Curators debate retirement issues
A board committee initially approved an involuntary forlough program.
Feb. 05, 2009
The UM system Board of Curators convened Thursday at the Reynolds Alumni Center to discuss a new retirement plan for university employees, hiring a new investment adviser and delegating authority to UM system president Gary Forsee.
The board met in committees to discuss the proposals today. The full board will meet tomorrow to consider final approval to the plans.
The board approved a new retirement plan for UM System employees that will divert 1 to 2 percent of an employee's salary to contribute to their individual retirement fund.
"I think many employees are afraid this new plan is a short term solution for a long-term problem," said Vice President of Human Resources Betsy Rodriguez. "But this truly is a long term solution."
The retirement plan is a permanent change for all benefit-eligible employees, but will not affect part-time workers.
"The plan will have an annual fiscal impact of $11.9 million on the university based on current salaries," Rodriguez said.
One percent of the first $50,000 of an employee's salary will be diverted to their retirement fund, while 2 percent on salaries above $50,000 would be diverted.
The board also discussed salary and benefits changes, prohibiting merit increases in employees' salaries for fiscal year 2010 and eliminating the early retirement package.
"Overall, the package is too expensive in these tough economic times and is a long-term liability," Rodriguez said.
The curators also discussed giving Forsee the authority to furlough employees when necessary. This would allow Forsee to put employees on an involuntary, unpaid leave of absence.
"Furloughs give the university the ability to reduce salary costs on a one-time basis and are especially useful in the event of an emergency," Rodriguez said.
The board will also consider whether to give Forsee the authority to develop a procedure for employees who lose jobs due to budget reductions, also known as transition assistance.
Transition assistance components include continued access to medical insurance for employees who lose their jobs due to budget restrictions. Severance pay for these employees will be based on years of service to the university.
Vice President for Finance and Administration Nikki Krawitz spoke about the UM system's relatively good investment situation despite the economic recession and projected the 2009 investment income will come out to around $39 million.
In search of an investment consultant firm to manage their investments, the curators voted unanimously to hire Rocaton Investment Advisers LLC for two years.
"Two years is a good plan, because what if a new treasurer comes in and they don't have a good relationship?" Krawitz said.
The board also discussed diversification of investments with Robin Pellish, a consultant for Rocaton who has worked with the university for many years.
Forsee then discussed what was to come to the UM system in 2009 and 2010 and spoke about university planning to set the stage for the work that will unfold later in the year.
Forsee cited the four biggest financial challenges that are currently facing the UM system. He said the combination of financial shortfalls in tuition, philanthropy, external research and state funding was a "perfect storm" of financial trouble.
"Historically, we've had the ability to attract students to our university at base tuition as well as increase tuition along the way," Forsee said. "We've reached the point where enrollment will start to decline."
Forsee said that he has asked the campuses to review their budgets, in hopes of reducing them.
"We have the asked the campuses and the system office to continue that budget review process," Forsee said. "At some point in time we need to get out of this day to day grind and get back to business. "
The board will meet again today for the conclusion of their two-day meeting at MU.