1. www.mercer.com National Asbestos Workers Pension Plan Rehabilitation Plan September 30, 2010 William Ruschau, FSA, Columbus

2. 1 Mercer Agenda  Review of plan financial status  PPA Red Zone requirements  Proposed rehabilitation plan  Default plan  Implementation

3. 2 Mercer Financial Status  The last decade has not been a kind one for the plan. Investment return over the last 10 years averaged 3.26%, compared to our anticipated return of 7.50%.

4. 3 Mercer Financial Status  These returns have caused a net loss of nearly $190 million. Plan Year BeginningInvestment July 1Gain (Loss) 2000(11,000,000)$ 2001(82,000,000) 2002(17,000,000) 200328,000,000 200416,000,000 200520,000,000 200649,000,000 2007(76,000,000) 2008(124,000,000) 20099,000,000 Total(188,000,000)$

5. 4 Mercer Financial Status  Trustees have been limited in their ability to address the growing problem because of Internal Revenue Code restrictions. Retired and Inactive 72% Active Accrued 21% Active Future Accruals 7%

6. 5 Mercer Financial Status  Trustees have taken action over the years to address some of the funding issues: – 2003:Reduced multiplier to 2.21% – 2004:Reduced multiplier to 1.43% – 2008:Required $3.00 minimum contribution with reduced benefits for locals under that rate; instituted additional lump sum benefit to encourage participants to remain in the workforce. – 2009:Reduced multiplier to 1.20%; increased minimum contribution to $4.00 by 12/31/2012; rule of 90 for future accruals  In aggregate these changes reduced accrued liabilities by $52M.

7. 6 Mercer Financial Status  Current financial position – Estimated 2010 funded status is 74% (62% using market value of assets rather than actuarial value) – Funding deficiency projected in 2012-2013 plan year  This puts the plan in Critical Status (Red Zone) under PPA.  Certification of Critical Status was delivered this week.

8. 7 Mercer Financial Status  The fund is projected to be depleted in the next 20-25 years in the absence of significant contribution/benefit action.

9. 8 Mercer Financial Status  Failure to act is not an option – Insolvency of the fund would result in all benefits being reduced to the PBGC guaranteed level. This is around $1,100 per month for a 30-year participant. – Funding deficiencies are subject to large excise taxes (100%) unless plan adopts and operates in accordance with a funding rehabilitation plan. – PPA requires adoption of a funding rehabilitation plan and the imposition of a default plan if the bargaining parties do not agree. – Trustees have a fiduciary obligation to operate the plan in accordance with PPA requirements. – Withdrawing employers are potentially subject to significant withdrawal liability payments.

10. PPA Red Zone Requirements

11. 10 Mercer PPA Red Zone Requirements  Trustees must develop a funding rehabilitation plan.  Rehabilitation plan consists of benefit reductions, contribution increases, or other changes sufficient to meet the goal.  Goal of rehabilitation plan is that the plan is projected to no longer be red zone at the end of the rehabilitation period.  Bargaining parties must implement a rehabilitation plan as approved by the trustees or a default plan will be imposed.  Rehabilitation plan must be updated each year. However, bargaining parties are not required to re-open a bargaining agreement each year. Changes can be made at the start of the next agreement.

12. 11 Mercer PPA Red Zone Schedule of Activities 9/28/2010Certification of zone status 10/28/2010Notification to participants, bargaining parties, PBGC, DOL 11/27/20105% contribution surcharge imposed 5/26/2011Last day to adopt rehabilitation plan 6/25/2011Last day to present rehab plan to bargaining parties 7/1/201110% contribution surcharge until new CBA adopted  Note: Contribution surcharges end when new CBA adopted that is consistent with the rehabilitation plan  Rehabilitation plan can be adopted earlier to avoid contribution surcharges

13. 12 Mercer PPA Red Zone Collective Bargaining  Contracts expiring after rehab plan is provided – Must adopt one of the alternative schedules in the rehabilitation plan – After 180 days, the default schedule is implemented  Contracts expiring before rehabilitation plan is finalized: – Timing until default schedule is implemented is not clear  Law says 180 days after contract expiration  This could technically be before the rehabilitation plan is determined  Most start 180-day period from date rehabilitation plan is delivered  Employers without bargained employees (i.e., staff and AWLU plans) are treated as if covered by a CBA that expires on the first day of the plan year following delivery of the rehabilitation plan.  Surcharges continue until new schedule is implemented  Rehabilitation plan must be updated annually  Future agreements must use most recent update to rehabilitation plan

14. 13 Mercer PPA Red Zone Rehabilitation Period  Starts on the first day of the plan year after the earlier of 2 years after the adoption of the funding rehabilitation plan or the expiration of CBAs covering 75% of active participants. – For NAW that is 7/1/2012. – This does not affect when rehabilitation plan must be adopted, but affects when it ends, and may change required contributions.  Rehabilitation period ends 10 years after it starts (i.e., 6/30/2022).

