Opinion ID: 75921
Heading Depth: 2
Heading Rank: 1

Heading: the establishment of the combined benefit fund

Text: 3 In 1947, a National Bituminous Coal Wage Agreement (NBCWA) between coal companies and the United Mine Workers of America (UMWA) established a benefit fund to provide pension and medical benefits to miners and their dependents. The fund relied on proceeds from a royalty on coal production, and did not specify particular benefits to which miners were entitled; instead, the NBCWA provided for UMWA-sponsored trustees to determine and alter benefits as the proceeds from this royalty fluctuated. Successive 1950 and 1974 benefit funds expanded traditional coverage by providing for the payment of health care benefits to retired mine workers and their dependents. This change in coverage and other factors — a decline in coal production, the retirement of a generation of miners, and a rapid acceleration in healthcare costs — soon led to financial trouble for the 1950 and 1974 Funds. A 1978 NBCWA intended to address these problems led to further insolvency. 4 Congress then passed the Coal Industry Retiree Health Benefit Act of 1992 (the Coal Act or the Act), which merged the 1950 and 1974 Funds into a new multi-employer plan called the UMWA Combined Benefit Fund (the Combined Fund). The Combined Fund provides benefits essentially equivalent to those provided under the 1950 and 1974 Funds, and is financed by annual premiums assessed against coal companies that signed any NBCWA or other agreement that obligated them to contribute to the 1950 or 1974 Funds. Under the Act, the Commissioner of Social Security assigns retirees to signatory coal companies according to this formula: first, to the most recent signatory to the 1978 or a subsequent NBCWA to employ the retiree in the coal industry for at least two years; second, to the most recent signatory to the 1978 or a subsequent NBCWA to employ the retiree in the coal industry for any period of time; and third, to the signatory company that employed the retiree in the coal industry for the longest period of time prior to the effective date of the 1978 NBCWA. Retirees that cannot be assigned under any of these three tiers are placed in a pool of unassigned beneficiaries. 5 The annual obligation assessed to each company by the trustees of the Combined Fund (the Trustees) consists of three parts: a health benefit premium, a death benefit premium, and an unassigned beneficiary premium. See 26 U.S.C. § 9704(a)(1)-(3). The health benefit premium is a set amount multiplied by the total number of beneficiaries assigned to that operator. The death benefit premium is determined by dividing an estimated total death benefit pay-out by the number of assigned retirees, and then billing each company a pro-rata share for each retiree assigned to it. The unassigned beneficiary premium assumes a set amount is paid for each unassigned beneficiary, and then divides the total among signatory companies based on the number of retirees assigned to them. 6 In order to reduce the premium obligations of signatory companies, the Coal Act provides for a transfer of monies to the Combined Fund from two sources. The first source is the 1950 Fund. The Coal Act directed the 1950 Fund to transfer $210 million to the Combined Fund in three yearly payments of $70 million. See 26 U.S.C. § 9705(a). The Coal Act required that the first $70 million transfer, made on February 1, 1993, be used to reduce coal operators' health benefit, death benefit, and unassigned beneficiary premium obligations for the 1993 plan year. See 26 U.S.C. §§ 9704(a), 9705(a)(3)(A). Following the Act, the Trustees applied the payment first to premiums for unassigned beneficiaries ($38.5 million) and then death benefit premiums ($8.9 million), leaving $22.6 million to be applied to reduce unassigned beneficiary health benefit premiums (from $1,504.71 per retiree to $1,232.78). 7 The remaining two transfers were applied to plan years 1994 and 1995. Following the Coal Act, these payments were applied first to unassigned beneficiary premiums and then to death benefit premiums; they could not be applied to assigned beneficiary premiums. The remainder from the second and third transfers was set aside for use against death benefit premiums in future plan years. 8 After these payments, a second source of funds was introduced to offset premiums: the Abandoned Mine Land Reclamation Fund (the AML Fund), managed by the Department of the Interior. Beginning with plan year 1996, § 402 of the Surface Mining Control and Reclamation Act of 1977 (SMCRA) provides for an annual transfer of interest earned on the corpus of the AML Fund to cover expenditures made from the Combined Fund for unassigned beneficiaries in that plan year. See 30 U.S.C. § 1232(h); see also 26 U.S.C. § 9705(b). Interest from the AML Fund entirely covered premiums for unassigned beneficiaries in plan years 1996-98.