View
38
Download
2
Category
Tags:
Preview:
DESCRIPTION
Retiree Health Benefit Task Force Recommendations. UK Employee Benefits. Overview of Retiree Health Benefits. Discuss current retiree health plan “Why does the University have to make changes?” “Proposed changes” “What do ‘I’ need to do?”. - PowerPoint PPT Presentation
Citation preview
Retiree Health Benefit Task Force Recommendations
UK Employee Benefits
Overview of Retiree Health Benefits
Discuss current retiree health plan
“Why does the University have to make changes?”
“Proposed changes”
“What do ‘I’ need to do?”
Recommendations of the Health Care Task Force
July 1, 2001
Additional funding for dependent subsidy
Additional plan choices
A proactive strategy for the management of health care and benefits
Response
FY 2003: $10.4 million funding for health plans
FY 2004: Central Funding of health care cost increase
New plan options were introduced
New health and wellness programs were put in place (e.g., Healthtrac)
Health Care Costs to UK’s Budget
$17 million increase over the past two years
$57 million in the current budget
Retiree Health Care Issue
Not an accounting problem
Retiree health care costs are escalating in sync with national trends People are living longer Health care costs increase significantly more than
inflation Health care is most expensive for the young and the old A growing retiree base is being supported by a
relatively static employee group
Retiree Health Care Task Force
Appointed March 14, 2003
Professor Tom Samuel (Chair)
Report Issued August 12, 2003
Recommendation: move from a defined benefit to a defined contribution plan
Issue
Limited dollars
Increasing demands
Retiree Health Benefits Task Force
Focus of the Task Force was the GASB exposure draft that will require some type recognition of the unfunded liability of the retiree health benefit.
Brad Canon University SenateShelia Brothers Staff SenateJean Cox RetireeBruce Miller RetireeJean Pival RetireeNancy Ray RetireeKaren Stefaniak EBCJoey Payne Director, University BenefitsHenry Clay Owen Controller and TreasurerTom Samuel Chair
Effects of Private Employers Recording Unfunded Liability
>500 employees offering retiree health benefits to current and future employees
> 1,000 employees offering pre-65
retiree health benefits
> 1,000 employees offering Medicare eligible retirees health benefits
1992 2002
46% 29%
89% 72%
80% 61%
Note: Based on responses from private-sector firms with 1,000 or more employees that offer retiree health benefits.
Source: Kaiser/Hewitt 2002 Retiree Health Survey, December 2002.
Ratio of Working Age Population (20 to 65) to Retirement Age (over 65)
Ratio of Working Age Population (20 to 65) to Retirement Age (over 65)
Year 20 to 65 – workers Over 65 - retirees
1950 7.3 1
2003 4.7 1
2035 2.7 1
Benchmarks (information on 17)
Retiree has zero contribution
Retiree contribute between $50 and $223 per month
NumberPercent
6 35%
11 65%
Current Plan with 50% Continuing to Surviving Spouse
$$9
$17$26$34$43$51$60$68$77$85$94
Current Plan with 50%Continuing toSurviving Spouse
Year
Cos
t in
Mill
ions
Revised Scenario Includes Expected Retirements and Stable Population
$$9
$17$26$34$43$51$60$68$77$85$94
Revised Scenario D,Includes ExpectedRetirements
Year
Cos
t in
Mill
ions
Current Plan and Revised Scenario D Including Expected Retirents
$$9
$17$26$34$43$51$60$68$77$85$94
Current Plan with 50%Continuing to SurvivingSpouse
Revised Scenario D,Includes ExpectedRetirements
Year
Cos
t in
Mill
ions
Revised Scenario D Includes Expected Retirements
$
$9$17
$26$34
$43$51
$60
$68$77
$85$94
Revised Scenario D,Includes ExpectedRetirements, No New HiresEligible
Year
Cos
t in
Mill
ions
All Three Scenarios
$
$9
$17
$26
$34
$43
$51
$60
$68
$77
$85
$94
Current Plan with 50%Continuing to Surviving Spouse
Revised Scenario D, IncludesExpected Retirements
Revised Scenario D, IncludesExpected Retirements, No NewHires Eligible
Year
Cos
t in
Mill
ions
Estimated Real Growth 2002-2014Contributions to Kentucky Public Employee Pension Programs
% increase # times low assumption employer contribution to retiree benefits – General Fund and Road Fund
# times high assumption employer contribution benefit – Personal Income increase
General Fund and Road Fund State of Kentucky
27%
