Chapter 500: Benefits Program Plans

520.010 Benefit Programs

kuscheld — Mon, 24 Jan 2011 19:20:00 +0000

520.010 Benefit Programs kuscheld Mon, 01/24/2011 - 19:20

Bd. Min. 4-10-15; Revised 6-25-15; Revised 9-26-19; Amended Bd. Min. 7-8-20; Revised 7-28-20; Amended 2-4-21.

Introduction – The University's benefits include the medical, dental, long term disability plans and various other insurance benefits available to faculty and staff, retirees, former employees, and their dependents (hereafter “Participants”) as described in the respective benefits plan documents. The following sections of the Collected Rules and Regulations are being replaced by this new policy statement: Sections 500.010, 510.010, 540.010 and 550.010. The voluntary and defined contribution retirement plans previously contained in Sections 530.030, 570.010, 580.010 and 590.010 of the Collected Rules and Regulations are being replaced by this new policy statement. However, the University's Retirement, Disability and Death Benefit Plan contained in Section 530.010 of the Collected Rules and Regulations is not being replaced or otherwise affected by this policy statement. The cost for the covered benefit plans, various other insurance benefits and the covered voluntary and defined contribution retirement plans are funded with contributions by the University and contributions and/or premiums paid by Participants. The University determines the contribution and premium amounts on an annual basis considering the costs required to provide and administer the benefits. The University also provides other benefits programs on a voluntary participation basis including educational assistance, employee assistance program, and leave benefits to support the work-life balance and other needs of eligible Participants. Together, all of these benefits are considered the Total Rewards offered by the University. This benefits policy provides direction for the provision, selection and administration of the covered benefits programs.
Objectives – It is the University's intention to provide competitive benefits programs that are valued by current and prospective faculty and staff. The definitions pertaining to benefit eligibility are contained in Section 320.050 of the Collected Rules and Regulations or in the respective benefit plan documents.
Faculty, Staff and Retiree Involvement – An advisory committee, appointed by the Vice President and Chief Human Resources Officer (“CHRO”), shall serve in an advisory capacity in matters related to benefits programs and in the treatment of pay and benefits as interrelated parts of the University's overall Total Rewards. The advisory committee shall be comprised of at least 12 members. Committee membership shall consist of a faculty and a staff member from each campus, a hospital representative and a retiree representative appointed by the CHRO from nominations by the campuses, retiree associations and self-nominations. The CHRO may appoint additional at large members and the Committee Chair at the CHRO's discretion. In making the committee appointments the CHRO will strive to appoint members to represent the various University constituencies. The Committee may study, consider and make recommendations to the CHRO regarding proposed revisions to, modifications of, additions to, or deletions from benefits programs covered by this policy statement. This advisory role does not include the selection or management of vendors, plan investments or other administrative responsibilities; however, members may provide input on program design as related to the needs of Participants, provide feedback on communication and education, and advise in other areas.
University Financial Support of Benefits Programs – The University will contribute to the cost of the covered benefit programs (medical, dental, disability, and life) as well as covered voluntary and defined contribution retirement plans and leave programs. The University may develop, administer and support other benefits programs that are not contributed to by the University but that provide competitive, affordable and accessible programs valued by faculty and staff.
Responsibilities and Authorities
1. The Board of Curators hereby delegates management of these covered benefits including, without limitation, overall financial management, cost and administration, plan design, and selection of vendors to the President of the University. For purposes of the preceding sentence, the term “plan design” shall include calendar year deductibles, coinsurance, Participant contributions or premiums, the University's and/or Participant's contribution percentages, copays, covered charges, covered services, out-of-pocket maximums and exclusions, but shall not include any modification of eligibility requirements, or vesting requirements. The President may further re-delegate all or a portion of these delegated management responsibilities at the President's discretion in the manner, and documented in accordance with, applicable University policies.
2. The Board of Curators hereby delegates to the President the authority to amend the plan documents for these covered benefits when such amendments are required by law, as determined by the GeneralCounsel.
3. For all other proposed amendments to the plan documents for these covered benefits other than the foregoing delegated management responsibilities described in Section 520.010.E.l. above and the foregoing delegated authority for amendments required by law described in Section 520.010.E.2. above, the Board of Curators hereby delegates to the President the authority to amend the plan documents for these covered benefits; provided, however that such amendments shall be provided to the Board of Curators so that it has an opportunity to reject any such amendments prior to their effective date.
4. Under the direction of the Vice President the covered benefits programs will be audited and/or evaluated as appropriate to ensure efficient and effective administration, service and pricing. An annual benefits report will be provided to the Board of Curators and will include:
  1. Any action taken pursuant to the authority delegated hereby including, but not limited to, changes in the University's cost of and contribution to the covered benefit plans and/or the individual Participant's cost of and contributions to the covered benefits plans;
  2. Current trends and developments in the strategic direction of Total Rewards both within higher education and in the market as a whole (market review);
  3. A comparative peer analysis of the University's benefits;
  4. The University's strategic direction in regard to ensuring a competitive benefits offering; and
  5. The financial status and projected financial impact of the benefits programs; and other data related to the programs.

