Posted:
February 14, 2011
By Tom Bethel
National President
As national president of American Maritime Officers, I have reported often in AMO publications and during AMO membership meetings on my administration's steady and successful effort since January 2007 to reduce operating costs in our union--income is up, and expenses are down.
Now, as chairman of the joint union-employer boards of trustees of AMO Plans, I am pleased to report on an ongoing administrative cost-cutting strategy in these benefit funds. AMO Plans Executive Director Steve Nickerson and AMO Plans Finance Director John Macuski outlined this strategy for the trustees during their recent meetings.
But first, there is an important legal and financial distinction to be made between AMO and AMO Plans, a substantial difference that should be understood completely by every deep-sea, Great Lakes and inland waters AMO member and applicant for AMO membership:
One specific example is the streamlined AMO Plans payroll, which had topped out at 203 employees in Dania Beach and in Toledo by December 2007.
In 2008, this payroll was reduced to 157 employees, with a total base annual cost of $9.2 million a year--not including the cost of employee benefits and future salary increases already agreed to.
A year later, the AMO Plans payroll was down to a total of 146 employees in Dania Beach and Toledo, with a total base annual cost of $8.6 million.
By December 2010, the AMO Plans payroll had fallen to a total of 134 employees and a total base annual cost of $8.3 million. Again, these totals do not include savings realized in the cost of employee benefits and anticipated salary increases.
These AMO Plans payroll reductions--valued at nearly $1 million a year in salaries alone--were achieved through more sophisticated automation, personnel reassignment and attrition.
Additional savings approaching $2 million a year in operating costs since 2008 were achieved by eliminating a glaring redundancy--AMO Plans personnel in Dania Beach and Toledo were doing the same work. Now, this work--claims processing, for example--is done exclusively in Dania Beach.
Training was consolidated as well--AMO members sailing the Great Lakes had for many years studied to upgrade their licenses at the AMO Safety and Education Plan's Simulation, Training, Assessment and Research Center in Toledo, where the length of the Great Lakes shipping season determined STAR Center class schedules. Great Lakes engineers and mates typically found time for training only in the winter, leaving the Great Lakes wing of STAR Center idle most of the time. Now, Great Lakes engineers and mates sign up for classes at the year-round main STAR Center campus in Dania Beach as their work and vacation schedules permit.
In the AMO Medical Plan, operating costs were pared substantially in 2010 when the Plan signed an agreement with a new Preferred Provider Organization, or PPO, selected through competitive bidding among major companies. This PPO now serves as a third-party administrator and secures significant discounts for AMO families from doctors, hospitals and other health care providers.
A preliminary claims analysis by AMO Plans and its auditors indicated recently that the resulting savings will total about $2 million a year--with no cut in benefits, which actually increased in some cases.
In another significant shift from past practice, AMO Plans established an in-house legal department, cutting $950 thousand a year from a legal services budget that had exceeded $1,100,000 a year in retainers and "billable hours" to an outside law firm.
Like any sound, well-run business, AMO Plans carries liability and property insurance, and AMO Plans is determined to get the greatest bang for its buck in this area. Working carefully with several brokers and insisting upon lower premiums with no loss of coverage, AMO Plans in 2010 paid more than $300,000 less than it paid for comprehensive coverage in 2008.
In all, operating costs in AMO Plans have declined by more than 6 percent each year since 2008, with annualized savings of more than $5.6 million.
This year and beyond, AMO Plans will hold to responsible management of deep-sea, Great Lakes and inland waters employer money in the benefit funds established for all AMO members and their families.
Meanwhile, AMO--the union--will continue to pursue fleet expansion and new jobs in all sectors as the nation's largest union of licensed seafaring professionals. Each job in our union represents employer contributions to AMO Plans--and new work means even greater benefit security.
AMO--the union--will also continue to reduce its operating overhead. The official opening of the first-ever AMO headquarters building in Dania Beach in Spring 2011 will lead immediately to significant cost cuts--for example, our union will no longer have to rent office space and membership meeting rooms from AMO Plans, and we anticipate income from meeting hall rentals to outside interests--principally in the maritime industry--for conferences and conventions.
Moreover, AMO will own this building outright--there will be no mortgage because the construction cost of about $4 million was paid from a portion of the proceeds of the sale by AMO of more than 6 acres of land in Dania Beach--the land now housing STAR Center and AMO Plans offices--to AMO Plans for $10 million. The $6 million balance of proceeds from the sale is secure in the AMO treasury, earning a good amount of interest.
As always, AMO members with questions or comments on these or other matters are encouraged to call me anytime on my cell phone at (202) 251-0349.
Cost cutting strategies save money for union, Plans
By Tom Bethel
National President
As national president of American Maritime Officers, I have reported often in AMO publications and during AMO membership meetings on my administration's steady and successful effort since January 2007 to reduce operating costs in our union--income is up, and expenses are down.
