Regular session – December 8, 2008 – 3:30 p.m. – Jacobson Faculty Hall 102
office: Jacobson Faculty Hall 206 phone: 325-6789
e-mail: firstname.lastname@example.org web site: http://www.ou.edu/admin/facsen/
The Faculty Senate was called to order by Professor Cecelia Brown, Chair.
PRESENT: Ahmed, Apanasov, Atiquzzaman, Basic, Bass, D. Bemben, M. Bemben, Blank, Bradshaw, Brown, Brule, Clark, Conlon, Croft, Eodice, Forman, Franklin, Grasse, Greene, Hawthorne, Horn, Kent, Livesey, Miller, Milton, Moses, Muraleetharan, Rambo, Reeder, Sadler, Strauss, Striz, Trafalis, Vehik, Verma, Vitt, Weaver
Provost's office representative: Mergler
ISA representatives: Bondy, Cook
Buckley, Graham, Kershen, Knapp, Lifschitz, McDonald, Morrissey, Riggs,
TABLE OF CONTENTS
Faculty development awards
Search committee, Fine Arts dean
Benefits: retiree medical plan, management of retirement plans
Employment Benefits Committee membership
Election, Faculty Awards & Honors Council
Senate Chair's Report:
The Faculty Senate sent out the call for proposals for the Ed Cline faculty development awards on November 20. Proposals are due to the Faculty Senate office on February 4. Up to $2500 is awarded. Further information is available at http://www.ou.edu/admin/facsen/facdev.htm.
From the two nominations submitted by the Faculty Senate for the faculty-at-large position on the Fine Arts dean search committee, the administration selected Abi Asojo (Interior Design) to serve.
Human Resources director Julius Hilburn discussed the preliminary report concerning the retiree medical plan (see http://www.ou.edu/healthcareoptions/RetireeMedicalReport.pdf) and potential changes in the defined contribution plans. The slides from the presentation are available from the Senate office.
This year, for the first time, the University, as well as other non-profit organizations, will have to disclose post-retirement obligations. It has focused attention on what our commitment is for retiree medical benefits, which is close to $600 million. This year we spent around $6 million on retiree medical. In ten years, the figure is projected to grow to $26 million. That cost will take up an increasing part of the University’s budget. The health insurance options committee thought it made sense for the University to look at possible changes so we could avoid any emergency situation. The committee compared OU retiree medical benefits to those of peer organizations, agreed that any changes should not cause employees to retire earlier than they would have and that length of service should be recognized, and considered other plan designs that might manage the overall cost. Guiding principles were adopted during the initial review. The committee members did not want to do anything that would cause employees to think they had to accelerate their retirement to preserve a better benefit, and they wanted the program to be sustainable and affordable for both the retiree and the University. An ever increasing portion of OU’s budget is being consumed by retiree medical benefits. Any changes would be phased in over time and would have the least impact on people who are closest to retirement. Our retiree medical program is a good one compared to our peer group. We pay 100 percent of the premiums, which is fairly unusual. Most institutions require a contribution from retirees if they provide any institutional support at all. Using a combination of age and service to qualify for retiree medical is pretty common. Our plan is similar to others but provides a richer benefit.
Some recommendations in the report have to do with phasing in changes over time, some have to do with potential changes in the worth of the benefit, and they all are geared toward having an impact on the post-retirement benefit obligation. The recommendations would reduce the University’s future liability by about 35 percent. Because there is no change in the University’s out-of-pocket expense for the next 12 years, the savings will be in the future, not in the short term. Eligibility would not be based on when individuals leave employment but when they meet the age and service requirement. One of the questions was how to protect people who do not have time to react to any potential changes. The approach taken was to establish five groups: 1) current retirees -- no change; 2) current employees who have met the retirement requirements or will within the next five years -- no change; 3) employees who meet eligibility requirements within 5 to 10 years -- modest changes, and 4) people who meet the requirements more than 10 years from now. The committee’s view was that group 4 had a significant period of time to adapt to any potential changes. No changes are proposed in the current eligibility rules for retiree medical coverage. The three ways to qualify are 25 years of service regardless of age, age and service equal 80, or age 62 with 10 years of service. For employees who are more than five years away from retiring, the recommendation is for some employee contribution based on a matrix that considers age and service.
A review of the recommendations will be held on December 10 on the Norman campus and on December 12 at the HSC. A video of the presentation will be available on the HR web site.
Some employees have misinterpreted the recommendations and believe they need to leave the University to preserve their benefits. What establishes a person’s eligibility for benefits is when the individual first meets the requirements, even if s/he chooses to work another several years. The committee members had a lot of debate on where to draw the line. They wanted to make sure people could make meaningful preparations if they were impacted and also make sure the changes from one group to the next were not too drastic. Some members had suggested the creation of additional groups, but the committee decided that the plan would be too complicated.
