Meeting Minutes
Budget and Finance University Policy Committee
Meeting Minutes: April 26, 2004
Members Present
John Frendreis
Wayne Magdziarz
Dave Schweikart
Tom Kelly
Larry Fortuna
Cindy Gonya
Tassos Malliaris
Bill Laird
Marge Beane
Member Absent
Brian Welsh
Guests
Mike Franz, Hewitt Associates
Alan Steinberg, Hewitt
Continued Discussion on Retiree Medical Benefits
Mike Franz and Alan Steinberg of Hewitt Associates provided updated
information on redesign alternatives for the LUC retiree medical benefit
necessary to achieve the goal of reducing the FY '05 benefits budget by
$2.7M. The current FY 05 benefits budget represents 31.2% of payroll and
administration's goal is to lower to 29.5% of payroll.
The committee chose to consider an account based structure strategy rather
than eliminating the subsidy. Under an account based strategy, employees
would earn annual credits after age 50 combined with a pre-determined length
of service requirement. The account would earn interest each year and be
debited during retirement for the full cost of coverage. No spousal subsidy
would be included and the Retiree would pay full cost after the account
expires. Under this plan, the LUC subsidy would be tied to interest credit
instead of medical inflation and unlike the current structure, longer
service employees would be rewarded. The account based strategy would also
allow LUC the option to annuitize account balances at retirement to avoid
account expiration, make accounts non-interest bearing to ease
administration and provide extra credits for dependent coverage. Dollar
amounts could also be adjusted once Medicare changes take effect in 2006.
Current retirees would continue under existing coverage.
The committee suggested a contribution of $4000.00 per year for employees
after age 50.
Bill expressed administrations goal would be to fund the annual expense and
allow earnings to accumulate. Hewitt will prepare account based models
beginning at age 50. The prescription impact will also be included in the
models which will be done for June 30th to capture any possible affects on
the FY 04 results of operations
Pete advised that inasmuch as the committee had decided on the policy
direction, the issue of specific numbers and service requirements could be
addressed by the Budget Review Team once the models have been completed by
Hewitt. This committee will reconvene to revisit the tuition benefit after
the division budget hearings for FY 05 have concluded and the retiree health
matter is complete.