15. 14 Mercer Rehabilitation Plan Toolkit  Funding relief  Amortization extensions  Benefit reductions  Contribution increases

16. 15 Mercer Funding Relief  Passed by Congress in June  Provides some extended smoothing of 2008-2009 investment losses  To utilize funding relief plans must: – Pass solvency test – No benefit increases in the following two years – Notify participants, participating employers and PBGC  Much uncertainty. There are no regulations for how to apply funding relief, nor are any expected in the near future.  Our prior analysis showed: – NAW plan may qualify for some of the relief – Relief generally reduced annual required contribution increases by about $0.10 per year.  Executive Committee approved adopting whatever relief is available.

17. 16 Mercer Amortization Extensions  PPA permits “automatic” 5-year extensions of amortization charge bases, subject to a few requirements. This is similar to refinancing a mortgage over a longer period.  We believe NAW plan could extend all charge bases that have 15 or fewer years remaining.  Must file with IRS, although IRS has no statutory basis to decline.  Must notify participants and participating employers.  Earlier analysis showed that amortization extensions reduced annual contribution increases by approximately $0.15.  Executive committee has approved filing for amortization extensions.

18. 17 Mercer Rehabilitation Plan Possible benefit reductions  Changes permitted by PPA – Change normal form from 5C & L to life only – Eliminate pre-retirement death benefits except 50% survivor benefit – Reduce multiplier (Can go to 0%, but not less than 1% in the default plan) – Eliminate disability benefits – Eliminate rule of 90 on accruals after 6/30/2009 – Eliminate 30 & out and all subsidies on all accrued benefits  No benefit changes for participants in pay status on the date that notice of critical status is provided to participants (not later than 10/28/2010) – Trustees can choose to use a later date to apply benefit changes and determine grandfathered status  Reductions in adjustable benefits are not reflected in determining withdrawal liability.

19. 18 Mercer Rehabilitation Plan Possible contribution changes  Contribution increases must be implemented so that together with benefit changes the rehabilitation plan goals are met.  Increase can be a flat one-time increase in the contribution rate, or can be spread out over the rehabilitation period.  Thus, the rehabilitation plan can include scheduled contribution increases beyond the end of the next bargaining agreement.  Contribution increases are not eligible for benefit accrual. Surcharges are not counted in withdrawal liability determination, though they do affect the withdrawal liability contribution schedule.

20. 19 Mercer If Unable to Meet Rehabilitation Plan Goals  Trustees must determine that: – Plan has exhausted all reasonable measures – Plan cannot reasonably be expected to emerge from Critical Status on schedule  Plan must then take reasonable measures to: – Emerge from Critical Status at a later time; or – Forestall insolvency

21. Rehabilitation Plan

22. 21 Mercer Proposed Rehabilitation Plan  Normal form will change to life only for all benefits.  Lump sum pre-retirement death benefits will be eliminated; only remaining death benefit is the 50% surviving spouse benefit.  Multiplier will be reduced to 1.00%.  Disability benefits will be eliminated for those not already disabled.  All early retirement benefit subsidies will be eliminated except for limited transition benefits for participants meeting certain service and retirement age requirements.  Contributions will be increased annually in the amount determined to meet the rehabilitation plan requirements after the benefit reductions.  Additional contributions are not eligible for benefit accrual.  Locals must continue to increase benefit accruing contribution rate to $4.00 by the end of 2012.  All benefit changes occur 1/1/2011.

23. 22 Mercer Proposed Rehabilitation Plan Transition Benefits  Participants with 30 or more years of service at 12/31/2010 may retire at any time. – Existing early retirement subsidies (30 & out, rule of 90) are retained. – All other benefits reductions apply  Participants with 25-29 years of service may retire if they meet all of the following requirements: – Attained age 55 – Completed 30 years of service – Met rule of 90 – Same benefits as above  Participants in pay status or those who have submitted a completed application by 12/31/2010 will have benefits determined under the provisions in the plan as in effect 7/1/2009.

24. 23 Mercer Proposed Rehabilitation Plan Contribution Increases  Contribution rates must be increased annually. Required contribution increases are as follows: Bargaining Agreements 12/1/10 – 6/30/11$0.32 Bargaining Agreements 7/1/11 – 6/30/12$0.35 Bargaining Agreements after 6/30/12$0.41  Rates for apprentices would increase by a proportional amount.  Contribution increases continue each year through 6/30/22  Amounts will be recalculated each year based on plan experience; contributions can be revised annually based on the updated amount or adjusted at the start of each bargaining agreement to the then current rate.

