Automotive Industries Pension Plan

Transcription

1 Automotive Industries Pension Plan Regarding the Proposed MPRA Benefit s November 2, 2016 Atlanta Cleveland Los Angeles Miami Washington, D.C.

2 Purpose and Actuarial Statement This report to the Retiree Representative of the (the Plan) provides our actuarial opinion of the proposed benefit suspensions under the Multiemployer Pension Reform Act of 2014 (MPRA). Under Section 432(b)(3) of the Internal Revenue Code, a multiemployer pension plan certified in critical and declining status may apply to the Treasury Department for benefit suspensions designed to allow the plan to remain solvent in the long term. Code Section 432(e)(9)(B)(v) requires a plan with 10,000 or more participants to appoint a Retiree Representative to advocate for the interests of retired and inactive vested participants. Horizon Actuarial Services has been retained to provide actuarial support to the Plan s Retiree Representative. In preparing this report, we have relied upon information and data provided to us by the Plan s Board of Trustees, the Plan administrator, actuary, and other persons or organizations designated by the Board of Trustees. We did not perform an audit of the financial and participant census data provided to us, but we have reviewed the data for reasonableness for the purpose of this report. We have relied on all of the information, including plan provisions and asset information, as complete and accurate. In our opinion, all methods, assumptions and calculations used in this report are in accordance with requirements of the Code and the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Pension Protection Act of 2006 (PPA), and the MPRA. Further, in our opinion, the procedures followed and presentation of results are in conformity with generally accepted actuarial principles and practices. This report is based on actuarial calculations that require assumptions about future events. We believe that the assumptions and methods used in this report are reasonable and appropriate for the purposes for which they have been used. However, other assumptions and methods could also be reasonable and could result in materially different results. The undersigned consultants of Horizon Actuarial Services, LLC with actuarial credentials meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein. There is no relationship among the Board of Trustees of the Plan, the Retiree Representative, and Horizon Actuarial Services, LLC that affects our objectivity. Cary Franklin, FSA Actuary and Managing Consultant Ron Littler, FSA Consulting Actuary

3 Table of Contents 1. Summary 2 Page 2. Background 5 3. Analysis and Discussion A. Has the Plan met the conditions for MPRA benefit suspensions? 7 B. Have the MPRA limitations on suspensions been satisfied? 8 C. Who are the winners and losers with the proposed benefit suspensions? D. What other benefit suspension approaches were considered and are there other approaches that would be preferable to the benefits suspensions proposed in the Application? E. What if benefit reductions for retirees and beneficiaries are limited to 50% of the current benefit? F. How would a delay in implementing the benefit suspensions impact the projected viability of the suspensions? G. How sensitive are the results to variations in future experience? 19 H. Are the actuarial assumptions reasonable? 20 I. Are the data and calculations underlying the benefit suspensions accurate? 21 Appendix: Winners and losers analysis median benefits 23 Distribution of benefit reductions 25 Sample benefit calculations 26 1

4 Summary Horizon Actuarial Services, LLC has been retained by the Retiree Representative of the Automotive Industries Pension Plan (the Plan) to evaluate the application for benefit suspensions under the Multiemployer Pension Reform Act of 2014 (MPRA). The Plan was certified by its actuary to be in critical and declining status for 2015 and 2016 under the Pension Protection Act of 2008 (PPA), as modified by the MPRA. That fact, in conjunction with the fact that the Plan s Trustees assert that they have taken all reasonable measures to avoid insolvency, has led the Trustees to apply for benefit suspensions, as allowed by the MPRA. The benefit suspensions are intended to provide at least a 50% likelihood that the Plan will be able to avoid insolvency in the long term. This report is based upon the documents and information we received from the Plan, the Administrator, and the Plan s current actuary. The proposed formula for benefit suspensions limits the benefit accrual percentage for pre-2005 contributions to 1.96% of contributions. In accordance with the MPRA rules, no participant s benefit is to be reduced below 110% of the PBGC guaranteed benefit. In the aggregate, the proposed suspensions would reduce current benefits by approximately 38%. However, individual benefit reductions range from 0% to 61%. Our role as actuary to the Plan s Retiree Representative is to evaluate the accuracy, reasonableness, and appropriateness of the proposed suspensions from the perspective of the Plan s retirees, beneficiaries, and inactive vested participants in order to assist the Retiree Representative in his role as advocate for those participants. This report addresses a number of topics related to the proposed benefit suspensions as described in the Plan s application, dated September 27, 2016 (the Application). A brief summary of our observations and conclusions is provided below; the remaining sections of the report explore these topics in greater detail: The Plan has met the conditions for MPRA suspensions: o From an actuary s perspective, it appears all reasonable measures to emerge from critical status have been exhausted benefits have been reduced to a reasonably practical limit (short of the proposed MPRA suspensions) and contribution rates would need to increase more than eight-fold from 2012 levels to emerge from critical status by the end of 2023 or by more than four-fold just to avoid insolvency. o Solvency cannot be maintained without benefit suspensions. o The proposed suspensions are necessary and sufficient to project long term solvency. The MPRA limitations on benefit suspensions appear to have been satisfied: o No benefit is reduced below 110% of the PBGC guaranteed amount. o No benefit suspensions apply to retirees age 80 and older. o Benefit suspensions for retirees between ages 75 and 80 are graded in accordance with the MPRA rules. o No benefit suspensions apply to benefits based on disability (as defined under the plan). o Aggregate benefit suspensions do not materially exceed the amount needed to avoid insolvency. o From an actuary s perspective, benefit suspensions appear to be equitably distributed across the participant population. However, the benefit reductions for some participants are very large (as much as 61% of the current benefit) and it might be worth exploring the viability of narrowing the range of benefit reductions. 2

