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Nov. 4, 2010 Volume 32, No. 11

Forsee calls for advisory committee to review retirement plan options


UM might need more time to reach pension decision

University of Missouri President Gary Forsee won’t rush a vote by the Board of Curators on changes to the UM retirement plan for future employees, and he called for creation of an advisory committee of faculty and staff to review data compiled by the System’s pension consultants.

That data, including a detailed overview of how a defined contribution plan for future employees might work, was presented Monday to the Board of Curators Compensation and Human Resources Committee. Forsee said he wants faculty and staff to have a chance to absorb the new information — an “additional drill-down step” that could delay a decision by curators, who were scheduled to consider recommendations next month.

“We’ll make a decision between now and December if we’re ready for recommendations to come to the board at that point in time, and if not, why, and what else would need to be done,” he said.

Betsy Rodriguez, UM vice president for Human Resources, told curators that faculty and staff harbor “grave concerns” about offering future employees a separate pension plan. They are particularly worried, she said, that switching from the current defined benefit plan, which is managed by the university and guarantees some level of retirement income, to a plan that requires employees to save and invest on their own, known as defined contribution, could lead to reduced benefits for current employees.

Rodriguez said many employees want a “guarantee” that the university will continue to fully fund the existing defined benefit plan and that current employees will not lose retirement income they have been promised. 

Curators were given an example of one type of defined contribution plan. Under the model presented, which was based on faculty and staff input, the university would contribute an amount equal to 5 percent of an employee’s pay. Hourly workers would be required to contribute 1 percent; salaried workers would contribute 2 percent. Higher employee contributions would be matched by the university. Employees would be vested after three years rather than the current five years, and they could take their individual contributions with them if they left the university.

Such a plan, which has not been proposed, would cost the university about 8 percent of total payroll costs — slightly more than the university budgets annually to pay for the current defined benefits plan. However, under a defined contribution plan, the university’s cost would be more predictable from year to year.

“I would grant a slightly higher contribution by the university in exchange for some certainty in the long run,” said Curator Warren Erdman, chairman of the compensation committee. 

Curators also heard a presentation on challenges faced by public pension plans across the country, as well as an overview of how the System invests its retirement fund. Returns on that investment have been adequate to keep the current plan fully funded. However, they have been lower in recent years, which is why the university asked employees last year to begin making their own contributions to the plan. 

Foresee said he would spend the next few weeks meeting with employees on the four campuses to discuss the retirement project, which was launched almost a year ago. On Wednesday, he addressed the issue at a Town Hall meeting at Jesse Auditorium, where he again emphasized that, in choosing a new plan for future employees, the board will seek to minimize any “adverse impact” on the current defined benefit plan. 

He acknowledged employee fears that the December target date for curator action on the new plan was “rushing to the finish line.” That’s one reason why he has asked for the creation of a committee to provide additional input to Rodriguez, who has been meeting with groups of employees regularly since the beginning of the year. 

Forsee said one question that needs to be answered is how to keep the current plan solvent.

“If we kept the status quo, can we provide assurance that we wouldn’t have to come back five or 10 years from now to employees and ask for more contributions to keep the plan fully funded?” he said. “That probably creates some unease.”