Benefits Committee
Meeting Minutes: February 24, 2009
Faculty and Staff Benefits Office
Bldg. 7, Woodrail Centre
Chairman Hahn called the meeting to order at 10:35 a.m.
In addition to the chair, those present included: Jack Batterson, John Bauman, Deb Denham, June DeWeese, Jere L. Gilles, Roger Heath, Marj Leavene, Jatha B. Sadowski, Barbara Savio, Lisa Wimmenauer, with guests Mike Paden, Betsy Rodriguez, Bob Stewart, and Toni Monsen.
The Chairman introduced guests attending the meeting today: Betsy Rodriguez, Vice President for Human Resources, Bob Stewart, a member of the Retirement and Staff benefits Committee and Board of MURA, who is also a Professor Emeritus from the College of Education and an Adjunct Faculty member in the School of Nursing; and Toni Monsen, the Chair of the UM Staff Advisory Council.
Betsy Rodriguez showed the committee a PowerPoint presentation to explain the pension situation in a more visual format. Rodriguez answered several questions during this presentation. She explained that furlough is the same as unpaid vacation or time off without pay. She believed that it is highly unlikely that there will be furloughs, because the University is not in a crisis mode this year. If there are furloughs, the University will try to spread them to one day per pay period if possible. The University took those early steps to reduce costs (e.g. hiring freeze, and expense reductions), and those steps placed our university on a much better footing.
The University is in a much better situation than many of our peers at other universities around the country. For example, Arizona State University was forced to take 15 days of furlough in addition to the layoff of about 200 faculty members. There are no plans to offer an early retirement package, because it is too expensive and too disruptive. In the FY 2010 (starts on July 1, 2009), there will be no merit raises.
The pension plan’s actuarial study considers the plan contributions in five-year increments when it projects how much to put into the plan. The study dated October 2008 assumed 0% investment return for 2009/10 and 8% return over the next four years. Using these assumptions, the required contributions will increase dramatically over the next four years.
At some point in the next five years, a 12% contribution will probably be required. As of Oct. 31, 2008, the plan had a net worth $2.427 billion, down from $2.9 billion a year ago. Today (Feb., 2009) it has a net worth about $2.1 billion. Even with the significant losses, it is important to note that the investment performance of the pension has outperformed the market. The important thing is that the University was not forced to sell any assets during this downturn in the market. This is an especially difficult market because there were no safe investments. Importantly the University pension plan is 100% funded which also protects the plan from even higher required future contributions.
Below are the actual and projected pension plan contributions required to maintain a fully funded plan (based on the actuarial study of October, 2008):
| Fiscal Year | UM % Contribution |
| 2009 | 5.87% |
| 2010 | 6.12% |
| 2011 | 8.8% |
| 2012 | 10.7% |
| 2013 | 12.29% |
Originally, the plan was for everyone to contribute 1.4% to the pension plan. Later the plans were revised to have 1% of the first $50,000 of salary and 2% on salary above that amount. This would start July 1st 2009. This contribution is unlikely to go away due to the significant investment decline and expected length of recovery.
The University budgets about 7% for the retirement plan, and that will continue. The difference between the University budget and the required pension contribution will be set aside in a reserve fund for the years when the budgeted amount will not cover the required contribution.
There is no guarantee that the employee contribution will stay at 1 or 2% of gross salary. It is hoped that the employee contributions will not change, because there is hope that the economy will improve later this year and that the recent stimulus funding will enable the University to contribute more to the plan.
The idea of having employees contribute 1% or 2% to the plan is better than having salary cuts. Salary cuts for employees within 5 years of retirement could reduce their lifetime pension benefit. The pension contribution changes do not apply to part-time employees who are not eligible for University benefits.
A few suggestions came from committee members. One suggestion was to have graduated contributions into the pension based on salaries in much the same way the IRS has graduated taxes based on income. Another suggestion was that the University should give serious thought not to require the 1% contribution from those employees making less than $50,000 and to raise the contribution for those making more than $50,000.
Rodriguez confirmed the newspaper reports that a person’s 1% or 2% contributions will be returned with interest if that person left the university before being vested in the pension plan. She also mentioned that someone at the first open meeting said that he would like to contribute to a “University food bank” to help some people who cannot meet their every day expenses.
There was further discussion about the 1% contribution to the pension plan starting July 1, 2009. One person mentioned how this 1% contribution will hurt those people living pay check to pay check.
A probable dollar amount of contributions to the plan is projected to be:
| Annual Salary | Monthly contribution to the pension plan |
| $36,000 | $30.00 |
| $50,000 | $42.00 |
| $150,000 | $208.00 |
| Hourly wages | |
| $10.00/hour | $8.00 |
For more information about the recent changes, see the document “University Pension Plan Changes” at: http://www.umsystem.edu/ums/departments/hr/benefits/
One person asked about the transition assistance procedure for people who are laid off. Rodriguez explained that this procedure would provide some salary and benefits for a defined period while they found another job either here or somewhere else.
Bob Stewart (stewartb@missouri.edu) talked about the work of the System Retirement and Staff Benefits Committee in amending the UM Retirement, Disability, and Death Benefit Plan document. The document is part of the UM Collected Rules and Regulations. He explained that the committee is advancing the formal language needed to enact what the Board has already approved in regard to requiring employee contributions to the UM pension plan.
Mike Paden spoke briefly about what was going on around Missouri with respect to benefit plans. He discussed two bills in the legislature. The first focuses on prescription drugs and would place restrictions on management practices that are currently in place. The end result would be an increase in costs. The second is an effort to have UM's medical benefits and those of other public employers in Missouri consolidated into one plan. This would result in UM giving up control over the design, pricing, and management of its own medical plans. That comment garnered little support from those attending.
The next two meetings are Tuesday, April 7, 2009, and Tuesday, May 12, 2009 at 10:30 a.m. at the Faculty-Staff Benefits Office Conference Room, Building 7, Suite 210, Woodrail Center on Nifong Blvd. It is hoped that Ms. Betsy Rodriguez, UM Vice Pres Human Resources, will be able to attend this meeting.
Respectfully submitted,
Jack Batterson
Secretary Pro-Tem