5 Summary Winners/losers analysis: Of the 21,633 inactive participants, 61% are expected to have an equal or greater value of expected retirement benefits with the suspensions; 39% will have a lower value, assuming PBGC guaranteed benefits would be payable indefinitely post-insolvency without the suspensions. If PBGC guaranteed benefits are not payable (i.e., if the PBGC s multiemployer program itself becomes insolvent and is discontinued), then 88% are expected to have a greater value of retirement benefits with the suspensions, 12% will have a lower value. Section C of the Analysis and Discussion provides more detail and commentary on this winners/losers analysis. Based on a review of the Application and other materials provided by the Plan s actuary, Segal Consulting (Segal), it is clear that a number of alternative suspension formulas were evaluated and considered by the Trustees. The design of the suspensions ultimately chosen for the Application reflects the thought that participants with benefits accrued after 2004 (i.e., the active participants and more recent inactive participants) have borne the greatest share of the benefit side of the Plan s funding corrections to date, and so it is fairer to focus these benefit suspensions on the pre-2005 accruals. o o The proposed benefit suspensions impact those who retired before 2005 the most. Retired participants generally have less opportunity to restore lost retirement benefits than younger participants, and so it could be argued that non-retired participants should bear a greater share of the benefit suspensions. Given that the projected insolvency date is only 12 years from the effective date of the proposed benefit suspensions, it is possible that shifting a greater share of the benefit reductions from retirees to active participants and inactive vested participants may not enable the Plan to avoid insolvency. Current actives expected benefit payments may be too far in the future to impact a projected insolvency that is only 12 years away. Accordingly, to the extent that the MPRA suspensions are a desired solution to the Plan s situation, there may not be a more effective distribution of benefit suspensions than what is proposed in the Application. Possible adjustments to the proposed benefit suspensions formula to address this are (a) capping the retirees benefit suspensions at no more than a 50% (or perhaps less) reduction in benefit and (b) providing greater benefit reductions to vested inactive participants. By our calculations, 1,360 retirees and beneficiaries are estimated to have benefit reductions of more than 50% of their current benefit. If the amount of these participants benefit suspensions were capped at 50% of the current benefit, we estimate that other participants pre-suspension benefits (besides those with MPRA protected benefits) would need to be reduced by an additional aggregate 9% to maintain the same projected solvency. We estimate that a one-year delay in implementing the suspensions would mean that postsuspension benefits would need to be reduced by an average additional 3.5% (before consideration of the MPRA benefit protections). A two-year delay would mean that benefits would need to be reduced by an estimated average additional 7.2%. The projected date of insolvency is sensitive to differences between actual experience and that assumed in designing the suspensions. Future experience and subsequent years projections may indicate that the benefit suspensions are either inadequate to sustain solvency or are excessive and did not need to be as large it may be many years before the success of any benefit suspensions design can be assessed and confirmed. 3

6 Summary In our opinion, the actuarial assumptions underlying the proposed benefit suspensions are reasonable and appropriate. Based on our review and analysis, we do not have any concerns about the quality of the data used or the accuracy of the calculations prepared by the Plan s actuary and administrator. 4

7 Background MPRA BENEFIT SUSPENSIONS The Multiemployer Pension Reform Act of 2014 (MPRA) was enacted in December MPRA created a new funding status under the Pension Protection Act critical and declining for plans that are projected to become insolvent within 20 years (or in certain rare instances, within 15 years). Plans in critical and declining status that have taken all reasonable measures to emerge from critical status can submit an application to the Treasury Department to reduce benefits (either temporarily or permanently) so called benefit suspensions if doing so will enable the plan to avoid insolvency. Such benefit suspensions must be enough to avoid projected insolvency, but not reduce benefits more than is necessary to do so. The has been heading towards insolvency for a number of years. In second opinion consulting projects for the Board of Trustees in and again in 2014, we confirmed the Plan actuary s projections of future insolvency. The most recent projections, which we have independently confirmed, indicate expected insolvency in The Plan s Trustees adopted a Rehabilitation Plan in 2008 (updated in subsequent years) which provided for a number of benefit reductions: elimination of Early Retirement subsidies for non-retired participants elimination of Early Retirement benefits for vested inactive participants elimination of future Disability Benefit awards elimination of 36-payment pre-retirement death benefits elimination of optional forms of benefit payment elimination of subsidies under qualified joint and survivor annuities for non-retired participants The Rehabilitation Plan also included contribution rate increases of 5% per year for seven years beginning in Given the Plan s poor investment performance beginning in 2008 and other adverse experience such as the decline in contributory work levels, the Rehabilitation Plan changes in benefits and contributions have not been enough to allow the Plan to emerge from critical status or even to forestall insolvency. Documents provided by the Plan and its actuary describe the measures taken to forestall insolvency and the conclusion that all reasonable measures have been taken, leading to the decision to apply for MPRA benefit suspensions. The Plan s retirement benefits are determined as a percentage of the contributions made on behalf of each participant. The benefit percentage has been changed frequently in the past, reaching a high of 5.00% in Prior to 2003, a participant s benefit percentage ranged from 2.75% to 5.00%, depending on the date of retirement. Effective July 1, 2003, the benefit percentage was lowered to 3.00%, lowered again effective January 1, 2005 to a range of rates from 0.50% to 2.00%, and then finally lowered again effective July 1, 2008 to the current 1.00%. In designing the benefit suspensions, the Plan evaluated a number of alternative formulas. Ultimately, the Trustees opted for a benefit formula that caps the benefit percentage for pre-2005 contributions at 1.96%. Benefits for all participants, including retirees and beneficiaries in pay status, would be recalculated at the new capped benefit percentage (as opposed to simply reducing current benefits by a percentage). The rationale for (1) applying the benefit reductions only to pre-2005 service and (2) recalculating all participants benefits rather than a simpler percentage reduction in accrued benefits is that previous benefit reductions focused on post-2004 service and so the Trustees considered it more equitable to focus the proposed benefit suspensions on the pre-2005 accrued benefits (further 5

8 Background comments on the equitable distribution of the proposed benefit suspensions are provided in Section B of the Analysis and Discussion). THE RETIREE REPRESENTATIVE MPRA requires that the Trustees of a plan with more than 10,000 participants appoint a Retiree Representative to advocate for the interests of retirees, beneficiaries, and inactive vested participants throughout the benefit suspensions approval process. Accordingly, the Trustees appointed Raymond Monteiro to serve as the Plan s Retiree Representative. MPRA further permits the Retiree Representative to retain legal and actuarial support in his role. The law and accompanying regulations do not provide specific tasks and responsibilities for the Retiree Representative and his actuary. Given our familiarity with the Plan from our previous studies, as well as the importance of providing the Retiree Representative with objective information regarding the proposed benefit suspensions, we feel that it is essential that our services to the Retiree Representative not be limited to a qualitative assessment of the reasonableness of the proposed suspensions, but to also provide our own check of the calculations and projections prepared by the Plan s actuary in support of the proposed suspensions. Accordingly, our review includes independent matching of many of the calculations and projections prepared by Segal, as well as additional quantitative analysis. 6

