Hundreds flock to hear update on changes to retiree medical plan

L.A. Cicero Etch

Etchemendy answered questions about proposed changes to retiree benefits at a town hall meeting Monday.

Provost John Etchemendy told a crowd of about 400 faculty and staff members on Monday, Dec. 6, at a town hall discussion that he and the president will decide in February what changes to make to future retiree medical benefits. It was the first of two town hall meetings designed to encourage feedback and suggestions in an ongoing process.

The meeting, held in Tresidder Union's Oak Lounge, lasted more than two hours as employees with varying lengths of tenure asked the provost about how coverage amounts would be affected as a result of the changes under consideration. The changes will be implemented in January 2006 and won't affect current retirees, Etchemendy said.

Etchemendy called the meeting to update employees on a proposal he initially presented to the Faculty Senate in late May that would link medical plan contributions to years of employment. Etchemendy said the changes are necessary to control the soaring cost of providing benefits, which has stymied Stanford's efforts over the last few years to implement a competitive salary program.

Since fiscal year 1999, the university contribution to retiree medical benefits has risen 438 percent, while the cost of university contributions to the Stanford Contributory Retirement Plan (SCRP) for employees has increased by 31 percent. Those increases, along with a concurrent 59 percent rise in the cost of providing health care benefits to active employees, helped push the total cost of benefits, in inflation-adjusted dollars, from $193 million in FY 99 to $286 million in FY 04, a 48 percent increase.

Under the proposed changes, the university will no longer cover the cost of the lowest-priced health plan—instead calculating retiree medical benefits based on the number of years of service at the time of retirement. The proposal was created by a benefits task force at the joint request of the university budget group and the Board of Trustees, and in consultation with the Committee on Faculty and Staff Benefits, as well as other groups.

"The future health of the university depends on this," Etchemendy told employees Monday night. "There is a finite amount of money that the university can put into the salary and benefits pool."

To be eligible for retiree medical benefits, an employee must have a minimum of 10 years of service; in addition, the employee's age plus years of service must equal 75, and that would not change under the proposed plan. (Employees hired prior to 1992 will continue to be eligible when they are 55 and have 10 years of service.)

In the plan that Etchemendy has proposed, eligible retired employees would annually receive $100 for each year of service for their own medical plan costs and $60 per year of service to cover a spouse's medical plan costs. That benefit rate is based on a plan that would give future employees with 25 years of service the same approximate dollar value that an employee who is over 65 now receives for medical plan costs.

Eligible employees with fewer years of service would receive a benefit with a lower dollar value and employees with more years of service would receive greater benefits. The basic rate would be adjusted annually to match the percentage growth in salaries and benefits for active employees. In this way, Etchemendy said, the university will provide the same overall "raise" to its retirees as is provided to its active employees.

Under Stanford's current benefits program, a retiree older than 65 receives $2,472, while a spouse gets $1,483. Under the proposed plan, that same aged retiree, with 30 years of service, would receive $3,000, while the spouse would get $1,800.

Currently, retirees younger than 65 can participate in the university's active plan and receive up to $3,176 in annual benefit dollars, while the spouse gets $1,905. Under the proposed structure, an employee who retires with 20 years of service would get $2,000, while the spouse receives $1,200.

Faculty and staff at Monday's meeting voiced concern over who among the presently employed would fall under the university's existing retiree medical plan. Others urged that special consideration be given to employees who are now nearing retirement.

"One thing I hope we can do is be generous with the grandfathering," an employee said toward the end of the meeting. Etchemendy said he agreed.

No decision has been made about how to grandfather existing employees into Stanford's current retiree medical plan, Etchemendy said. He added that the university planned to start tax-deferred savings accounts for individual employees that they can contribute to and draw upon for medical needs once they retire.

The provost will hold another town hall meeting on Jan. 19 for those who missed Monday's meeting and to gather more feedback. Etchemendy encouraged all faculty and staff to attend, saying that he has incorporated suggestions that have been offered since he first made the proposal.

"My sense is that the university is attempting to deal with the uncertainty of future health costs and find a way of coping with open-ended risks," said Warren Hausman, a professor in management science and engineering at the School of Engineering. "I think the Q-and-A worked out very well, although it could've been improved upon by having wireless mikes for the audience."

Hausman was referring to the fact that statements from the audience were sometimes inaudible, forcing the provost to spend extra time repeating questions and concerns.

The Jan. 19 meeting will be at noon in Tresidder's Oak Lounge, so employees are encouraged to bring lunch. Anyone with further questions or concerns about the proposed changes to the university's retiree medical plan should send an e-mail to retiree-questions@lists.stanford.edu.