Discussing the age and service chart (Appendix 2 of the report), Mr. Hilburn noted that employees would receive a larger contribution from the University the older they are when they start the benefit and the longer they have worked at OU. Questions have been raised about employees who can qualify to retire at age 62 with as little as 10 years of service. His response is people can qualify with 25 years of service and be as young as 50. For those individuals, the University is then obligated to pay for their retiree medical from age 50 until they are no longer covered. The University’s cost to cover the 62-year-old can be significantly less because it is for a shorter time. The recommendations include a distinction, though, so that longer service people have a higher level of benefit from the University.
Several plan design changes are being recommended for people who are more than five years away from eligibility. When people are younger than 65, they participate in the same plan as active employees. At age 65, they participate in a plan that coordinates with Medicare. Our current plan pays everything that Medicare does not pay, and it is very expensive. Included in the recommendations is a change that introduces a Medicare coordination approach and implements a deductible for the Medicare plan.
To summarize, there will be no change for the current 1400 retirees or the 2000 active employees who are eligible or within five years of being eligible to retire. The earliest that anyone will be affected is more than five years away. With the projected changes, the post-retirement liability will be reduced from about $600 million to $386 million in the long term. The report, which is available on the HR web site, represents about six months of work by the committee. The web site includes a link for feedback; those responses are shared anonymously with the committee members. In early January, the committee will determine whether to move forward with the recommendations or, based on feedback and suggestions, modify the recommendations. Ultimately, the committee will issue a report to President Boren for his consideration and action.
Prof. Trafalis asked whether a sabbatical was considered continuous service. Mr. Hilburn replied that sabbaticals would not affect continuous service. What constitutes a break in service is if someone leaves OU, resigns or goes to another employer.
Prof. Vitt commented that universities across the country are facing the same issues with health care. If we change coverage for young faculty and other institutions do not, we could lose faculty over health care. Mr. Hilburn answered that other universities are subject to the same forces; some have already enacted changes to their retiree medical programs. The big trigger is the new accounting disclosure standards. Rating agencies want to know what an institution is obligated to pay, and the obligation could affect the University’s ability to borrow. The ways to reduce the obligation are to reduce the benefit, change eligibility, or charge participants more. Mr. Hilburn said many people are hoping for some change nationally in the overall health care delivery system. In the last several years, health care for retirees has gone up 10-12 percent a year. The committee has tried to preserve a valuable benefit that shares the cost in some reasonable way between the retiree and the University.
Prof. Forman asked whether the committee had considered whether to start pre-funding retiree benefits, at least for the new hires. Mr. Hilburn said the challenge would be to find the dollars to set aside for the pre-funding. Last year, the rules were changed for people who are hired after January 1, 2008. Those employees can participate in the group plan once they retire, but there is no commitment from OU to contribute toward the cost. Prof. Forman remarked that if we hire somebody who is 52 to be an endowed professor, s/he will get no retiree health benefit because s/he is hired after January 1, 2008. Mr. Hilburn responded that more than half of the organizations provide no subsidy for that group of people. After this first set of recommendations is settled, the committee would like to take a look at how the University could help with that group’s retiree medical. Rather than take on an unlimited obligation, what might make more sense is to provide some matching contribution or some flat dollar contribution.
Prof. Moses commented that members of group 3 will pay about 43 percent of their retiree health care costs; members of group 4 will pay about 78 percent. He said it was a big step change from group 3 to group 4. According to the chart, OU will pay $43 million for group 4, and the baseline is $200 million. Mr. Hilburn said a more appropriate way to look at the numbers was the age and service grid, which shows how much the University will pay versus how much the employee will pay toward the cost. Prof. Moses pointed out that with the 2X cap for group 4, if costs go up 10 percent a year, we will hit that cap in 7.5 years. In retirement, the amount OU pays is capped at a fixed dollar amount and never adjusted for inflation. Mr. Hilburn said the 2X cap was a way to deal with the costs in the future and reduce the university’s liability. If OU continued to pay 10 percent a year, the numbers would get to be unmanageable. The hope is that something will happen in the health care delivery system nationally. Prof. Moses pointed out that we are likely to hit that limit before the people in group 4 retire. He said it would be useful to have more step changes. Mr. Hilburn said he would look at those numbers again.
Prof. Vitt asked whether OU
had looked into making health care accessible through the medical school at a
reduced rate. He said we should think
about how to cut health costs at the state level. Mr. Hilburn said there are lots of challenges
in the current health care delivery system.
HR has conversations with the medical school. The
Prof. Strauss said he thought people hired after 1995 were under the age and service rule of 90, not 80. Mr. Hilburn explained that eligibility for retiree medical has the three requirements he mentioned earlier and is separate from eligibility for Oklahoma Teachers Retirement, which is based on the rule of 80/90.
Prof. Muraleetharan asked whether the December 10 presentation was open to all faculty. Mr. Hilburn said it was open to faculty and staff. The announcement went out today. Prof. Muraleetharan asked whether the proposed contribution would be revisited in the future if things changed at the national level. Mr. Hilburn said the committee based its recommendations on how things are today, but recognized that changes could come out of a national debate that would cause them to re-examine the recommendations. He noted that five years ago nobody thought about Medicare Part D, the prescription drug benefit.