9 Our analysis of the proposed MPRA benefit suspensions is addressed by answering a series of questions posed by the Retiree Representative and his legal counsel. A. Has the Plan met the conditions for MPRA benefit suspensions? MPRA specifies these conditions before a Plan can implement benefit suspensions: 1. The plan has been certified in critical and declining status under the PPA; 2. The plan has taken all reasonable measures to avoid insolvency; 3. The plan s actuary certifies that, taking the benefit suspensions into account, the plan will avoid insolvency; and 4. The plan sponsor (Board of Trustees) determines that the plan is projected to become insolvent unless the benefit suspensions are implemented. Each of these conditions is addressed below. 1. The annual PPA status certifications prepared by the Plan s actuary for 2015 and 2016 show a projected insolvency occurring sometime in 2029 or Based on the January 1, 2016 valuation data provided to us and the assumptions used in the 2016 status certification, we verified the projected insolvency date and confirmed the Plan s critical and declining status. In previous studies that we prepared for the Trustees in and 2014, we confirmed the insolvency projections prepared by the Plan s actuary at those times. Specifically, in our November 24, 2014 review of cash flow projections, we projected that the Plan would become insolvent in Further, our analysis showed that the Plan s projected insolvency was fairly insensitive to variations in investment return, contributions, retirement rates and other experience in most instances, reasonable variations in future experience did not change the projected insolvency date by more than one or two years. This is because, prior to any benefit suspensions, expected benefit payments are so large relative to the assets and other cash flows that variations in experience simply don t make much difference in the fund s expected remaining period of solvency. 2. The Plan s 2015 update of its Rehabilitation Plan describes the measures that the Plan has taken in recent years to emerge from critical status and, failing that, to forestall insolvency. The updated Rehabilitation Plan noted that the average contribution rate would have needed to increase from $394 per month to $3,356 per month to enable the Plan to emerge from critical status by the end of We estimate that for the Plan to remain solvent without benefit suspensions, contribution rates would need to be increased by approximately 56% per year for three years, beginning in As we are not attorneys and do not practice law, we will defer to the Plan s legal counsel, and ultimately the Treasury Department s opinion, as to the determination that all reasonable measures have been taken to avoid insolvency. However, from the documents we reviewed, the Plan s Trustees appear to have addressed the all reasonable measures question. Note that this is merely an observation about the material we reviewed and does not constitute a formal actuarial opinion that all reasonable measures were taken. 3. We were provided with the details of Segal s cash flow projections, showing a 2029 insolvency year for the current Plan s benefits, based on their assumptions underlying the design of the benefit suspensions. We were also provided with data files containing benefit amounts and credited 7

10 service for each participant under alternative benefit suspension scenarios 1. In addition, we requested and received detailed contribution history for 13 sample participants, which allowed us to verify the benefit amounts in the data files. After confirming the benefit amounts for these 13 sample participants and reviewing the benefit calculations for the entire participant file, we then calculated the PBGC guaranteed benefits in order to apply the minimum 110% of PBGC guaranteed benefit and we projected the post-suspension benefits through Our results were reasonably close to Segal s (within about 2% of each year s expected benefit payments), giving us confidence that Segal s projections are accurate. 4. As discussed in item 1 above, we independently verified that the Plan is projected to become insolvent in 2029, absent any benefit suspensions. B. Have the MPRA limitations on suspensions been satisfied? MPRA specifies these limitations regarding benefit suspensions: 1. No participant s benefit may be reduced below 110% of the PBGC guaranteed benefit. 2. Benefits of retirees and beneficiaries age 80 or older may not be suspended. 3. No benefits based on disability (as defined by the Plan) may be suspended. 4. Benefits of retirees and beneficiaries between ages 75 and 80 may be only partially suspended (based on age). 5. Aggregate benefit suspensions cannot materially exceed the amount needed to avoid insolvency. 6. Benefit suspensions must be equitably distributed across the participant population. Each of these limitations is addressed below. 1. The PBGC guaranteed benefit for multiemployer pension plans is based on the underlying benefit accrual rate, which is each participant s monthly benefit under the Plan (before any suspensions) divided by the participant s years of service. The PBGC guaranteed benefit accrual per year of service is then 100% of the first $11 of the participant s accrual rate plus 75% of the next $33 of accrual rate. Thus, the maximum PBGC guaranteed benefit accrual rate is $35.75 per year of service ($35.75 = 100% of $11.00 plus 75% of $33.00). The data files provided by Segal and the Plan s administrator (ATPA) did not explicitly include the PBGC guaranteed benefit (or 110% of the PBGC benefit). However, the closeness to which we matched Segal s cash flow projections for the proposed benefit suspensions gives us confidence that the 110% of PBGC minimum benefit was correctly considered. 2. Our review of the benefit suspension data confirmed that benefits are not being suspended for retirees age 80 and older as of the proposed July 1, 2017 effective date of the benefit suspensions. 3. Our review of the benefit suspension data confirmed that no benefits based on disability as defined by the Plan are being suspended. 1 We were provided files with a 1.50% and 3.00% cap on the benefit percentage for pre-2005 service. Using the same approach as Segal, we interpolated the benefit amounts in these two files to estimate the benefits under the 1.96% benefit cap under the proposed suspensions. We estimated the PBGC guaranteed benefits based on the credited service provided in the data files is the end of the extended period (as defined by MPRA) chosen by the Plan. 8

