Pilots Serving Pilots
ALPA makes changes in member benefit plans.
Air Line Pilot, October 2001, p. 16
By Capt. Howard Farrington (Northwest), Chairman, ALPA Retirement and Insurance Committee
As you review the recently produced ALPA publication, A History of Pride, you’ll get a renewed sense of the Association’s commitment to your professional safety and welfare. As chairman of ALPA’s Retirement and Insurance Committee, I want to take this opportunity to communicate with you about the ways that ALPA is carrying out its commitment to your personal welfare, with some upcoming changes in the ALPA-sponsored member benefit plans.
ALPA has offered a term life insurance plan to members continuously since 1953. Over the years, the plan has been enhanced in ways consistent with improvement in the plan’s loss experience and with new developments in the insurance industry. Our coverage is available to approved eligible members and their spouses and children, without exclusions. Benefits now include an Association-sponsored waiver-of-premium provision—the plan will pay premiums for any insured who meets a definition of total disability—and an Accelerated Death Benefit, which makes available during the insured’s lifetime a benefit of as much as $100,000 of the coverage that the member or spouse carried. New York Life underwrites the coverage.
Beginning November 1, the maximum available coverage under this plan will increase by 50 percent, to $750,000. With the increased benefit maximum, no other terms of coverage will change, including the Association’s commitment to bringing you pilot-friendly products without onerous exclusions and limitations.
While the ALPA-sponsored Group Term Life Insurance plan has been a solid ALPA asset for almost 50 years, the Association’s R&I Committee felt that the time had come to enhance the life insurance offerings to members by bringing in a new kind of life insurance product. On November 1, ALPA will introduce a Ten-Year–Level Term Life Insurance product that eligible members can apply for. The new plan will also have increased limits of $750,000, and other plan features will be similar; New York Life will also underwrite this plan.
However: while under the current Group Term Life plan, premiums increase in 5-year age brackets, and coverage reduces by at least 50 percent when you reach age 60 or retire—an arrangement that has merit for those whose obligations are greater while raising a family and building a career—under the Ten-Year–Level Term Life plan, coverage and premiums remain level for a period of 10 years from the effective date. At the end of the 10-year term of the coverage, the participant can allow coverage to terminate or, if still an active member of ALPA, may reapply; when the new application is approved, coverage will continue for another 10-year term.
You should also know that if you are enrolled in both life insurance plans, the combined maximum under both plans cannot exceed $750,000.
Details on the new plan are expected to be mailed to eligible members during October. Application materials are still being developed at this writing; therefore, contacting ALPA for further information is not recommended until mid-October. At that time, a call to 1-800-746-ALPA will put you in touch with an insurance analyst who can help.
In 1953, the Air Line Pilots Association Mutual Aid Association was established to provide short-term disability benefits to pilots in need, through assessment of members in a true "mutual aid" arrangement–pilots helping pilots. In the 1990s the MAA Board of Directors reevaluated the plan’s operation and concluded that an insured arrangement would better serve the membership, and currently the MAA plan is fully insured through New York Life.
In May, the MAA Board of Directors recommended a merger into ALPA; MAA’s members accepted this recommendation, and ALPA’s Executive Council adopted a merger resolution at its May 21 meeting.
Under the ALPA umbrella, all member benefits offerings must comply with employee benefits legislation, and to accomplish this, the existing Mutual Aid Association-sponsored plan will undergo certain changes at the October 1 merger effective date, as follows:
* Plan provision—ALPA Short-Term Disability.
* Eligibility—Any member in an eligible class, regardless of the member’s age.
* Coverage begins—The first of the month after the third-party administrator of the plan notifies ALPA that the application is approved.
* Coverage ends—Cessation of full-time work, without regard to age.
* Definition of disability—Continuous inability to perform job due to injury or sickness; pregnancy included; no coverage for self-inflicted injury; pre-existing conditions limitation applies during first 2 years of new or increased coverage.
* Waiting period—less than age 40: 180 days for illness, including pregnancy, and 90 days for accident; 40 and over: 90 days for all causes.
* Benefit duration, disability under age 50—12 months.
* Benefit duration, disability after attaining age 50—50, 11 months; 51, 10 months; 52, 9 months; 53, 8 months; 54, 7 months; 55+, 6 months.
* Monthly benefit amount (benefit paid cannot exceed 50 percent of average monthly wage)—From $500 to $3,000 in $500 increments; reduced 10 percent of original selected amount per year each year after age 55, to a minimum of 30 percent.
* Maximum lifetime benefit—12 months × benefit, for sickness.
* Benefit increase terms—Increase in existing benefit would be delayed for 1 year.