Personal Income – residents of Kentucky
46%
Employer (LOW) Contribution Retirement State System
98% 3.6 times 2.1 times
Employee (HIGH) Contribution Retirement State System
152% 5.6 times 3.3 times
Source: Kentucky Long Term Policy Research Center, No. 14, October 2003
2002 dollar contribution $453 (2003 dollars) million2014 dollar contribution $898 (2003 dollars) million LOW Estimate2014 dollar contribution $1.142 (2003 dollars) billion HIGH Estimate
Current Retiree Health Benefits
Eligibility for health benefits:• Rule of “75” = Age + Years of service
• Must have 15 consecutive years of service
(if hired after March, 1997)
Example: Tim is 52 years old and has worked at UK for 27 years.• 52 + 27 = 79, so Tim can retire with health
benefits
Current Retiree Health Benefits
Retiree under 65• Retiree receives “single-credit” towards any
University Health Plan• UK pays $275 towards any plan
Retiree over 65• Retiree receives the “single-credit ” towards UK
Medicare Carveout Plan• UK pays $249 • Retiree pays $21
Current Retiree Health Benefits
“Credit” is the monthly amount the University pays towards an individual’s health plan
Surviving Spouse Credit:• Surviving spouse receives half of “credit”
towards health plan• UK pays $125
National Average Monthly Premiums for Retirees and Spouses, 2002
Weighted Average Monthly Premiums for New Retirees and Spouses, 2002
$241
$115
$401
$212
$165
$79
$328
$153
$- $100 $200 $300 $400 $500 $600 $700 $800
Retiree + Spouse
Retiree Only
Retiree + Spouse
Retiree Only
65+
Ret
iree
Pre
-65
Ret
iree
Employer Contribution to Premium
Retiree Contribution to Premium
Note: Based on responses from private-sector firms with 1,000 or more employees that offer retiree health benefits. Premiums for full-time employees retiring on or after January 1, 2002, in plans with the largest number of enrolled retirees.
Source: Kaiser/Hewitt 2002 Retiree Health Survey, December 2002.
University of Kentucky Average Monthly Premiums for All Retirees and Spouses
University Of Kentucky Weighted Average Monthly Premiums for All Retirees and Spouses
$249
$249
$275
$275
$291
$373
$48
$21
$- $100 $200 $300 $400 $500 $600 $700
Retiree + Spouse
Retiree Only
Retiree + Spouse
Retiree Only
65+
Ret
iree
Pre
-65
Ret
iree
Employer Contribution to Premium
Average Retiree Contribution to Premium
Source: University of Kentucky Employee Benefits Booklet, 2003-2004
“Why does the University have to make changes?”
Change in governmental accounting standards:
• The University must set aside enough money to pay for all employee’s future retiree health benefits
• Current retiree health benefit costs $351 million$46 million annually for 30 years
• Proposed retiree health benefit will cost $256 million $32 million annually for 30 years
“Why does the University have to make changes?”
To account for high costs and funding of future retiree health benefits, the national trend has been to drop health benefits for retirees.
• 38% of all firms offer retiree health benefits in 2003, as opposed to 66% who offered retiree health benefits in 1988
• 85% of State and Local government organizations currently offer retiree health benefits
• 91% of large employers (10K employees or more) offer retiree benefits
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2003
0%
10%
20%
30%
40%
50%
Increased RetireeContributions to
Premiums
Increased Cost-Sharing
IncreasedDependent
Contributions toPremiums
Added or ImprovedCoverage orBenefits for
Retirees
OfferedMedicare+Choice
as an Option
Percentage of Large Private Employers That Made Changes to Retiree Health Benefits Within the Past Two Years
Note: Based on responses from private-sector firms with 1,000 or more employees that offer retiree health benefits.
Source: Kaiser/Hewitt 2002 Retiree Health Survey, December 2002.
44%
36%
14%17%
29%
0%
10%
20%
30%
40%
50%
Provided Access-Onlyto Health Benefits with
Retiree Paying 100% ofCosts
Terminated AllSubsidized HealthBenefits for Future
Retirees
Shifted to a DefinedContribution Approach
Percentage of Large Private Employers That Made Changes to Retiree Health Benefits Within the Past Two Years
Note: Based on responses from private-sector firms with 1,000 or more employees that offer retiree health benefits.
Source: Kaiser/Hewitt 2002 Retiree Health Survey, December 2002.