11 4. Our review of the benefit suspension data confirmed that for retirees age 75 and older but less than age 80 the benefit suspensions correctly apply the phased suspensions. 5. To confirm that the aggregate benefit suspensions do not materially exceed the amount needed to avoid insolvency, we duplicated the 5% test prepared by Segal. This test shows that if the benefit suspensions were 5% less than the amount proposed, the Plan would not be able to avoid insolvency. Our independent cash flow projections matched those prepared by Segal to within a reasonable degree and so we conclude that the cannot materially exceed test is satisfied by the proposed benefit suspensions. Further, stochastic analysis prepared by Segal (as required by the MPRA) shows a 50.3% probability that the Plan will remain solvent through 2062 with the proposed suspensions. This analysis demonstrates, as required by MPRA, that the amount of proposed suspensions is not excessive in the aggregate. 6. MPRA requires that the benefit suspensions be equitably distributed across the participant population, taking into account a number of factors such as age, length of time in pay status, amount of benefit, years to retirement for non-retired participants, subsidized benefits (such as early retirement benefits), and other factors. Although the law and accompanying regulations provide guidance in answering this question, no quantitative test is prescribed and so compliance with this requirement is largely subjective. The equitable distribution requirement may be the single biggest challenge in designing the optimal benefit suspension formula. It is impossible to know with any certainty which participants will be better able to adjust to benefit reductions; plan Trustees must balance many factors in attempting fairness in the design of the suspensions. Our analysis of the equitable distribution question discussed here and also in Sections C, D, and E focuses on an objective mathematical evaluation of how the proposed benefit suspensions impact the expected benefits of different groups of participants. By definition, any MPRA benefit suspension alters the promise of pension benefits made to participants. The particular suspension formula chosen by the Trustees changes that promise only to those participants with pre-2005 service; the benefits to participants with no pre-2005 service are not affected. In the aggregate, the proposed suspensions would reduce accrued benefits and benefits currently in pay status by approximately 38%. However, because of the very wide range of benefits under this Plan (attributable to both the wide range of contribution rates and the multiple benefit percentages that have applied over the years), individual benefit reductions range from 0% to 61%. (See the Appendix for sample benefit calculations provided with the Application that illustrate the impact of the proposed benefits suspensions on individual participants.) Based on a review of the Application documents and additional materials provided by Segal, we observed that several alternative suspension formulas were evaluated and considered by the Trustees. Document 13.1 of the Application discusses the reasoning underlying the design of the suspensions ultimately chosen for the Application, noting in part: In general, those with Future Service prior to January 1, 2005 have benefited from higher accrual rates. The reduction of the historical accrual rate will help even out the differences in accrual rates between participants with Future Service before and after January 1, So it appears that the Trustees concluded that it was appropriate to focus the benefit suspensions on the pre-2005 accruals. It is also worth noting that those participants with relatively larger benefits who have been retired for many years have already received a significant portion of the expected lifetime value of their retirement benefits. 9

12 Further, the Trustees noted other factors that influenced their decision to focus the benefit suspension formula on pre-2005 service (as noted in Application Document 13.1): participants who have retired under the 2008 Rehabilitation Plan have not been eligible for any subsidized retirement benefits, which has further widened the gap in benefit amount between those with Future Service before and after January 1, 2005, while those who retired previously have continued receiving their subsidized benefits. further reducing the accrual rate for active participants would cause a loss of support for the Plan and may lead to further employer withdrawals. The proposed benefit suspensions will impact the retirees and beneficiaries the most, since they have relatively more pre-2005 benefit service than the active participants or many of the inactive vested participants. Retirees generally have less opportunity to restore lost benefits than younger participants, and so it might be more appropriate to weight the suspensions towards those participants who have more years left to restore retirement savings and lost benefits. Given that the projected insolvency date is only 12 years from the effective date of the suspensions, it is possible that shifting benefit reductions from retirees to active participants may not enable the Plan to avoid insolvency. Current actives expected benefit payments may be too far in the future to impact a projected insolvency that is only 12 years away. Accordingly, to the extent that the MPRA suspensions are a desired solution to the Plan s situation, there may not be a more effective distribution of benefit suspensions than what is proposed in the Application, although there may be adjustments to the proposed suspensions that warrant further study and consideration, such as: Limiting the amount of benefit reduction for current retirees and beneficiaries to 50% of the current benefit; the proposed benefit suspensions can amount to a 61% reduction for certain participants. Providing relatively greater benefit reductions for inactive vested participants. These variations are discussed in more detail in Sections D and E below. The following table also illustrates the equitable distribution challenge. This table allocates all of the Plan s participants, based on their pre-suspension accrued benefits: Participant Counts as of December 31, 2015 Pre- Monthly Benefit Actives Inactive Vested Retirees & Beneficiaries Total Less than $500 1,901 4,627 5,568 12,096 $500-$ ,525 2,120 5,261 $1,000-$1, ,331 1,129 2,863 $1,500-$1, ,734 $2,000-$2, ,268 $2,500-$2, $3,000-$3, $3,500-$3, $4,000-$4, $4,500-$4, $5,000-$5, $5,500-$5, $6,000 or greater Total 3,923 10,394 11,239 25,556 10

13 This table shows that: 47% of the Plan s participants (12,096 of 25,556) have pre-suspension monthly benefits of less than $500 per month, while less than 3% of the participants (653 of 25,556) have monthly benefits in excess of $4,000 (and 60% of those 653 high benefit participants are in pay status). Those 12,096 participants with less than $500 monthly benefits account for only 11% of the Plan s total accrued pre-suspension benefits, while the 653 participants with monthly benefit above $4,000 account for nearly 14% of the total benefits. Given the significant amount of aggregate benefits that must be reduced in order to achieve long term solvency, this table shows how the Plan appears to have little choice but to generate relatively larger savings from the high benefit participants. That is not to say that there is no viable alternative besides the proposed formula that suspends up to 61% of some participants benefits, but the degree to which the suspensions can be lessened is likely limited. C. Who are the winners and losers with the proposed benefit suspensions? Perhaps the most important question in deciding whether to accept the proposed suspensions is whether participants are financially better off with or without the suspensions. The answer to this question varies by participant, depending on several factors including age, years of service, health, marital status, and personal financial resources. Another factor impacting the question of whether participants are better off with or without the proposed suspensions is the uncertain future that the PBGC itself is facing. The prospect of a few very large plan insolvencies within the next ten or so years means that the solvency of the PBGC s multiemployer plan program is itself threatened. Barring future legislative action to significantly increase PBGC multiemployer plan premiums or other legislative protections that may be enacted to ensure the PBGC s continued solvency, there is a risk of the PBGC being unable to pay guaranteed benefits. While it is our opinion that some legislative action will occur so that potentially millions of multiemployer plan participants do not lose their benefits, there is no certainty that this will occur and the Plan s Trustees, the Retiree Representative, and the Plan s participants must consider the future of the PBGC s benefit guarantees in evaluating the proposed suspensions. Consider this example: Assume two retirees, one age 60 and the other age 75, each with a $3,000 monthly benefit, paid as a life annuity. Further, assume that the proposed benefit suspension would reduce the $3,000 benefit to $1,500 and that the PBGC guaranteed benefit is $700 per month. Then, the expected benefits for these two retirees with or without the suspensions are as follows: With suspensions: Without suspensions: $1,500 per month for life (assuming the Plan remains solvent after the suspensions and the post-suspension benefit never changes) $3,000 per month for 12 years until the Plan s projected insolvency ( ), followed by $700 per month for life (assuming the PBGC remains solvent) or $0 (assuming the PBGC itself becomes insolvent and is unable to pay benefits) 11

