of the Plan's operations for
each of the first 11 years from December 1, 1970, to
December 1, 1981.

We also interviewed representatives of the former Plan administrator and the New York State Department of Insurance.

Our projections were based on (1) techniques commonly used by actuaries for such projections and (2) the assumptions and data indicated in the appropriate sections of this report.