25. 24 Mercer Projected Results of Rehabilitation Plan  Funding standard account credit balance projection:

26. 25 Mercer Default Rehabilitation Plan  All the benefit reductions in the proposed rehabilitation plan  No transition benefits for those with 25 or more years  Participants in pay status or those who have submitted a completed application by 12/31/2010 will have benefits determined under the provisions in the plan as in effect 7/1/2009.  Contribution rates must be increased annually. Required contribution increases are as follows: Bargaining Agreements 12/1/10 – 6/30/11$0.32 Bargaining Agreements 7/1/11 – 6/30/12$0.36 Bargaining Agreements after 6/30/12$0.42  Contribution increases continue each year through 6/30/22 and are recalculated annually as with the proposed plan

27. 26 Mercer Implementation  Trustees must approve rehabilitation plan.  Plan to be delivered to all bargaining parties within 30 days.  Notice of benefit reductions to be provided to all plan participants as soon as possible.  Notices for funding relief and amortization extensions will follow later.

28. 27 Mercer Plan Operation in Red Zone  Before enactment and during rehabilitation period: – Cannot accept CBA that reduces contributions or excludes younger or newly hired employees – Cannot amend plan to increase benefits unless actuary certifies the increase will be paid by contributions not contemplated in the rehabilitation plan – Cannot pay lump sum benefits except small cashouts < $5,000  Rehabilitation period ends when the plan is no longer projected to have a funding deficiency in the next 10 years or at the end of the 10-year rehabilitation period.  Rehabilitation plan is updated annually for experience and progress.

29. Assumptions and Certification

30. 29 Mercer Key Projection Assumptions  Liabilities from 7/1/2009 census, adjusted for actual retirements through 7/1/10. For default plan, all participants who have 30+ years and 50% of those age 55+ with 25-29 years are assumed to retire before the benefit reductions.  Assets are estimated 6/30/10 assets as provided by Salter and Company  Assets and liabilities from Local 74 are excluded  Assets are assumed to earn 7.50% per year net of investment expenses  All other actuarial assumptions are exactly met.  Contribution increases based on actual 2008-2009 experience reduced 5%, with approximately 7% of those hours for apprentices.  All benefit changes are assumed to occur 1/1/2011.  Additional plan contributions begin 12/1/2010, 7/1/2011, or 7/1/2012 depending on the bargaining agreement effective date. 5%/10% supplemental contributions from 12/1/2010 to effective date of rehabilitation plan contribution increases.  Available funding relief is 10-year recognition of 2008 investment loss in actuarial value of assets and use of 130% corridor rather than 120%.  Officers contribution rate increased to 16% of pay effective 1/1/2011. Staff contributions equal ERISA costs each year.

31. 30 Mercer Certification/Limitations Mercer has prepared this report exclusively for the National Asbestos Workers Pension Plan; Mercer is not responsible for reliance upon this report by any other party. Subject to this limitation, the National Asbestos Workers Pension Plan may direct that this report be provided to its auditors [in connection with audits of the Plan or its sponsoring entities]. The only purpose of the report is to provide information to the trustees to assist them in the development of a funding rehabilitation plan as required under ERISA Section 305. This report may not be used for any other purpose; Mercer is not responsible for the consequences of any unauthorized use. Decisions about benefit changes, granting new benefits, investment policy, funding policy, benefit security and/or benefit-related issues should not be made on the basis of this report, but only after careful consideration of alternative economic, financial, demographic and societal factors, including financial scenarios that assume future sustained investment losses. The trustees are solely responsible for selecting the plan’s investment policies, asset allocations and individual investments. Mercer’s actuaries have not provided any investment advice to the trustees. A report ERISA Section 305 is only a snapshot of a Plan’s estimated financial condition at a particular point in time; it does not predict the Plan’s future financial condition or its ability to pay benefits in the future and does not provide any guarantee of future financial soundness of the Plan. Over time, a plan’s total cost will depend on a number of factors, including the amount of benefits the plan pays, the number of people paid benefits, the period of time over which benefits are paid, plan expenses and the amount earned on any assets invested to pay benefits. These amounts and other variables are uncertain and unknowable at the valuation date. Because modeling all aspects of a situation is not possible or practical, we may use summary information, estimates, or simplifications of calculations to facilitate the modeling of future events in an efficient and cost-effective manner. We may also exclude factors or data that are immaterial in our judgment. Use of such simplifying techniques does not, in our judgment, affect the reasonableness of valuation results for the plan.

