This letter confirms the understanding of the parties regarding administration of the pay conversion process. Beginning with the________________2007 premium payment, this agreement will allow for a portion of pay for medical premiums to be deducted from the employees pay on a pre-tax basis. By signing below the parties agree to the following requirements:

The University of Minnesota will extend the pay conversion program to employees, in addition to the health and dependent care reimbursement accounts currently offered. This program will be applied consistently with the provisions of Code Section 125 and any regulations thereunder.

Employees will be permitted to make changes in coverage elections only in accordance with the status change rules of the regulations under Section 125 of the Internal Revenue Code.

Local 1-B will as necessary but at least annually provide the employer with a letter from the Fund A Plan Administrator as per the attachment.

1-B will immediately report to the University any changes in benefits offered under Fund A.

All information will be reported by the University of Minnesota on the annual IRS Form 5500.

In accordance with the Pre-Tax Benefits Plan, Employees will not be given an election to treat premium payments as after-tax payments.