Benefits available under the new Short-Term Disability plan have carried forward at the same levels as under the Mutual Aid plan—$500, $1,000, $1,500, $2,000, $2,500, and $3,000.
The merger of the Mutual Aid Association into ALPA adds a fourth disability plan to the three already included in the ALPA member benefits package: the new Short-Term Disability plan provides benefits for covered disabilities after a 90-day wait (or, as noted above, after a 180-day wait where applicable), and then continues those benefit payments for 12 months (or until recovery, if sooner). (Note that benefit duration declines beginning at age 50.)
The self-funded Air Line Pilot Welfare Benefit Plan, also referred to as the ALPA Loss-of-License plan, has a 12-month waiting period for disabilities based on either accident or illness, and benefits are payable for as many as 48 months (or, if earlier, until the pilot returns to flying). A declining benefit-duration scale also applies under this plan, for disabilities beginning at and after age 57. The Loss-of-License plan, like the Short-Term Disability plan, relies on an "own occupation" definition of disability; if your accident or illness results in the loss of medical certification to fly, the loss of your medical will serve as the primary indicator that a benefit may be payable to you.
Under the ALPA-sponsored Extended Total-Disability plan, a different standard of disability will apply than is applicable for the Short-Term Disability or Loss-of-License plans. Under the "ETD" plan, an "any occupation" definition of disability applies; this means that in addition to the loss of your medical certification to fly, you must have sustained an illness or injury that prevents you from working at any occupation for which you are reasonably suited by education, training, or experience. When the disability is of this nature, benefits are payable until age 65, for disabilities beginning at or before age 55, and on a declining scale for disabilities beginning after age 55.
The ETD plan benefits are available in $600 increments, to a maximum monthly benefit of $3,000.
The final piece in the set of voluntary disability benefit plans sponsored by ALPA is the IFALPA lump-sum loss-of-license plan; this benefit is provided on an "own occupation" basis, like the Short-Term Disability and Loss-of-License plans, but provides a lump-sum benefit after a 12-month wait, for a qualifying disability.
In November 1998, ALPA brought in to Association sponsorship a Long-Term–Care Insurance plan underwritten by the John Hancock Insurance Company. One of the plan provisions was a guaranteed upgrade offer, to be made at 3-year intervals from the plan’s inception. With the first 3-year anniversary arriving on Nov. 1, 2001, John Hancock has mailed to plan participants (of any tenure) an offer to purchase additional coverage, relative to the original daily maximum benefit (DMB) amounts of $75, $100, $150, or $200. For those insured for an original $75, the increase offer is to $85; other increments are as follows: $100 increases to $115, $150 increases to $175, and $200 increases to $230. Acceptance of the increase was required by September 11 and was strictly voluntary; the increase increment will be billed based on the insured person’s age on November 1.
If the insured person declines the offer, it will be made again in 3 years based on cost-of-living increases deemed appropriate at that time and will continue to be made every 3 years regardless of whether the insured person accepts or declines any one of the offers.
In every case, the original DMB will continue to be billed at the original entry age (assuming no plan-wide rate change is necessitated by claims experience), and the new increments will continue to be billed based on the age when the insured accepts the upgrade offer.
For members and relatives coming into the plan for the first time on or after Nov. 1, 2001, the coverage amounts available will be only the amounts to which the original DMBs were increased—$85, $115, $175, and $230.
A final addition to services offered to ALPA members through the ALPA R&I Department in the fall of 2001 is a QDRO services subsidiary. This organization will, to quote its business plan, "use the unique background and expertise of ALPA’s R&I Department to offer reasonably priced …actuarial assistance to pilot members and their attorneys in preparing Qualified Domestic Relations Orders (QDROs)." Because R&I Department staff has been involved intensively in negotiating pilot retirement programs, the R&I Committee felt that ALPA’s proficiency could be well-used in protecting pilots’ assets in a divorce action. The ALPA actuarial staff would be called on, as consultants to the subsidiary, to determine the allocation of the marital portion of retirement benefits, to calculate the present value of such benefits, and to review and respond to actuarial reports from other actuaries. This service is intended to work only on retirement programs negotiated in the pilot’s contract with an airline, and not on other sources of marital funds. Currently, only actuarial work is authorized for the corporation, but attorney support services are being explored.
Information on this service will be disseminated as it develops; for further details, check with the Retirement and Insurance Department at 703-689-4215.
For additional informational on the new Short-Term Disability plan or any existing ALPA member benefit program, please call Membership Services at 1-800-746-ALPA.
ALPA’s R&I Committee, along with our superb staff, is constantly evaluating the needs of our profession for benefit programs that are cost-effective and consistent with the guiding principles of the Association, while providing added value to membership in ALPA. We believe that the new programs and program changes outlined here will contribute significantly to meeting that charge.