530.010 Retirement, Disability and Death Benefit Plan

kuscheld — Mon, 24 Jan 2011 19:29:00 +0000

530.010 Retirement, Disability and Death Benefit Plan kuscheld Mon, 01/24/2011 - 19:29

Information for this rule is available at umsystem.edu/sites/default/files/media/gc/crr_530.010.pdf

530.020 Retirement, Disability and Death Benefit Plan Financial Management Policy

kuscheld — Mon, 25 Jul 2022 14:54:00 +0000

530.020 Retirement, Disability and Death Benefit Plan Financial Management Policy kuscheld Mon, 07/25/2022 - 14:54

Bd. Min. 4-21-22.

Introduction - This policy establishes principles for the prudent financial management of the University’s Retirement, Disability and Death Benefit Plan (“the Plan”).
Policy Objectives
1. Recognize the Plan’s total pension liability as a significant debt of the University which must be managed accordingly.
2. Prioritize and protect University funding for Plan contributions needed to achieve and maintain full funding of the Plan, utilizing actuarial assumptions and risk levels appropriate for a closed plan.
3. Provide cost stabilization provisions to protect the University’s operating budget - to the extent possible – from volatility in Plan contributions.
4. Provide full transparency to internal and external constituents of the Plan and University.
Financial Management Principles

While closed to new participants since October 2019, annual benefit payments under the Plan are projected to continue growing through 2043; based on current mortality assumptions, benefit payments by the Plan will continue well past 2090. At the time this policy was adopted, total remaining benefit payments over the life of the Plan were projected to be more than $19 billion. Given the magnitude and longevity of the Plan’s liabilities, the following principles have been established:
1. Expected Investment Return / Liability Discount Rate - Current governmental accounting standards utilize the same actuarial assumption for both the expected rate of return on the Plan’s investments and the discount rate applied to the Plan’s benefit liabilities. This creates tension when managing risk, particularly for closed plans. A higher discount rate results in a lower pension liability with lower required contributions, while the same higher expected investment return often results in a higher level of risk within the Plan’s investment portfolio. A lower discount rate results in a higher pension liability with higher required contributions, while the same lower expected investment return often results in a lower level of risk within the Plan’s investment portfolio.
  
  With a pension plan closed to new participants, annual contributions going into the plan will decline over time, leaving a closed plan increasingly reliant on investment income and, ultimately, plan assets to fund the plan’s liabilities. As such, reducing the risk and volatility of the plan’s investments becomes increasingly important as the plan matures in closure. This represents the ultimate tradeoff in managing a pension plan under current governmental accounting standards – balancing an acceptable level of investment risk against the strain of pension contributions on operating budgets.
  
  Regardless of the actuarial assumptions used by the Plan, the University remains responsible for the actual benefit payment obligations under the Plan. Any differences between what is assumed and what actually occurs will flow through to impact required Plan contributions, with corresponding impact to the University’s operating budgets. As an example, while a higher expected investment return may result in lower Plan contributions initially, if the Plan’s realized investment returns are lower than what was expected, future contributions must necessarily increase to cover the shortfall. Given the time value of money and the longevity of the Plan’s liabilities, any underfunding of contributions in the near term will almost always lead to significantly higher required contributions over time.
  
