Meeting Minutes
Budget and Finance University Policy Committee
Meeting Minutes: March 18, 2004
Members Present
Larry Fortuna
Tom Kelly
Brian Welsch
Tim McGuriman
Bill Laird
Tassos Malliaris
John Frendreis
Members Absent
Marge Beane
Cindy Gonya
Wayne Magdziarz
David Schweikart
Guests
Mike Franz, Hewitt Associates
Alan Steinberg, Hewitt Associates
Mike Franz and Alan Steinberg of Hewitt Associates presented information on
Retiree Medical Benefits: Redesign Alternatives and Medicare Reform, which
included an overview of the impact the Medicare Reform Bill will have on
retiree health benefits. The two most significant changes to Medicare are
the addition of prescription drug coverage for post-65 and disabled Medicare
beneficiaries, and the establishment of new Health Savings Accounts. The
new voluntary prescription coverage will become available January 1, 2006.
Hewitt proposed four potential design plan alternatives to the current LUC
retiree coverage.
Alternative A: Service-Based Percentage Contribution
Eligibility for retiree medical benefit is 60/15
LUC subsidy is 5% of cost per year of service over 15 years with a
maximum subsidy of 50%; does not include a spousal subsidy.
This plan design would leave full career employees "whole" with more
gradual "earning" of LUC subsidy while LUC still responsible for subsidy
that includes medical inflation.
Eligibility for Alternative B:
Account-Based Approach 60/15 Eligibility retiree receives a "credit" of $3,000 per year of
service (after age 40) up to a maximum of 25 years. Retiree bears the
risk of inflation although growth in account, e.g. CPI might be helpful.
Retiree bears longevity risk; LUC could "accept" that risk by annuitizing
account at retirement. Eligibility age/years of service and dollar
amount can be decided by LUC. Employees can make voluntary post-tax
contributions and have discretion to spend the money as they choose so long
as expenses are health related.
Alternative C: "Soft Dollar" Cap
Eligibility for retiree medical benefit 60/15 " LUC subsidy capped at 150%
of current cost; Annual increases limited to CPI once cap reached "
Integration with Medicare " No spousal subsidy " LUC would still be
responsible for subsidy that includes some medical inflation.
Alternative D: Current Proposal
Access-only (no employer subsidy) for all employees
Increase retiree premium to 50% of cost (for retiree) and increase
spouse premium to 100% of cost.
Grandfather provisions for employees who are currently eligible
(60/10) or have 25 years of service or 70/75/80 points.
Harsh "cliff" between those with and those without
LUC could choose to impose this premium increase only on future
retirees or could include existing retirees.
The committee favored Alternative B and requested detailed examples for the
next meeting using 60/15 and 60/10 eligibility requirements to determine the
most cost effective option.
Hewitt also provided an Introduction to Health Savings Accounts (HSAs),
which are truly tax free (contributions, earnings, distributions) and allow
individuals who are not yet Medicare eligible to save for health care on a
tax-effective basis while participating in a high-deductible health plan
(HDHP).