Board of Curators Compensation and Human Resources Committee

1. Board of CuratorsCompensation and Human Resources Committee June 13-14, 2013

2. Total Rewards Ad Hoc Task Force (Information Item)

3. Task Force Charge • Charge: Development and communication of recommendations regarding the Total Rewards Program for employees and retirees and to facilitate communication • Components: • Includes all health and welfare programs • Preserves the value of current retirement plans • Does not include mandatory programs or salary and wage decision • Representative of employee, retirees and community

4. Health Care Reform (PPACA) Update

5. UM Cost Impact of PPACA

6. UM Population University of Missouri Population

7. Definitions • Fully Benefit Eligible – based on primary job • 75 percent FTE and a 9 month or greater appointment • Eligible for all benefit plans • Variable Employee – based on all concurrent jobs • Individual whose appointment is less than a 75 percent FTE, and/or does not have a 9 month or greater appointment • Eligible for medical if averaging 30 hours or more per week during the measurement period

8. Eligibility Changes • Clarify employment status definitions in CRR 320.050 to comply with “Shared Responsibility” provisions in PPACA • Fully benefit eligible academic appointment • Fully benefit eligible regular employee • Variable employee • Retiree • Student • Update eligibility language in Medical, Dental, Long-term Disability and Flexible Benefits Plans

9. Eligibility Changes – All Health and Welfare Benefit Plans • The sponsored adult dependent of an employee or retired employee, so long as the employee or retired employee does not have a spouse • Criteria: • Same principle residence for at least 12 months • Over age of 18 • Not currently married • Not related to employee • Not Medicare eligible

10. Retirement Plan Assumptions

11. Cost Impact of Changes in Assumptions The net impact to the Required Employer Contribution is an additional $6.3 million.

12. Investment return assumption Based on the latest available Public Fund Survey data, the median expected real return assumption was 4.50% (based on 126 plans with $2.7 trillion in plan assets). When comparing the investment consultant’s expected investment returns to those utilized in the University’s actuarial study, it is important to look at the real return expectations (gross expected returns less assumed inflation). Due to different time horizons, inflation assumptions will often be different between the two.

13. Downward trend of return assumptions 7.77% Current Average Return Assumption (top 126 public pension plans)

14. Amortization of Unfunded Liability • The Retirement Plan has historically amortized any unfunded liability over a 20 year period using the level dollar method. • A switch to a 30 year amortization period was reviewed. While a switch could result in a 0.30% reduction in the required contribution rate in the near term, it would ultimately lead to higher annual costs for the Plan in later years.

15. Upcoming GASB Changes • Beginning in FY 2014, the annual income statement expense associated with the Retirement Plan will be largely governed by new Governmental Accounting Standards Board guidance for public pension plans. • The actuarial assumptions just discussed will continue to drive the amount of required contributions to the Plan each year. • Currently, the required contribution and the annual expense are the same; that will no longer be the case going forward.