32. 31 Mercer Certification/Limitations (cont) To prepare the report, actuarial assumptions, as described in this report and in the July 1, 2009 actuarial valuation report, are used in a forward looking financial and demographic model to select a single scenario from a wide range of possibilities; the results based on that single scenario are included in the valuation. The future is uncertain and the plan’s actual experience will differ from those assumptions; these differences may be significant or material because these results are very sensitive to the assumptions made and, in some cases, to the interaction between the assumptions. Different assumptions or scenarios within the range of possibilities may also be reasonable and results based on those assumptions would be different. As a result of the uncertainty inherent in a forward looking projection over a very long period of time, no one projection is uniquely “correct” and many alternative projections of the future could also be regarded as reasonable. Two different actuaries could, quite reasonably, arrive at different results based on the same data and different views of the future. A "sensitivity analysis" shows the degree to which results would be different if you substitute alternative assumptions within the range of possibilities for those utilized in this report. We have not been engaged to perform such a “sensitivity analysis” and thus the results of such an analysis are not included in this report. At the trustees’ request, Mercer is available to perform such a “sensitivity analysis. Actuarial assumptions may also be changed from one valuation to the next because of changes in mandated requirements, plan experience, changes in expectations about the future and other factors. A change in assumptions is not an indication that prior assumptions were unreasonable when made. Valuations do not affect the ultimate cost of the Plan, only the timing of contributions into the Plan. Plan funding occurs over time. Contributions not made this year, for whatever reason, including errors, may continue to be required and may be made in later years. If the contribution levels over a period of years are lower or higher than necessary, it is normal and expected practice for adjustments to be made to future contribution levels to take account of this with a view to funding the plan over time. Data, computer coding and mathematical errors are possible in the preparation of a valuation involving complex computer programming and thousands of calculations and data inputs. Errors in a valuation discovered after its preparation may be corrected by amendment to the valuation or in a subsequent year’s valuation.

33. 32 Mercer Certification/Limitations (cont) The National Asbestos Workers Pension Plan Trustees are responsible for selecting the plan’s funding policy, actuarial valuation methods, asset valuation methods, withdrawal liability methods and accounting assumptions. The policies, methods and accounting assumptions reflected in this valuation are those that have been so selected and are described in the July 1, 2009 actuarial valuation report. The Trustees are responsible for reviewing and confirming that the policies, methods and accounting assumptions as described in the July 1, 2009 actuarial valuation report are accurate and are solely responsible for communicating to Mercer any changes required thereto. The July 1, 2009 actuarial valuation report also reflects the assumptions that have been selected for funding purposes as of July 1, 2009. By relying on this report, the Trustees confirm they have accepted the assumptions contained in the report. To prepare this report Mercer has used and relied on financial data and participant data supplied by Carday Associates and Salter and Company, and summarized in the July 1, 2009 actuarial valuation report. National Asbestos Workers Pension Plan is responsible for ensuring that such participant data provides an accurate description of all persons who are participants under the terms of the plan or otherwise entitled to benefits as of July 1, 2009 that is sufficiently comprehensive and accurate for the purposes of this report. Although Mercer has reviewed the data in accordance with Actuarial Standards of Practice No. 23, Mercer has not verified or audited any of the data or information provided. Mercer has also used and relied on the plan documents, including amendments, and interpretations of plan provisions, supplied by O’Donoghue & O’Donoghue as summarized in the report in the July 1, 2009 actuarial valuation report[and on plan provisions stipulated by statute]. We have assumed for purposes of this valuation that copies of any official plan document including all amendments and collective bargaining agreements as well as any interpretations of any such document have been provided to Mercer along with a written summary of any other substantive commitments. The National Asbestos Workers Pension Plan is solely responsible for the validity, accuracy and comprehensiveness of this information. If any data or plan provisions supplied are not accurate and complete, the

34. 33 Mercer Certification/Limitations (cont) valuation results may differ significantly from the results that would be obtained with accurate and complete information; this may require a later revision of this report. Moreover, plan documents may be susceptible to different interpretations, each of which could be reasonable, and that the different interpretations could lead to different valuation results. The National Asbestos Workers Pension Plan agrees to notify Mercer within 30 days of receipt of this report if it disagrees with anything contained in this report or is aware of any information that would affect the results of this valuation that has not been communicated to Mercer or incorporated herein. This valuation will be deemed final and acceptable to the National Asbestos Workers Pension Plan unless notice is received by Mercer within such 30 day period. We are available to answer any questions on the material contained in the report, or to provide explanations or further details as may be appropriate. The undersigned credentialed actuary meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained in this report. ______________________________ William J. Ruschau, FSA, EA, MAAA The information contained in this document (including any attachments) is not intended by Mercer to be used, and it cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code that may be imposed on the taxpayer.

35. www.mercer.com