Welcome to BorgWarner!

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2 Welcome to BorgWarner! We are excited to begin sharing the many benefits of belonging to BorgWarner. This Preview of the medical plans is just one of a series of communications you ll receive throughout the coming months intended to familiarize you with your new BorgWarner benefit program and help ensure a smooth transition. Specifically, this brochure provides an overview of the BorgWarner medical plans, explains some of the similarities and differences with your current medical plans and addresses the transition process. We realize that changes to benefits can cause some uncertainty, but you ll be pleased to know that, on average, replacing your current medical benefits with BorgWarner s will represent a significant benefit enhancement. COMING THIS FALL! YOUR NEW MEDICAL PLAN OPTIONS: During BorgWarner s open enrollment this fall, you can cover yourself and your eligible dependents under one of two Cigna medical plan options: Basic Plan Buy-Up Plan Both plans are built around a Health Reimbursement Account (HRA). Think of an HRA as a health spending account funded by BorgWarner that is used to pay for your share of healthcare costs, such as deductibles, copays and coinsurance until the fund is depleted. Both plans generally work the same way and cover the same types of services. However, they differ in the way you pay your portion of the costs the balance between the amount you pay upfront (through payroll deductions) versus the amount you pay at the time of care (through deductibles and coinsurance). THE BASIC PLAN tends to appeal to someone who doesn t want to pay upfront for medical care they are not sure they ll use. It offers lower payroll deductions but higher out-of-pocket costs (deductibles and coinsurance). TOP 5 THINGS TO KNOW about the BorgWarner HRA Both medical plans are HRA-based. Here are some key features of the HRA: It is funded solely by BorgWarner; you do not contribute. It provides first-dollar coverage for medical expenses. Since you don t contribute to the fund and any eligible expenses are automatically paid from the HRA, you won t incur any out-of-pocket health expenses until the fund is depleted. It is used for medical expenses only. However, you can pair the HRA with a Health Care Flexible Spending Account (FSA) to help offset medical, prescription, dental and vision expenses. Any unused balance can rollover to the next year and continue to be available for medical expenses (up to a pre-set limit). THE BUY-UP PLAN tends to appeal to someone who is willing to pay more upfront so they have the security of paying less at the time of service. It offers higher payroll deductions but lower out-of-pocket costs. 5 The HRA is embedded as part of the medical plan and is NOT a standalone account that is used as a long-term savings vehicle. However, you may participate in the BorgWarner Retiree Health Account (RHA),for added support with saving for retirement.

3 A Closer Look at How the Medical Plan Works The medical plan consists of a number of key elements. Understanding each of these elements and how they work together will help you make the most of your medical benefits: HEALTH REIMBURSEMENT ACCOUNT (HRA). NET Out-of-Pocket-Maximum (OOPM) Serving as your safety net, the medical OOPM gives you peace of mind in the event of a costly illness or accident by capping the amount you d pay in coinsurance in a given year. Once you reach this maximum, you stop paying coinsurance and the Plan begins paying 00% of any additional eligible medical expenses for the remainder of the year. If you reach the NET MEDICAL OUT-OF-POCKET MAXIMUM, BorgWarner pays 00% of remaining eligible medical costs for the year. Once you meet the Member Deductible Gap, you and BorgWarner share the costs through COINSURANCE.. Medical Plan Coinsurance Once you meet your member deductible gap, you and BorgWarner share a portion of eligible expenses called coinsurance. Plan Deductible = + If you exhaust the HRA, you pay 00% of eligible expenses until you meet the MEMBER DEDUCTIBLE GAP. BorgWarner funds the HRA at the start of each plan year to be used to pay for medical expenses. This is intended to cover part of the plan deductible. 00% Plan-Paid Preventive Care (In-Network). Member Deductible Gap The member deductible gap is your portion of the annual plan deductible that must be met before the plan starts paying benefits. This means if you spend all the money in the HRA and continue to have medical expenses, you will pay 00% of those expenses out-of-pocket until it adds up to the member deductible gap.. The Health Reimbursement Account (HRA) Serving as the foundation of your coverage, the HRA is a special account that BorgWarner funds each year on your behalf. The amount contributed varies by which plan and coverage level (Employee Only versus Family) you elect. The HRA is your first source of payment for medical expenses, meaning when you have an eligible medical expense, it will automatically be paid for using those funds. It is designed to cover a portion of the annual plan deductible. Rx Coverage Highlights No deductible. Since prescriptions are not run through the HRA, you are not required to meet a deductible. Coverage begins with your first prescription! Nominal copay. By choosing generics, you only pay a flat-dollar copay and the plan covers the rest. You can choose to fill prescriptions with brand-name medications, but you ll pay more. Safety net. Prescription coverage has an Out-of-Pocket Maximum (separate from the medical OOPM). Once you reach this limit, the plan pays 00% of prescription costs for remainder of the year. QUICK TIP: Consider using a Health Care Flexible Spending Account to help offset out-of-pocket prescription costs.

