UNIVERSITY OF KENTUCKY
SENATE
*******
Regular Session
October 10, 2005
3:00 p.m.
W. T. Young Library
First Floor Auditorium
Lexington, Kentucky
Dr. Ernie Yanarella, Chair
An/Dor Reporting & Video Technologies, Inc.
179 East Maxwell Street
Lexington, Kentucky 40508
(859)254-0568
University of Kentucky Senate
*******
ERNIE YANARELLA, CHAIR
GIFFORD BLYTON, PARLIAMENTARIAN
REBECCA SCOTT, SECRETARY TO SENATE COUNCIL
ROBYN BARRETT, COURT REPORTER
*******
3
1
CHAIR YANARELLA:
I'd like to call to
2
order the October 10, 2005
3
University Senate Meeting.
4
first order of business is approval
5
of the minutes of the October 3rd
6
University Senate Meeting, a Special
7
Senate Meeting that brought the
8
President to us to offer a view on
9
the state of the university.
Our
Are
10
there any corrections or
11
recommendations that need to be made
12
of the minutes for the last Senate
13
meeting?
14
minutes stand as approved.
15
announcement that I have is to
16
elaborate just a little bit on my
17
comments of a few minutes ago
18
regarding our microphone problems.
19
We usually have that shotgun
20
microphone that is entirely
21
adequate, not only for the taping of
22
the presentation but also for the
23
transcribing of the meeting itself.
24
That microphone is broken, and we
25
have two wireless microphones, one
There being none, the
The only
4
1
which Michelle is holding and I
2
believe Kyle, who is doing double
3
duty here as a guest of ours as the
4
president -- as Chair of the Staff
5
Senate and also who is holding the
6
wireless microphone to my right.
7
When you are acknowledged to speak,
8
would you please wait until
9
the wireless -- one wireless
10
phone -- microphone is delivered to
11
you so that you can speak into it
12
and assure that your comments will
13
be duly recorded.
14
announcements at this time, and I
15
would like to turn to the next
16
agenda item, which is the Provost
17
search update.
18
is the Dean of the Graduate School
19
and is Co-Chair of the Provost
20
Search Committee.
21
presenting to us an update on that
22
search.
23
heels of a meeting with Korn/Ferry,
24
an executive search firm,
25
representatives that took place last
We have no other
Jeannine Blackwell
She will be
This update comes on the
5
1
month.
2
are part of the faculty
3
representative bodies had an
4
opportunity to meet with them and to
5
put forth our concerns, as did other
6
individuals.
7
looking forward to an update and to
8
let us know where we stand and where
9
we might be going over the next few
10
11
A number of individuals who
Jeannine, we are
months.
BLACKWELL:
Thank you, Ernie.
I first
12
want to thank the Senate for giving
13
us the opportunity to come and give
14
you a brief update on where things
15
stand right now, but above all to
16
give you-all an opportunity for
17
giving us, that is the search
18
committee, some input into your
19
ideas about the qualities and
20
experience that you want us to be
21
looking for in Provost candidates.
22
Right now in the search, we're at
23
the point where the pool is almost
24
completely built.
25
the committee will receive the
This coming week,
6
1
applications from Korn/Ferry.
This
2
will be this coming Friday, and we
3
are going to then -- at the time
4
that we receive these, I'm going to
5
give the search committee some extra
6
input from campus from the various
7
venues that we -- where we have met
8
with constituencies on campus and
9
received more ideas and input about
10
the search itself and the kind of
11
qualities that people want to see in
12
the Provost and, above all, the
13
kinds of qualities that they want us
14
to emphasize as important.
15
are in addition to those qualities
16
and characteristics and
17
qualifications that we had listed in
18
the initial job description.
19
met with the President's Commission
20
on Women.
21
forum for anyone from faculty, staff
22
or students who wanted to come and
23
meet with us; that is, with the
24
search committee separately.
25
course, several of you were involved
These
I've
We had a public open
Of
7
1
in one constituency or another or in
2
an open forum with the
3
representatives of the search firm,
4
Korn/Ferry International, when they
5
were here on campus.
6
had a series of meetings and
7
possibilities for people to give us
8
input.
9
have emphasized at those meetings,
And so we've
Among the things that people
10
which were attended by a quite small
11
number of people, among those things
12
that were emphasized again and again
13
was an emphasis on undergraduate
14
education and the sort of liberal
15
arts core of the university.
16
came to the fore very often in the
17
things that people encouraged us to
18
care about and to think about.
19
Another thing that they reiterated
20
that the search committee itself is
21
very, very concerned about and
22
wanting to see in Provost candidates
23
is a kind of transparency in
24
processes, in ideas, in leadership,
25
a collaborative spirit in the
That
8
1
leadership style that this person
2
exhibits, someone who has a strong
3
sense of academics, an
4
understanding -- deep understanding
5
of academics and the ethical
6
implications of the work that we do
7
in the deepest sense.
8
are some of the things that people
9
have been emphasizing to us as we've
And so those
10
held these meetings with various
11
constituencies.
12
a strong recommendation from many of
13
our constituents here on campus that
14
we build a diverse pool.
15
although I have not seen the
16
applications myself, I am told that
17
the search firm people are very
18
happy with the way that the pool has
19
developed, that it's a very strong
20
pool and it's a numerous pool and
21
it's a very diverse pool.
22
very pleased to hear that that was
23
the case, that many people think
24
that the University of Kentucky is
25
in a position to move on to great
There has also been
And
And I was
9
1
and good things and that this is a
2
job that, given the national pool of
3
jobs at this level, is a very -- is
4
seen very positively by many
5
candidates.
6
news.
7
now to move into this search fairly
8
quickly now that our President's
9
future and the contractual
So that's all very good
I think that we're positioned
10
relationship between the President
11
and the Board of Trustees and the
12
university is now set for some time
13
to come, that that gives a kind of
14
stability at the top that I think is
15
very, very crucial for this search,
16
because that relationship between
17
the President and the Provost is one
18
that is clearly a close working
19
relationship and one that's
20
necessary to have a certain degree
21
of stability.
22
know met with many of you-all, but
23
what I would like to do now is first
24
acknowledge everyone in the room who
25
is a member of the search
The search firm I
10
1
committee -- there are several here
2
today who are members of the search
3
committee -- and then possibly open
4
the discussion up to your comments
5
and questions about how the search
6
committee is going to proceed and
7
just a little bit about the time
8
table.
9
everyone who is a member of the
So first I'd like for
10
search committee, if you-all would
11
please just stand, because I can't
12
recognize you in the pack.
13
Bob Wiseman at the back of the room
14
and Mike Reid here at the front, and
15
I guess that's it for the search
16
committee.
17
search committee.
18
15 people that are members of the
19
search.
Is Ernie here, Ernie
20
Bailey?
And Ernie is your
21
representative, the representative
22
from the Senate Council and the
23
University Senate on the search
24
committee.
25
that we will be meeting for the
We have
It's a quite large
There are about
The time table is such
11
1
first time next week to start
2
cutting down the list and getting to
3
a short list.
4
be further scrutinized by the search
5
firm.
6
checks, looking for dirty laundry
7
and skeletons in closets, and after
8
that we will move to some further
9
investigation at an off-campus site
Then that list will
We'll do deep background
10
with a selected number of those
11
individuals.
12
sending forward our list to the
13
President.
14
names, nonranked, and we'll see if
15
we can do what the President asks.
16
So that's it.
17
and see if any of you-all have
18
comments that you would like for me
19
to pass on to the search committee.
20
CHAIR YANARELLA:
Then we will move to
He has asked for three
Let me just be quiet
Okay.
As I
21
acknowledge you, would you please
22
indicate your name and wait for the
23
microphone.
24
25
BLACKWELL:
Davy.
And while that's happening,
Kyle standing up reminds me:
I'm
12
1
meeting with the Staff Senate on
2
Thursday afternoon, too, so I'll be
3
in a meeting with the Staff Senate
4
as well.
5
JONES:
Davy Jones.
Jeannine, could you
6
just remind us, I don't know where
7
my e-mail is that was sent out by
8
the President months ago that links
9
to a Web site.
10
11
Where is the Web
site at?
BLACKWELL:
The Web site is right on the
12
Provost page, so www.uky.edu/provost
13
and when you get there, it's the
14
first item:
15
that site we have the job
16
description, the list of committee
17
members, the initial charge, the --
18
some of the press releases and
19
synopses of the meetings that we've
20
had and also the indication of
21
future meetings.
22
23
24
25
CHAIR YANARELLA:
Provost Search.
And on
Another question?
Please identify yourself.
BURKHART:
Patricia Burkhart from the
College of Nursing.
Jeannine, I
13
1
just wondered -- you mentioned about
2
off-campus interviews.
3
candidates also come on campus and
4
do presentations/interviews in a
5
broader sense?
6
BLACKWELL:
Will the
Yes, I'm sure that that will
7
happen, and those campus interviews
8
will probably -- the sort of general
9
procedure for those is to have
10
three, maybe four candidates to
11
actually come to campus for a
12
two-day grueling campus visit where
13
they meet many, many constituencies,
14
do a public presentation, probably
15
about their vision for Kentucky for
16
the future or something like that,
17
many fora with different groups and
18
meeting with key campus
19
constituencies as well as students.
20
And that will probably be -- in the
21
best of all possible worlds, if
22
everything happens the way that we
23
want it to, we might be able to have
24
one of those before Christmas,
25
before the winter break, but I doubt
14
1
it.
It will probably be right when
2
we return in the spring semester
3
that we'll have those on-campus
4
interviews.
5
CHAIR YANARELLA:
Another question?
6
Going once, going twice, going three
7
times.
8
9
BLACKWELL:
And I just want to say that
when you see me on campus, don't ask
10
this question.
11
nuts.
12
say:
13
going?"
14
It makes you nervous, but if you
15
just stop asking me, maybe I'll get
16
it done, and I hope I can deliver a
17
good one.
18
It's driving me
People come up to me and they
"How's the Provost search
And it makes me nervous.
Thank you.
CHAIR YANARELLA:
Thank you, Jeannine.
19
We appreciate that.
The next order
20
of business relates to the proposed
21
AR relating to Nonresident Fee
22
Committee.
23
here?
Suzanne McGurk, is she
Suzanne, are you here?
24
McGURK:
I'm right here.
25
CHAIR YANARELLA:
There you are -- and
15
1
Dave Watt are here representing the
2
committee that put together a draft
3
of a new AR to respond to this
4
particular issue.
5
which will be discussed in just a
6
moment, comes to the University
7
Senate with a positive
8
recommendation from the Senate
9
Council.
The draft AR,
Dave or Suzanne, I'm
10
wondering if one of you would be
11
willing to just give us a quick
12
synopsis of this, discussing its
13
origins and the rationale for this
14
particular proposal.
15
WATT:
16
McGURK:
17
WATT:
18
McGURK:
19
20
Suzanne, where are you?
I'm right here.
Do you want to do it?
You go ahead and I'll
(inaudible).
WATT:
21
Very briefly, this AR was
revised --
22
CHAIR YANARELLA:
23
Sorry.
24
25
WATT:
Just one second.
Very briefly, this AR was revised
because we were interested in trying
16
1
to get better control of the process
2
whereby out-of-state students manage
3
to convert themselves into in-state
4
students.
5
back and reviewed the history in
6
various colleges, what you would
7
find is that a disturbing number of
8
students made this transition to
9
in-state status, only ultimately to
And I think if we went
10
leave the state of Kentucky.
And we
11
felt, in fairness to those students
12
who were in-state residents who came
13
from Kentucky, we wanted to be
14
assured that the process we would
15
use for screening would be, number
16
one, consistent with the rules that
17
the Council on Postsecondary
18
Education provides but also we
19
wanted them to jump through the
20
appropriate hurdles and convince us
21
that they really were intending to
22
take up permanent residence in the
23
state of Kentucky.
