The Personnel Benefits Committee met on September 22, 1994; October 17, 1994; October 24, 1994; November 17, 1994; January 27, 1995; February 20, 1995, March 22, 1995 and May 9, 1995.
The Committee expresses its loss at the death of Professor Paul Taubman. His commitment to the Personnel Benefits Committee was a demonstration of his commitment to the Penn community. He will be missed by members of the Committee.
University of Pennsylvania Health Systems (PennCare): The Personnel Benefits Committee (PBC) worked with the Benefits Office to determine the appropriateness of implementing a University of Pennsylvania Health Systems managed care plan option for Open Enrollment 1994-1995. Martha Marsh, Executive Director of Managed Care at the University of Pennsylvania Medical Center, attended the October 17, 1994 meeting to share with the Committee information on HUP's directions and to learn what the University would need from a HUP plan.
The PBC examined several pertinent issues such as the limitation of the current PennCare network of providers; folding the Blue Cross Comprehensive Plan into the PennCare plan versus maintaining the Comprehensive plan as a separate plan option; the assumption of financial risk for the plan resting with the Medical Center rather than the University, and quality of care.
Recommendation: The PBC recommended implementing PennCare for Open Enrollment 1994-995 provided that the Medical Center assumed the financial risk. The PBC further recommended that the University maintain the Blue Cross Comprehensive plan as a separate plan option. The recommendation was initiated and PennCare was added to the University's medical plan options for Open Enrollment 1994-1995.
Reduction of Life Insurance Rates: The Benefits Office brought this item to the attention of the PBC. For the first time in several years the University's life insurance rates fluctuated significantly enough to warrant a change in flex dollars. There will be a decease in rates for 1995-1996. Since flex dollars are tied to the cost of life insurance, flex dollars for 1995-1996 will decrease. The reduction in flex dollars will not diminish the individual faculty or staff member's purchasing power in terms of life insurance.
Cost Savings in Pharmaceuticals Under the Blue Cross Plans: Benefits Management proposed that the University "carve out" prescription drugs from the Blue Cross plan as a cost savings measure. "Carving out" prescription drugs is an administrative change which will remove prescription drug coverage from the major medical portion of the plan and allow it to stand alone as another component of the plan. The change will be relatively seamless for employees and save the University approximately $200,000.
Benefits Management also explored the possibility of changing administration of prescription drugs from Blue Cross to Pharmaceutical Card Systems (PCS). This change was considered in light of Pharmaceutical Card Systems' ability to provide a comparable prescription drug coverage to Blue Cross at a lower cost.
Recommendation: The PBC recommended carving out prescription drug coverage and supported a change in administration from Blue Cross to PCS provided that there is no additional deductible for prescription drugs. The PBC supported implementing a change mid-year outside of Open Enrollment.
Greater Atlantic Network: Greater Atlantic enhanced its plan for Open Enrollment 1995-1996 to include an out-of-network benefit. After negotiations with Benefits Management, Greater Atlantic added the out of network component with no added premium costs in an effort to remain competitive with the University's other HMO plans. The PBC supported this addition to the plan since it enhances the plan for employees at no added cost to the University or employees.
The PBC was charged by the Steering Committee of University Council to make a recommendation on pro-rated benefits for regular part-time employees. The Steering Committee asked that they receive the PBC recommendation by December 5, 1994. The issue had been brought forward to interim President Fagin by regular part-time professional staff. The following summarizes a detailed report prepared by the Committee.
There are approximately 160 to 180 regular part-time staff. The PBC considered including part-time faculty in the discussions; however, defining part-time status for faculty proved to be too complicated for the Committee to resolve in the given time frame. The Committee agreed to examine the issue as it pertains to regular part-time staff only.
The Committee discussed the strategic importance of benefits in the recruitment and retention of employees. It was agreed that the strategic value of part-time benefits was pertinent to the discussion; yet, outside of the Committee's purview. The Committee focused on issues within its purview such as a review of the current part-time benefits package; the costs associated with providing pro-rated part-time benefits and the impact of these benefits on the full-time benefits package. The Committee concluded that the Basic Tax Deferred Annuity (TDA) plan would be excluded from the Committee's recommendation due to compliance issue with non-discrimination regulations and cost. Tuition benefits would also be excluded from the recommendation for reasons of cost.
The Committee developed three potential approaches to benefits for regular part-time employees. They are as follows:
1) A recommendation not to change the current part-time benefits package.
2) A recommendation that the University develop a cost neutral part-time benefits plan. The Plan would not add cost to the University's benefit plans; however, it would entail administrative costs. Such a plan could conceivably leave the current part-time package in place and add the option of participating in a health care expense account and the option of buying disability insurance. It would not include tuition benefits or participation in the Basic TDA Plan.