Now, as chairman of the joint union-employer boards of trustees of AMO Plans, I am pleased to report on an ongoing administrative cost-cutting strategy in these benefit funds. AMO Plans Executive Director Steve Nickerson and AMO Plans Finance Director John Macuski outlined this strategy for the trustees during their recent meetings.
But first, there is an important legal and financial distinction to be made between AMO and AMO Plans, a substantial difference that should be understood completely by every deep-sea, Great Lakes and inland waters AMO member and applicant for AMO membership:
- AMO--the union--is funded primarily through membership dues and the initiation fees applicants pay over five years in addition to dues. This income and revenue from other sources cover only the cost of operating AMO--the union. No AMO income from any source is used to provide benefits for AMO members and/or their families or to pay for AMO Plans administration.
- The AMO Pension, Medical, Vacation, Safety and Education, 401(k) and Defined Contribution Plans are by law separate and apart from AMO--the union. These benefit funds are supported exclusively by contributions from deep-sea, Great Lakes and inland waters merchant vessel operators under terms established through collective bargaining between each of these companies and AMO--the union.
- These employer contributions cover all benefits from AMO Plans and the attendant administrative costs.
One specific example is the streamlined AMO Plans payroll, which had topped out at 203 employees in Dania Beach and in Toledo by December 2007.
In 2008, this payroll was reduced to 157 employees, with a total base annual cost of $9.2 million a year--not including the cost of employee benefits and future salary increases already agreed to.
A year later, the AMO Plans payroll was down to a total of 146 employees in Dania Beach and Toledo, with a total base annual cost of $8.6 million.
By December 2010, the AMO Plans payroll had fallen to a total of 134 employees and a total base annual cost of $8.3 million. Again, these totals do not include savings realized in the cost of employee benefits and anticipated salary increases.
These AMO Plans payroll reductions--valued at nearly $1 million a year in salaries alone--were achieved through more sophisticated automation, personnel reassignment and attrition.
Additional savings approaching $2 million a year in operating costs since 2008 were achieved by eliminating a glaring redundancy--AMO Plans personnel in Dania Beach and Toledo were doing the same work. Now, this work--claims processing, for example--is done exclusively in Dania Beach.
Training was consolidated as well--AMO members sailing the Great Lakes had for many years studied to upgrade their licenses at the AMO Safety and Education Plan's Simulation, Training, Assessment and Research Center in Toledo, where the length of the Great Lakes shipping season determined STAR Center class schedules. Great Lakes engineers and mates typically found time for training only in the winter, leaving the Great Lakes wing of STAR Center idle most of the time. Now, Great Lakes engineers and mates sign up for classes at the year-round main STAR Center campus in Dania Beach as their work and vacation schedules permit.
In the AMO Medical Plan, operating costs were pared substantially in 2010 when the Plan signed an agreement with a new Preferred Provider Organization, or PPO, selected through competitive bidding among major companies. This PPO now serves as a third-party administrator and secures significant discounts for AMO families from doctors, hospitals and other health care providers.
A preliminary claims analysis by AMO Plans and its auditors indicated recently that the resulting savings will total about $2 million a year--with no cut in benefits, which actually increased in some cases.
In another significant shift from past practice, AMO Plans established an in-house legal department, cutting $950 thousand a year from a legal services budget that had exceeded $1,100,000 a year in retainers and "billable hours" to an outside law firm.
Like any sound, well-run business, AMO Plans carries liability and property insurance, and AMO Plans is determined to get the greatest bang for its buck in this area. Working carefully with several brokers and insisting upon lower premiums with no loss of coverage, AMO Plans in 2010 paid more than $300,000 less than it paid for comprehensive coverage in 2008.
In all, operating costs in AMO Plans have declined by more than 6 percent each year since 2008, with annualized savings of more than $5.6 million.
This year and beyond, AMO Plans will hold to responsible management of deep-sea, Great Lakes and inland waters employer money in the benefit funds established for all AMO members and their families.
Meanwhile, AMO--the union--will continue to pursue fleet expansion and new jobs in all sectors as the nation's largest union of licensed seafaring professionals. Each job in our union represents employer contributions to AMO Plans--and new work means even greater benefit security.
AMO--the union--will also continue to reduce its operating overhead. The official opening of the first-ever AMO headquarters building in Dania Beach in Spring 2011 will lead immediately to significant cost cuts--for example, our union will no longer have to rent office space and membership meeting rooms from AMO Plans, and we anticipate income from meeting hall rentals to outside interests--principally in the maritime industry--for conferences and conventions.
Moreover, AMO will own this building outright--there will be no mortgage because the construction cost of about $4 million was paid from a portion of the proceeds of the sale by AMO of more than 6 acres of land in Dania Beach--the land now housing STAR Center and AMO Plans offices--to AMO Plans for $10 million. The $6 million balance of proceeds from the sale is secure in the AMO treasury, earning a good amount of interest.
As always, AMO members with questions or comments on these or other matters are encouraged to call me anytime on my cell phone at (202) 251-0349.