Whirlpool Retiree Healthcare Whirlpool Corporation Overview n Worlds

Whirlpool Retiree Healthcare

Whirlpool Corporation Overview n World’s Leading Manufacturer of home appliances n Whirlpool, Kitchen. Aid, Roper - US brands n Many other brands worldwide n 66, 000 worldwide employees n 23, 000 US based active employees n Rural, non-metropolitan locations n 9, 000 + retirees n Culture n Paternalistic n Highly tenured n Generally, older workforce n Union and Non-union - ability to achieve balance n Company Transformation - Innovation 2

Background Issues: n Unacceptable FAS 106 increases and non-competitive, outdated plan(s) Challenges: n Union and non-union workforce with multiple retiree healthcare plans n Cap implemented 2001 for salaried and hourly non-union n Basic Retiree Healthcare plans were outdated n No changes since initial implementation n Focus on post-65 benefits n Inadequate coverage for pre-Medicare years n No care management or discount incentives Goal: n Address FAS 106 costs while creating a more viable long-term program that could also be negotiated with our unions 3

Review of Objectives and Implications Objective Implication n Benefit Adequacy: Provide benefit based on age 62 retirement, single retiree n Reduced support for earliest retirements and spouses; Meaningful subsidies will remain n Uniformity: All employees covered by same program n Eliminates union/non-union distinction, reduces administrative complexity n Employee Recognition: Solution should illustrate the substantial value that Whirlpool provides to retirees n Designs that are easy to understand communicate financial value are favored n Cost Control: Reduce cost of uncapped plans, maintain cost of capped plans, reduce volatility of year-over-year cost increases n Immediate cost reduction is limited, but long-term control is essential; Risk of early retirement, excess medical trend is moved to employees 4

Key Features of the Redesigned Program n Notional retiree health care savings account (RHSA) n $2, 000 annual credit for all employees starting at age 40. n $1, 000 for the spouses n Transition credits for participants over age 40 n Redesigned healthcare plans n Concentration on higher catastrophic coverage n Additional use of PPO networks and care management initiatives n RHSA may be used to pay 80% of premium n Now allow deferred participation n Adequacy designed for 62 yr old full career employee 5

Benefit Adequacy Illustration $25, 000 Cost $20, 000 $15, 000 $10, 000 $55 58 61 64 67 70 RHSA Whirlpool $ 73 Age 76 79 82 85 88 91 Employee Additional Contributions 6

Analysis of Redesign n Reduced risk - greater catastrophic coverage n Reduced FAS 106 and more acceptable future cost growth n More predictable and Limited exposure to healthcare trend n Early retirees will pay more n Uncovered claims reporting issues negatively impacted benefit adequacy n Looking at opportunities to improve benefit adequacy n Integration with new Consumer Driven Health Plans (CDHP) offered to active employees, with possible retirement account rollover n Exploration of new Medicare options (subsidies, coordination, HSA’s, Medicare Advantage plans) 7

Integration with CDHP n Allow deferral of active health care Personal Care Account rollover benefits n May be rolled into RHSA at retirement n Rolled over PCAs accrue interest and are available at retirement with same rules as other RHSA funds n Significantly improves RHSA benefit adequacy n Provides continuum of care from Active to Retiree n. Drives consumerism throughout career 8

Benefit Adequacy Illustration Including CDHP Rollover $25, 000 Cost $20, 000 $15, 000 $10, 000 $55 58 61 64 67 70 73 76 79 82 85 88 91 Age RHSA Whirlpool $ EE Additional Contributions 9

Outcomes of the Redesign n Communicated June 2003 - with 18 month transition n Voluntary election effective 1/1/04 - Mandatory 1/1/05 n. A little grumbling, but no serious pushback n Slight acceleration in retirements, but no “rush for the doors” n Union locations accepted RHSA design n FAS 106 savings of close to $14 million n Designed for flexibility to address changes n. Strategic advantage n. Cost competitiveness n. Government/medicare initiatives 10