3) A recommendation that the University provide pro-rated benefits to include medical, tuition, dental, life insurance, long term disability and a health care pre-tax expense account provided there is funding for this expansion of benefits. The level of Benefits under this option is dependent upon the funding available as determined by the administration. It would not include participation in the Basic TDA plan.
Eligibility criteria for receipt of part-time benefits such as service requirements under each option would be determined by the administration.
The Committee vote was in favor of option number (2). The recommendation was forwarded to the Steering Committee of University Council within the appropriate time frame. The issue of a change in the part-time benefits package was placed on hold pending a review of the University's benefit package.
In cooperation with Richard Hendrix, Associate Dean of SAS and Director of CGS, and Provost Stanley Chodrow, the PBC examined the situation of employees on deferred admission status to CGS or Wharton Evening. The following summarizes a detailed report prepared by the Committee. Employees on deferred admission status brought to the Committee their concern that they were unable to use the employee tuition benefit. Certain employee-applicants to the University are placed in a "deferred" admission status and are required to take four courses at Community College of Philadelphia and obtain grades of at least "B" in order to demonstrate their academic preparedness for studies at Penn. Employees who cannot afford the tuition at Community College never have the opportunity to use the tuition benefit at Penn.
Recommendation: The PBC and Dr. Hendrix recommended an amendment to the tuition policy to pay tuition at approved, accredited community colleges for employees on deferred admission status to CGS or Wharton Evening. The full recommendation was published in Almanac. The recommendation was presented to the Steering Committee of University Council and placed on hold pending a review of the full benefits package.
Benefits management brought the issue of adding accelerated death benefits to the University's life insurance plan. Accelerated death benefits became a plan option when the University changed life insurance carriers from CIGNA to TIAA. TIAA offers accelerated death benefits at no additional cost. These benefits allow terminally ill individuals to access all or a portion of their life insurance benefit while living.
Recommendation: The Committee unanimously recommended the addition of accelerated death benefits to the life insurance plan. The recommendation went into effect as of March 1, 1995.
The PBC examined two aspects of retirement: 1) University contributions to the Basic TDA plan and 2) retirement benefits for support staff. The Committee concluded that both issues need further evaluation and noted its understanding of the need to ensure adequate retirement income for support staff. The Committee agreed that the issue of retirement is complicated with significant importance to both the University and Faculty/Staff. Given the complexity of the issues and their wide ranging impact, the Committee concluded that retirement plan design issues must be reviewed in the context of benefits re-design.
Recommendation: The Committee recommended that the issues of university contributions to the Basic TDA plan and retirement benefits for support staff should be included in the University's total benefits re-design effort.
The PBC reviewed the current design of the University's life insurance benefit in terms of both cost effectiveness and responsiveness to employee needs. The Committee examined the coverage levels for older faculty and staff; the link between flex dollars and life insurance and the requirement for minimum coverage.
The Committee agreed that the current design does not provide for optimum cost effectiveness or optimum responsiveness to employee needs. Employees who have no dependents may not need life insurance at all. For employees who have no need for life insurance, all money spent on premiums is wasted. For other employees, the amounts of insurance needed, the appropriate form of insurance--term vs. cash value products- -and the company from which insurance would best be purchased may vary widely. Usually the need for insurance declines as an individual ages due to an increase in assets and reduced obligations to dependents. The cost of term life insurance increases dramatically at older ages. Thus, many employees are forced to purchase expensive life insurance at a point in their lives when they have little or no need for it. Employees who have no need for insurance, or who obtain insurance outside of the University, would benefit from removing the requirement that all employees purchase insurance.
Although the current policy clearly represents a potential waste of money for some employees, there is a concern that certain employees, given the opportunity, would behave in a highly irresponsible fashion by dropping needed insurance with the University and fail to replace it from other sources. There was a concern that the dependents of these employees would then demand a payment from the University on the grounds that the University should have forced the employee to purchase life insurance. It was argued that, if there was a minimal death benefit, however inadequate for the dependents needs, then this would prevent any such claims from being made. In fact, the staff of the Benefits Office know of no such claims against the University under the current system of mandatory coverage. Another argument against dropping mandatory coverage was the impact on cost of coverage for those who choose to continue to purchase life insurance through the University. According to TIAA, dropping mandatory coverage would be expected to result in adverse selection with healthy and younger employees leaving the plan, while older employees and those who could not medically qualify for coverage elsewhere remained in the plan. Some felt that mandatory coverage should be maintained in order to lower the cost of life insurance for those who purchase it through the University. Others believed that, by forcing certain employees to subsidize the cost of insurance for others, this unfairly exploited those who would prefer to drop coverage. This issue of fairness was left unresolved.
