1 Presentation to University of Alaska Board of Regents September, 2008 EMERITI AS A STRATEGIC RETIREMENT BENEFIT

2 Broader Context of Retiree Health Care

3 INSTITUTIONAL CONTEXT OF RETIREMENT PLANNING  No mandatory retirement age  Increasingly delayed retirement decisions  Aging demographics coupled with expanded life expectancy  Negative impact of delayed retirement on UA’s workforce needs  Increasing end-of-career compensation pressures  Explosive trend in the active health care plan  Rising health care utilization at the end of career

4 Faculty Stay Months Longer No Plan Some Support High Support Source: Mellon Faculty Retirement Project (2000) Retirement Date BEHAVIORAL IMPACT OF RETIREE MEDICAL ACCESS

5 University of Alaska Compensation Impact Delayed Faculty Retirements

6 EMPLOYEE PERCEPTIONS - RETIREMENT SECURITY  Dwindling employer commitment to retiree benefits  Erosion of defined benefit retirement plans in all sectors  Escalating cost of all medical services  Worries about access to “good” insurance  Anxieties about financial impact of a catastrophic illness  Concerns about outliving retirement assets  Preoccupation with long-term care expenses  Frustrations with complexities of Medicare  Perceived lack of insurer commitments to local market  Loss of control over health care decisions

7 9 HOW RETIREE HEALTH CARE EXPENSES ARE PAID Other Gov’t Programs* 10% * VA/Tricare 4%, Medicaid 4%, Other 2% Source: The Employee Benefit Research Institute (EBRI) 2006 estimates from the 2003 Medical expenditure survey. Individual Out-of-Pocket 20% Private Insurance 19% Medicare 51%

8 The Emeriti Solution

9 EMERITI’S VALUE PROPOSITION  A strategic purchasing alliance of, by, and for higher education  An innovative retirement benefit paradigm tax-advantaged savings/investment accounts nationally accessible retiree medical plans reimbursement benefit for other health expenses  An educational framework for integrating health planning into retirement decision making  A single source administrative structure

(b) Pension Plan 501 (c) (9) EMERITI PLAN Defined Benefit Promise RETIREMENT PARADIGM SHIFT + Defined Contribution Account Social Security Medicare + NOTE: Emeriti is made possible through the generosity of The Andrew W. Mellon Foundation and The William and Flora Hewlett Foundation.

11 EMERITI TRUST STRUCTURE EMERITI HEALTH ACCOUNTS EMERITI INSURANCE OPTIONS Lifecycle Mutual Funds EMERITI REIMBURSEMENT BENEFIT EMERITI’S RETIREMENT MODEL Grantor Trust* VEBA Trusts Eligible out-of-pocket expenses incurred by participants Fidelity: Trust Administrator Fidelity: Investment Provider Acclaris: Claims Processor - Indemnity Medical Plans - Rx Plans - Medicare Part C Plan - Dental Plan Aetna: Insurance Provider *NOTE: Grantor Trust money can only be used for Emeriti Insurance Options $

12 Emeriti PlanWho PaysContributionsEarningsPayout RequiredEmployerPre-taxTax free Strongly Encouraged Employee Voluntary After-taxTax free Optional by Plan Employee Mandated* Pre-taxTax free * Depending on the organization, your employer’s contributions may also include additional pre-tax amounts in lieu of compensation or other benefits. TAX ADVANTAGES Plan Options; Amounts into VEBA Trusts

13 TAX ADVANTAGES How to pay for $1,000 Out-of-Pocket Medical Expense  Tax-free withdrawal of $1,000  100 cents on the dollar  Equals $1,000 Emeriti Health Account  Taxable withdrawal of $1,000  72 cents on the dollar (28% federal tax does not include any state taxes)  Equals $720  To get $1,000 after tax would require a withdrawal of $1,389 ORP Retirement Plan

14 TAX ADVANTAGES Employer-Selected, Special Contributions into Grantor Trust Workforce Management Flexibilities Retirement Incentives Retention Opportunities Recruitment Strategies Special Transition Contributions PAYERCONTRIBUTIONEARNINGSPAYOUT EMPLOYER ONLY (non-profit) Pre-taxTax free NOTE: These special employer contributions may be made in any amount, but are limited to fully insured products.

15  Pre-65 health insurance premiums  Supplemental insurance deductibles, co-insurance, co-pays  Vision, dental, hearing care  Over-the-counter drugs  Long-term care insurance  Medical expenses associated with nursing or in-home health care services  Medicare premiums and cost shares  Other post-65 insurance premiums (if Emeriti coverage is not elected) NOTE: A wide range of health care expenses apply for tax-free reimbursement as long as they satisfy the requirements of Section 213 (d) of the IRS Code. Unlike a flexible spending account, any residual balance stays in the employee’s account and continues to grow tax free for future use TAX ADVANTAGE OF THE REIMBURSEMENT BENEFIT Tax-free earnings can be used for reimbursement of qualified medical expenses, such as:

16  Guaranteed issue group health insurance coverage  A menu of options to fit your personal needs  Catastrophic protection  Prescription drug coverage  Nationwide access  Annual enrollment choice  Foreign urgent or emergency care  Preventive care  Builds on the foundation of Medicare ADVANTAGES OF EMERITI INSURANCE

17  Four Post-65 Medical Plans Choice of Two Medicare Supplement Plans (Original Medicare) Choice of Two Private Fee for Service Plans (Medicare Advantage)  Three Medicare Part D Prescription Drug Plans Choice of Formularies Choice of Coverage in the “Gap” Choice of mail order and retail pharmacy supply  One Optional Dental Plan  Pre-65 Retiree Health Plans (coming in 2009) EMERITI’S BUILD YOUR OWN PLAN APPROACH TO RETIREE INSURANCE COVERAGE NEW in 2008

