ST. LOUIS — The UM System Board of Curators set the stage Tuesday for a final vote on a new retirement plan at its next meeting, Oct. 20-21.
The plan would affect new employees and would start in October 2012.
Discussion focused on the curators' continuing concerns about the plan's long-term cost and investment risk.
"The bottom line is that a defined contribution plan could be more expensive," said Betsy Rodriguez, University of Missouri System vice president for human resources.
In June, the board discussed a preliminary design for the new plan and posed questions and concerns to Rodriguez. Since then, she has made changes and, on Tuesday, presented a final draft of the proposal to the board.
The current plan is based on a defined benefits model, which specifies what percentage of an employee's paycheck goes into the retirement plan and guarantees the employee a certain amount upon retirement.
The new plan combines some elements of a defined benefits plan with a defined contributions plan, in which some retirement income would be put in investments selected by the employee. It would not guarantee a certain amount of return upon retirement.
Part of the defined contributions portion of the new plan says that in addition to the automatic 2 percent of pay invested, the system will match 100 percent of funds put into retirement investments — up to an additional 3 percent of the participant's total pay.
Since employees may voluntarily contribute more to their retirement investments in the new plan, Rodriguez said the ultimate cost is potentially higher than the current plan because the system will have to match these varied investment amounts depending on how much employees voluntarily invest.
The debate at previous meetings focused on whether the system is willing to contribute more to a new retirement plan in exchange for some protection against market volatility, according to a memo sent to interim UM System President Stephen Owens about questions raised at the Aug. 19 curators' meeting.
Because participants of the plan choose their investments, the defined contribution portion of the plan shifts much of the investment risk to the employee. As he has in the past, curator Don Downing said he disagrees with changing the retirement plan and thinks the university could better mitigate market risks.
"You just don't know what's going to happen in the market," Rodriguez said.
With the help of Nikki Krawitz, UM System vice president for finance and administration, and her staff in evaluating costs, Rodriguez said she's confident the plan has been well researched.
"There was a great deal of faculty and staff input that was put into this design," Rodriguez said. "I feel like this plan has been very thoroughly researched and analyzed."
In addition, Rodriguez said detailed rules regarding changes in employee status and former employees who return under the new retirement plan are still being finalized and will be presented in full at the board's December meeting.