4 Comparing the Plans (Based on current 06 plans) This illustration compares key components of BorgWarner s Basic Plan (our most popular plan) and the HDHP Plan: BASIC PLAN (Family Coverage) If you reach the NET Medical Out-of-Pocket Maximum of $6,000 (or $,500 per individual family member), the Plan pays 00% of eligible expenses for remainder of the year. HDHP PLAN (Family Coverage) If you reach the Medical/Rx Out-of-Pocket Maximum of $6,850 the Plan pays 00% of expenses for remainder of the year. Plan Deductible = $,000 + Once you meet the Member Deductible Gap, you pay 0% coinsurance and the plan pays 80%. If you exhaust the HRA, you pay 00% of eligible expenses until you meet the MEMBER DEDUCTIBLE GAP of $,000. BorgWarner funds the HRA with $, % Plan-Paid Preventive Care (In-Network) Once you meet the Plan Deductible, you pay 0-0% coinsurance and the plan pays 70-80%, depending on the type of service. You pay 00% of eligible expenses until you meet the PLAN DEDUCTIBLE of $,000. You may apply your HSA toward meeting the deductible. contributes $750 to the HSA You can make pre-tax contributions to the HSA 00% Plan-Paid Preventive Care (In-Network) You pay $0 annually for medical coverage through pre-tax payroll deductions (assumes you earn the full medical premium credit incentive). You pay between $,6-$7,505 annually depending on your earnings for medical coverage through pre-tax payroll deductions (assumes you earn the full wellness incentive) Comparing All Four 06 Plans At-a-Glance (family coverage) FEATURE. Employer Funding/ Contribution. Deductible. Coinsurance. Out-of-Pocket Maximum (once this limit is met, plan pays 00%) Employee Payroll Contributions (assumes fully discounted plan) BorgWarner Basic Plan HRA = $,000 Your part: $,000 ($,000 deductible minus $,000 that is automatically paid by BW-funded HRA) You pay 0%, BW pays 80% $6,000 (or $,500 individual) $0 BorgWarner Buy-Up Plan HRA = $,500 Your part: $,500 ($,000 deductible minus $,500 that is automatically paid by BW-funded HRA) You pay 0%, BW pays 90% $6,000 (or $,500 individual) $,00 annually HDHP HSA = $750 $,000 You pay 0%-0%, plan pays 70-80% (depending on service) $6,850 Between $,6-$7,505 annually depending on earnings HDHP none $5,50 You pay 0%-0%, plan pays 70-80% (depending on service) $0,500 Between $9-$, annually

5 What You Can Expect from Your New BorgWarner Medical Plans When comparing your current medical plans to the new BorgWarner medical plans, you will notice BorgWarner s plans offer numerous advantages: Substantially lower payroll deductions you can even reduce your contribution to $0 by earning the full discounted premium rate through wellness incentive credits! Lower deductibles. Lower coinsurance. Lower out-of-pocket maximum for medical expenses (meaning a better safety net for you). The HRA is fully-funded by BorgWarner and replaces the current HSA. No hassle; medical claims are automatically forwarded and deducted from HRA (and even your FSA) no payments required at the time of service and no reimbursement process. Immediate coverage for prescription drug expenses with just a nominal copay when choosing generics; no deductible to meet first. No use it or lose it rule unused HRA balances rollover from year to year (up to a pre-set limit) for ongoing use to offset medical expenses as long as you stay in the plan. AUGUST OCTOBER What s Next? Receive a detailed total benefits program comparison 07 Open Enrollment Packet Plus, throughout 06, you ll receive regular communications describing BorgWarner s benefits so you are well-informed by annual open enrollment this fall. Need clarification about what happens with your current HSA? General benefit questions? Resource Dashboard TWO EASY WAYS to Put Your BorgWarner Benefits to Work for You Health Care FSA: Since the BorgWarner medical plans are HRA-based, you can supplement your medical coverage by participating in a comprehensive Health Care Flexible Spending Account (as opposed to the current Limited Purpose FSA ). This account helps offset eligible medical,prescription, dental and vision out-of-pocket costs. And, you can rollover up to $500 from year-to-year! Retirement Health Account: Since you are no longer going to be contributing to an HSA, take that money and put it into the BorgWarner Retirement Savings Plan which includes an optional Retirement Health Account (RHA). The RHA lets you set aside pre-tax money (up to % of pay) to build savings for future needs, plus BorgWarner matches a portion of what you contribute (up to $500 per year). Call Optum Member Services at (866) -89 (select option ) Visit borgwarner.com/benefits, or call the benefits hotline at (765)