18 1. Toll-free service center 2. Dedicated website 3. Printed enrollment materials 4. Annual workshops on campus 5. Periodic newsletters to active employees and to retirees EMERITI EDUCATIONAL COMMITMENTS 32

19 Emeriti Funding, Services, and Fees

20 I. Prefunded Contributions for Active Employees II. Transitional Funding Support for Older Employees III. Insurance Access for Current Retirees CAMPUS POPULATIONS POTENTIALLY SERVED

21 OTHER POTENTIAL BENEFITS  Potential Savings from more timely retirements  Potential Savings on Active Health Plan  Competitiveness  Greater opportunity for instructional renewal  Combinations of the above

22 EMERITI SERVICES  Legal Structure  Plan Design  Evaluation Tools (Funding Models)  Plan Documents  Regulatory Compliance  Communications to employees and retirees  Enrollment and ongoing education  Negotiation of insurance rates and plan provisions  Service and performance monitoring of partners  Ongoing evaluation and feedback from members

Required one-time institutional implementation fee: $25, Optional institutional cost sharing of participant fees:  Emeriti account fee: $4.00/mo.  Fidelity record-keeping fee: Actives $1.67/mo., Retirees $6.25/mo.  Fidelity investment management fees: variable  Reimbursement benefit claims processing fee: first 4 submissions free, thereafter $6.00/bundle of receipts EMERITI PROGRAM FEES

24 Strategic Value of the Emeriti Program

25 ■ Talent Management: The Three “Rs” - Recruitment - Retention - Retirement ■ Parity among Employee Groups - Equal opportunity for retirement security - Value-added employee benefit VALUE TO UA AND ITS EMPLOYEES

26 ■ Value of Group Sponsored Consortium Based Insurance - Guaranteed issue, fully portable - Flexible menu of options, annual choice by retiree ■ Single Source Solution - Comprehensive approach (savings and insurance) - Integrated service delivery (enrollment, communications, education) - Reduced administrative responsibilities THINK STRATEGICALLY, THINK RENEWAL

27 20 PHONE(866) (toll-free) FAX(866) (toll-free) URLwww.emeritihealth.org POSTEMERITI Retirement Health Solutions 103 Executive Drive – Suite 503 New Windsor, NY EMERITI CONTACT INFORMATION

28 ADDENDUM

29 RETIREMENT BENEFIT DIFFERENCES RETIREMENT INCOME 403(b) Plan-Available Now RETIREMENT HEALTH CARE Plan-Available with Emeriti General income protectionDedicated health security Unrestricted distributions for any purpose Qualified distributions for eligible medical expenses Tax-deferred earningsTax-free earnings Fully taxed at distributionTax-free disbursements for qualifying medical expenses Taxable, unqualified death benefit (assignable to any designated beneficiary) Tax-free lifetime asset distribution for health care (assignable to eligible spouse, partner, other federally defined dependents) Residual balance is payable to estateResidual balance reverts to plan

30 POTENTIAL UNIVERSITY OF ALASKA COMPENSATION SAVINGS via ORDERLY RETIREMENT

31 Emeriti Retirement Health Solutions provided this information and is responsible for its content. The Emeriti Program, Aetna Life Insurance Company, Fidelity Investments, HealthPartners (in Minnesota), and Acclaris Inc., are independent corporations and are not legally affiliated. The full name of Emeriti Retirement Health Solutions is The Emeriti Consortium for Retirement Health Solution, an Illinois Nonprofit Corporation. Emeriti Retirement Health Solutions is not an insurance company, insurance broker or insurance provider. Summary Plan Description (SPD) This presentation is intended to provide you with a brief summary of some of the details of your Employer’s Emeriti Plan and the Emeriti Program. For a full summary of the terms of your Employer’s Emeriti Plan you must consult the SPD, which will be provided to you upon enrollment or upon request. A benefit program of, by, and for colleges, universities, and higher education-related tax-exempt organizations.

32 Investment Decisions It is your responsibility to select and monitor your investments to make sure they continue to reflect your financial situation, risk tolerance and time horizon. Most investment professionals suggest that you reexamine your investment strategy at least annually or when your situation changes. In addition, you may want to consult an investment adviser regarding your specific situation. Unless otherwise noted, transaction requests confirmed after the close of the market, normally 4 p.m. Eastern time, or on weekends or holidays, will receive the next available closing prices. Recordkeeping and shareholder services for the Emeriti Program are provided by Fidelity Investments Tax-Exempt Services Company, a division of Fidelity Investments Institutional Services Company, Inc. Strategic Advisers, Inc., a subsidiary of FMR Corp., manages the Fidelity Freedom Funds Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges and expenses. For this and other information, call or write Fidelity for a free prospectus. Read it carefully before you invest. An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although money market funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in these funds. Investment Adviser Status Emeriti Retirement Health Solutions is a registered investment adviser for purposes of selecting the range of investment options for the Emeriti Program, selecting the investment manager for employer and voluntary employee contributions, and providing these and other impersonal educational materials to plan participants. Emeriti does not provide advice to participants about their individual investment selections. The participation interests in the voluntary employee contribution VEBA trusts associated with the Emeriti plans (the “Interests”) may be treated as securities under various state securities laws. The offering of these Interests is subject to compliance with any applicable state law. For residents of Georgia, the Interests are being offered in reliance on paragraph 13 of Code Section of the Georgia Securities Act of 1973, as amended (the “Georgia Act”). The Interests may not be sold or transferred except in a transaction which is exempt under the Georgia Act or pursuant to an effective registration under the Georgia Act.