Prof. Striz asked if anyone was looking at a health care system that would cover all of academia and could provide greater buying power. Mr. Hilburn answered that each sponsor tends to go its own way. There are not many coalitions for purchasing health care because everybody tries to get the best deal. The needs in different cities vary. The national debate is likely to focus on the uninsured and how that impacts the overall market efficiency and cost.
Discussing the next issue, Mr. Hilburn explained that effective January 1, 2009, new federal regulations will increase OU’s responsibility for administering 403(b) plans, voluntary defined contribution plans. The new regulations require OU, as a sponsor, to take on the role of understanding the options offered to employees and making sure we comply with certain IRS rules. The responsibility has been with the individual employee. President Boren appointed a committee that engaged an investment consulting firm. The committee looked at best practices and how to offer a better quality and experience for OU employees. Our plans are cumbersome and hard to use, and some people are making decisions without the best information. The committee issued an RFP in the summer to try to find a company that could serve as an administrator. One of the potential opportunities is to have consolidated statements. We have various plans and multiple vendors within the plans. If we could provide information in a more consolidated fashion, we could enhance an individual’s planning, and the university could achieve some efficiencies of scale. About 30 percent of our employees are defaulted into money market accounts because they never made a decision about the university’s contribution to their 401(a) account. Going to a single administrator may allow for plan enhancements and new features. The committee is considering a three-tiered structure: (1) target date retirement funds in which the investment company makes the decision about the blend of equities and fixed income investments based on when the individual expects to retire; (2) core group of 10-15 investment options that would be monitored and managed actively; (3) brokerage window that would include hundreds of investment options for employees who are very actively involved in making investment decisions. Two or three companies that are capable of managing that type of plan design were identified. The most obvious potential impact is that some current options might not be available in the future. A fund that might not be available in the brokerage window is the TIAA‑CREF traditional individual annuity, because no one can do the record keeping for it except TIAA‑CREF. A recommendation will be made to President Boren in the next couple of months. Any changes will be communicated upfront to employees. The earliest any change could happen is July 1, 2009.
Prof. Mergler asked for an estimate of the percentage of employees who would be in the three tiers. Mr. Hilburn estimated 30-40 percent in tier 1, 40-50 percent in tier 2, and 5-10 percent in tier 3. Prof. Muraleetharan asked if it was a possibility that companies would add fees for those in tier 3. Mr. Hilburn said there would be no fee disadvantage. The committee hopes to get lower fees because the University is buying in volume. Prof. Moses asked if HR had a process to collect feedback. Mr. Hilburn he would send something out to campus and invite feedback and suggestions.
The Faculty Senate Journal for the regular session of November 10, 2008 was approved.
Prof. Brown said she had invited some students from OUr Earth to discuss the Focus the Nation Teach-In in an effort to continue the discussion about sustainability issues, which started at the last meeting with the lighting project. Mr. Chris Applegate, an officer with OUr Earth, said the National Teach-In will be held the first week of February. The week-long event brings teachers and students at educational institutions and other organizations together to discuss solutions that we have available to move forward in a more sustainable way. The organizers are asking faculty to consider saying something in class about the events that will be going on, dedicating a few minutes of class to discuss how that discipline can help further this movement, offering extra credit to students for going to an event, or participating in a panel discussion. The Teach-In is about bringing in solutions and opening up a dialogue for students, faculty and decision-makers to talk about where we go from here. The handout Mr. Applegate distributed at the meeting is available from the Senate office. See also http://www.ou.edu/student/ourearth/.
Prof. Brown explained that
the proposed change in the Employment Benefits Committee was presented at the
last meeting and concerns the
Current charge: 1 College of Medicine-Tulsa faculty member, President appoints after recommendations from HSC Faculty Senate, 4-year term.
Proposed charge: 1 Tulsa Campus faculty member, President appoints after recommendations from HSC Faculty Senate and Norman Faculty Senate, 4-year term.
Rationale: EBC would like to broaden the
The Faculty Senate approved the proposal on a voice vote.
The Faculty Senate approved the Senate Committee on Committees’ nomination of Dan Snell (History) to complete the 2007-10 term of Fred Beard (Journalism & Mass Communication) on the Faculty Awards & Honors Council.
Following up on the presentation last month about the Bedlam blood drive, Prof. Brown said OU donated the most blood, 73 donations compared to OSU’s 50 donations.
The Senate Executive Committee and student leaders are working on the pre-finals week proposal. It is being routed around and will be brought to the Senate for consideration, probably in February.
The meeting adjourned at 4:50 p.m. The next regular session of the Faculty Senate will be held at 3:30 p.m. on Monday, February 9, 2009, in Jacobson Faculty Hall 102.
Sonya Fallgatter, Administrative Coordinator
Paula Conlon, Faculty Secretary