14 The 75-year old retiree may conclude that he is better off without the benefit suspension, collecting his full benefit until age 87. The 60-year old may prefer the suspension, on the grounds that he cannot risk having no pension after age 72. One way of evaluating who is better off with the suspensions is a winners/losers valuation. While this is a purely quantitative analysis without regard to factors such as health and personal financial situations, it is nonetheless a useful tool. We compare the with suspension and without suspension scenarios by calculating the present value of the expected benefits; in other words, what is the single sum value that would provide the future expected benefits, based on the assumed life expectancy and interest. For this analysis, we assumed 2.00% interest and the same mortality table used by Segal in developing the suspensions. The 2.00% interest assumption was chosen as a representative shorter term rate on invested cash; this assumption is more appropriate for this analysis than the longer term asset allocation in which the Plan s assets are invested. The tables below summarize the participant counts of the winners/losers analysis for the proposed suspensions (in these tables Winner means the present value of benefits with the proposed suspension exceeds the present value without the suspension, Loser means the opposite and Tie means that the present value is unaffected by the suspension). In these tables, fully protected by PBGC guarantee means that the pre-suspension benefit is no more than 100% of the PBGC guaranteed benefit; no benefit reduction means that the pre-suspension benefit is between 100% and 110% of the PBGC guaranteed benefit. i. Retirees; assuming PBGC guaranteed benefits would be paid if the Plan becomes insolvent Category Winners Losers Ties Total Disabled Retirees Retirees Age 80+ 2, ,908 Retirees fully protected by PBGC guarantee Other Retirees with no benefit reduction Retirees age not included above 266 1, ,530 All other Retirees 641 3, ,580 Total 4,469 5,203 1,567 11,239 ii. Retirees; assuming PBGC guaranteed benefits would not be paid if the Plan becomes insolvent (e.g., if the PBGC multiemployer program becomes insolvent and is not protected by future legislative action) Category Winners Losers Ties Total Disabled Retirees Retirees Age 80+ 2, ,908 Retirees fully protected by PBGC guarantee Other Retirees with no benefit reduction Retirees age not included above 1, ,530 All other Retirees 2,739 1, ,580 Total 8,951 2, ,239 12

15 iii. Inactive Vested Participants; assuming PBGC guaranteed benefits would be paid if the Plan becomes insolvent Category Winners Losers Ties Total Inactive Vested fully protected by PBGC guarantee Inactive Vested with no benefit reduction All other Inactive Vested 6,487 3, ,667 Total 7,000 3, ,394 iv. Inactive Vested Participants; assuming PBGC guaranteed benefits would not be paid if the Plan becomes insolvent Category Winners Losers Ties Total Inactive Vested fully protected by PBGC guarantee Inactive Vested with no benefit reduction All other Inactive Vested 9, ,667 Total 10, ,394 A summary of the winners and losers analysis is graphically represented on the next page. This shows that, regardless of whether PBGC benefits are ultimately paid, a majority of participants is projected to fare better (or at least no worse) under the proposed benefit suspensions than without the suspensions. 13

16 10,000 Retirees & Beneficiaries (from tables i and ii) PBGC Remans Solvent PBGC Goes Insolvent 8,000 6,000 5,129 4,000 5,129 5,203 2,000 3,822 2, Winners & Ties Losers Winners Losers Winners/Ties: Benefit Reduction Winners/Ties: No Benefit Reduction Losers: Benefit Reduction 10,000 Inactive Vesteds (from tables iii and iv) PBGC Remains Solvent PBGC Goes Insolvent 727 8,000 6, ,314 4,000 6,487 2,000 3, Winners & Ties Losers Winners Losers Winners/Ties: Benefit Reduction Winners/Ties: No Benefit Reduction Losers: Benefit Reduction 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 All Inactives (from tables i + iii, ii + iv) PBGC Remains Solvent PBGC Goes Insolvent 5,856 5,856 13,136 7,394 8,383 2,641 Winners & Ties Losers Winners Losers Winners/Ties: Benefit Reduction Winners/Ties: No Benefit Reduction Losers: Benefit Reduction 14

17 Here are some detailed observations on the results shown in the tables and graphs above: 46% of the retirees (5,129 of 11,239) cannot lose under the suspensions because their benefits are fully protected under MPRA based on age, disability, or that their benefits are no more than 110% of the PBGC guarantee. Of the remaining 54% of retirees (6,110 of 11,239), only 15% (907 of 6,110) would be better off under the proposed suspensions, while 85% (5,203 of 6,110) would be worse off, assuming that the PBGC remains solvent and pays guaranteed benefits indefinitely. If the PBGC is unable to pay any benefits, 63% of the unprotected retirees (3,822 of 6,110) would be better off with the suspensions, while 37% (2,288 of 6,110) would be worse off. Considering all retirees (protected and unprotected), 40% (4,469 of 11,239) are projected to be winners under the proposed suspensions if PBGC remains solvent, with 46% (5,203 of 11,239) being worse off with the suspensions, and 14% (1,567 of 11,239) being unaffected by the suspensions because their Plan benefits are the same as their PBGC guaranteed benefits. If the PBGC cannot pay benefits, 80% of all retirees (8,951 of 11,239) are projected to be winners under the proposed suspensions, with 20% (2,288 of 11,239) being worse off with the suspensions. A clear majority of the vested inactives are better off with the proposed suspensions: 67% (7,000 of 10,394) win if the PBGC remains solvent, with 31% (3,180 of 10,394) being worse off, and 2% (214 of 10,394) being unaffected by the suspensions; without PBGC benefits these figures change to 97% winners (10,041 of 10,394) and 3% losers (353 of 10,394). Considering all 21,633 inactive participants (retirees, beneficiaries, and inactive vested), 53% (11,469 of 21,633) are projected to be winners with the proposed suspensions, 39% (8,383 of 21,633) will be losers, and 8% (1,781 of 21,633) are tied, assuming PBGC remains solvent. If the PBGC cannot pay benefits, 88% (18,992 of 21,633) will be winners and 12% (2,641 of 21,633) will be losers. The Appendix provides additional tables showing the median pre-suspension and post-suspension benefits for the results shown in tables i. through iv. above. D. What other benefit suspension approaches were considered and are there other approaches that would be preferable to the benefits suspensions proposed in the Application? The design of benefit suspensions is a zero-sum game given the aggregate amount of benefit suspensions that must be implemented in order to avoid insolvency, lessening the amount of suspensions for one group of participants necessarily means that larger suspensions must apply to other groups. This gets back to the equitable distribution question what is the fairest way to allocate benefit suspensions among the Plan s participants? Consideration of alternative suspension approaches Based on several documents in the Application and additional materials provided by Segal, it appears that multiple approaches to the benefit suspensions were evaluated by Segal and considered by the Trustees. These include: 15