  Consistent with each of the objectives noted above, the following principle should govern the management of the Plan’s actuarial expected investment return / liability discount rate:
  1. When the actuarily determined funded status of the Plan exceeds 95%, the Executive Vice President for Finance and Operations, in consultation with the Board Finance Committee, should work with the Plan’s actuary to evaluate the feasibility of lowering the Plan’s expected investment return / liability discount rate by an amount that brings the funded status of the Plan back down to 95%, to the extent this can be accomplished without causing an increase in contributions already being paid into the Plan. As the expected investment return / liability discount rate is lowered, the investment risk of the Plan’s investments should be lowered concurrently.
  2. At minimum, this practice should remain in place until the expected investment return / liability discount rate drops to a level equal to the FTSE Pension Index + 2%. The FTSE Pension Index is commonly used by corporate plan sponsors and actuaries to establish discount rates used to value private pension liabilities in compliance with SEC and FASB requirements. The University may substitute another standard liability index in accordance with any shifts in common practice of valuing pension liabilities.
2. Plan Contributions – The Actuarily Determined Contribution (ADC) for the Plan is equal to the normal cost payment plus an amortization payment on the unfunded actuarial accrued liability (if applicable). In determining the ADC, the University will follow standard actuarial practices, working in conjunction with the Plan’s independent actuary. Differences between actual and expected experience and their related impact on the amortization payment must be amortized on a closed basis. For purposes of this policy, regardless of actuarial determination, the amortization payment component of the ADC shall not be lowered below the level in existence when this policy was adopted until the Plan is fully funded on an actuarial basis utilizing an expected investment return / liability discount rate as prescribed by Section C.1.b. “Expected Investment Return / Liability Discount Rate.” With the inclusion of this special provision for amortization payments, the University’s required Plan contribution shall be referred to as the Minimum Actuarily Determined Contribution (MADC). The University shall make the MADC into the Plan on an annual basis.
3. Cost Stabilization – Until depleted, the Plan’s Stabilization Fund is intended to be the primary means to provide cost stabilization to Plan contributions. The Stabilization Fund can be used to help fund year over year increases to the MADC (as applicable).
  
  As another means of cost stabilization, it is possible that the provisions of Section C.2. “Plan Contributions” may result in Plan contributions in certain years being higher than what is actuarily required (years in which the MADC is greater than the ADC). Given the objective to help provide cost stabilization for the Plan, it is the explicit intent of this policy that excess contributions in one year (the amount by which the MADC exceeds the ADC) may be used to help offset other years in which the MADC exceeds the level of the prior year MADC. The University can only utilize unused excess contributions from the previous five years towards the current year contribution.
  
  This policy explicitly acknowledges that efforts to provide cost stabilization may not be effective during periods of financial markets duress. To the extent this (or any other factors) cause the actuarily determined funded status of the Plan to fall below 75%, the Executive Vice President for Finance and Operations should develop formal recommendations for the Board Finance Committee to improve the funded status of the Plan, which should include a review of investment risk, required contributions and the management of the Plan’s liabilities.
4. Plan Benefits – given the magnitude of the Plan’s liabilities and the additional risks inherent in managing a closed plan, under no circumstances shall Plan benefits be increased above levels in place at the time of this policy’s adoption.
5. Actuarial Review / Transparency – The University shall continue to engage an independent actuary to prepare an annual valuation of the Plan, as well determine the Plan’s annual ADC/MADC requirement. The Plan’s independent actuary shall also conduct a formal review of the Plan’s actuarial assumptions not less than every five years. Actuarial reports shall be made available to the Board on an annual basis as well as other internal and external constituents of the Plan and University.
Other Matters

The Board of Curators delegates to the Executive Vice President for Finance and Operations of the University the following responsibilities with respect to the Plan:
1. Recommend contributions to the Plan.
2. Recommend annuity, mortality and other tables as may be useful in actuarial determination.
3. Recommend actuarial valuations made by experts retained for that purpose.
4. Maintain data necessary for actuarial valuations of the assets of the Plan.
5. Maintain accurate records for the Plan.

(NOTE: Section D - Other Matters is currently contained within the Investment Policy for the Retirement Plan (CRR 140.015). These items are being relocated to this new policy.)

