Benefit costs for employees and retirees in the University of Missouri System are on a trajectory that is unsustainable, Betsy Rodriguez told Faculty Council April 24.
For every dollar spent on salary, 34 cents goes to employee benefits. In three years, benefits are projected to cost the four campuses 40 cents on the dollar for each employee, said Rodriguez, UM System vice president for human resources.
Medical costs are expected to increase by $3 million annually, and medical benefits for retirees might hit $1 billion by 2018, she said.
The rising cost of medical, retirement and other benefits is not so much a slippery slope as a fiscal cliff.
But a plan is developing to avoid the fall. It’s about reimagining campus benefits.
Lower benefit costs
In June 2013, UM System’s Total Rewards Ad Hoc Task Force formed to help develop recommendations that address the benefits cost problem.
The task force is composed of 17 faculty and staff from System and all four campuses, an MU retiree and an outside medical expert. MU employees on the task force are John David, associate professor of biological sciences; Kristofer Hagglund, dean of health professions; Leona Rubin, associate vice chancellor of graduate studies; and Lisa Wimmenauer, associate director of business services.
Task force members reviewed relevant literature, listened to presentations from experts across the campuses and outside the System, and interviewed leaders at each campus and at MU Health Care. They also reviewed workforce demographics and extensive data on pay and benefits programs. The team presented the report to System earlier this year.
On April 10, at the Board of Curators meeting in Rolla, System President Tim Wolfe endorsed the recommendations.
Rodriguez, task force chair, cautioned that the recommendations are simply directional. The heavy lifting of how to turn recommendations into a workable strategy that saves dollars will be ongoing.
“This is the recommendation,” Rodriguez said. “Now the hard work starts.”
Pay versus benefits
The recommendations are as follows:
- Treat benefits and pay as interrelated parts of overall Total Rewards strategy
- Establish a benefits rate cap
- Increase flexibility within Total Rewards programs
- Utilize medical plan options to lower costs and encourage healthy behavior
- Leverage marketplace opportunities for retiree medical benefits
- Evaluate additional retirement plan options
- Evaluate time-off plans for staff
- Invest in communication, education and behavior change
- During her presentation to council members, Rodriguez talked mostly about the need to treat benefits and salary as interrelated.
The four campuses experience significant employee turnover, some units replacing 30 percent of its faculty and staff over a short period, Rodriguez said. Would more employees stay if they had higher pay and fewer benefits? she asked. A 2010 survey of university employees in all age groups indicated that pay was by far the most valued component of their Total Rewards package.
Rodriguez said a balance is needed between having competitive wages and managing benefit costs.
Engaging employees
Rodriguez also talked about a rate cap, in which the percentage of money the campuses pay toward benefits is limited to a percentage far below the current 34 percent.
Other recommendations included better explanation and increased flexibility of benefit programs.
Employees indicate that they often do not understand the benefits available, the task force reported. And because employees are at various stages of medical needs, a wider variety of medical plan options might be a cost-saver.
Medical options might “lower costs and encourage healthier behavior,” Rodriguez said. “People not living healthy lives need to pay more” for medical benefits.
The report concludes that, if recommendations are fleshed out into policies and programs, it will result in healthier employees more knowledgeable about benefits and active in their benefit decision-making.
This year, the recommendations will be vetted with employees, retiree groups, standing committees and campus administrators.