18 Across-the-board reductions; e.g., reducing all benefits by a uniform percentage Greater reductions for vested inactive participants Elimination of early retirement subsidies for retired participants and beneficiaries Benefit formulas that reversed the prior practice of retroactive application of increases in the benefit percentage; i.e., before July 1, 2003, whenever the benefit percentage was increased, it was applied retroactively to all prior service, as opposed to applying the higher percentage only to recent or subsequent service Combining a higher pre-2005 benefit percentage (i.e., higher than the 1.96% in the Application) with an across-the-board uniform percentage reduction Various memoranda prepared by Segal document that these alternative approaches would also have projected the same long term solvency as the proposed benefit suspension formula. Those memoranda confirm that the alternative approaches work mathematically, without providing any opinion as to whether any of those approaches may have been preferable to the suspension formula ultimately selected for the Application. We do not have any information regarding the Trustees discussions of the pros and cons of the various approaches other than the discussion in Document 13.1 of the Application in support of the suspensions formula ultimately selected. However, it is clear that a number of alternative approaches were evaluated. Other suspension formula variations for consideration As discussed above, other approaches for the suspension formula that could be considered include: The cap on reductions see the 50% idea described in Section B above (and evaluated in Section E below). Greater reductions for vested inactives. Vested inactives are generally considered to have less of an attachment to the industry and so their benefits are often the first source for reducing benefits. Further, vested inactives may also include orphan participants whose employers withdrew from the Plan without fully paying their withdrawal liability, and so plans will sometimes focus benefit reductions on the orphan participants. Note that greater reductions for vested inactives is included in the list above of other approaches evaluated by the Trustees, but we did not observe any discussion about the orphan participant issue. These approaches could potentially mitigate the degree to which the current retirees bear the burden for the benefit suspensions. In terms of dollars of benefits, the biggest losers under the proposed suspensions are naturally those with the greatest benefits. Would it be preferable to lessen or limit the amount of those losses at the expense of those with lower benefits? This is a difficult question to answer, since participants circumstances differ and recall the table in Section B that shows the concentration of benefits in those participants with the highest benefits. When correcting funding problems, as for a PPA Rehabilitation Plan, many plans choose to apply the most severe benefit reductions to vested inactive participants, on the grounds that those participants have less of a connection to the plan and may be working and earning benefits under another plan. Is it reasonable to apply that same logic to the design of the benefit suspensions and impose greater benefit reductions on the vested inactive participants? That raises the question of whether larger reductions for the vested inactive participants would allow for a material lessening of the suspensions for the retirees and beneficiaries. 16

19 The tables below summarize the projected benefit payments before and after the proposed suspensions, broken down by type of participant and viewed separately for (the projected period of solvency without the suspensions) and : Before suspensions: Projected Aggregate Benefit Payments (in $millions) Current and Future Actives Current Vested Inactives Current Retirees and Beneficiaries All Participants $156.2 $373.9 $1,323.1 $1,853.2 % of all Participants 8.4% 20.2% 71.4% 100.0% $0.0 $0.0 $0.0 $0.0 % of all Participants 0.0% 0.0% 0.0% 0.0% Total $156.2 $373.9 $1,323.1 $1,853.2 % of all Participants 8.4% 20.2% 71.4% 100.0% With the proposed suspensions: Projected Aggregate Benefit Payments (in $millions) Current and Future Actives Current Vested Inactives Current Retirees and Beneficiaries All Participants $112.2 $224.7 $907.2 $1,244.1 % of all Participants 9.0% 18.1% 72.9% 100.0% $900.7 $1,037.7 $624.9 $2,563.3 % of all Participants 35.1% 40.5% 24.4% 100.0% Total $1,012.9 $1,262.4 $1,532.1 $3,807.4 % of all Participants 26.6% 33.2% 40.2% 100.0% The pie charts below show the relative portions of the aggregate pre-suspension benefits, suspension benefit reductions, and post-suspension benefits for for the current and future actives, current vested inactives, and current retirees and beneficiaries: Pre- Reduction Post- 8% 7% 9% 20% 24% 18% 71% 68% 73% Actives Inactive Vesteds Retirees & Beneficiaries Actives Inactive Vesteds Retirees & Beneficiaries 17 Actives Inactive Vesteds Retirees & Beneficiaries

20 These tables and charts further illustrate the challenge the Plan faced in designing a viable suspensions formula that did not impact the retirees too severely. Retirees account for 71% of the pre-suspension expected benefit payments through the Plan s projected insolvency in Given the aggregate amount of benefit reductions that must be made to achieve long-term projected solvency, as well as the limitations on benefit suspensions (due to age, disability, and 110% of the PBGC guaranteed benefit), it becomes very difficult to design a viable suspensions formula that does not impact the retirees (at least in the aggregate) less than the proposed formula does. E. What if benefit reductions for retirees and beneficiaries are limited to 50% of the current benefit? Our analysis indicates that an estimated 1,360 retirees and beneficiaries will have benefit reductions of more than 50% of their current benefit. If the amount of benefit suspension is capped at 50% of the current benefit, we estimate that the pre-suspension benefits of all other unprotected participants would need to be reduced by an additional aggregate 9% to maintain the same projected solvency. Unprotected participants are those with benefits that cannot be reduced further due to age, disability, or the minimum 110% of PBGC guaranteed benefit. Given that some of these unprotected participants could not have their benefits further reduced by 9% because they might then reach the 110% of PBGC benefit floor, this necessarily means that the benefits of other participants would need to be reduced by more than an additional 9%. F. How would a delay in implementing the benefit suspensions impact the projected viability of the suspensions? Each year that the Plan continues to pay full benefits is one less year of corrective action that will help the Plan avoid insolvency. The benefit suspensions in the Application are assumed to become effective July 1, The estimated impact of delaying the suspension by one or two years is as follows: If the effective date of the suspensions is delayed by one year, to July 1, 2018, o o We estimate that post-suspension benefits would need to be reduced by an additional average 3.5% to maintain the same long-term projected solvency as the proposed suspensions. Note that since some participants benefits could not be reduced any further due to the MPRA benefit protections (age, disability, and minimum required 110% of PBGC guaranteed benefit), some participants benefits would need to be reduced by more than the additional average 3.5%. If the effective date of the suspensions is delayed by two years, to July 1, 2019, o We estimate that benefits would need to be reduced by an additional 7.2% to maintain the same projected long-term solvency (again, some reductions would need to be more than 7.2% due to the limitations on benefit reductions for some participants). 18