24
consequence, we revised the AR,
25
changed the committee composition
As a
17
1
slightly, and have put forward the
2
document in front of you.
3
do you want to add anything to
4
this?
5
McGURK:
Suzanne,
I think that sums it up.
I
6
don't have any additions, other than
7
just to say I would be represented
8
at the committee but I would not be
9
a voting member on the committee, as
10
11
the bullets on the front page.
CHAIR YANARELLA:
Okay.
I'd like to
12
make one amendment to the draft that
13
you have before you.
14
University -- the University Senate
15
Council requested that the version
16
that comes to the University Senate
17
indicate quite explicitly, at least
18
two places, that the word "Faculty
19
Senate" be amended to read
20
"University Senate."
21
the third -- fourth line of the
22
second paragraph.
23
at the end of the second sentence,
24
"University Senate," and the
25
following sentence should begin also
The
So you look at
That should read,
18
1
with the words "The University
2
Senate."
3
questions that individuals would
4
like to make with regard to this
5
draft AR?
6
GESUND:
Are there any comments or
Hans Gesund.
Hans Gesund, Engineering.
Is
7
there a good reason why you're
8
setting up a separate appeals
9
process instead of going -- using
10
the Appeals Board of the university
11
to handle the appeals from this?
12
CHAIR YANARELLA:
I apologize for the
13
cumbersome nature of this, but we
14
will be rewarded in the end with far
15
more accurate transcriptions and
16
tapes of this meeting if we have
17
these.
18
McGURK:
Suzanne.
We prefer to go with the change
19
in the administrative regulation and
20
have this type of committee, as it
21
kind of mirrors what we do with the
22
undergraduate admission process
23
appeals, and this gives us some
24
consistency with knowing the
25
regulation.
The regulation that we
19
1
receive from the Council on
2
Postsecondary Education is fairly
3
cumbersome, and we just thought it
4
would add some consistency to the
5
administration of the policy if
6
people very consistently were
7
familiar with the policy itself.
8
The policy is about six pages long,
9
and it's very legalistic, and it's a
10
bit to undertake to -- to grasp it.
11
CHAIR YANARELLA:
Dave, I wonder if you
12
would reiterate a point that was
13
made at the University Senate
14
Council Meeting just a week or so
15
ago in regard to why this is being
16
vetted through to the Board of
17
Trustees.
18
WATT:
This must go to the Board because
19
of the Kentucky Revised Statute that
20
basically mandates that whatever
21
process we use be blessed by the
22
Board.
23
CHAIR YANARELLA:
Thank you.
Other
24
questions?
I think the rationale
25
has been made pretty clear and
20
1
explicit, the impetus to this as
2
well.
3
questions, we have a motion on the
4
floor to approve -- to recommend
5
approval of this AR to the board.
6
All those in favor, please indicate
7
by raising your hand.
8
opposed, like sign.
9
abstentions?
If there are no other
All those
Any
The motion carries.
10
Thank you, Dave.
Thank you,
11
Suzanne.
12
relates to the Retiree Health Care
13
Benefits Committee.
14
who have been members of the
15
University Senate, those of you who
16
have been interested faculty members
17
in this process are aware of the
18
fact that the Tearney Committee is
19
the second committee to grapple with
20
this issue.
21
that explored this issue raised a
22
number of proposals and
23
recommendations that met with
24
significant questioning and
25
resistance within this body.
Our last agenda item
Those of you
The first committee
A
21
1
decision was made by the Employee
2
Benefits Committee, I believe, to --
3
to follow the recommendation of the
4
University Senate and to institute a
5
new committee.
6
chaired by Mike Tearney, and we
7
have, today, before us, two
8
representatives of the Retiree
9
Health Care Benefits Committee, Mike
That committee is
10
Tearney and Sean Peffer.
11
would like to give them an
12
opportunity to come down and to
13
offer their thoughts and
14
perspectives on this ongoing
15
process.
16
PEFFER:
And I
That would be good if Mike was
17
here.
Mike and Joey Payne, the head
18
of Benefits, or the person from
19
Benefits on that committee, have put
20
together a presentation.
21
in on putting together the
22
presentation, but Mike's supposed to
23
give the presentation.
24
not different than the one that I've
25
got that we approved before it went
And I was
Now, if it's
22
1
out, I can start the presentation
2
and see how far we get, but that's
3
up to y'all, or we can take a
4
ten-minute recess and come back and
5
Mike, hopefully, should be here by
6
that time, since it's 3:30 and he
7
was supposed to be here right now.
8
CHAIR YANARELLA:
9
PEFFER:
10
Sean --
Here we go.
CHAIR YANARELLA:
-- we have implicit
11
trust in you.
12
you carry order.
13
PEFFER:
We're happy to have
Oh, goody.
Have you ever given
14
a presentation you didn't prepare
15
for?
16
was this about this being recorded?
17
Okay.
18
the committee.
19
of the presentation.
20
last time -- how far can I wander
21
from this?
22
I'll stay behind it.
This will be good.
Mike Tearney is the chair of
23
CHAIR YANARELLA:
24
PEFFER:
25
And what
There's the purpose
What happened
Don't worry about it.
Okay.
Thank you.
What happened last time, at
least from my view -- now, my view
23
1
is from the Senate, okay, committee
2
member and a faculty member.
3
was sitting in the Senate one day,
4
and some people came up and stood in
5
front, and one of them was Joey
6
Payne, who I happen to know because
7
I know his sister.
8
and they said:
9
recommending from this committee on
But I
They stood up
This is what we are
10
the health care issue -- most of you
11
were sitting here at that time
12
also -- about retirement health
13
care.
14
care do you get.
15
it before.
16
a committee going on.
17
dense sometimes, anyway, but this
18
kind of just missed me.
19
heard a bunch of things such as:
20
GASB is requiring this.
21
is Governmental Accounting Standards
22
Board, and I happen to be an
23
accountant, an accounting
24
professor.
25
Well, I knew about that, but I
After you retire, what health
I hadn't heard of
I didn't know there was
I'm pretty
And then I
Now, GASB
So I kind of thought:
24
1
didn't know it was the cause of all
2
this.
And here we go; here's one of
3
them.
See how scared they are?
4
Come on down.
5
6
7
TEARNEY:
Go ahead.
You're doing all
right.
PEFFER:
I'll finish up my thought here,
8
because I'm going -- because I get
9
my two seconds.
But I was sitting
10
right back here, and I was dumb
11
enough to raise my hand and go:
12
GASB doesn't say that.
13
something.
14
ago from summer, Mike Tearney calls
15
me into his office and says:
16
are going to be the Faculty Senate
17
Representative on a committee that's
18
going to meet four hours a week, a
19
standing four hours a week, and
20
we're going to look at this issue.
21
And he looked at me and he said:
22
First, before I put you on that
23
committee, I want to know
24
something.
25
and this will come up on a slide,
No,
And I said
And one year ago, a year
You
There's two things --
25
1
and he'll cover it, but there's two
2
things we've got to do on this
3
committee.
4
Is there a problem?
5
committee before -- or at least I
6
had never heard that consideration;
7
it was an assumption there was a
8
problem.
9
issue:
The first is determine:
Because the
And I had raised the
There is not a problem.
And
10
then the second one is:
What are
11
some alternatives to handle that
12
problem?
13
If you have a preconceived notion on
14
whether there is a problem, if you
15
think there is and you're not going
16
to consider what we say or you know
17
how to solve it, we don't want you
18
on the committee.
19
close to what you said to me.
20
made my second mistake.
21
No, I don't have a preconceived
22
notion, and I don't have a
23
preconceived notion on the
24
alternatives, so I wound up on the
25
committee.
He looked at me and said:
That's pretty
I
I said:
What did I learn?
Don't
26
1
speak up in Faculty Senate and shoot
2
somebody down or you're on the
3
committee.
4
says, "do you have a preconceived
5
notion," just like if you're being
6
picked for a jury, say yes.
7
want to go ahead and do this part?
8
TEARNEY:
9
PEFFER:
10
11
Second, if somebody
Do you
All right.
Go for it.
I was ready.
I've
got it all written down.
TEARNEY:
Well, I was just hoping you
12
didn't make things up as you went
13
long.
14
15
PEFFER:
I'll sit down here so I can
share with you.
16
CHAIR YANARELLA:
17
TEARNEY:
18
Sean, thank you.
And did you go over -- have
you gone over this one?
19
PEFFER:
20
TEARNEY:
Yeah.
All right.
The one thing --
21
let me say about this:
This is real
22
important.
23
probably more time on process than a
24
lot of people might be interested
25
in.
I'm going to spend
We see, as we do all these,
27
1
everybody's getting anxious:
2
the plan?
3
like to talk about the process.
4
then this is also very important to
5
us.
6
Jolie is here with me and she's
7
taking notes, will transcribe --
8
when she gets time will transcribe
9
the notes of the questions, and
What's the plan?
What's
But we
And
So if you have input to us,
10
we'll distribute them to the
11
committee, because we're going to
12
revisit our tentative
13
recommendations two more times.
14
Joey Payne is here with me to take
15
care of technical questions that I
16
can't handle.
17
this.
18
is the committee.
19
as bad as Sean said in terms of
20
selecting the committee, and I'm not
21
going to go over them.
22
is on our Web site.
23
show you that this is a diverse --
24
a diverse group, representing as
25
many constituencies on campus as was
And
Whoops, I guess I do
Wrong one.
All right.
This
It wasn't really
Everything
It's just to
28
1
possible.
2
actually not because of Joey or I,
3
but Sean was nominated as one of a
4
couple of potential candidates from
5
the Senate, and that's the case with
6
many of the people on the
7
committee.
8
very, very hard and I think could
9
make this presentation.
10
And Sean got on here
And everyone has worked
I don't
know why Sean didn't make it.
11
PEFFER:
I didn't dress up in a suit.
12
TEARNEY:
I got you.
Now, this is
13
something I just want to spend a
14
moment on, because this has to do
15
with the decision.
16
or the decision-making process.
17
This is the previous recommendation,
18
and I'm not going to get into what
19
it is or how it is or anything else
20
or talk about the committee.
21
the one thing I want to remind you
22
all of is that the previous -- the
23
previous recommendation had two sets
24
of benefits, and the benefit under
25
the first bullet was perceived and
This is the --
But
29
1
in fact actually was perhaps a
2
little bit better than the benefit
3
in the second bullet.
4
as we view it, was not with the
5
recommendation, but there was this
6
line drawn in the sand between the
7
two, and you had to -- you had to --
8
I almost said "graduate."
9
to retire by December 4 -- by
The problem,
You had
10
December 31st, '04, to get this
11
benefit.
12
then, then you got this benefit.
13
the committee was fairly conscious
14
of that line being drawn in the
15
sand, and we tried to avoid that as
16
much as possible.
17
that at least our tentative
18
recommendation takes that into
19
account.
20
met with our Executive Vice
21
President Butler in early January
22
and he gave us a charge, if you
23
will.
24
look at the current plan, see what's
25
going on, see what it costs, see
If you didn't retire by
So
And you'll see
All right.
Phase one, we
And the first was just to
30
1
what we think's going to happen, and
2
then look at -- and if we believe
3
that the funding for that is not a
4
good deal or not possible, then to
5
go forward and recommend
6
alternatives, and I'd like to say
7
something right now about that.
8
the time Butler met with us, until
9
we requested meeting with him again,
At
10
we never had met with anyone from
11
Central Administration.
12
put any constraints on us or
13
anything else.
14
anything and everything we wanted to
15
do.
