COLUMBIA — Revamping the University of Missouri System’s benefits plan inched one step closer to fruition Monday, as the school’s governing board devoted an entire day to weighing the pros and cons of change.
The UM System Board of Curators met via telepresence, not to take action but to explore concerns and identify objectives for developing a new retirement plan for faculty and staff.
The discussion is years in the making, but within the past year, the system has more earnestly looked into shifting its current pension-based retirement plan to one based on direct contributions, similar to a 401(k).
Any changes to the system’s benefits, which likely would take effect in 2012, would apply only to new hires.
A new committee
UM President Gary Forsee opened the meeting by asking the curators to focus on the needs of employees, not cost or the UM System budget.
“It is about the employees,” Forsee said. “This is about making sure we have the correct framework for the future.”
As a way to give UM employees a conduit for their interests, Forsee announced the formation of a new committee whose sole purpose will be to advise Betsy Rodriguez, UM vice president of human resources. It will include the system’s Compensation and Human Resources Committee and select faculty and staff.
“I believe that’s the most efficient way for the faculty and staff voices to be heard,” Forsee said.
Additionally, Forsee is working to “winnow down” the range of discussion on this topic to alleviate the worries of current faculty and staff, many of whom are afraid that a move to defined contributions would jeopardize their pensions.
However, the current defined-benefits plan is fully funded for the foreseeable future, Forsee said, adding the disclaimer that there is a future liability "based on the current snapshot of the market.”
The defined-benefits plan largely is contingent on the fluctuations of the market, with most of the risk falling to the UM System. That liability is the reason a benefits plan should change to make it less volatile in the future, Forsee said.
“Can we continue to add new employees to a defined-benefit plan, realizing the market risks we’ve seen?” he said at a post-meeting news conference. “Can you start to mitigate risk in the short term, and obviously in the long term, by plan-design change?”
Under a direct-contribution plan, most of the risk would move from the UM System to its employees. The plan also would be portable.
At the meeting, Mary Ann Dutemple, a senior consultant from Towers Watson, provided an example that would include contributions from both the UM System and its employees.
Under her scenario, the system would put 5 percent of an employee’s salary into the retirement fund and provide a 200 percent match to employee contributions up to 2 percent. Thus, an employee could maximize UM contributions at 9 percent.
To differentiate levels of employment, the plan would require a 1 percent contribution from hourly employees and 2 percent from professionals. Employees would be vested in the program after three years of service.
For example, the UM System would put $5,000 into a retirement fund for an employee who makes $100,000 per year. The employee would contribute $2,000, and the system would match that with $4,000. That would bring the system's contribution to $9,000 per year, which the employee would receive after remaining at UM for three years.
Dutemple listed a series of benefits such a plan would offer to meet the system's objectives:
- Competitiveness: The 9 percent maximum university contribution would make UM competitive among its peers, according to documents from the meeting.
- Link to service: The three-year vesting would not reward short-term employees.
- Program complexity: The program could be difficult to understand, but Dutemple added the silver lining that it would allow for a 9 percent contribution.
- Cost sharing: Contributions would be mandatory, but faculty and staff would pay different amounts depending on employment status.
- Program cost: The net cost to the university would be 7.8 percent to 8.5 percent of payroll, according to meeting documents.
Forsee plans to embark on a two-week tour of UM’s four campuses and hold town hall meetings to seek additional faculty and staff input. The meeting at MU will be at 10 a.m. Wednesday.
At a post-meeting news conference, Rodriguez said the system will rely primarily on the meetings to reach out to faculty and staff.
“It’s a matter of people taking the time to learn about it,” she said. “It’s a complex issue, so it makes it more difficult to have that conversation. Once I get in front of a group, it’s a lot easier.”
The ultimate goal is to marry the system’s research with faculty and staff input to create a viable benefits plan that meets as many objectives as possible.
Forsee long has stressed a December 2010 deadline to have a plan recommendation for the Board of Curators, but he said Monday that the deadline might be more fluid than originally intended.
Curator Warren Erdman said: “I think we could come forward with a recommendation in that time frame — I don’t think anything prevents it. But we’re not bound by it.”