21 G. How sensitive are the results to variations in future experience? The analysis of the proposed suspensions involves a number of assumptions about future events. As discussed above, we believe that the assumptions used by Segal in projecting future solvency are reasonable and appropriate though we also noted that other assumptions could also be viewed as reasonable. What happens when (not if) future experience does not exactly match these assumptions? Document 26.1 of the Application provides Segal s analysis of the sensitivity of the Plan s cash flow projection to deviations in experience from the baseline assumptions, assuming the proposed benefit suspensions are implemented: If the annual investment return is 1.00% lower than assumed, the Plan is projected to become insolvent in If the annual investment return is 2.00% lower than assumed, the Plan is projected to become insolvent in If annual contributions decline at 5.39% per year (the actual average rate of decline for the past ten years), the Plan is projected to become insolvent in If annual contributions decline at 6.39% per year (1.00% more decline than the actual average rate of decline for the past ten years), the Plan is projected to become insolvent in We verified the accuracy of these results and ran several more sensitivity tests, assuming the proposed benefit suspensions are implemented: If the 2017 return is 0.00% instead of the assumed 5.50%, the Plan is projected to be insolvent in If the 2017 return is 11.00% instead of the assumed 5.50%, the Plan s assets are projected to reach almost $2 billion by These two tests show how sensitive the success of the proposed benefit suspensions is to future investment returns just one year s return being plus or minus 5.50% from the assumption means the difference between insufficient and excessive benefit suspensions. This highlights just how difficult it is to design and predict the optimal benefit suspensions. If the contribution base units (months worked) continue to decline 2% per year, instead of the assumed five-year decline then levelling off, the Plan is projected to become insolvent in If the Plan s mortality experience matches the 2016 valuation s assumed mortality instead of the more conservative mortality assumption used for the proposed suspensions, the average post-suspension benefit could be approximately 3% higher without threatening the Plan s longterm solvency (see the discussion of the mortality assumption in the next section). Again, the long-term solvency of the Plan with the proposed benefit suspensions is sensitive to many factors, making accurate predictions of the success of the suspensions extremely difficult to predict. As discussed below, the assumptions used in the suspensions design are reasonable, but other assumptions could be just as reasonable and lead to different degrees of benefit suspensions. 19

22 H. Are the actuarial assumptions reasonable? In our and 2014 second opinion studies for the Plan, we concluded that the actuarial assumptions at those times were reasonable and appropriate for the intended purposes. Minor adjustments to some of those assumptions have been made since our 2014 study. We conclude that the assumptions used in developing the proposed benefit suspensions continue to be reasonable and appropriate, subject to the comments below regarding four specific assumptions. Assumed Investment Return The assumed investment return is the most important actuarial assumption, both for the funding of the Plan s ongoing benefit liabilities and the projected solvency. The Plan s valuation interest assumption is 7.25% - this is a reasonable and appropriate assumption for the Plan s ongoing funding, assuming that the Plan remains solvent. However, when a plan is projected to become insolvent in less than 20 years, shorter term expected investment returns become more important; the unavoidable volatility of investment returns that healthier plans can absorb can be the difference between remaining solvent or becoming insolvent for a financially troubled plan. Thus, in designing MPRA benefit suspensions, it is important to consider the shorter term expected returns that may be lower than the long term assumption. Segal s investment return assumption underlying the proposed benefit suspensions is as follows: Plan Year Assumed Annual Return Plan Year Assumed Annual Return % % % % % % % % % % % % Applying the Plan s target asset allocation to the average expected returns in Horizon Actuarial s 2016 Survey of Capital Market Assumptions, we estimate the median expected ten-year return for the Plan to be 6.33% and the median expected 20-year return to be 7.42%. Based on these results, we conclude that Segal s investment return assumption for the proposed benefit suspensions is reasonable and appropriate. Note, however, that this conclusion is valid to the extent that the Plan will be able to maintain its current asset allocation in the future; to the extent that the Plan s assets decline to a level that raises concerns about shorter term liquidity, necessitating a more conservative asset allocation, the future expected returns may then need to be revised. Assumed Mortality For the benefit suspensions Application, the assumed mortality (for non-disabled participants) used in the 2016 valuation has been changed from the RP-2000 Combined Healthy Mortality Tables, set back one year to the RP-2014 Blue Collar Healthy Annuitant Mortality Table, set forward one year, with generational projection using Scale MP-2015 (post-retirement) and the RP-2014 Blue Collar Employee Table, set forward one year, with generational projection using Scale MP-2015 (pre-retirement); a similar change was made for disabled participants mortality. 20