16
with Angie Martin's help, into
17
budgetary information dealing with
18
the past 20 years or past 10 years.
19
We were able to project things into
20
the future, get our own consultants,
21
use various indices; I mean not just
22
our own little trend lines or
23
whatever.
24
interference until we requested
25
meetings.
They didn't
We were able to do
We dug into -- significantly,
And so we had no
Whoops.
So we spent
31
1
about two and a half -- two to two
2
and a half months doing a lot of
3
research, looking into, of course,
4
health care in general, looking into
5
cost of retiree health care for the
6
particular retiree plan that UK
7
currently sponsors, and this is a
8
summary of the information that we
9
found.
The background and the
10
detail is all located at our Web
11
site.
12
write that down or you can't
13
remember it, just go to the UK Web
14
site and punch "R" for retiree
15
health care benefit.
16
it.
17
was that the retiree health care
18
will increase rather dramatically
19
over a 20-year period, and we looked
20
at from 1994 to 2004, because we
21
began looking in early 2005.
22
then we went out ten years in
23
projections to 2014.
24
number of retirees would increase
25
about 120 percent.
If you can't -- if you don't
You'll find
But anyway, we -- our findings
And
We found the
The health care
32
1
costs would increase about 940
2
percent over that 20-year period,
3
and at the same time the University
4
General Budget would increase 93
5
percent.
6
of you probably do, that the
7
University General Fund is not the
8
sole source of revenue to the
9
university, nor is it the sole
Now, I realize, and most
10
source of revenue that's used for
11
the retiree health care plan:
12
about 50 percent of it, of the cost
13
of the retiree health care plan.
14
looked at all funds and all sources
15
of revenue.
16
because most of the general audience
17
that we're speaking to around campus
18
have some appreciation of what the
19
General Fund is and no appreciation
20
of what other sources of funds are,
21
so that's what we're looking at.
22
Anyway, you can see a tenfold
23
increase.
24
cost two million dollars,
25
out-of-pocket cost in 1994, and it's
Only
We
I put this up here
This health care plan
33
1
projected that it'll cost 20.8
2
million in 2014.
3
the one that received a lot of
4
discussion.
5
alluding to it.
6
what that means.
7
mandatory change that is occurring,
8
and it's really -- it's really a
9
conceptual change in how we view
This third one is
Sean was even kind of
Let me tell you
This is a
10
postretirement benefits other than
11
pensions, or in this case, for our
12
case, medical benefits.
13
currently the way those are viewed,
14
and this is -- if you will, think of
15
it as a conceptual thing.
16
worry about the accounting right
17
now.
18
basically the university ignores
19
it.
20
many years we work -- I used to use
21
the example we work 30 years, we're
22
retired 20, but we may have to
23
reverse that before long.
24
work, we presumably are getting some
25
benefits built up, but they're not
And
Don't
The way it is viewed is that
And as we work, no matter how
But as we
34
1
recognized.
Then when we retire,
2
the university then comes in and
3
funds it throughout our retirement.
4
And it's called a pay-as-you-go
5
method.
6
will, extension fund or any fund
7
established.
8
Well, is the university stupid?
9
are they doing such a thing?
So there's not any, if you
Now, one might say:
Why
The
10
university is not stupid.
That is
11
the rational, accepted practice in
12
the industry.
13
public entities in the United States
14
use the exact same funding.
15
Commonwealth of Kentucky, the City
16
of Lexington, University of
17
Kentucky, we all use the same
18
funding.
19
change.
20
of the concept.
21
concept, the way this is going to be
22
viewed, is almost like deferred
23
compensation.
24
happen now, beginning on 1-1-07 -- I
25
mean 7-1-07, is that the retiree
98.5 percent of all
The
We're going to have to
We have no choice, in terms
And the new
And what's going to
35
1
health care benefits will be viewed
2
like deferred compensation.
3
will earn them.
4
to a point in time when you retire,
5
and then you will receive them.
6
the hope is that they will be funded
7
throughout that, because it's going
8
to be treated, for example, as an
9
expense of the year you work, just
So you
You'll earn them up
And
10
like a salary expense from an
11
entity's point of view.
12
I call it deferred compensation.
13
And this is going to cause a
14
dramatic change in how all of these
15
are viewed.
16
Kentucky or Commonwealth of
17
Kentucky, they've got an estimated
18
retiree health care liability for
19
the teachers' retirement system of
20
between two and three billion as of
21
7-1-07.
22
wanting to use that.
23
have a similar problem.
24
we came up with.
25
as you go" for 2007/'08 academic
That's why
For the State of
So we have -- boy, I keep
We're going to
Here's what
The projected "pay
36
1
year is estimated to be 11.4
2
percent.
3
contribution -- this is under the
4
deferred compensation concept --
5
will be 30 and a half million.
6
you say:
7
higher?
8
got my little pointer, here.
9
footnote is why it is higher:
And the annual required
Now,
Why is it so darn much
In this footnote -- I've
This
10
Recognition of previous and current
11
service earned by employees.
12
let me tell you -- and again,
13
remember, we're suddenly going to
14
view this as a deferred compensation
15
thing.
16
using round numbers, but we have
17
somewhere between 13 and 14,000
18
employees, either retired or
19
active.
20
earned in terms of their retiree
21
health care benefits have not been
22
viewed as deferred compensation
23
since they started work.
24
7-1-07, the cumulative benefit for
25
all of those, including those who
Now,
Now, we have -- and I'm just
Their -- what they have
As of
37
1
are retired, for all of those
2
13/13,500, whatever the number is,
3
people must suddenly be recognized.
4
That's the liability that the state
5
has of two to three billion.
6
liability, depending on certain
7
assumptions and so forth, is
8
somewhere between, say, 450 and 725
9
million, somewhere in that range,
Our
10
under the current plan.
And why I
11
say "somewhere in that range," it
12
depends on interest rates and this,
13
that and the other.
14
accumulated -- previous accumulated
15
earnings, if you will, or deferred
16
compensation, we are allowed to
17
record that over a 30-year period.
18
That's why the number is 30 1/2
19
million as opposed to 450 million.
20
So that is, you know -- whoops, I
21
lost my -- there it is.
22
what's causing that big jump.
23
presented this information to
24
Executive Vice President Butler back
25
in March, I think around mid-March
That total
That is
We
38
1
or sometime.
We didn't make any
2
conclusions as to whether there was
3
a problem or not, nor did he say
4
whether there was a problem or not.
5
But he asked us to begin looking at
6
plan design changes.
7
thing you have to remember about the
8
makeup of the committee, Joey Payne
9
was the only person on the committee
And so one
10
that we could say was an actual
11
expert in this area.
12
like Sean or me or anyone else that
13
you may know who was on the
14
committee, it was the first time
15
that most of us ever looked at
16
retiree health care plans.
17
even know what the little
18
(inaudible).
19
alternatives?
20
choose between one and the other and
21
everything else?
22
a month, if not longer, in fact,
23
just looking at the plan, looking at
24
different things, which this is the
25
process I'm telling you about or
Other people
We don't
You know, what are the
How are we going to
So we spent maybe
39
1
mentioned that I'm going to take you
2
through.
3
do is we just had to look at the
4
plan.
5
guess I was retired, but I hadn't
6
been retired long enough to pay any
7
attention to it, but there were two
8
retired people on the committee.
9
They knew what the plan was, and
10
Joey knew what the plan was, but
11
very few of the rest of us did.
12
retiree health care plan is two --
13
really two different plans.
14
one plan for pre-Medicare people,
15
everybody that's retired under 65.
16
There's another one for
17
post-Medicare, or 65 and older.
18
current -- I'm sorry, the
19
pre-Medicare plan is the same as the
20
plan that all of you have as active
21
workers.
22
had the UK HMO, had my wife on the
23
plan.
24
difference.
25
HMO.
The first thing we had to
We had two retired -- well, I
The
There's
I retired in December.
The
I
In January there was no
I still have the UK
I'm pre-65.
I still have the
40
1
UK HMO; my wife is still on the
2
plan.
3
before and after retirement.
4
to pay a little bit more for my
5
wife, approximately $100 more for UK
6
HMO, and I understand that that $100
7
may be different, depending on, you
8
know, whether -- if you have some
9
other plan.
I paid the same amount for me
I have
But the point is it's
10
basically the same; in fact, it's
11
seamless.
12
didn't know any change.
13
Post-Medicare:
14
have a different plan.
15
itself is for medical benefits.
16
right?
17
benefits.
18
your medical benefits.
19
UK -- then D, but UK has a plan that
20
supplements or is a carve-out, as
21
the term is used, for Medicare.
22
what that carve-out covers, with
23
deductibles, is the 20 percent that
24
Medicare does not cover.
25
right?
I didn't even notice -- I
Post-Medicare, we
Medicare
All
It's primarily for medical
It covers 80 percent of
Then the
All
Plus the pharmaceutical
And
41
1
costs, because the -- as of now,
2
Medicare does not cover pharmacy
3
costs.
4
don't think I need to go over this
5
for you, but I will.
6
this last the two or three days.
7
When we started doing these
8
presentations earlier, a lot of
9
people thought we were messing
So that's our two plans.
I
We just had
10
around with the Rule of 75 or we
11
were doing something.
12
going to spend a moment to review
13
for you how one can retire at UK and
14
assure you:
15
this at all.
16
charge.
17
is 65.
18
you meet the Rule of 75, which is
19
the number of years of continuous
20
service, at least being 15, but the
21
number of years of continuous
22
service, plus your age, add up to
23
75.
24
retire.
25
the requirements for retirement.
So I'm just
We're not messing with
It's not part of our
Normal retirement age at UK
You have early retirement if
If you meet that, then you can
So that's the -- you know,
We
42
1
are not messing with it.
The
2
current plan costs $23.
3
based on UK HMO.
4
different if you happen to have a
5
different kind of plan, but UK HMO
6
is $23.
7
that should be what you pay if you
8
have that plan, and Medicare is $23
9
too.
This is
It would be
And that's what I pay, and
And I want to say something
10
now, which I will point out later,
11
also.
12
coincidence those two are the same.
13
In other words, it just so --
14
because they're two different
15
plans.
16
the same.
17
this number:
18
that plan in 2007.
Those are 2005
19
per month numbers.
2007 is the --
20
and we're zeroing in on that because
21
that's when this mandatory change
22
occurs.
23
committee sitting around the table,
24
and we don't know much that's going
25
on.
That is a -- it's a
It just so happens they are
We've already looked at
11.4 is the cost of
Now, again, think about the
And so we had to, first of all,
43
1
decide what's important to us.
It's
2
just like a group of standard
3
setters that are sitting around
4
trying to come up and make
5
definitions of what's important.
6
And we broke into little groups and
7
everybody -- what's important to
8
you, what's important to you, and so
9
on and so forth.
And as we did
10
that, we came up with a list -- we
11
call them Principles to Consider --
12
of 15 things.
13
go through those with you.
14
all defined on our Web site, but
15
how -- what we did is we defined
16
them, of course, and then we voted.
17
We rank-ordered the 15.
18
one up there is called Access to
19
Plan or Access to Group Plan, and
20
we -- the committee as a whole, in
21
terms of this (inaudible),
22
considered that the most singly
23
important criterion.
24
words, in all the plans that we look
25
at or plan designs, the one thing we
Now, I'm not going to
They are
The first
In other
44
1
think's most important is everybody
2
ought to have access to it, even if
3
they have to pay for it.
4
right?
5
theoretically, we were going to use
6
this is every time, as we would
7
discuss plans, and we looked at 16
8
different variations of plans, we
9
would be comparing.
All
And so the way,
And if one plan
10
had that but didn't have this,
11
another plan had this but didn't
12
have that, then that would be our
13
decision tree, and we would go up
14
with the first one -- I mean with
15
the one that had that particular
16
characteristic.