The Committee concluded that tying flexdollars to the cost of life insurance was not an optimal approach. This policy was adopted for historical reasons at the time that Pennflex was instituted, in order to insure that employees were not disadvantaged by what was then a new benefit design. However, since life insurance costs escalate with age, this approach leads to rapidly increasing costs to the University for older employees. Costs of other benefits, such tuition, etc. do not systematically rise with employee age. Linking flexdollars to age does not necessarily benefit older employees as long as they are required to use their flexdollars to buy life insurance.
The Committee explored the possibility of dropping the requirement for minimum coverage of one times salary or $50,000, or dropping the requirement only for employees above a certain age. Either change would benefit older employees who do not need the coverage through the University.
Recommendation: The Committee recommended that the level of flex dollars should not be linked to life insurance costs, with the caveat that this delinking should not produce a reduction in benefits. Although the Committee considered several options for determining flexdollars, it did not come to a conclusion about a suitable alternative. The Committee did not endorse fully voluntary life insurance coverage. Instead, it recommended permitting employees over age 55 to reduce their life insurance coverage by $5,000 a year until they reach some minimum required level of coverage such as $10,000. The Committee acknowledges that adverse selection could arise with this approach, but believes it should be mitigated due to the slow decline in coverage over time.
A request was made for the University to allow hardship withdrawals under the Basic TDA Plan. Currently, hardship withdrawals are permitted under the Supplemental TDA plan. The Committee examined the issue of hardships, and the impact to the plan should hardship withdrawals be permitted. Comparability with the Retirement Allowance Plan (RAP) for support staff was also given consideration. The Committee further sought the advise of legal counsel on issues of non-discrimination. As of the end of the year, the opinion of counsel was that hardship withdrawals would be legally permissible, but might create problems with compliance with non-discrimination rules. Debra F. Fickler of the Office of the General Counsel provided this statement to the Committee Chair after the last meeting of the year:
"At your request, I am providing you with the legal justification for not adding hardship withdrawals to the basic tax deferred annuity plan at this time. Pending different guidance in the regulations, the nondiscrimination requirements for retirement plans that officially go into effect in 1997 and are technical requirements that are designed to prevent discrimination in favor of highly compensated employees, provide that in order for two plans to be comparable (i.e., the TDA and RAP), they must have comparable benefits, rights and features. Hardship withdrawals are considered a feature. If features are not comparable, i.e., if there are withdrawals permitted from the TDA, but not permissible under the RAP, the University would have to demonstrate that the difference does not discriminate in favor of highly compensated employees, which may prove difficult."
Recommendation: The Committee accepts the advice of legal counsel and recommends not moving forward with hardship withdrawals on the Basic TDA Plan until the impact on compliance with non- discrimination regulations is clarified.
The issue of the treatment of faculty leave time for adoption verses the leave time for the birth of a baby was brought to the Committee. Faculty receive paid leave time in the form of sick time/disability for the birth of a child and must use vacation or unpaid leave for the adoption of a child. The request sought to have leave time for both adoption and maternity treated identically as paid leave. The implication was that the two situations should receive the same treatment.
The University policy for time off for the birth of a baby is in compliance with law which requires that employers not discriminate against pregnancy in disability policies. The policy assumes that a standard period of six to eight weeks is required for physical recovery from pregnancy and child birth with no complications. Some Committee members agreed that the current policy unfairly favors pregnancy over adoption. Although adoption does not require physical recovery on the part of the parents, time off gives adoptive parents or birth mother time to bond with the child and adjust to the family transition. Other Committee members believed the difference in policy for adoption vs birth is appropriate because childbirth creates a need for physical recovery that does not exist with adoption. In addition, sick time cannot be extended for individuals without an illness or disability (again, this assumes a fixed duration of disability for birth mothers).
Recommendation: Since the Committee opinion was divided on this issue, the Committee agreed to forward both opinions to University Council.
Sarita Battish, Patricia Danzon, Robin Goldberg-Glen, Donna Hawkins, Harriet Joseph, Paul Lloyd, Patricia Noel-Reid, Karl Otto, Carl Polsky, Sheldon Rovin, Daniel Shapiro, David Silverman, Paul Taubman
Committee Chair: David Hackney
Alfred Beers, John Gould, Phyllis Lewis, Dennis Mahoney
Tuesday, October 31, 1995
Volume 42 Number 10