University of Missouri

University Communications

Spectrum

Volume 33, Number 4, August 2006

Retirement & staff benefits committee issues report

The University of Missouri’s existing pension plan is a value to the University, faculty and staff, and should be retained, the Retirement and Staff Benefits Committee recommended in a recent report. The committee completed a comprehensive study on retirement plans and post-employment health plans.

The committee, comprised of faculty, staff and retirees representing each campus, engaged the services of The Segal Company, the University’s consulting actuaries, and experts in the field of retirement plans and post-employment health plans.

UM’s current plan is considered a hybrid of the defined benefit and defined contribution approaches, combining the best features of both. With the University’s defined benefit pension plan, the University funds the entire cost of the benefit for vested employees. The “hybrid” feature of the plan borrows from accumulated account features in a defined contribution plan, where accumulations are based upon a certain contribution going into an account. When employees leave or retire from the University, they receive the greater value of the “accumulated value” or the “present value” of the defined benefit. If they retire, it is paid in the form of an annuity.

The committee recommended that UM retain this existing hybrid plan. This approach offers a unique combination of flexibility in benefits while still maintaining cost efficiency for the institution.

UM has spent 50 years in diligently managing and appropriately funding its defined benefit pension plan, the report stated. The result is a cost-effective, well-financed asset that allows UM to offer competitive benefits at a lower cost than comparator institutions with defined contribution plans.

The University offers other retirement plan programs, such as 403(b), 457(b), and 401(a) plans that allow employees to voluntarily contribute.

The committee also analyzed the issue of post-retirement health care benefits and recommended that UM continue to offer and subsidize such benefits. They are considered to be a critical part of the overall benefit package.

In order to control increasing costs in this regard, the committee recommended that UM consider areas that can impact growth, including: increasing the eligibility threshold for post-employment benefits; reviewing opportunities offered by Medicare Part D; using Medicare Advantage opportunities as they become available in geographic areas where UM retirees are located; and mandatory home delivery of maintenance prescription drugs for retirees to take advantage of greater discounts.

In addition to its report on retirement plans, the committee continues to regularly assess alternatives and new approaches to manage the benefit programs in a value-oriented, cost-efficient environment. Its latest effort involved a series of health care plan changes that were implemented January 1, 2006.

The best possible investment of the compensation dollar is critical to effective recruitment and retention of high quality faculty and staff, the committee reported.

The Board of Curators has expressed interest in the University’s retirement and post-employment benefits, which have been the topics of board development sessions.

“The University and the board can stand tall and take pride in how these benefit programs have been managed for many years,” said Ken Hutchinson, UM Vice President for Human Resources.

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