17
sat that out on the table.
18
looked at it, but we really weren't
19
forced to use it; in other words, we
20
didn't get into a lot of difficult
21
decisions in that light.
22
thing the committee had to do was to
23
break out the work force or segment
24
the work force.
25
we looked at those that are retired
I can tell you, we
We
The next
So the first thing,
45
1
as of 7-1-07.
Now, why did we look
2
at those?
3
out?
4
Sean or Joey can jump in if they
5
think there was another one, but the
6
main reason is this committee is
7
very sympathetic to the people
8
already retired, particularly the
9
people that are over 65, and I think
10
you can carry it a step further and
11
say maybe the people that are over
12
70 or 75.
13
about those people because they are
14
on a fixed income.
15
in terms of retired staff, if
16
they've been retired for eight or
17
ten or 12 years, they didn't --
18
throughout most of their working
19
life, if not all of it, they didn't
20
have the same contribution to
21
TIAA-CREF as the current staff or as
22
faculty have.
23
much lower, if someone's been
24
retired 10 or 12 years, and so we
25
just, as a committee, feel that
Why did we segment that
The main reason, I think, and
And we are concerned
In many cases,
Faculty salaries were
46
1
those people do not have a great --
2
as much flexibility.
3
saying is if they are currently --
4
have got in their budget that they
5
have to spend, I don't know what --
6
make up numbers -- they've got to
7
spend $100 a month for medical care
8
and all of a sudden we make some
9
change that makes them spend $300 a
10
month, we have a feeling that some
11
of them can't afford it and may then
12
alter their lifestyle in a way we
13
wouldn't like to see it altered.
14
that's why we segregated that
15
group.
16
in that group and everything else.
17
The next is Active; this means
18
active employees but eligible to
19
retire as of 7-1-07.
20
segregated that group because we
21
don't want to draw a line between
22
those two.
23
that line, it's estimated, because
24
nobody ever knows, but certainly a
25
lot of the complaints were -- but it
So what I'm
So
We know how many people are
And we
Last time when we drew
47
1
was estimated that 400 or more
2
people were considering retiring in
3
order to get a certain medical care
4
benefit, retiree medical care
5
benefit.
6
having to or at least perceive that
7
they had to take such drastic
8
action.
9
will, the Default group.
We wanted to avoid people
The third group is, if you
That's
10
everyone that's left.
The fourth
11
group is Future Employees.
12
a decision fairly early on with
13
future employees, which is
14
consistent with what has happened in
15
private industry since 1992 when
16
this conceptual change occurred for
17
them and what is consistent in --
18
with public institutions,
19
particularly colleges and
20
universities that have health care
21
benefits.
22
hear that most private colleges and
23
universities do not have retiree
24
health care benefits, and many
25
public limit them.
We made
You might be surprised to
But anyway, we
48
1
made a recommendation that future
2
employees, as of a given date, and
3
we did not specify a date, should
4
have access only to the retiree
5
health care plan but not be funded
6
by the university.
7
number one criterion:
8
have access only.
9
recommendation to Executive Vice
And that was our
That they
We presented that
10
President Butler back in May, late
11
April or May, and I guess the
12
President's Cabinet, or however
13
decisions are made, made a decision
14
to adopt that recommendation, and
15
they chose the date of 1-1-06 to
16
give some transition into that.
17
right.
18
PEFFER:
All
Before you go on, I do want to
19
say one thing about that, just --
20
can you hop back real quick?
21
There's people on that committee
22
that are from each one of those
23
sections, but I -- and a lot of
24
you -- I don't know where everybody
25
falls out, but the one -- the one
49
1
thing that I -- one of the things I
2
was looking for was -- we have
3
retired people on the committee; we
4
have the younger section on the
5
committee.
6
looking at this, it's very easy to
7
say the retired people have to be
8
protected, which is true, the people
9
who are actually eligible to retire
10
have to be protected, that's pretty
11
true, because you don't want the
12
line in the sand.
13
down here who have already been
14
working here between one and ten or
15
12 or 15 years, they're the third
16
group, because they're the
17
low-hanging fruit as you look at it
18
there, if you actually look at
19
that.
20
you get to the end, look at, if
21
those are protected up there, these
22
are protected, but the people like
23
myself, like Joey Payne, people who
24
have worked here long enough that
25
think, "We're owed something, don't
And when you start
But these people
So we had discussion -- when
50
1
just cut us off," look at the end,
2
and you'll see they didn't get cut
3
off.
4
that all that was done was the
5
retired people were protected, which
6
makes sense, but then down here when
7
you get to the people who've worked
8
here just so many years, they were
9
just kind of left off the table,
I just want you not to think
10
because there were a couple of us on
11
the committee that there's no way
12
that was going to happen, for what
13
it's worth.
14
THELIN:
Can I make a comment?
15
CHAIR YANARELLA:
16
THELIN:
Yeah, John Thelin.
You might want to check with
17
some chairs of search committees, as
18
UK intends to be top 20 in the
19
future, and how that treatment of
20
the future employees will enhance
21
UK's attractiveness in the
22
competitive market.
23
TEARNEY:
Okay.
All right.
Now, the
24
next thing the committee had to do
25
is we had to discuss all the various
51
1
things that are involved in these
2
different plan designs.
3
make some decisions.
4
I'm doing now is kind of
5
summarizing, or will summarize for
6
you, the six main points of interest
7
that we considered as we considered
8
plans.
9
decision point on each one of these,
We had to
And so what
And we had to make a
10
as we work our way through the
11
plans.
12
work force segments pay the same or
13
different portion of health care
14
cost.
15
is retired -- retired, you know,
16
already retired work force, should
17
they pay a proportion of the health
18
care costs that is different than
19
people that are eligible to retire
20
but not retired, or should the
21
latter group or both groups pay a --
22
an amount of their health care cost
23
proportion that is different than
24
those in the third group that are
25
not eligible to retire.
The first one:
Different
What that means, for example,
Now, as we
52
1
looked at this particular item, as
2
much as possible, we said everybody
3
should pay the same.
4
in our recommendation, in terms of
5
implementation, we're recommending
6
the first two groups, as retired and
7
eligible to retire, have absolutely
8
the same; and for the third group,
9
that they have the -- or that group,
10
the majority of people in that group
11
would have the ability to get to the
12
same benefit.
13
that for you in just a moment.
14
we had to look at -- had to make a
15
decision regarding Medicare D and
16
the UK -- what we're seeing, this is
17
on the UK carve-out post-65.
18
Beginning on 1-1-06, Medicare is
19
expanding and coming up with
20
Medicare D plan.
21
going to cover pharmacy.
22
actually gotten a whole lot more
23
information this afternoon before
24
Joey and I walked over here, but we
25
do not have complete information on
Now, as we --
Now, I'll go through
Next
Medicare D is
We have
53
1
Medicare D.
And so we fairly
2
easily, I think, got to the decision
3
that we would move, if you will,
4
groups two and three, those eligible
5
to retire but not retired and those
6
not eligible to retire, we moved
7
them to Medicare D.
8
group that's already retired, we
9
want to make sure that Medicare D is
10
not going to result in them having a
11
significant change in their monthly
12
expenses -- expenses, and I will
13
speak more about that in a moment.
14
But the tentative decision was made,
15
then, to move everybody to
16
Medicare D as of 7-1-07.
17
Age/Service Table for Retirees:
18
What this means conceptually is the
19
older you are and the longer you've
20
worked for the university -- the
21
older you are when you retire and
22
the longer you've worked for the
23
university when you retire, the
24
lower the proportion of your retiree
25
health care costs you have to pay,
But for the
54
1
and of course the opposite.
The
2
younger you are and the fewer years
3
you've worked at UK when you retire,
4
the higher you have to pay.
5
adopted that theory, if you will.
6
I'll show you how we are
7
recommending it, you know,
8
specifically what we're
9
recommending.
We
But we adopted that
10
for the -- you know, the group this
11
really pertains is for the active
12
employees that are not eligible to
13
retire.
14
Retirees:
15
conceptually is the lower your
16
income, lower your salary, UK salary
17
when you retire, the lower the
18
proportion of health care cost you
19
would pay.
20
when you retire, you're earning
21
30,000 from the university, you'd
22
pay 10 percent of your health care
23
costs.
24
earning 130,000 from the university,
25
you would pay 50 percent of your
Final Salary Base Table for
What this means
So, for example, if,
And if you retire and you're
55
1
health care cost.
We talked about
2
this a lot and a lot of different
3
varieties of it.
4
words, the last three years' salary,
5
last five years' salary, all kinds
6
of stuff.
7
reject that conceptually, and we
8
will not -- or are not recommending
9
that.
I mean, in other
We ultimately decided to
There's a lot of reasons why
10
we decided to reject it.
I think
11
the overriding reason is because
12
there's nothing similar with the
13
active work force.
14
same benefits; we all have the
15
same -- if you want to look at
16
health care, we all have the same
17
health care options; we all pay the
18
same amount for them, whether we are
19
making 30,000 a year or 130.
20
didn't think that it made sense to
21
then, suddenly, when someone
22
retires, put on a new standard, if
23
you will.
24
Post-65 Retirees:
25
with that second retiree insurance
We all get the
We
Different Deductibles for
This has to do
56
1
plan, the carve-out plan for
2
Medicare.
3
complaints -- Joey's office gets an
4
awful lot of complaints and now that
5
my name -- some people know my name,
6
I even get some of the complaints.
7
But the complaint is that the
8
retiree never reaches the deductible
9
on the carve-out.
And we get a lot of
Now, the way it
10
works, I already told you, Medicare
11
is going to pay the first 80
12
percent, and then UK carve-out --
13
I'm just talking about medicine
14
right now -- UK carve-out comes in.
15
PAYNE:
16
TEARNEY:
Medical.
Yeah, medical, UK carve-out
17
comes in.
UK carve-out has a $500
18
deductible right off the top, which
19
means that the retiree pays the
20
first 500.
21
deductible that is a co-share.
22
watch the main (inaudible) retiree
23
pays a certain amount and the
24
insurance pays a certain amount.
25
And the maximum exposure that the
Then it's got a $1,500
But
57
1
retiree has is $2,000 a year.
So we
2
have a lot of people that say they
3
don't reach that.
4
enough, we did some research to see
5
how big that set is.
6
roughly -- and, again, round
7
numbers -- 1,800 people that fall
8
into the total universe of post-65
9
retirees, and our research indicates
Interestingly
There's
10
about 1,400 of those people did
11
reach the deductible, so we have a
12
group of about 400.
13
because we had cost estimates made.
14
It would cost us about -- cost the
15
university, I guess you would say,
16
about 1.1 million to eliminate the
17
$500 deductible, and so the
18
committee has tentatively made a
19
decision to leave it alone.
20
of the things we think is a problem
21
is the deductible -- I mean the
22
carve-out -- has a fiscal year
23
basis.
24
deductible, the $2,000 deductible,
25
if you will, starts on July 1 and
It costs us --
But one
In other words, the
58
1
runs through June 30.
But the
2
Medicare, which it's trying to match
3
up with, starts on January 1 and
4
runs through December 31st.
5
believe that a lot of the problem on
6
reaching the deductible is that the
7
two years aren't aligned.
8
recommendation is that the carve-out
9
switch to a calendar-year basis to
And we
So our
10
get the two years aligned.
That
11
will cost the university some money
12
in the year of the switch, but then
13
everything should be -- should be
14
the same.
15
called Transition Groups.
16
transition group -- actually I was
17
going to use the example of last
18
year -- of the last recommendation
19
that was made, but I'll just make
20
one up.
