Retiree plan to cost $96 million

President Sheldon Hackney is expected to accept changes to the retiree medical plan which, complying with a new national accounting standard, will make the University financially liable for $96 million -- its projected cost of retiree benefits. During the next 20 years, the University must allocate at least $96 million dollars -- the estimation of an outside consulting firm -- on its balance sheets to demonstrate it can fund agreements it has made with employees about retirement health benefits. Hackney is expected to approve the plan in the next few weeks. Last March, a task force was organized to consider possible modifications to the current benefits plan, and the suggestions were presented to the president earlier this year. To raise the necessary funds and eliminate high costs of medical benefits in the future, it was proposed that the University take three steps to decrease future liability: · change its eligibility requirements for retirees who receive medical benefits · increase the percentage rate of insurance premiums paid by retirees · stop allowing former staff members to add spouses and dependents to their plans after they retire These changes will apply to employees hired after July 1. According to the proposal, the University will put the money it sets aside each year for retiree benefits into an account outside the University where it will receive revenue from the federal government, said Acting Executive Vice President John Gould. Vice President for Human Resources Bill Holland said that in complying with the standard, it will be cheaper for the University to set aside the money for 20 years than to allocate $96 million all in one year. He said the University, unlike schools such as Brown University and the University of Southern California, will still have an attractive benefits program for retirees even after the changes are made. Holland called the proposed changes "relatively minor" and said they will not affect many of the University's 14,000 current retirees. The modifications, first proposed in December by a task force headed by Gould and Provost Michael Aiken, will be made to comply with the Financial Accounting Standards Board's Statement 106, which requires institutions within their budgets to estimate and allocate for the projected cost of retiree medical benefits. According to statistics provided by the University's FAS 106 Work Group, last year the University spent $2.6 million on retiree medical benefits, and the medical care component of the employees benefits program has grown by 281 percent in the past 10 years. The rules of the FAS Board do not have legal force, but the University must comply with the regulations so that it can maintain its current AA credit rating and cost of financial borrowing, the task force's report said.