TO: University of Idaho Retirees, Faculty and Staff
FROM: Scott Green, President
DATE: March 31, 2020
SUBJECT: Changes to Other Post-Employment Benefits
Last Tuesday, the Faculty Senate approved policy changes that implement recommendations of the Other Post-Employment Benefits (OPEB) Advisory Group. The purpose of this communication is to outline retiree benefit changes recommended by the OPEB Advisory Group, supported by the Staff Council and subsequently approved by the Faculty Senate. I apologize for the length of this memo, but such a weighty and important issue is worth taking some time to communicate.
Summary of Changes
The Government Accounting Standards Board implemented a new accounting standard that required the recognition of Other Post-Employment Benefits (primarily healthcare benefits) on the balance sheet. For the University of Idaho, the impact was the recognition of a $33 million liability in fiscal year 2018. The increase in liabilities on our balance sheet together with the operating losses in FY18 and FY19 eliminated our reserves (our savings account) as calculated by the Idaho State Board of Education (SBOE). SBOE requires all institutions maintain a 5% reserve to ensure adequate resources during times of financial stress. The OPEB Advisory Group was tasked with identifying ways to meet our SBOE reserve requirements while still taking into consideration the needs of our employees and retirees. To summarize the recommendations:
- Tier I benefits remain unchanged.
- Pre-Medicare benefits remain unchanged for Tiers II and III.
- Post-Medicare benefits remain unchanged for Tiers II and III, for those already retired or eligible to retire by Jan. 1, 2021.
- Post-Medicare benefits will be phased out by the end of 2023 for those in Tier II and III not eligible to retire by Jan. 1, 2021.
- Pre-Medicare benefits remain unchanged for Tier IV.
- Post-Medicare benefits remain unchanged for those in Tier IV who are already retired or eligible to retire by Jan. 1, 2021.
- Post-Medicare benefits will end for those in Tier IV not eligible to retire by Jan. 1, 2021, at the end of 2023.
- Tier IV will be closed for employees hired after June 30, 2020.
Rationale and Context for OPEB Changes
As mentioned above, the objective of our review was to identify ways to meet our SBOE reserve requirements while still taking into consideration the needs of our employees and retirees. I believe this change does that. The revised policy will reduce the OPEB liability by approximately $11 million. These changes will not, by themselves, bring university reserves into full compliance with SBOE policy, but will produce substantial improvement.
The revised policy allows Tier I benefits to remain unchanged. This is our most vulnerable population, with most, if not all, on fixed income. These retirees count on these benefits and we have a commitment to continue to support these employees who dedicated their working lives to our university.
The committee further determined, after substantial due diligence and analysis, there is no practical alternative for the pre-Medicare benefits offered, either in the private sector or by the state of Idaho; therefore, the recommendation was made to continue to support this important coverage, bridging benefits between retirement and Medicare eligibility.
For post-Medicare benefits, there are supplemental Medicare plans that, in many cases, are more attractive than the University of Idaho plan for Tier II and III retirees and could save individuals up to $950 annually. Understanding why it can be beneficial for an employee to select a Medicare Supplemental Plan is not always easy. For example, the university plan costs $400 per year but has maximum annual exposure of $3,350. Medicare Plan G costs $200 a month but the costs are largely fixed, producing maximum annual exposure of $2,400 ($950 less in total than the U of I plan). Providing advising support to employees will be critical to helping you evaluate the subtleties of each plan and pick the one that best fits your circumstances. Based on the most recent OPEB census data from Dec. 31, 2018, there were 520 Tier III current employees not eligible to retire before Jan. 1, 2021. We will offer robust advising services for these employees to aid in selecting the best coverage available. All Tier II employees will be eligible to retire by that point and thus will not be impacted.
We will close Tier IV at the end of this fiscal year. This effectively eliminates the sick leave conversion program for future Tier IV employees. This would not impact any current employees, only those hired after June 30, 2020. To assess the impact this may have on recruiting, we polled our peer land-grant institutions and found that this change will align us with the vast majority. We do not, therefore, expect any significant impact on our recruiting efforts.
Consensus and Next Steps
To assess the efficacy of the proposed policy changes, we solicited feedback from across the university, including Faculty Senate, Staff Council, UIRA Board, Distinguished Professors, President's Cabinet, Deans and Center Executive Officers. The feedback was largely supportive of the OPEB Advisory Group recommendations. Most believed these steps were reasonable and fair given the financial challenges the university is facing. It is worth noting that a review of our health plans by our actuary determined that the OPEB Advisory Group recommendations are in line with the benefits offered by nearly all of our 16 peer institutions. If any of our employees or retirees have questions regarding how these policy changes impact them directly, please email opeb@uidaho.edu.
I appreciate the hard work of the OPEB Advisory Group and all those who weighed in on the recommendations. I care about and remain committed to our employees and retirees. Each served our university with honor. I wish we did not find ourselves in a reserve deficit position, but I believe this change best balances the needs of our university with our commitments to our employees and retirees. Our OPEB Advisory Group accomplished that goal. I thank them for their service to our University of Idaho.
Scott Green
President
president@uidaho.edu
uidaho.edu/president