21
say that you are an active
22
worker/employee, but you are not
23
eligible to retire as of 7-1-07.
24
All right?
25
to retire as of 8-1-07.
Finally we have what's
And a
A transition group, let's
And you will be eligible
So in other
59
1
words, you would change segments
2
within the work force, from eligible
3
for -- I mean from not eligible to
4
eligible, one month after the
5
recommended implementation date of
6
whatever the plan is.
7
you're upset; you got cut off by a
8
month.
9
say, "For this X period, maybe six
10
months, if you will move, for lack
11
of a better -- if you move from
12
group three to group two within six
13
months, we'll go ahead and treat you
14
as though you were in group two."
15
All right?
16
that's the way the transition will
17
work.
18
talked about it a long, long time.
19
We actually had cost estimates made
20
for having a three-year transition
21
period.
22
for having a five-year transition
23
period.
24
maybe we should have an eight-year
25
transition period.
So naturally
A transition period would
That's the transition;
We looked at this, and we
We had cost estimates made
Someone even suggested
We looked at all
60
1
these things, and one thing that
2
became readily obvious:
3
what period we have, somebody's
4
going to qualify one month later.
5
All right?
6
any difference.
7
going to feel as though maybe they
8
got short-changed.
9
frankly, the committee said:
No matter
I mean, it doesn't make
So somebody is
So quite
We
10
can't make that decision.
We
11
decided to reject transition
12
periods.
13
is not an arbitrary date.
14
we would pick would be arbitrary, so
15
we didn't do that.
16
plan.
17
through my question?
18
everybody wants to know exactly what
19
line -- you know:
20
mean to me?
21
completely obvious, that you could
22
read this and you could figure out
23
what line is yours.
24
out last week, after we'd go through
25
it and I'd spent however much time
The date of July 1, '07,
Anything
Now for the
Do you think I need to go
We know that
What does this
And I thought it was
But we found
61
1
going through it, that people will
2
say, "Well, I want to know -- I'm
3
62.
4
just going to go through an exercise
5
and ask this question:
6
anybody in the room that's retired?
7
All right.
8
worry about that top one.
9
rid of that cell.
What line is mine?"
Good.
So I'm
Is there
We don't need to
So we got
Nobody look at
10
that top one.
11
here -- well, actually, is anyone
12
going to be retired by 7-1-07?
13
we've picked up some.
14
15
16
Is there anyone in
UNIDENTIFIED SPEAKER:
Aha,
It depends on
what you tell me.
TEARNEY:
(Inaudible) 15 months out.
17
All right.
18
focus up there.
19
won't be 65, so just focus on that
20
top line.
21
PAYNE:
22
TEARNEY:
So you do go ahead and
You look like you
He's not going anywhere.
Yeah, well, maybe others are.
23
Now, those of you -- how many of you
24
will be eligible to retire by July
25
1, '07?
All right.
Now we're
62
1
picking up a few more.
You folks
2
look in here.
3
you're going to zero in on -- the
4
lines.
5
eligible to retire by 7-1-07?
6
Notice that the subtitle for your
7
line is red.
8
other lines is yellow.
9
that would get Ernie to turn around.
That's the line
How many of you will not be
10
CHAIR YANARELLA:
11
TEARNEY:
The subtitle for the
I thought
Yes, indeed.
Now, let me point out one
12
thing.
Those two yellow lines and
13
the subdivisions under them are
14
exactly the same.
15
you, it doesn't make any difference,
16
because I'm assuming, if you could
17
retire in 18 months, you already
18
qualify to retire.
19
zero in on this one here, and this
20
is the current plan; this is the
21
recommended plan.
22
plan, pre-Medicare -- well, I
23
already told you earlier on they're
24
paying $23 a month.
25
and it's a coincidence, that that is
So really, for
So let's just
Under the current
It so happens,
63
1
7 percent of the premium cost.
2
There's nothing engraved in stone
3
about that being 7 percent.
4
just what it is.
5
budget shortfall at the university,
6
that could easily go to some other
7
number.
8
in other words, maybe it will go to
9
40.
It's
If there was a
That's the number.
I mean,
You remember a few years ago
10
when we had zero; then it went to
11
21.
12
happen.
13
percent of the true retiree rate,
14
which costs $60 a month.
15
need to explain something in there
16
between -- the difference between a
17
blended rate and a true rate,
18
because it makes a significant
19
difference for early retirees.
20
you just go from 7 percent to 10
21
percent, that adds about $7.00.
22
That means that 23 will go to 30
23
with no other change, but this
24
versus this is making a change.
25
me try to explain that.
All right?
So that could
We're recommending 10
Now, I
If
Let
And I might
64
1
also add, since I'm an early
2
retiree, I don't like this change.
3
I like it the way it is, and here's
4
the way it is.
5
about 11,000 active employees,
6
11,000 (inaudible) and about 700 of
7
me, early retirees.
8
go out to get the -- I used UK HMO,
9
since that's what I have.
Right now there's
Now, when they
You go
10
out to get the rates for the UK
11
HMO.
12
colleagues, and they put them in
13
with you 11,000, and they go out and
14
get out a single rate for 11,700
15
people.
16
blended rate.
17
effect of that?
18
that is, on average, my 700 should
19
have, per annual -- or annual per
20
person medical expenses higher than
21
the comparable for your 11,000,
22
because we're older.
23
And so other things being equal, we
24
should.
25
recommending -- and by the way, I
They take my 700 people,
Okay?
And that's called a
Now, what is the
Well, the effect of
All right?
Now, what the committee is
65
1
forget whether I said it, but that's
2
a blended rate.
3
we're going to a true retiree rate.
4
What that means, using the same
5
actually -- it's not an example;
6
it's reality.
7
my 700 and put them over here and
8
get our own rate, true retiree
9
rate.
The committee says
They're going to take
They're going to leave you
10
11,000 alone, and you'll get a true
11
active rate or whatever.
12
of that is to double my monthly cost
13
from $30 to $60 a month.
14
also, by the way, lower your monthly
15
cost, somewhere between $15 and
16
$20.
17
necessarily agree on how it's
18
calculated, but it will lower the
19
annual premium.
20
jumps from 23 to 60.
21
mind, by the way, this is a
22
recommended plan as of 7-1-07, but
23
the numbers we're using are today,
24
the '05/'06 academic year.
25
there's the change there.
The effect
It will
We can't -- Joey and I can't
That's why this
Now, keep in
So
Now, for
66
1
post-Medicare, these are the people
2
over 65, also 7 percent, also a
3
coincidence, 23; 10 percent of the
4
retiree rate, $44.
5
the 44 is made up of two numbers, 12
6
and 32.
7
carve-out, which is actually a
8
reduction, because you can see the
9
percent's going from 7 to 10, but
And you'll see
The 12 would be the new UK
10
the cost is going from 23 to 12.
11
The reason for that is because we
12
would be eliminating pharmacy.
13
right?
14
the cost of the UK carve-out.
15
we're eliminating that, so that's
16
12.
17
Medicare D.
18
are 44 for -- you know, like for
19
this year.
20
at this next group.
21
anybody in any one of those two
22
groups have a question before I go
23
on?
24
end, but --
25
CIBULL:
All
Pharmacy is 70 percent of
So
The 32 is picking up
The two put together
All right?
Let's look
Is there
We'll have questions at the
This actually pertains to all
67
1
of this -- Medicare D -- I'm sorry,
2
Mike Cibull.
3
what the difference in cost will be
4
between Medicare D and, let's say,
5
UK HMO in terms of a participant?
6
realize it would matter in terms of
7
how much medicine you buy and so
8
forth and so on, but is there any
9
kind of figures that estimate that?
Do you have any idea
10
Because I suspect that for the
11
average person, Medicare D will be
12
more expensive than the benefit.
13
TEARNEY:
I
Let me -- let me, without
14
being specific right now, Mike, let
15
me address that later.
16
slide.
17
CIBULL:
18
TEARNEY:
I've got a
Okay.
Because that's a concern to
19
the committee, so -- and then, if I
20
don't answer it adequately, bring it
21
back.
22
look at the majority of you in the
23
red.
24
got 7 to 23.
25
The Age/Service Table, 90 to 480.
Anything else?
All right?
Well, let's
Look here:
You've
That's all the same.
68
1
How in the heck did that happen?
2
Well, the $90 -- go on to the next
3
did -- oh, I'm the one that's doing
4
the slide.
5
already back here.
6
Age/Service Table that I was telling
7
you about.
8
talking about the Age/Service Table,
9
and I said the age of retirement --
10
this is the age of retirement along
11
here.
12
you retire, the less you pay.
13
is the person under 60; pays 80
14
percent down to 50 percent.
15
Then you've got 20 -- this is --
16
obviously, this is 15 years'
17
service, but less than 20; 20 but
18
less than 25; 25 or more.
19
goes:
20
pay.
21
obviously a percent of the retiree
22
health care you're going to pay.
23
Now, the reason that is 90 -- oh,
24
I'm the one.
25
Jolie to flip it back.
(Inaudible.)
Well, I'm
This is the
Do you remember, I was
I said the older you are when
This
Okay?
Notice it
The more years, the less you
But these percents are
I was going to tell
Notice that
69
1
this is 60.
This is 90.
That's the
2
two numbers I want you to focus on
3
right now.
4
same?
5
in this group, it's given that they
6
are not 65, right?
7
they are younger than 65.
8
now, (inaudible).
9
or more but less than 65.
Why aren't those the
Well, first of all, anybody
Pretty much,
Well,
All right.
So 64
If
10
they've worked here for 25 or more
11
years, they paid 15 percent of the
12
health care costs.
13
percent, so $90 is 15 percent.
14
is the cell that those people would
15
come in.
16
480 per month.
17
480 would be somebody's retired
18
that's less than age 60 and they
19
have worked here for less than 20
20
years, at least 15 but less than
21
20.
22
percent of the cost would be 480.
23
And that's how those numbers grow.
24
Now, if you look at the post-65,
25
that 12 is the same as that 12.
$60 is 10
That
Now, it can go as high as
How could that be?
They would pay 80 percent; 80
70
1
Could be 96, and I'll show you an
2
example on it again.
3
same as that 32.
4
is:
5
and if you've been at the university
6
for at least 25 years, you will have
7
the exact same benefit as that group
8
or that group; it makes no
9
difference.
That 32 is the
What this says
If you work until you're age 65
And -- oh, darn it.
10
The reason that one number got --
11
went from 12 to 96 is, again, here.
12
The 65 or more is the 10 percent
13
that's the same as everyone else's
14
benefit.
15
worried and this -- Mike kind of
16
directed us here.
17
worried about Medicare D coverage.
18
We are most worried about Medicare D
19
coverage for the people already
20
retired, already on a fixed income.
21
The first bullet up there refers to
22
something called "doughnut hole."
23
can tell you all about the doughnut
24
hole if you want to know, but
25
everybody I've told about the
Okay?
So I told you we're
We're really
I
71
1
doughnut hole has more questions
2
about it after I got done than
3
before I started.
4
you is there isn't going to be a
5
doughnut hole for our retirees.
6
right?
7
about the doughnut hole, don't worry
8
about it.
9
offered in Lexington where you won't
All I can tell
All
So if you've been reading
Medicare D is going to be
10
have a doughnut hole (inaudible)
11
that people are exposed to.
12
second one is not quite as easy to
13
deal with.
14
this slide up, that first one, we
15
weren't positive about.
16
one is not quite as easy to deal
17
with.
18
got some information about this just
19
before we left, and it is a little
20
bit incomplete.
21
has shown that there are 79 UK
22
retirees over 65 that take what I'm
23
going to call -- and I think it's a
24
common term -- high-cost medicine.
25
The example I'm going to use for
The
In fact, when we made
We don't know.
