PACE UNIVERSITY POSTRETIREMENT AND BENEFIT PLAN PROPOSALS

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PACE UNIVERSITYPOST-RETIREMENT AND BENEFIT PLAN
PROPOSALS

• FACULTY STAFF DISCUSSION MEETINGS
• President David A. Caputo
• April 14 15, 2003

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• AGENDA
• Comparative Benchmark Analysis
• Current Post-retirement Benefits
• Alternate Proposal 1
• Alternate Proposal 2
• Recommended Proposal

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS
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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS
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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS
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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS
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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS
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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS
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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• STAFF SALARIES
• PROGRESS TOWARDS COMPETITIVENESS
• New compensation structure implemented 1/2001
  covering over 500 staff positions for more than
  1000 staff employees
• 5-7 year commitment to provide additional funding
  to improve staff salaries
• Over 1.3 million additional/reallocated funding
  to date
• Staff Job levels B, and EE II at or above
  competitive targets
• Staff Job levels C I, and BB - DD still about
  9 behind competitive targets and will be
  priority for next 3-4 years

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• CURRENT POST RETIREMENT BENEFIT PLANS
• Plan 1 Pre-1996 FT Hires
• Qualifying Rule Age plus service equals 75 with
  minimum of 10 years of service
• Fully paid health insurance for retiree
• Reimbursement of Medicare Part B premium
• Life insurance- 100 of FT Salary grading down to
  40 after 7 years
• On-campus tuition benefits

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• CURRENT POST RETIREMENT BENEFIT PLANS
• Plan 2 FT Employees hired between 1/1/96
  9/30/00
• Qualifying Rule Age plus service equals 75 with
  minimum of 15 years of service
• Health Insurance for retiree with contributions
  according to years of service schedule
• Life insurance- 10,000
• On-campus tuition benefits

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• CURRENT POST RETIREMENT BENEFIT PLANS
• Plan 3 FT Employees hired after 10/1/00
• No benefits in retirement
• Employees in this category may when they retire,
  with at least 10 years of service, continue on
  University health plan by paying 100 of premium

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• CURRENT POST RETIREMENT BENEFIT PLANS
• Issues (based on 7 FAS 106 medical trend)
• Current Post-retirement Benefit Obligation (PBO)
  is 41 million
• PBO will increase to 48 million in 2003 and to
  50.8 million in 2004, due to continued increase
  in retiree claims and expenses
• PBO will grow to 75 million by 2021
• All health care costs are increasing faster than
  normal inflation
• Combined PB and health care costs will cause
  University benefit budget to increase by over 10
  in 2003-2004
• Pressure from external auditors may force us to
  raise medical trend assumption to 10 which has
  the effect of increasing our PBO to over 92
  million by 2021

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• Alternative Proposal 1
• Proposed Action
• Make no change to benefits
• Fund the increased annual costs of
  post-retirement benefits by reducing future
  salary increase pools (reduces planned 2003-2004
  increase pool from 4.15 to 3.27) OR
• Fund the increased annual costs of
  post-retirement benefits by reducing expenditures
  in other areas OR
• Fund the increased annual costs of
  post-retirement benefits by combination of above.

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• Alternative Proposal 1
• Proposed Action - Issues
• This option will not impact the current and
  projected PRB obligation
• Will not result in cost-containment of future
  health care costs
• Will erode the Universitys ability to provide
  competitive compensation for staff and faculty
• Will erode rewards to recognize excellent staff
  and faculty performance

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• Alternative Proposal 2
• Proposed Action Effective 1/1/2004
• Increase medical co-pays to 15 then increase by
  5 every three years
• Implement 3-tier prescription drug program
  10/generic, 20/brand, 30/non-formulary, then
  increase each tier by 5 every four years
• University caps its medical plan contribution at
  2003 cost future increase up to CPI and 50 of
  increase over CPI. Applies to all current
  employees and employees retiring after 8/31/2004.
  Maximum contribution rate of 20
• New employees pay 20 of medical plan premium
  immediately
• These changes will have the impact of reducing
  the PB obligation by 42.6, from 50.8 million to
  29.2 million in 2004

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• Alternative Proposal 2
• Proposed Action Effective 1/1/2004
• Increase medical co-pays to 15 then increase by
  5 every three years
• Illustration (based on average utilization)
• 2003 170 (10 co-pay)
• 2004 255 (15 co-pay)
• 2007 340 (20 co-pay)
• 2010 425 (25 co-pay)
• 2013 510 (30 co-pay)

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• Alternative Proposal 2
• Proposed Action Effective 1/1/2004
• Implement 3-tier prescription drug program
• 10/generic, 20/brand, 30/non-formulary, then
  increase each tier by 5 every four years
• Illustration (based on average utilization)
• 2003 192 (10 co-pay)
• 2004 258 (10/20/30 co-pays)
• 2008 325 (15/25/35 co-pays)
• 2012 392 (20/30/40 co-pays)

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• Alternative Proposal 2
• Proposed Action Effective 1/1/2004
• University caps its medical plan contribution at
  2003 cost future increase up to CPI and 50 of
  increase over CPI. Applies to all current
  employees and employees retiring after 8/31/2004.
  Maximum contribution rate of 20
• New employees pay 20 of medical plan premium
  immediately

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS
Projected Annual Premiums for Alternative 2
Proposal
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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• Recommended Proposal
• Proposed Action Effective 1/1/2004
• Increase medical co-pays to 15 then increase by
  5 every four years
• Implement 3-tier prescription drug program
  10/generic, 20/brand, 30/non-formulary,
  then increase each tier by 5 every five years
• University caps its medical plan contribution at
  2003 cost future increase up to CPI and 50 of
  increase over CPI. Applies to all current
  employees and employees retiring after 8/31/2005.
  Maximum contribution rate of 15. Employees
  retiring after 8/31/2005 will continue to pay the
  same rate as prior to retirement and that rate
  will be frozen.
• New employees pay 15 of medical plan premium
  immediately
• These changes will have the impact of reducing
  the PB obligation by 35.5, from 50.8 million to
  32.8 million in 2004

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• Recommended Proposal
• Proposed Action Effective 1/1/2004
• Increase medical co-pays to 15 then increase by
  5 every four years
• Illustration (based on average utilization)
• 2003 170 (10 co-pay)
• 2004 255 (15 co-pay)
• 2008 340 (20 co-pay)
• 2012 425 (25 co-pay)

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• Recommended Proposal
• Proposed Action Effective 1/1/2004
• Implement 3-tier prescription drug program
• 10/generic, 20/brand, 30/non-formulary, then
  increase each tier by 5 every five years
• Illustration (based on average utilization)
• 2003 192 (10 co-pay)
• 2004 258 (10/20/30 co-pays)
• 2009 325 (15/25/35 co-pays)
• 2014 392 (20/30/40 co-pays)

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• Recommended Proposal
• Proposed Action Effective 1/1/2004
• University caps its medical plan contribution at
  2003 cost future increase up to CPI and 50 of
  increase over CPI. Applies to all current
  employees and employees retiring after 8/31/2005.
  Maximum contribution rate of 15
• New employees pay 15 of medical plan premium
  immediately

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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS
Projected Annual Premiums for Recommended
Proposal
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PACE UNIVERSITYPOST-RETIREMENT ANDBENEFIT PLAN
PROPOSALS

• Questions?
• For more information about current employee
  benefit
• programs visit www.pace.edu/hr . This briefing
  will be
• posted to this site on or about April 21, 2003