6 Comparing Plan Features FEATURE Employer contribution Employee contribution Eligible expenses FSA compatibility Account growth Paying benefits Tax impact BorgWarner HRA Credits that help offset your out-of-pocket medical expenses are provided under both BorgWarner plans. No, BorgWarner fully funds the HRA. TIP: Take your current HSA contributions and re-direct them into the FSA or RHA! See brochure flap for details. Eligible medical expenses (such as medical deductible, copays and coinsurance). Eligible to participate in a FULL Healthcare FSA (offsetting medical, prescription, dental and vision costs). Claims auto-forwarding feature lets you connect the FSA with HRA so expenses* are automatically paid using company-funded HRA first and then the FSA. Makes payments seamlessly from the two accounts! Through employer contributions and unused balance rollover (up to a limit high enough to cover the out-of-pocket maximum). You do nothing! Expenses* are automatically paid through the HRA. Nothing is collected at time of care and no claims to submit. None. Portability The HRA is part of the medical plan benefit, meaning if you leave the plan or the company, any remaining balance would be forfeited. * for all eligible expenses incurred through an in-network provider HSA Cash deposit used to help pay down your out-of-pocket healthcare costs is provided for s HDHP only. Yes, employees are able to make voluntary contributions. Eligible medical, prescription, dental and vision expenses. Can be used for non-healthcare expenses, but a tax penalty will apply. Eligible to participate in a Limited-Purpose Healthcare FSA only (offsetting only dental and vision out-of-pocket expenses). Through employer contributions, your own contributions, interest and any investment returns. You decide whether to pay expenses out-of-pocket or with the HSA. You must maintain records and keep receipts in case of an audit. None, unless you use for non-healthcare related expenses, in which case a tax penalty will apply. The HSA is a personal savings vehicle that belongs to you, even after you leave the plan or the company. What Happens to Your Current HSA? If you have a remaining HSA account balance as of January, 07, those funds are yours to keep! Although by law you and the company can no longer contribute to the HSA, you can choose among the following options for handling your remaining HSA balance:. USE IT. You can use what money is left in your HSA for certain qualified expenses as defined by IRS Publication 50 Section d, which includes: Qualified medical, prescription, dental and vision expenses Premiums for COBRA continuation coverage Premiums for qualified long-term care Premiums for health insurance, not including Medicare, if you re 65 or older. GROW IT. You can let it stay in the account where it will continue to grow with interest and any investment returns. About this Brochure: Details of these plans and programs can be found in the 06 Benefits Reference Guide and the Summary Plan Descriptions, available online at: This document is a summary of your benefits and does not create a contract of employment between BorgWarner and any employee, and are subject to change.. WITHDRAW IT. If you withdraw your HSA funds for non-qualified purposes, you will be subject to a 0% penalty (prior to age 65) and will owe taxes on those funds (if contributions have been made pre-tax).. CLOSE IT. You can choose to close your Optum HSA account. For more details about your HSA balance, contact Optum Member Services at (866) -89 (select option ). BorgWarner Will Pay HSA Maintenance Fees for 07! There are administrative maintenance fees charged by Optum for maintaining your HSA, but GOOD NEWS: If you keep your Optum account, BorgWarner will smooth the transition by paying these fees on your behalf for all of 07! 06/6