The second
Joey and I
But our research
72
1
high-cost medicine is something that
2
costs $1,000 a month.
3
people that fall into that
4
category.
5
that those people will pay some kind
6
of a copay.
7
is, $40/$60, something like that.
8
We want to insist that Medicare
9
result in -- not have the result of
10
increasing those 79 people's subcase
11
outflow from, say, $50 to a lot
12
more.
13
$1,000.
14
medicine per month; I've got a copay
15
of $50; I'm paying $50 a month.
16
right?
17
High-cost medicine will be covered
18
by Medicare D.
19
there.
20
them are going to be covered by
21
Medicare D.
22
I saw earlier didn't give the list
23
of what's going to be covered, but
24
that's the first characteristic.
25
Then, by a fixed dollar copay, the
So we have 79
Now, the current plan is
I don't know what it
Let me use the example of
So I'm taking $1,000 of
All
What this thing says is:
Let me stop right
We're not positive all of
The stuff that Joey and
73
1
$50 a month.
All right?
Now, we're
2
not going to specify that's the
3
exact same copay, but what we're
4
looking at is we don't want
5
something that's going to be such an
6
increase in somebody's pay --
7
somebody's cash flow that they might
8
make a decision we don't want them
9
to make.
As opposed to a percentage
10
copay, a percentage copay would be
11
like 25 percent as opposed to a
12
fixed dollar copay, a percentage.
13
25 percent would be $250, with the
14
$1,000 example, without a copay
15
cap.
16
percentage.
17
plan now has a percentage, but it
18
has a fixed cap per month.
19
okay with us, as long as the fixed
20
cap's low enough.
21
that it would be a percentage, 25
22
percent, without a cap.
23
like that.
24
not meet these things -- we already
25
know we can cross that one off.
Now, it could be a
In fact, our pharmacy
That's
But it could be
We don't
So if Medicare D does
74
1
That's going to be okay.
If
2
Medicare D does not meet that, then
3
we will not recommend it for the
4
current people who have already
5
retired.
6
recommendation, because we're not
7
going to have complete -- I can tell
8
you right now, we're not going to
9
have complete information by
Included in our ultimate
10
December 31st.
We're going to have
11
a feeling about it.
12
problems with Medicare D, it's going
13
to be offered by private industry
14
with getting a subsidy from the
15
government.
16
they offer every six months, plus
17
the people that are going to be
18
offering it, we're going to have 18
19
people offering it for next year.
20
There might be 14 the following year
21
or maybe 30.
22
heck knows?
23
is going to be that this be
24
continuously reviewed on an ongoing,
25
continuous basis, and certainly
One of the
They can change what
I mean, who in the
So our recommendation
75
1
before it's implemented, it be
2
reviewed as long as possible before
3
implementation.
4
going to take roughly four to six
5
months of transition to end, so we
6
would say that that should be
7
reviewed very carefully by the
8
university to meet these conditions
9
by, let's say, up till 7-1-01 [sic],
10
whatever, July 1st -- I mean January
11
1st, '07, or however late we can
12
go.
13
question?
14
CIBULL:
And it probably is
Does that get to your
Partially.
It covers the major
15
difference between Medicare and the
16
plan we have now, but it doesn't
17
address the actual cost.
18
was just wondering if you have any
19
feeling for what the actual cost
20
would be.
21
difficult, because every retiree
22
will have a different profile of
23
medicines, but do they have any
24
feeling for --
25
TEARNEY:
And so I
And I realize it's
I don't know.
Joey is the one
76
1
who has more information than me.
2
CIBULL:
3
PAYNE:
On an actuarial basis.
Yeah, I mean, on an actuarial
4
basis, they're going to be close.
I
5
mean, we actually took what's called
6
the standard benefit design, the one
7
that has in the doughnut hole that's
8
in the legislation, and we had our
9
pharmacist compare the -- I think it
10
was the calendar year '04
11
prescription cost against that
12
benefit design, you know, looking at
13
by retiree, you know, looking at how
14
somebody fared under our plan, how
15
much they paid out of pocket versus
16
how much they pay out of pocket.
17
You know, you've got outliers in
18
both.
19
percent of the people, they were
20
fairly close.
21
actually did a little better under
22
the Medicare plan; some did a little
23
better under ours, but it wasn't
24
that material of a difference.
25
know, but you did have about 10
But the majority, about 80
You know, some
You
77
1
percent or so that were going to pay
2
more.
3
pay more were those that were going
4
to have to pay the majority of the
5
cost before the catastrophic
6
coverage kicked in.
7
to have to pay as much as $3,600 out
8
of pocket, and right now they're
9
paying for these $1,000
The ones that were going to
They were going
10
prescriptions.
Most of these are
11
injectable drugs, and they pay, you
12
know, $40 to $60 copay.
13
don't would not know -- well, what
14
we do know is Medicare is moving a
15
lot of those injectable drugs over
16
to what's called the Part B Benefit,
17
the medical benefit, since a lot of
18
those prescriptions are actually
19
administered in a physician's office
20
or some kind of inpatient or
21
outpatient type setting.
22
moving those over there, so that
23
puts it under the medical benefit.
24
So what's left is the true
25
prescriptions.
So what we
So they're
And, you know, we
78
1
just looked at a plan just before we
2
came over here, and they have three
3
tiers, all with a fixed dollar
4
copay.
5
like 22.50, and then the third one
6
was like $53.00, and then the fourth
7
tier was a percentage.
8
you don't know is where do the
9
individual medications fall in
One was like 7.50; one was
Now, what
10
those, you know, tiers.
And that's
11
what we're going to be finding out
12
here in the next two to three
13
weeks.
14
add at this point is we've done some
15
focus groups already with some of
16
our retirees and committee members
17
and emeriti faculty.
18
to a number of people.
19
they're telling us is, you know,
20
"There's going to be 18 plans to
21
choose from; how in the world do I
22
figure out which one's best for
23
me?"
24
there some experts at the university
25
that could review this information
And the other thing I would
We've talked
And what
And so they're saying, "Aren't
79
1
and come up with a recommended plan
2
or even some kind of a UK-group
3
Medicare Part D Plan?"
4
the answer is yes.
5
certainly review it, but everything
6
that we're seeing indicates that we
7
can actually contract with somebody
8
to do the Part D benefit in some
9
form or fashion.
And we think
I mean, we could
So that's the
10
current mindset, is that once this
11
is over, a recommendation is made,
12
and if it follows through as it is
13
right now, then, you know, HR, we
14
have pharmacists through the College
15
of Pharmacy we work with, that we
16
would tackle that issue and spend
17
the bulk of '06 trying to figure out
18
which is the best way to position
19
our retirees in the plan and then
20
roll that out sometime 2007.
21
PEFFER:
Joey, one thing about what you
22
said, you said there were 10 percent
23
that were out here that were not as
24
well off, and they were -- they
25
would go up $3,600.
But that was
80
1
under if they had the doughnut hole.
2
PAYNE:
3
PEFFER:
4
Right.
And without the doughnut hole,
a lot of those people --
5
PAYNE:
6
PEFFER:
Right.
-- will be pulled back in.
7
I didn't want that to hang out
8
there.
9
3,600, that was under the
So
Those people that are paying
10
government's plan.
11
big doughnut holes -- he was talking
12
about the catastrophic coverage is
13
the top of that doughnut hole.
14
private providers -- and correct me
15
if I'm wrong -- the private
16
providers will disquise that
17
doughnut hole and spread it so that
18
won't happen.
19
not be out there under the private
20
providers.
21
PAYNE:
They had these
The
Those 10 percent may
The doughnut hole really -- and
22
it's not fair to even talk about
23
this thing.
24
picture of it, you don't even know
25
what I'm talking about, but it's
If you've never seen a
81
1
just a scheme, if you will, of how
2
the benefits will be paid by
3
Medicare.
4
hole plan design, it was basically
5
put out there as a default, meaning
6
that if no company, no private
7
company, decided to offer the
8
benefit in a given area, like
9
Kentucky, then Medicare would go out
10
and hire somebody to administer it.
11
And that's the plan design that
12
would be used, but they've already
13
contracted with 18 companies.
14
so these companies know this is how
15
they're getting their money back
16
from Medicare.
17
do is take the money they anticipate
18
getting back from Medicare, plus the
19
little premium, $30 a month, they're
20
going to charge a retiree and, as
21
Sean says, try and disguise it, if
22
you will, in some kind of copay
23
system, you know, that we're all
24
used to seeing.
25
one, level two, level three,
And with that doughnut
And
So what they have to
You know, level
82
1
something like that, so -- and
2
spread those costs out, you know.
3
To further answer Sean's question,
4
you know, pushing a lot of those
5
high-cost drugs over to that part B
6
benefit will help, you know, that 10
7
percent that I called outliers quite
8
a bit.
9
CIBULL:
I would just mention, though,
10
if they do that, then part B
11
premiums may go up.
12
they'll --
13
14
TEARNEY:
Yeah, part B premiums are the
carve-out.
15
CIBULL:
16
TEARNEY:
17
I mean,
Yeah.
If the carve-out comes
(inaudible).
18
CHAIR YANARELLA:
19
GROSSMAN:
Bob Grossman.
Ernie, you got my name
20
right.
I'm trying to get an
21
understanding of the big picture
22
here.
23
you closed that gap between the 11
24
million that you were able to --
25
that you were spending now and the
It seems to me that the way
83
1
30 million that you would have to
2
pay is in two ways:
3
much heavier burden on people who
4
retire before age 65.
5
6
7
TEARNEY:
One, you put a
That's exactly right, by
design.
GROSSMAN:
And which, I think, is a very
8
reasonable thing to do.
9
and two, you cut off all subsidies
10
for people who are hired from now
11
on.
12
things that balance the books.
13
TEARNEY:
14
GROSSMAN:
But two --
Those are basically the two
Uh-huh (affirmative).
Is it not a little drastic to
15
be cutting off all benefits -- all
16
subsidies, I should say, from people
17
who are hired from now on?
18
raised a point earlier, which I
19
guess I should elaborate on a little
20
bit.
21
come here, and if you tell them that
22
they don't get -- won't be getting
23
any subsidy for their health care
24
costs, postretirement, that may
25
be -- it may become much more
John
We try to recruit people to
84
1
2
3
4
difficult to recruit them.
TEARNEY:
We did consider that, but let
me ask Joey to respond.
PAYNE:
One of the things that we looked
5
at when -- Julia Costich is a
6
faculty member.
7
benchmarking for us.
8
said, if you look across the country
9
at the -- especially the smaller
10
private institutions, there is no
11
retiree health benefit.
12
going to come back to who you're
13
competing against.
14
wouldn't call them smaller, but
15
certainly private -- they don't have
16
retiree health benefits.
17
we're looking at the Ivy League, you
18
know, then, yeah, you know, they
19
might -- I'm sure they'll continue
20
to offer retiree health benefits to
21
their retirees.
22
at the public research institutions
23
that we benchmark against, many of
24
them are making similar kinds of
25
changes that we are.
She did a lot of
And as Mike
So it's
Vandy -- well, I
So if
If we are looking
Here in
85
1
Kentucky, for example, is probably
2
the best way to look at our own
3
state retirement systems.
4
to be that, with five years of
5
service, you could get a partial
6
contribution from those systems for
7
health benefits.
8
that to ten now for future hires.
9
They grandfathered certain people,
It used
They've changed
10
but for future hires, you've got to
11
have ten years now.
12
the regional universities, we don't
13
benchmark against them for faculty,
14
but sometimes for staff we do.
15
There's really two options you have
16
as a faculty member or a staff
17
member:
18
one of the state systems, or you can
19
join what's called the Optional
20
Retirement Plan to get your
21
TIAA-CREF and those types of plans.
