Retirement plans still up for debate for curators
The UM system Board of Curators will decide on a new employee benefits system in December.
Nov. 02, 2010
With a vote on retirement benefits for employees quickly approaching, the UM system is in the midst of a series of meetings to gather input on their options.
In the past week, both the Compensation and Human Resources Committee of the UM system Board of Curators and the Intercampus Faculty Council met to further discuss retirement benefits. They are currently faced with the option to keep their current plan, switch to a new one or integrate aspects of a new one into the existing plan.
No votes were taken in either meeting.
IFC, who met Thursday, does not have the power to approve or veto any change in the policy, but is the voice of faculty from all four UM system campuses to the Board of Curators, which will vote on a re-evaluated policy in December.
“This is about looking forward and understanding the risk factors that are important for the university to understand financially as it looks about its overall benefits and compensation plans for the future,” UM system President Gary Forsee said Monday at the beginning of the Board of Curators meeting.
The UM system currently adheres to a defined benefit plan, which involves the university investing money into stock and bonds to ensure employees will receive a certain percentage of their former salary after they retire.
“Principle number one is that a retirement plan should focus on providing adequate and secure income throughout retirement,” said Rich Hiller, a representative from financial advisors TIAA-CREF. “This is a bedrock principle.”
Rocaton Investment Advisors LLC said the current Retirement Fund policy calls for broad diversification among a wide variety of global capital markets — a good thing, given the instability inherent in investing in capital markets.
“When we talk about risk in the portfolio, we’re primarily talking about the uncertainty of capital market returns,” CEO Robin Pellish said.
One proposed change to the retirement plan is a defined contribution plan in which the university would instead entrust faculty and staff to invest a percentage of their salaries at their own risk.
IFC member Leona Rubin said the latter plan appeals mostly to younger staff members.
“So in one case, the university does the investment and in the other the individual does,” Rubin said. “Senior members like the defined benefit plan while younger faculty like the defined contribution plan because it is more portable. You can take it when you leave. But that’s a generality and not always true.”
For Monday’s meeting, Towers Watson senior consultant Mary Ann Dutemple and The Segal Company Vice President Howard Rog each put together a study, evaluating the impact if the UM system implemented a defined contribution plan for new employees.
In Rog’s projection, 50 percent of active employee payroll would be covered under the defined contribution plan by 2019. Total payroll would increase to more than $2 billion by 2034. Of that, 85 percent would be covered by the defined contribution plan.
Although changes to the current retirement plan would not directly affect current UM employees, IFC member for MU Clyde Bentley said a reduction of benefits might not entice new faculty.
“If our salaries are already low, that could be pretty tough for lower paid staff,” Bentley said.
Betsy Rodriguez, UM system vice president of Human Resources, compared the UM system’s retirement plan to other plans in the Big 12 and Big 10. The second half of Rodriguez’s presentation included feedback from faculty and staff.
“We did hold informational meetings August, September and October,” Rodriguez said. “I was on the road quite a bit.”
From those meetings, Rodriguez said challenges the UM system has faced include a belief among faculty and staff that a decision about retirement benefits has already been made and some perceive the timeline for a decision is too fast.
“The faculty would like to see more time to consider this than to push it right through to December,” Bentley said. “If we had a couple more months to look at it, it would be better.”
Faculty can learn more about the different retirement plans and voice their opinions at an open town hall meeting 10 a.m. Tuesday in Jesse Auditorium. Forsee and Chancellor Brady Deaton will host the forum and allow for questions from the audience.