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HEHS-95-230R 1 (1995-08-07)

handle is hein.gao/gaobackxu0001 and id is 1 raw text is: GAO United States General Accounting Office Washington, D.C. 20548 Health, Education and Human Services Division B-261408 August 7, 1995 The Honorable Nancy L. Johnson House of Representatives Dear Mrs. Johnson: The United Mine Workers of America (UMWA) Combined Benefit Fund pays the health benefits of certain retired mine workers and their dependents or survivors. The Fund was established by the Coal Industry Retiree Health Benefit Act of 1992, which merged two existing UMWA health benefit trusts. The Fund, which had a surplus of $114.8 million as of September 30, 1994, is financed mostly by annual premiums assessed to certain companies, called operators, and some operators have claimed that the requirement that they pay the premiums is unfair. The Subcommittee on Oversight, House Committee on Ways and Means, held a hearing on June 22, 1995, on this issue and other matters affecting the Fund. Among the witnesses at the hearing were representatives of the consulting firms of Ernst & Young and Towers Perrin. These firms did studies of the Fund's financing, and each projected different financial outcomes for the Fund: Ernst & Young projected that the surplus would decrease each year and be eliminated by 2004, while Towers Perrin concluded that the surplus would continue to grow well past the year 2004 (see table 1.1). This letter responds to your May 31, 1995, letter and subsequent discussions with your staff asking us to explain the differences in the two consultants' studies. BACKGROUND The Fund's trustees requested the March 1995 Ernst & Young study, which projects the Fund's activities through 2004. A private group requested Towers Perrin's initial study to gauge the effects of certain proposed legislation on the Fund's finances through 2043. Towers Perrin did three analyses: an initial study in early 1994, and updates in May 1994 and January 1995. In May 1995, Towers Perrin also issued a critique of the Ernst & Young study, which supported the estimates reflected in its own January 1995 update. GAO/HEHS-95-230R Combined Fund Analysis 13 -1/

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