22
You know, the drawback to the state
23
system is that there's a five-year
24
vesting period.
25
there five years before you get any
If you look at
One is that you can go into
So you have to be
86
1
of the institutional contributions
2
towards your retirement benefit.
3
if you're planning on being there
4
for the long haul, that's not
5
necessarily a bad place to be.
6
system has a health benefit.
7
once again, you've got to be there a
8
minimum of ten years now before you
9
can qualify for that.
So
That
But
If you opt
10
for the Optional Retirement Plan,
11
the ORP, there is no retiree health
12
benefit.
13
your question, it's really going to
14
come back to, you know, who are we
15
competing with?
16
that Tom Samuel is a friend of mine,
17
so I can say this about Tom.
18
probably a few months before he was
19
asked to chair the previous
20
committee, he didn't know we had a
21
retiree health benefit.
22
tell you, probably, the same thing,
23
about six months to a year.
24
know, for a lot of the higher-paid
25
individuals --
You know, so to answer
And I will tell you
Until
Mike will
You
87
1
TEARNEY:
2
PAYNE:
Now, wait a minute.
-- they, you know, they may not
3
keep up with policies and things
4
like that, and it's not as material
5
an amount of money for them as it is
6
for a lot of the lower-paid faculty
7
and certainly some of the lower-paid
8
staff.
9
about key individuals in recruiting,
10
you know, I think it's just going to
11
depend.
12
places, as a staff person, that you
13
can go anymore and get that type of
14
a benefit, especially short-range.
15
16
17
So, you know, we're talking
But there's not too many
CHAIR YANARELLA:
Kaveh Tagavi and then
Connie Wood behind him.
TAGAVI:
Yes.
I'd like to ask a
18
clarifying question regarding this
19
rule that if you're an employee
20
after 1-1-06, you're on a different
21
plan.
22
proposal.
23
approved and it's done with; is that
24
correct?
25
TEARNEY:
That's not part of your
That's already been
That's correct.
88
1
2
TAGAVI:
Okay.
That's not your
proposal.
3
TEARNEY:
4
TAGAVI:
Well, it was last -It was your proposal, but now
5
it has been approved at whatever
6
level had to approve it.
7
TEARNEY:
8
PEFFER:
9
That's correct.
Part of that was we had the
committee going on and we were
10
looking at all the different options
11
of what was going on.
12
be bringing people in right now
13
saying, "We have this benefit
14
out" -- oh, I'm sorry -- "we have
15
this benefit out in the future,"
16
when we know we're sitting in a
17
committee over here trying to figure
18
out how to make it work to begin
19
with.
20
with just an integrity issue of
21
popping up right away and getting
22
the word out so you didn't hire
23
somebody in and then one year later
24
say, "Oh, we're changing it this
25
way."
And you can't
So a lot of that had to do
89
1
CHAIR YANARELLA:
2
WOOD:
Connie Wood.
Mike, a point of information:
In
3
your annual required contribution,
4
this is being based on a benefit
5
which is being accrued but not
6
realized until the individual
7
retires; is that correct?
8
TEARNEY:
9
WOOD:
Yeah.
Not everyone who accrues that
10
benefit will actually -- will
11
actually get money from their
12
accrued benefit; is that not
13
correct?
14
TEARNEY:
15
WOOD:
Yeah.
In that case, can we not bring
16
new faculty into the plan at a
17
prorated basis, based on the
18
expectation that they will actually
19
ever avail themselves of those
20
funds?
21
phase --
22
TEARNEY:
I mean, this is -- this is a
Yeah, it's statistics, and I
23
understand, you know, something
24
about statistics.
25
WOOD:
More than I do about accounting.
90
1
TEARNEY:
You know more than I do about
2
statistics.
But where the fallacy
3
of your -- if there is a fallacy,
4
let me say that.
5
fallacy is in your logic is that
6
when an accrual is made, it is
7
actuarially determined based on the
8
actual experienced rate of turnover,
9
et cetera, at UK.
But where the
So it is a -- it
10
is a specific accrual.
11
like they take you or me and say,
12
"Well, okay, you've been here, you
13
know, X years; you get -- the amount
14
of your benefit is worth this; round
15
it up and discount it."
16
actually actuarially determined, and
17
therefore the number is much -- the
18
number is much lower than what you
19
would come up with the way you're
20
doing it.
21
CHAIR YANARELLA:
22
WOOD:
23
It's not
It is
Judith.
But why does that exclude new
faculty?
24
TEARNEY:
25
WOOD:
Pardon?
That's the whole point.
91
1
TEARNEY:
2
WOOD:
Why does it what?
Why does it, by definition,
3
exclude new faculty who may be
4
brought in?
5
TEARNEY:
The number, actually -- I
6
guess we didn't get a run on that,
7
but the number would have been
8
significantly higher had new faculty
9
been in there, because it just keeps
10
turning over.
11
way this is, is once everybody here
12
is retired, there is no cost, once
13
everybody here is dead.
14
15
The way this -- the
UNIDENTIFIED SPEAKER:
That makes you
feel better.
16
CHAIR YANARELLA:
17
TEARNEY:
18
LESNAW:
Judith Lesnaw.
Judith.
I would like to return to the
19
issue of benchmarks for a moment.
20
And it's very interesting to know
21
what our regional institutions are
22
doing and perhaps some small private
23
colleges, but those are not our
24
competition, A; and, B, I'm a firm
25
believer in not reinventing wheels
92
1
and trying to benefit from
2
collective wisdom.
3
if you have any data on our
4
research -- public research
5
benchmark institutions and if anyone
6
has made any calculations taking
7
into account salary differentials
8
versus health care plans.
9
TEARNEY:
And I wondered
In terms of benchmarking,
10
Julia did most of that for us, and
11
interestingly enough, there are very
12
few -- I think only about two or
13
three in our actual benchmark list.
14
But very few of benchmarks have the
15
same situation that we do, meaning
16
this:
17
a -- is this thing working?
18
UK plan.
19
Also, I shouldn't say most, but
20
let's say the ones that Julia looked
21
at for us and reported on are the
22
big state institutions.
23
state.
24
state takes over the retiree health
25
care benefit, and they aren't
This is a UK plan.
It's not
It's a
It's not a state plan.
It's a
It's a state plan.
The
93
1
concerned about this.
2
they're just going to go to the
3
legislature and ask for -- you know,
4
if they need more funding for that.
5
I know the University of Iowa, and I
6
don't remember if there's any
7
others --
8
9
10
11
12
PAYNE:
It's just --
I think Purdue possibly is
another one.
TEARNEY:
I think Purdue doesn't have
any.
PAYNE:
They don't have any
13
contribution, but they have a
14
liability --
15
TEARNEY:
But University of Iowa was
16
comparable to us, in terms of our 19
17
benchmarks.
18
question, we did look at that.
19
did not look at -- I mean, we all
20
have, I suppose, some concept, but
21
we didn't sit down and look at the
22
relative salary levels.
23
CHAIR YANARELLA:
24
THELIN:
25
But to answer your
We
John Thelin.
Back to Bob Grossman's point
about who bears disproportionate
94
1
expense on this, it seems to me that
2
faculty who come to UK in midcareer
3
who are induced to come here are
4
going to get hit particularly hard
5
on your chart.
6
TEARNEY:
7
THELIN:
Yeah.
Now, the beauty of something
8
like TIAA-CREF is that it
9
acknowledges your career, your
10
professional career, with
11
portability.
12
certainly, years of service and
13
loyalty is a good thing and should
14
be rewarded, but you're penalizing
15
those who come -- and they would
16
tend to be a large number of faculty
17
and I guess even like deans or
18
whatever, who come at like age 45 or
19
50.
20
disproportionate burden for
21
something when they were induced to
22
come?
23
TEARNEY:
And I also think that,
Why -- why should they bear a
I agree with your logic.
Now,
24
if they -- you know, how long does a
25
person work?
I don't know.
But
95
1
they've been working somewhere
2
already for quite a while.
3
talking about, somebody's coming
4
here at 50.
5
to come here when they're 50.
6
know that's a little older than you,
7
but I'm trying to give you the
8
logic.
9
they're 50, they've worked at least
What I'm
Let's say they're going
I
If they come here when
10
half their working life somewhere
11
else.
12
their retiree health care benefit as
13
opposed to someone else?
14
bit of the logic.
15
logic, and I want to use this -- I
16
think Joey or somebody did this the
17
other day.
18
going to be a picture.
19
doesn't address your question, but
20
it addresses the committee's -- how
21
the committee leaned.
22
that there is a finite amount of
23
money that can be spent for retiree
24
health care, I mean, we don't know
25
what the number is, but let's just
Why should we pay for all of
That's a
And the other
I'm going to -- it's
And it
If we assume
96
1
say there is.
Within that finite
2
number, you've got the bottom part,
3
which would be the early retirees,
4
and the top part, which would be the
5
post-65 retirees.
6
squeeze that balloon anywhere along
7
the line, the other side is going to
8
get bigger; one side is going to get
9
smaller, and the other side is going
And if you
10
to get bigger.
Kind of the way we
11
did it, and it does harm to people
12
that you're referring to, is we kind
13
of squeezed it down here at the
14
bottom to push up more up to the
15
top, to give the people that are --
16
I say over 65, but really like over
17
75.
18
in their life when their medical
19
expenses are going to really start
20
coming, we don't want them to have
21
less resources.
22
design that was recommended before
23
was more or less the opposite.
24
squeezed at the top, blew it out at
25
the bottom.
When they've got to the point
Now, the plan
It
And the people up at
97
1
the top that were, say, over 75 or
2
whatever would have run out of money
3
and had to use their own, whereas
4
there was no change in early
5
retirement.
6
that doesn't address your issue.
7
Sean brought your issue up
8
continuously on the committee, and
9
we did -- we did talk about it, but
10
we just -- I don't know where I put
11
the microphone.
12
13
14
PAYNE:
We got the same.
Now,
You laid it downhill and it was
getting ready to roll.
TEARNEY:
We did -- all I can say is we
15
very seriously did consider he kept
16
bringing it up, but we decided
17
differently.
18
PEFFER:
Yeah, this was mine, because my
19
comment was faculty, you're going to
20
have to go out and get a Ph.D.;
21
you're probably going to have to go
22
out and do a postdoc; you're going
23
to not get tenure somewhere else;
24
then you're going to wind up here.
25
(LAUGHTER.)
98
1
PEFFER:
That's how a lot of us get
2
here, and some of us leave.
Anyway,
3
the -- but the deal is this:
4
original table went out to 30 or
5
more years, and the best I could do
6
on the committee is push this back
7
to 25 or more years.
8
here 40 years old.
9
pretty -- it's pretty high up there,
The
You can arrive
40 years old is
10
if you can arrive at 40 years old
11
and still work your way back up into
12
those upper groups.
13
answer to it, as opposed to:
14
didn't like the 30- or 35-year
15
version of this, because then you're
16
having to get here before you've had
17
time to do those items, for faculty,
18
at least.
19
is:
20
here's the thing the committee kept
21
doing.
22
put them back in, who do you take it
23
away from?
24
infinite amount of money out there.
25
You've got a certain pool of money
That's my first
I
The second answer to this
If you put that back in --
You take those people and
Because there's not an
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1
that you've got to do this.
Then
2
where -- as soon as you decide to
3
give a benefit to one of these
4
groups or to anybody, you'll have to
5
find somewhere else to take it
6
away.
7
not saying, you know, I need an
8
answer to that, but keep that in
9
mind.
And that's where -- and I'm
There's a lot of choices in
10
here that the committee -- it was
11
very hard for the committee to make
12
to do these kinds of things, but do
13
you take it away from the retirees?
