MINUTES
EMPLOYMENT BENEFITS COMMITTEE
January 21, 2010
Members Present
Debbie Copp / Chad JohnsonAlisa Dougless / Frank Lawler
Brenda Freese - Chair / Darryl McCullough – Vice Chair
Suzanne Gilmore / Scott Moses
Don Harrison / Sue-Anna Miller
Joann Dean / Will Wayne
Justin Wert
Members Absent
Don ClothierBetty Kupperschmidt
Simone Pulat
Ex Officio Members
Barbara Abercrombie
Julius Hilburn
Nick Kelly
The meeting was called to order by the Chair at 1:30 pm.
I. Approval of Minutes
· The December 2009 minutes were approved with no changes.
II. Defined Contribution Plan
· An overview of current DC plans was given as follows:
Plan / OU ContributionOTRS prior to 1995 / 15% of salary over $9,000
OTRS after 1995 / 8% of salary over $9,000
9% ORP / 9% of full salary
9% Hourly / 9% of full salary
· Julius presented a variety of scenarios for the committee to evaluate. Some options discussed were:
o Option A – 20% Reduction on All Plans
§ Would affect each group proportionally
§ Easy to administer and explain
o Option B – Salary Based Reductions
§ Those with higher salaries realize a larger reduction to contributions
§ Difficult to communicate and administer
§ Would involve significant systems modification at a high cost
§ Not a common feature among retirement plans
o Option C – Remove $9K offset from 15% and 8% plans and offer a match on all plans
§ Difficult transition communication, easier administration and communication going forward
§ University contribution levels would remain competitive and comparable to other institutions
§ Match option provides an incentive for additional savings
o Option D (EBC Member suggestion) – Eliminate the 15% plan and bring all OTRS plans to 8%
§ Puts the savings burden on one group
§ May be perceived as unfair to those in the 15% group
Comment: Julius told the group the reduction in university contributions to the defined contribution plans may not be temporary cut.
Question: A committee member asked if the university retirement contribution obligation would decrease annually due to the 15% plan being available only to long-service employees, who are likely closer to retirement.
Response: Nick explained to the group that the 15% plan still has a large number of participants. Many of the plan participants have a significant number of years remaining before they are likely to retire. So while it is true the obligations will reduce slightly as people retire, it will not save a significant amount of money in the near term.
Next Steps:
· Modify Option A to show the effect of eliminating the $9K offset in the 15% and 8% plans
· The group voted affirmatively to omit Option B from further consideration.
· HR was asked to create a scenario for review at the February meeting that combines elements of Options C&D. The new option should eliminate the offset feature of plans for OTRS defined contribution plan participants, include a matching provision, and have a larger university contribution reduction for the 15% dcp group.
Comment: Nick discussed a 2 phase implementation process in the event a match program is adopted. The flat decreases could be implemented immediately, and matches would be implemented after several months in order to provide adequate time for systems modification.
Comment: Darryl McCullough – Vice Chair, stated that EBC needs to make a decision at the February meeting if they are to have an influence in this process. The committee voted affirmatively to select an option in February.
Comment: It was requested that scenarios be made available to the committee prior to the meeting on February 18th.
III. Master Record Keeper
· Nick discussed the following proposed investment lineup:
o Tier 1, Target Retirement Funds
§ Designed for employees using their planned retirement date to manage the degree of risk in their investments.
o Tier 2 -Active and Index funds
§ Approximately 12 Active funds will be available
§ Approximately 4 Index funds
· Plan participant buys into a particular index, such as S&P 500
A decision has not been made as to which specific funds will be available in Tier 2.
o Tier 3, Self-Directed Brokerage
§ There will be approximately 3,300 options available
· Items to address before a recommendation can be made to the Board of Regents:
o The Retirement Management Committee will talk with potential fund managers in the next few weeks
o Fees still need to be finalized
Question: When will the Master Record Keeper be implemented?
Response: Nick Kelly indicated January 1, 2011 as the goal. It is anticipated a vendor will be selected and on campus in early fall 2010.
Question: What will happen to 401(a) plans after the implementation of the Master Record Keeper?
Response: There will be an open enrollment to provide members the ability to choose where to put their money. If no choice is made by the member then the funds will be defaulted into the Tier 1 target retirement date plans. However, annuity funds, such as the TIAA-CREF traditional annuity, will not be defaulted and will remain in that fund unless the employee makes an active choice to move them.
Comment: One member of the committee indicated that they would like to see more index funds because they tend to perform better than actively managed funds. Some additional funds that would be desirable:
- Short term bond fund
- Real estate fund
Comment: Julius informed the group that OU’s consultants for this project are fee-for-service based; therefore, they are not compensated based on which funds are included in the investment lineup or where employees choose to invest. Human Resources will arrange to get the consultants on the telephone during the February meeting, so that they’re available to answer questions and provide their insights.
Question: Could HR provide examples to show how employees benefit from making pre-tax payments for flexible spending accounts or to make voluntary contributions to a defined contribution plan?
Response: Julius said that HR will look into finding a good online calculator that would be a resource employees can use to make these projections.
IV. Updates from the Chief Human Resources Officer
· There were no additional updates
V. Other Business
· There was no other business
The next EBC meeting will be Thursday, February 18, 2010.
There being no other business, the meeting was adjourned at 3:25 p.m.