560.010 Retirement Benefit System Benefit Restoration Plan

kuscheld — Mon, 24 Jan 2011 19:34:00 +0000

560.010 Retirement Benefit System Benefit Restoration Plan kuscheld Mon, 01/24/2011 - 19:34

Initiated 9-1-2000; Amended Bd. Min. 11-16-2023.

Definitions
1. "Beneficiary" means an individual receiving survivor benefits from the RDD Plan.
2. "Code" means the federal Internal Revenue Code of 1986, as amended.
3. "Employer" means The Curators of the ��ҹӰԺ.
4. "Member" means a retired individual receiving retirement benefits from the RDD Plan.
5. "Participant" means an employee who is eligible to receive benefits under this plan under Section B.01.
6. "Plan" means the plan established by this Act for the payment of retirement benefits as permitted under Code Section 415(m).
7. "Plan year" means the limitation year of the RDD Plan under Code Section 415.
8. "RDD Plan" means the ��ҹӰԺ Retirement, Disability and Death Benefit Plan.
9. "Trustee" means The Curators of the ��ҹӰԺ.
Participation
1. All retired members and beneficiaries of the RDD Plan whose retirement or survivor benefits from the RDD Plan for a plan year have been limited by Code Section 415 are participants in this Plan.
2. Participation in this Plan is determined for each plan year. Participation in this Plan will cease for any plan year in which the retirement benefit of a member of the RDD Plan is not limited by Code Section 415.
Benefits
1. Benefit Amount
  A Participant in this Plan shall receive a monthly benefit equal to the difference between the Participant’s monthly retirement benefit, otherwise payable from the RDD Plan prior to any reduction or limitation because of Code Section 415, and the actual monthly retirement benefit, payable from the RDD Plan as limited by Code Section 415. The monthly benefit shall be subject to a withholding of any applicable income and employment taxes.
2. Payment of Benefit
  Benefits under this Plan shall be paid only if the Participant or Beneficiary is receiving benefits from the RDD Plan.
3. Form of Benefit
  The form of the benefit paid to a Participant or Beneficiary from this Plan shall be the same as otherwise selected by the Participant and payable under the RDD Plan.
Contributions and Funding
1. Contributions
  1. The Trustee, upon the recommendation of the actuary, shall determine the required contributions to pay Plan benefits for each plan year. The required contribution for each plan year shall be the total amount of benefits, payable under Section C to all Participants and their Beneficiaries, and such amount as determined by the Trustee to pay the administrative expenses of this Plan and the Employer’s share of any employment taxes on the benefits paid from this Plan.
  2. The required contribution, as determined by the Trustee, upon the recommendation of the actuary, shall be paid into this Plan from an allocation of the employer contribution amounts paid under Section 530.010.N. titled Funding of the Plan of the Collected Rules and Regulations of the ��ҹӰԺ.
2. Excess Plan Fund
  Contributions to this Plan shall be deposited in a separate fund established and administered by the Plan Administrator of the RDD Plan. This fund is intended to be exempt from federal income tax under Code sections 115 and 415(m)(1).
3. Funding Assets
  The benefit liabilities of the plan shall be funded on a plan year basis. The fund established under Section D.02 shall not accumulate assets to pay benefits payable in future years. Any assets of the fund not used for paying benefits for a current plan year shall be used, as determined by the trustee, for the payment of the administrative expenses of the plan for the plan year, of for future plan years, or paid to the RDD Plan as an additional employer contribution.
4. Non-assignment of Benefits
  The benefits payable under this Plan may not be assigned or alienated by a Participant or Beneficiary except as otherwise permitted for benefits payable by the RDD Plan.
Administration
1. Plan Administration
  This Plan shall be administered by the Trustee. The Trustee, with the same delegation as exists for the RDD Plan, shall have the same authority to administer this Plan as exists for the RDD Plan.
2. Compliance Authority
  The Trustee may make modifications to the benefits payable under this Plan as may be necessary to maintain its qualified status under Code Section 415(m).
Effective Dates
1. Effective Dates
  The Trustee shall pay benefits under this Plan for all plan years beginning on or after September 1, 2000.