14
Do you raise them to doing 20
15
percent of their costs?
16
raise the eligibles -- you know,
17
just those types of issues.
18
THELIN:
Do you
Look at your bottom column, 50
19
percent for 65 or more with 15 but
20
less than 20; 10 percent for 25 or
21
more.
22
You're rewarding longevity.
What are you rewarding?
23
PEFFER:
Length of service.
24
THELIN:
You're not rewarding mobility
25
and assent.
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PEFFER:
No, no, we're not rewarding
2
mobility.
We're not rewarding "show
3
up at 50."
4
that, if you decide to do that, if
5
you decide to push that column over
6
to the right to 10 or more, where do
7
you take it away from to get the
8
money?
9
not saying I can get an answer to
But if you do reward
That's just the issue.
10
this.
11
decide to say everybody who's here
12
for ten years or more can earn their
13
way down to 10 percent, then you've
14
got to take the amount of extra
15
money that's going to cost and take
16
it from somebody.
17
it from?
18
19
TEARNEY:
PEFFER:
21
TEARNEY:
Who do you take
Let me interrupt before you
That's my job.
I think, in fairness, we did
discuss it.
23
PEFFER:
24
TEARNEY:
25
If you
get us in more trouble.
20
22
That's the issue.
I'm
Yeah.
And that's just the way we
came down.
It was -- well, where it
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1
looked like we were going to come
2
down was that you'd have to be here
3
30 years to get the 10 percent, and
4
we cut that to 25 years, which means
5
you could start here when you're
6
40.
7
there's a sharp -- a sharp decline.
8
And that's just -- that's the way
9
the table came out.
10
But you're absolutely right;
CHAIR YANARELLA:
Let's see.
Could we
11
have Roy Moore in the back and then
12
Judith and then Kaveh Tagavi.
13
MOORE:
Just a quick question, Mike.
14
Where does phase retirement fit into
15
all this?
16
TEARNEY:
17
MOORE:
18
TEARNEY:
State retirement?
Phase.
Oh, phase retirement.
19
Actually, we haven't discussed that,
20
but Joey and I have discussed it,
21
and I can't remember.
22
PAYNE:
Based on the current proposal,
23
assuming that you qualify to retire,
24
you know, you have to meet the Rule
25
of 75 and be 60 to go on phase
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1
retirement, it's not going to
2
matter.
3
could matter is if we take a look at
4
Medicare Part D and we think there's
5
just too many holes in it for those
6
people already retired as of July 1,
7
'07, and we decide to grandfather
8
that group, if you will.
9
somebody were already age 65 and on
10
phase retirement, that person might
11
want to go ahead and retire.
12
Because the short answer is:
13
on phase retirement; you're not
14
retired, so you're not in that first
15
category yet.
16
scenario, you might want to retire
17
before July 1, '07, if that
18
distinction was made that we were
19
going to kind of grandfather those
20
people already retired for the
21
prescription drug.
22
way the recommendation is now,
23
there's no need for anything like
24
that, because everybody goes over to
25
the Medicare Part D, so phase
The only point where it
Then, if
You're
So you -- in that
But based on the
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retirement is not impacted by this
2
at all.
3
CHAIR YANARELLA:
4
LESNAW:
Judith.
If I understood you correctly,
5
you said that most of our public
6
research benchmark institutions are
7
not going to face this problem, I
8
think you said, because they were
9
under statewide plans and they could
10
go back to the state and ask them to
11
fill in the gaps.
12
is:
13
which it most certainly is, A, and
14
B, if the state has mandated that we
15
at least become a better
16
institution, what is the possibility
17
of getting a state retirement plan,
18
statewide, that would address this
19
problem?
20
going to the state and pointing out
21
that this is a Kentucky problem?
22
TEARNEY:
So my question
If that is our competition,
Yeah.
Or what prevents us from
The major thing I have
23
seen:
The last thing we would want
24
to do is get a state plan.
25
is better than most any state plan
Our plan
104
1
I've ever seen.
Now, the second
2
part of your question is:
3
understanding that -- it's not a
4
committee matter, but people I have
5
talked to -- that the university
6
does plan to go Frankfort with this
7
issue and, you know, make -- ask for
8
an infusion of funds for it, and
9
hopefully that will be fine.
It's my
But
10
the state retirement plan right now,
11
they had to come up with 75 million
12
dollars special funding last year to
13
get through the year.
14
two to three billion dollars --
15
where we have a, whatever the number
16
is, 400 to 700 million-dollar
17
potential liability, the state
18
retirement system for teachers is
19
between two and three billion.
20
you know, what's the probability of
21
us getting it?
22
comment, and I think that the
23
university is planning on trying to
24
do something.
25
CHAIR YANARELLA:
And they are
So,
But it's a good
I'd like to give Kaveh
105
1
Tagavi an opportunity and then
2
perhaps one more person.
3
are other questions, I would hope
4
that Joey and Mike and Sean would be
5
able to stay for a few minutes after
6
the meeting.
7
8
9
10
TAGAVI:
If there
Kaveh.
Can you put back that table
that goes with age and -TEARNEY:
The Age/Service Table or
whatever?
11
TAGAVI:
12
TEARNEY:
13
TAGAVI:
Yeah.
This one?
Yeah.
I thought that you
14
implied that you don't want people
15
to make a decision to retire or not
16
based on their retirement benefit.
17
I think that's a reasonable
18
philosophy.
19
years old and I have 15 or more but
20
less than 20 years of experience.
21
So if I retire this year, it's 80
22
percent I have to pay.
23
one more year, it's going to be 35.
24
What's the present value of that for
25
the rest of my life, actuarially?
So let's say I am 60
If I work
106
1
Do you have a number on that?
2
TEARNEY:
3
TAGAVI:
4
5
No.
Is it like $800, or is it
$8,000?
TEARNEY:
It also depends on what you
6
think you're going to -- the
7
interest rate you're going to earn
8
the rest of your life.
9
TAGAVI:
But you have -- you must have
10
that assumption, because you have
11
that assumption in everything else.
12
13
TEARNEY:
We actually didn't even
discuss that
14
TAGAVI:
15
TEARNEY:
If you can find out -But I realize what you're
16
saying is true, so I'm not arguing
17
with that, but that wasn't a point
18
that we discussed.
19
someone else, I think.
20
CHAIR YANARELLA:
There was
One more question.
21
Jeff Dembo will be our last
22
question.
23
DEMBO:
There was one other person I
24
thought.
Mike, I thought I saw a
25
slide you zipped through that had a
107
1
timetable on it, but you didn't go
2
over it.
3
TEARNEY:
Yeah.
There are actually two
4
that I'd like to go over.
I'm
5
probably going the wrong way.
6
I am.
7
arrows.
8
one first.
9
differences between what currently
Yeah,
I never can read those
I'd like to look at this
This is the key
10
exists in the current plan and what
11
our recommendations would change.
12
Number one, I think most
13
importantly:
14
commitment to retiree health
15
benefits.
16
change does not require funding; it
17
requires recognition.
18
words, you must recognize, on your
19
financial statements, that you've
20
got a problem, but you don't have to
21
fund it.
22
course, Angie's on our committee,
23
but the Budget Office has looked at
24
it; the Fiscal Office has looked at
25
it; Appraiser's Office has looked at
Funds the university's
This new conceptual
In other
Now, the budget -- of
108
1
it; Controller's Office has looked
2
at it; Butler has looked at it; the
3
President's Cabinet has looked at
4
it.
5
received -- I mean, it's no
6
commitment, but every indication
7
that we have received is that the
8
university is committed to funding
9
whatever, you know, we can come up
Every indication that we have
10
with that's reasonable and
11
sustainable, so that would be great
12
for all of us.
13
does, and we talked about this a
14
little bit, but I didn't really
15
emphasize it, is right now, if
16
the -- when a new, you know, UK HMO,
17
when the new year comes out and it's
18
a bad budget year, it is possible
19
for the university to just increase
20
for all of us, for that matter, $21
21
a month like they did a few years
22
ago.
23
recommending, and I realize that it
24
just deals with retirees, but I
25
would assume it would have some
The second thing it
What this plan is
109
1
carryover benefit, is this says that
2
in the future all cost sharing --
3
all cost increases would be
4
cost-shared, 10 percent by the
5
retiree and 90 percent by the
6
university, which means that it
7
would go up each year, but it is
8
something that you could plan and
9
budget for, both from the
10
university's perspective and from
11
the retiree's perspective.
12
the second bullet.
13
bullet, I talked about the true
14
retiree rate.
15
the Medicare D, we talked about.
16
The fifth bullet establishes the Age
17
and Years of Service table we talked
18
about, provides access only, new
19
employees, and changes the Medicare
20
carve-out deductible to a calendar
21
year.
22
that we're recommending.
23
our calendar for the rest of the
24
year, we are going to be doing these
25
forums until roughly the end of
That's
The third
The fourth bullet,
Those are the main things
To look at
110
1
October.
The committee will come
2
back together.
3
out all of the questions and
4
comments of you and everyone else.
5
By the way, you've seen our public
6
schedule, if you will, or open
7
meetings.
8
many, if not more, quote/unquote,
9
private meetings.
Jolie will have got
We're doing at least as
Any group that
10
wants us to come and talk to them,
11
as long as they can give us 25
12
people, we'll be there, and we've
13
got -- most of them are like that.
14
So we're going to take all of those
15
questions and comments and give
16
those to the committee, plus
17
everything that Joey and I find out
18
about Medicare D.
19
will revisit all of the issues.
20
We'll do that for the first couple
21
of weeks in November.
22
meet with the Employee Benefits
23
Committee and make a presentation to
24
them regarding our -- you know,
25
where we are at that time.
The committee
We will then
We'll
111
1
work with them.
We actually report
2
to Butler, but I think it only makes
3
sense to get the endorsement of the
4
Employee Benefits Committee.
5
work with that committee during
6
November, trying to iron out any
7
differences that may exist between
8
the two committees.
9
together in December with the
We'll
We'll come back
10
information of the Employee Benefits
11
Committee as well as more on
12
Medicare D, and we'll finalize and
13
make our recommendation to Butler by
14
the end of the year.
15
CHAIR YANARELLA:
Okay.
Mike, let me thank you
16
for coming to talk with us about
17
this.
18
the committee on the transparency of
19
the presentation, certainly the
20
quality of the decisions, and your
21
emphasis on those key assumptions
22
that you have made that, since they
23
are transparent, have become part of
24
a very, very valuable forum for us
25
here.
I want to compliment you and
Thank you very much.
112
1
TEARNEY:
2
(APPLAUSE.)
3
CHAIR YANARELLA:
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Thank you.
If there's no further
business, this meeting is adjourned.
113
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STATE OF KENTUCKY)
2
COUNTY OF FAYETTE)
3
4
I, ROBYN BARRETT, CSR, the undersigned Notary
5
Public in and for the State of Kentucky at Large,
6
certify that the foregoing transcript of the
7
captioned meeting of the University of Kentucky
8
Senate is a true, complete, and accurate transcript
9
of said proceedings as taken down in stenotype by
10
me and later reduced to computer-aided
11
transcription under my direction, and the foregoing
12
is a true record of these proceedings.
13
I further certify that I am not employed by nor
14
related to any member of the University of Kentucky
15
Senate and I have no personal interest in any
16
matter before this Council.
17
My Commission Expires:
November 24, 2007.
18
IN TESTIMONY WHEREOF, I have hereunto set my
19
hand and seal of office on this the 23rd day of
20
October, 2005.
21
22
23
_______________________________
24
ROBYN BARRETT, CERTIFIED SHORTHAND
REPORTER, NOTARY PUBLIC, STATE AT
LARGE, KENTUCKY
25