EMERITI AS A STRATEGIC
RETIREMENT BENEFIT
Presentation to
University of Alaska
Board of Regents
September, 2008
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Broader Context of
Retiree Health Care
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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
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BEHAVIORAL IMPACT OF RETIREE MEDICAL ACCESS
Faculty Stay 18-36 Months Longer
100%
80%
60%
34%
40%
28%
28%
39%
36%
Late (67>)
On-Tim e (64-66)
40%
20%
Retirement Date
Early (<63)
26%
36%
33%
0%
No Plan
No Plan
Some Support
Some Support
High Support
High Support
Source: Mellon Faculty Retirement Project (2000)
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University of Alaska
Compensation Impact
Delayed Faculty Retirements
Total Cumulative Excess Costs (salary/benefits) Incurred with
Delayed Retirement for One Individual (monthly view)
$12,176
$120,000
$14,400
$100,000
$69,000
$6,088
$80,000
$60,000
$7,200
$34,500
$40,000
$20,000
$0
month month month month month month month month month month month month month month month month month month month
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Additional Salary
Additional Health Costs
Additional Disability/Life/Pension/403b
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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
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HOW RETIREE HEALTH CARE
EXPENSES ARE PAID
Individual
Out-of-Pocket
20%
Private Insurance
19%
Other Gov’t
Programs*
10%
Medicare
51%
Source: The Employee Benefit Research
Institute (EBRI) 2006 estimates from the
2003 Medical expenditure survey.
*VA/Tricare 4%, Medicaid 4%, Other 2%
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The Emeriti Solution
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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
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RETIREMENT PARADIGM SHIFT
Defined
Benefit
Promise
Defined
Contribution
Account
Social Security
+
403 (b) Pension Plan
Medicare
+
501 (c) (9) EMERITI PLAN
NOTE: Emeriti is made possible through the generosity of The Andrew
W. Mellon Foundation and The William and Flora Hewlett Foundation.10
EMERITI’S RETIREMENT MODEL
EMERITI
TRUST STRUCTURE
VEBA Trusts
EMERITI
HEALTH ACCOUNTS
Lifecycle
Mutual
Funds
Grantor Trust*
$
Fidelity:
Trust Administrator
Fidelity:
Investment
Provider
*NOTE: Grantor Trust money can only be
used for Emeriti Insurance Options
EMERITI
INSURANCE OPTIONS
- Indemnity Medical Plans
- Rx Plans
- Medicare Part C Plan
- Dental Plan
Aetna:
Insurance Provider
EMERITI
REIMBURSEMENT BENEFIT
Eligible out-of-pocket
expenses incurred by
participants
Acclaris:
Claims Processor
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TAX ADVANTAGES
Plan Options; Amounts into VEBA Trusts
Emeriti Plan
Who Pays
Contributions Earnings
Payout
Required
Employer
Pre-tax
Tax free
Tax free
Strongly
Encouraged
Employee
Voluntary
After-tax
Tax free
Tax free
Optional by
Plan
Employee
Mandated*
Pre-tax
Tax free
Tax free
*Depending on the organization, your employer’s contributions may also
include additional pre-tax amounts in lieu of compensation or other benefits.
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TAX ADVANTAGES
How to pay for $1,000 Out-of-Pocket Medical Expense
Emeriti Health Account
 Tax-free withdrawal of $1,000
 100 cents on the dollar
 Equals $1,000
ORP Retirement Plan
 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
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TAX ADVANTAGES
Employer-Selected, Special Contributions into
Grantor Trust
PAYER
EMPLOYER
ONLY (non-profit)
CONTRIBUTION
EARNINGS
PAYOUT
Pre-tax
Tax free
Tax free
Workforce Management Flexibilities
 Retirement Incentives
 Retention Opportunities
 Recruitment Strategies
 Special Transition Contributions
NOTE: These special employer contributions may be made
in any amount, but are limited to fully insured products.
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TAX ADVANTAGE OF THE
REIMBURSEMENT BENEFIT
Tax-free earnings can be used for reimbursement of qualified medical expenses,
such as:








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)
Unlike a flexible spending account, any residual balance stays in the
employee’s account and continues to grow tax free for future use
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.
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ADVANTAGES OF EMERITI INSURANCE
 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
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NEW in 2008
EMERITI’S BUILD YOUR OWN PLAN
APPROACH TO RETIREE INSURANCE COVERAGE
 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)
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EMERITI EDUCATIONAL COMMITMENTS
1. Toll-free service center
2. Dedicated website
www.emeritihealth.org
3. Printed enrollment materials
4. Annual workshops on campus
5. Periodic newsletters to active employees
and to retirees
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Emeriti Funding,
Services, and Fees
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CAMPUS POPULATIONS POTENTIALLY SERVED
I. Prefunded Contributions for Active Employees
II. Transitional Funding Support for Older Employees
III. Insurance Access for Current Retirees
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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
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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
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EMERITI PROGRAM FEES
1.
Required one-time institutional implementation
fee: $25,000.
2.
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
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Strategic Value of the
Emeriti Program
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VALUE TO UA AND ITS EMPLOYEES
■
Talent Management: The Three “Rs”
- Recruitment
- Retention
- Retirement
■
Parity among Employee Groups
- Equal opportunity for retirement security
- Value-added employee benefit
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THINK STRATEGICALLY, THINK RENEWAL
■ 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
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EMERITI CONTACT INFORMATION
EMAIL
info@emeritihealth.org
PHONE
(866) 685-6565 (toll-free)
FAX
(866) 686-6565 (toll-free)
URL
www.emeritihealth.org
POST
EMERITI Retirement Health Solutions
103 Executive Drive – Suite 503
New Windsor, NY 12553
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ADDENDUM
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RETIREMENT BENEFIT DIFFERENCES
RETIREMENT INCOME
403(b) Plan-Available Now
RETIREMENT HEALTH CARE
Plan-Available with Emeriti
General income protection
Dedicated health security
Unrestricted distributions for any
purpose
Qualified distributions for eligible
medical expenses
Tax-deferred earnings
Tax-free earnings
Fully taxed at distribution
Tax-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 estate
Residual balance reverts to plan
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POTENTIAL UNIVERSITY OF ALASKA COMPENSATION SAVINGS
via ORDERLY RETIREMENT
EMERITI RETIREMENT HEALTH SOLUTIONS
Potential University of Alaska Compensation Savings via Orderly Retirement
Compensation Differential:
Full Professor
1
Annual Salary
$ 85,000
Assistant Professor
1
Annual Salary
$
62,000
Replacement
Full Professor
Benefits Percentage2
22%
Assistant Professor
Benefits Percentage2
22%
Replacement
Full Professor
PEPM Health
Insurance Cost3
$
800 Month
$
9,600 Annual
Totals $ 113,300
Notes:
Differential
$ 23,000
Differential $
$ 5,060
Annual
Assistant Professor
PEPM Health
$
$
Insurance Cost
400
4,800
$
80,440
Annual
Replacement
Month
Annual
Differential
$
400
$ 4,800
$ 32,860
Month
Annual
Annual
1) Provided by University of Alaska
2) Estimate of pension, and other benefits as a percentage of salary; excluding healthcare
3) Aetna costs for Emeriti Pre-65 - 2009 average premium for mid level plan - Alaska
Assumptions:
Approximately 50 full-time staff over the age of 60 of which 15 are Full Professor faculty
If 5 of these faculty members could be induced to retire and replaced with Assistant
Professors, the annual compensation savings =
$ 164,300
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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.
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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 10-5-9 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.
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.
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