The
Regular session – December 8, 2008 – 3:30 p.m. – Jacobson Faculty Hall 102
office: Jacobson Faculty Hall 206
phone: 325-6789
e-mail: facsen@ou.edu 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
ABSENT: Asojo,
Buckley, Graham, Kershen, Knapp, Lifschitz, McDonald, Morrissey, Riggs,
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TABLE OF CONTENTS
Announcements:
Faculty development awards
Search committee, Fine Arts dean
Benefits: retiree medical plan,
management of retirement plans
OUr Earth
Employment Benefits Committee membership
Election, Faculty Awards & Honors Council
Senate Chair's Report:
Blood drive
Pre-finals week
________________________________________________________________________________
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