14% 13%7%
0%
10%
20%
30%
40%
50%
60%
70%80%
90%
Increased RetireeContributions to
Premiums
Increased Cost-Sharing
IncreasedDependent
Contributions toPremiums
Terminated AllSubsidized HealthBenefits for Future
Retirees
Terminated AllSubsidized Health
Benefits for AllRetirees
Percentage of Large Private Employers Who Are "Very Likely" to Make Changes to Retiree Health Benefits Within Two Years
Note: Based on responses from private-sector firms with 1,000 or more employees that offer retiree health benefits.
Source: Kaiser/Hewitt 2002 Retiree Health Survey, December 2002.
82%76%
5%
22%
75%
Government Effect on Employers Offering Retiree Health Benefits
Employers Have Capped the Contribution toward Retiree Health Benefits
• 45% of firms that offer pre-65 benefits have capped Employer Contribution
49% of these firms have already reached the cap
• 50% of firms that offer over-65 health benefits have capped Employer Contribution
57% of these firms have already reached the cap
Source: Kaiser/Hewitt 2002 Retiree Health Survey, December 2002
“Proposed Changes for UK”
Those retired prior to Jan 1, 2005
• Continue to receive “single-credit” health credit
• “Single-credit” has a monthly cap; UK will pay up to $625 a month ($7,500 annually)
• Once the cap is reached, the employee will pay 100% of the annual cost increase over $625 to continue coverage
“Proposed Changes for UK”
Those retired prior to Jan 1, 2005
Year 1 Year 5
Total Annual Premium $3,240 $4,916
UK Annual Credit $2,988 $4,534
Your Annual Cost $ 252 $ 412
Premium includes national healthcare trend between 5.25% - 13%
“Proposed Changes for UK”
Those retired prior to Jan 1, 2005
Year 15 Year 20
Total Annual Premium $8,636 $11,155
UK Annual Credit $7,500 $7,500
Your Annual Cost $1,136 $3,655
Premium includes national healthcare trend between 5.25% - 13%
20 Year Contribution Projection
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
Your Contr
University Contr
Cap has been reached
Cap has been reached
“How does this affect me?”
You will pay more money for your health premiums after the “cap” has been reached
• Cap placed on “single-credit”• Projected cap will be reached within 14 years
based on actuarial projections
“Proposed Changes for UK”
Jan 1, 2005 and after: All employees who retire after Jan 1 will receive
a Health Credit Account
• Money from Health Credit Account will be used to pay the “single-credit” for your health plan
• When your Health Credit Account reaches $0, you will begin paying your entire health premium
“Proposed Changes for UK”
Health Credit Account
• Health Credit Account starts with $50K in 2005 and is increased 4% each year.
• Health Credit Account will earn 4% annually on the balance after your retire until account is depleted.
• Health Credit Account will last approximately 13 years based on actuarial projections
Health Credit Account Index
$50,000
X 4%
$50,000
$10,833
$60,833
X 4%
$13,179
$74,012
X 4%
$60,833
$74,012
$16,035
$90,047
Jan 1, 2005 Jan 1, 2010 Jan 1, 2015 Jan 1, 2020
Health Credit Account During Retirement
$50,000
$2,988$1,880
$47,012$48,892
$48,892
X 4%
$3,376
$45,516
$1,820
$47,336$47,336
X 4%
$3,781
$43,555
$1,742
$45,297 $45,297
X 4%
$4,159
$41,138
$1,645
$42,783
Dec. 31, 2005 Dec. 31 , 2006 Dec. 31, 2007 Dec. 31, 2008
“Proposed Changes for UK ”
Jan 1, 2005 and after
Year 15 Year 20 Total Annual Premium $8,636 $11,155 Your Annual Cost $8,636 $11,155
Premium includes national healthcare trend between 5.25% - 13%
“How does this affect me?”
You will pay your entire health premium after your health credit account reaches $0
• Projected health credit account will be depleted within 13 years (based on actuarial projections)
“What do ‘I’ need to do?”
Prepare to begin paying a larger portion of your health benefit
• Save extra money in your voluntary retirement account [403(b) and 457(b)] to help cover your health plan premium
Encourage your co-workers to become involved in their health to help the University control health care cost
“What do ‘ I’ need to do?”
Become aware of your health to help control healthcare cost
• Participate in UK Healthtrac Rewards • Participate in the UK Wellness Program• Use the tools and resources provided by the
Health Literacy Project and REACH program
Make lifestyle modifications to live a healthier life and to save money
Contact Information
Retirement Planning Benefits Office 257-9519 press #1
Wellness and Health ResourcesWellness Program 257-9355Health Literacy 257-6215REACH 323-1493Elder Care 323-4600
Contact Information
www.uky.edu/HR/benefits/retireetask
Recommended