23 The 2015 and 2016 valuations indicated actuarial gains from mortality experience; that is, there were more actual deaths than assumed by the valuation mortality table. Changing to a more conservative (i.e., longer life expectancy) table could be expected to increase the size of these gains. Our analysis shows that the new mortality assumption is somewhat more conservative than the old assumption just slightly more conservative in the near term, but becoming more conservative in the long term as assumed mortality improvements impact later years projected benefit payments. While we may have preferred to maintain the use of the old assumption, we conclude that either assumption is reasonable and appropriate for use in developing the proposed benefit suspensions. As noted above, however, we estimate that had the old assumption been used for the benefit suspensions design, the proposed post-suspension benefits could be increased by roughly 3% on average. Assumed Rates of Retirement As a reason for requesting our 2014 study, the Trustees cited concerns that the Plan s actuary was assuming relatively too many early retirements and that this assumption was shortening the Plan s projected period of solvency. Our study showed that the projected insolvency date was not sensitive to the assumed rates of retirement if later retirements were assumed, the projected insolvency date was essentially unaffected. While that conclusion may not hold as well after the suspensions (i.e., earlier than assumed retirements may negatively impact the long-term solvency), it is our opinion that the current retirement assumption remains reasonable and that the projected long term solvency would not be particularly sensitive to alternative retirement assumptions. New Entrants Annual actuarial valuations do not (and are not permitted to) assume future new participants to replace participants who retire, terminate, become disabled, or die. However, in projecting a plan s long term cash flow and solvency, it is necessary to assume future new entrants. In our opinion, the projected solvency is not very sensitive to the new entrant assumption because new participants are not expected to begin receiving benefits for many years and new participants in this Plan are earning relatively smaller benefits than previous participants. Segal s new entrant assumption was developed based on the demographic characteristics of new entrants during the past five years; in our opinion this assumption is reasonable and appropriate. I. Are the data and calculations underlying the benefit suspensions accurate? For our analysis, we were provided with several participant data files and other documents by Segal and ATPA, including: Participant data files used in the January 1, 2015 and January 1, 2016 actuarial valuations of the Plan. Participant data files with alternative benefit suspension calculations, such as pre-2005 benefits capped at 1.50% of contributions and 3.00% of contributions. Contribution history for 13 sample participants, to allow us to verify the individual benefit calculations for those participants. Plan financial statements for prior years, including a statement for the period ended June 30, 2016 (which serves as the basis for the cash flow projections in the Application). Other documents, including prior years actuarial valuation reports, the Plan document, PPA status certifications 21

24 A copy of the MPRA benefit suspensions application, filed with the Treasury Department on September 27, As discussed above, we interpolated the benefit amounts in the 1.50% and 3.00% benefit percentage data files to obtain the 1.96% capped benefit (for pre-2005 service). Segal informed us that they used the same interpolation method. Then, based on the service amounts provided for each participant, we independently calculated the PBGC guaranteed benefit and the 110% of PBGC benefit floor for the postsuspensions benefits. With these estimated post-suspension benefits we projected the annual cash flows under the assumptions described in the Application (as discussed above). We confirmed that the post-suspensions cash flow will avoid insolvency. We also confirmed that reducing the amount of benefit suspension by 5% will not avoid projected insolvency (our projected insolvency date in this scenario was somewhat later than Segal s calculated date, but the conclusion is the same). We also verified that the benefits of retirees and beneficiaries age 80 and older and disabled retirees have not been reduced and that those between 75 and 80 were correctly reduced based on the phased suspension rule in MPRA. The participant counts in the files we were provided match the January 1, 2016 valuation counts. We accepted the valuation data files as correct, noting that the participant counts and expected presuspension aggregate benefit payments are consistent with recent years valuations. We also closely attempted to match the distribution of participants by percentage benefit reduction, as provided in Document 13.2 of the Application. Our results did not match the Application s table exactly, however, our results are reasonably close and we have no reason to question the accuracy of the Application s distribution of the benefit reduction percentages. In certain other calculations, our results do not exactly match the Plan s (presumably developed by Segal or ATPA), but in all cases the results are close enough that the conclusions we reached are unaffected by any differences in numerical results. In summary, based on our limited scope review and duplication of the Plan s results, we are comfortable that the calculations are accurate. 22

25 Appendix The tables below show the median monthly benefit before/after the proposed suspensions for the results of the winners/losers analysis shown in tables i. through iv. in Section C of the Analysis and Discussion (refer to those tables for the definitions of Winners, Losers, and Ties). In these tables, fully protected by PBGC guarantee means that the pre-suspension benefit is no more than 100% of the PBGC guaranteed benefit; no benefit reduction means that the pre-suspension benefit is between 100% and 110% of the PBGC guaranteed benefit. i(a) Retirees; assuming PBGC guaranteed benefits would be paid if the Plan becomes insolvent Median Monthly Benefits Winners & Ties Losers Category Pre- Post- Pre- Post- Disabled Retirees $1,080 $1,080 Retirees Age 80+ $332 $332 Retirees fully protected by PBGC guarantee $103 $103 Other Retirees with no benefit reduction $176 $176 Retirees age not included above $495 $476 $810 $659 All other Retirees $280 $271 $1,117 $767 ii(a) Retirees; assuming PBGC guaranteed benefits would not be paid if the Plan becomes insolvent Median Monthly Benefits Winners Losers Category Pre- Post- Pre- Post- Disabled Retirees $1,080 $1,080 Retirees Age 80+ $332 $332 Retirees fully protected by PBGC guarantee $103 $103 Other Retirees with no benefit reduction $176 $176 Retirees age not included above $562 $519 $1,787 $1,121 All other Retirees $506 $453 $2,363 $1,167 iii(a) Inactive Vested Participants; assuming PBGC guaranteed benefits would be paid if the Plan becomes insolvent Median Monthly Benefits Winners & Ties Losers Category Pre- Post- Pre- Post- Inactive Vested fully protected by PBGC guarantee $41 $41 Inactive Vested with no benefit reduction $75 $75 All other Inactive Vested $376 $275 $850 $483 23

26 Appendix iv(a) Inactive Vested Participants; assuming PBGC guaranteed benefits would not be paid if the Plan becomes insolvent Median Monthly Benefits Winners Losers Category Pre- Post- Pre- Post- Inactive Vested fully protected by PBGC guarantee $41 $41 Inactive Vested with no benefit reduction $75 $75 All other Inactive Vested $513 $334 $1,426 $600 The median monthly benefit is the benefit amount such that half of the participants in each cell have benefits above the median and half of the participants have benefits below the median. In this Plan the median benefits tend to be smaller than the average benefits because there are relatively more participants with small benefits. These tables show that the participants who are projected to be worse off under the proposed suspensions are those with larger pre-suspension benefits. This also helps illustrate the fact that in order to realize enough benefit payment savings to achieve long term solvency, the Plan has little choice but to focus the benefit suspensions on those with relatively larger benefits. 24

27 Appendix Below is a copy of the tables from Document 13.2 from the Application, providing a distribution of the proposed benefit suspensions by benefit reduction percentage. The distribution of all participants proposed benefit reductions is shown graphically below: 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Participant Count by Benefit Reduction Percentage 7,671 4,739 3,786 1,700 1,811 2,407 2,032 1,410 No Cuts 0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-61% 25