From the President

Dear Retired Member:

As you recall, this past May I wrote to provide you with an update on the improved status and financial condition of the Retiree Health and Welfare Fund. I explained the many steps this administration took to mend the insolvent Retiree Fund inherited by this administration and assure a sound and healthy fund for many years to come. Our goal was to bring the fund to an adequate reserve level so as to enable us to rollback member contributions and offer retirees the benefit enhancements you so richly deserve.

The recent PBA arbitration award at PERB provided a lump sum payment of $350 per retired member and beginning August 1, 2000, a $200 annual increase in rate per member. This award, coupled with the benefit modifications implemented in September 2000, will enable us to provide you with significant benefit enhancements that will be rolled out over the next several months. These enhancements address the benefit modifications that our retirees have sought for years. We have listened to your concerns and needs and, as such, are enhancing your benefits with respect to drug, vision and dental.

The benefit enhancements are as follows:

Prescription Drug Enhancements

1. Deductible Elimination
   The present $50 individual/$100 family prescription drug deductible will be eliminated.

2. Prescription Drug Maximum Increase
   The present $5,000 annual maximum will be doubled to $10,000 annually and the $75,000 lifetime maximum will be increased to $120,000.

Optical Plan Enhancements

1. Annual Coverage
   Coverage for exams, frames and lenses will be provided every year as opposed to every other year as presently designed.

2. Optical Plan "Premier" Designer Frames
   "Premier" designer frames will be part of the PBA's frame selection under the Davis Vision Program.  They include designer frames from Alfred Sung, Pierre Cardin, Elizabeth Arden, Bill Blass, Cosmopolitan, Advantage Eyewear and Ultrathin.  Many of these "Premier" frames have retail values well over $200.  The total PBA plan frames available will be increased to 267 and there will no longer be a co-payment differential asked of our members who wish to obtain these high-end designer frames.

3. Out-of Area Co-Payment Elimination
   Retirees who live out-of-area will no longer have to pay an out-of-area co-payment for Davis Vision services.  They will enjoy the same paid-in-full benefits as in-area retirees and active members.

Dental Plan Enhancements

1. Deductible Elimination
   The present $100 individual/$300 family dental plan deductible will be eliminated.

2. Schedule of Allowances Increase
   The schedule of allowances paid to our participating dental providers and to our retirees who do not utilize participating dentists will increase dramatically.  This significant schedule enhancement will enable us to not only maintain the dentists who have already earned our member's trust, but to also effectively recruit the higher quality dentists who we want to add to our panel, in and out of area.

3. Sealants Coverage
   Dental sealants will be provided for eligible dependent children to age 12.  Previously, such sealants have always been considered an exclusion under the PBA Dental Plan.

Conclusion

In the final analysis, we believe the benefit enhancements presented in this letter represent a successful joint effort between this administration and its membership to turn around a Retiree Fund that was insolvent to one which is again healthy and able to serve its retirees as intended. The sacrifices made by our members, coupled with effective benefit planning and management, have made these improvements possible. Although we have been successful in reversing the tide, we must remain prudent in managing this fund. Prescription drugs remain the critical and determining focal point when analyzing the future viability of the Retiree Health and Welfare Fund. The significant prescription drug plan modifications and cost sharing measures implemented two years ago have paid dividends. It has brought the Retiree Fund back to its present healthy state and enabled us to implement enhancements in areas that have gone untouched for years. It is critical, however, that our retirees continue to effectively manage their prescription drug needs and utilize alternative coverages whenever possible. Should future increased trends or over utilization of prescription drugs in this fund require this administration to act, we assure you that we will take the appropriate steps to modify fund benefits accordingly. Double-digit industry inflationary trends continue to rise with no immediate end in sight. We will continue to look for innovational ways to contain these rising costs, but need your continued cooperation.

This administration will continue its commitment to effectively manage its funds and thanks you for your cooperation and support.