UMSYSTEM.EDU February UMSYSTEM.EDU Compensation and Benefits Update February 2009 Betsy Rodriguez Vice President for Human Resources
UMSYSTEM.EDU February Context – National Economy Colleges and Universities are making drastic budget cuts due to: Reduced investment earnings Reduced state appropriations and other revenues Budget cuts result in layoffs, furloughs, salary cuts, benefits reductions See Chronicle article on university pension plans It all happened very quickly!
UMSYSTEM.EDU February Quote from President Forsee “The worst thing that can happen is that we delay actions, that we wait for the perfect answer to come, and then we find out that we can’t execute (a plan) without doing something that would dramatically affect our mission.”
UMSYSTEM.EDU February Board Actions February 2009 Board of Curators Meeting
UMSYSTEM.EDU February Compensation Changes Guiding principles for compensation changes: Minimize current impact to employees whose annual salary is below $50,000 Maintain competitive position within peer group
UMSYSTEM.EDU February Delegated Authority: Transition Assistance Authority to President to develop a procedure for employees who lose jobs due to budget reductions Transition Assistance components: Continued access to medical insurance Severance pay based on years of university service, with cap Available only to staff
UMSYSTEM.EDU February Delegated Authority: Furloughs What is a furlough? Unpaid time off, typically a few days per year Gives university ability to reduce salary costs on a one-time basis Complicated by need to keep essential functions President required to have board discussion President’s authority ends June 30, 2009
UMSYSTEM.EDU February Overtime Calculation Eliminate paid leave as part of overtime calculation – pay overtime only on actual hours worked Most employers do NOT allow paid leave to count toward overtime Results in annual savings of about $2m
UMSYSTEM.EDU February Information Items: No Board action No early retirement package Too expensive (create long-term liability) Disruptive to workplace FY2010 Salary pool No merit increases Possible 1% pool (e.g., faculty promotions, mid year retention, and market adjustments)
UMSYSTEM.EDU February Context for pension plan change Actuarial study Investment projections Peer group comparison
UMSYSTEM.EDU February How do we compare to our peers– for benefits? Employer Paid ValueTotal Value Rank (out of 15)Index Rank (out of 15)Index Current Retirement2/ / Benefit Index Relative Value Study
UMSYSTEM.EDU February Actuarial Value of Liabilities vs. Assets
UMSYSTEM.EDU February History and Future UM Contribution Rates
UMSYSTEM.EDU February Employee Contribution to Retirement Plan Allows UM to continue commitment to support meaningful pension benefits 1% up to $50,000 salary; 2% on all salary above $50,000 Annual fiscal impact - $11.9 million (based on current salaries) Employees will contribute on a pre-tax basis
UMSYSTEM.EDU February Paycheck Examples Annual Benefit Eligible SalaryMonthly contribution (pre-tax) $36,000 $30 $50,000 $42 $150,000$208 Hourly WageBiweekly Contribution (pre-tax) $10/hour $8 Note: Net impact on take home pay will be based on individual’s tax rate.
UMSYSTEM.EDU February How Does the Money Flow? UM Benefits Budget Retirement Trust Fund Employee Contributions Budget Stabilization Fund When UM share is greater than budget Total Required Contribution % % % % %
UMSYSTEM.EDU February How do we compare to our peers– for benefits? Employer Paid ValueTotal Value Rank (out of 15)Index Rank (out of 15)Index Current Retirement2/ / Future Retirement7/ / Benefit Index Relative Value Study
UMSYSTEM.EDU February AAU Public Average Faculty Salaries 10-Year Trend b How do we compare to our peers—for salary?
UMSYSTEM.EDU February Questions? Comments? ‘Frequently Asked Questions’ on benefits web site: or your questions to: