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Memo Regarding Benefits Changes

From: Traci Nordberg
June 1, 2010

At the end of March, the College Benefits Council (CBC) completed its work and recommended a set of changes to our health and retirement benefits. The target of $9 million as part of the $100 million budget gap meant that an extensive review and redesign would be necessary. The subsequent comments period provided nearly 400 submissions and, along with feedback from 200 people in six open sessions, informed the final set of benefits changes to be implemented in January 2011. I want to thank the Dartmouth community for the constructive and thoughtful comments on the proposal. We’ve completed the comments period, and both Steve Kadish, Executive Vice President, and Richard Howarth, Professor of Environmental Studies and Chair of CBC, have personally reviewed all of them. We then returned to the College Benefits Council with a summary of the comments and our decisions about the final version of the benefits plan changes. President Kim accepted the recommendations of the College Benefits Council, along with some changes and additions generated by suggestions from the Dartmouth community.

Because substantive changes have not been made in our benefits plan design for over 20 years, there was room both to update design elements and to align our costs more closely with peers and organizations of our size. Maintaining our competitiveness was a key consideration. In addition, the Council and the senior leaders of the College remain committed to a model that considers the impact on our lower paid employees. In an effort to address the impact of change on both the lower and higher income levels, and to partner with employees on savings strategies, two adjustments will be made:  

1. Hourly paid employees currently receive $250 deposited into a Flexible Spending Account (FSA) to use for uncovered medical costs such as co-pays and deductibles. At present, only half the employees use the accounts, and the money is returned to the College at the end of the year. Effective January 2011, the College contribution to the FSA will be extended to all employees with an annual income of up to $60,000, regardless of pay type (hourly or salaried). Not only will this defray the increased plan costs to employees, but it also will provide a pre-tax option to save money for reimbursement of eligible healthcare expenses.

2. More highly compensated employees, especially those who are hitting the IRS maximum on contributions to their supplemental retirement plans, expressed a desire to make up the reduction in retirement with their own funds. Therefore, the College will introduce a savings vehicle called a 457b to allow eligible employees to use pre-tax dollars to increase their maximum savings for retirement. The College will not contribute money to these funds.

Other improvements or support systems include expansion of the Blue Choice in-network to all New England states, a 2 for 1 prescription program for mail orders, continuation of free preventive care, and a catastrophic health fund.

The following describes the adopted recommendations to be implemented in January of 2011. Additional information, including plan design details and term definitions, is available via this link.

Premium Cost Share

  • The employee premium (out-of-paycheck cost) will continue to be based on pay level, using a formula that increases employee share for higher incomes.
  • Dartmouth will extend the contribution of $250 to the Flexible Savings Accounts for each employee with an annual income of up to $60,000.
  • The opt-out payment of $800 will no longer be offered to those who take other healthcare coverage.

Plan Design

  • Co-pays for office visits and prescriptions will increase.
  • Co-insurance will be added to the POS and PPO plans.
  • Deductibles will be introduced.
  • Out-of-pocket maximums will be put in place.
  • The indemnity plan will become a high deductible plan ($2500) and structured to legally allow us to offer a rolling Health Savings Account. Co-insurance will not be used in this plan.
  • A catastrophic health fund will be in place.
  • Preventive care will remain free.
  • The in-network coverage for the POS will be expanded from New Hampshire to all New England states.

Retirement Contributions

  • The contribution for employees aged 40+ will go to 9%.
  • A new level will be introduced for employees aged 35-39 with a contribution level of 7%.
  • A 457b plan will be available to eligible employees to expand their pretax retirement savings limits.

7% Pay/Benefit

As the 7% payment/benefit is not part of the health and retirement benefits, the CBC did not review or make recommendations on it. (The 7% payment is currently given to salaried staff over 40 years of age.) However, the senior leaders determined that it will remain in place for faculty and staff who currently receive it.

For those who do NOT currently receive it:

  • Those currently working in a staff salaried position and are between 35 and 39 years of age will be eligible to receive the 7% in the future, so long as they are still working in an eligible position and turn 40 before December 31, 2015.
  • New staff hires will no longer be eligible for it starting July 1, 2010.
  • Staff currently in hourly positions who later take a salaried position will not be eligible regardless of age.

Healthcare Reform

We are actively working on new requirements under the healthcare reform bill. Effective January 1, 2011, children through the age of 25 will be eligible to be on our medical plan regardless of student status. (Currently medical coverage eligibility for dependents is defined as an unmarried dependent child between the ages of 19 and 25 who is enrolled full time in an accredited secondary school, college, or university.) We’ll continue to provide updates on other reform changes.

The thoughtfulness and concerns of the members of our community are heartfelt and sincere. It is clear that we work among people who care deeply not only about the quality of the education we offer students, the support systems that make that possible, and the ability to recruit and retain excellent faculty and staff, but also about the financial and emotional impact that changes have on our colleagues. Finding ways to spread the increased costs across our employee population allows us to avoid other more difficult options such as salary cuts, furloughs, and further reductions in positions. It is necessary to do more to reduce the cost of healthcare overall and to ensure retirement savings for our employees. Going forward, two workgroups, with participation by experts in these fields, will be formed to give ongoing attention to these issues and to recommend actions to the administration. This summer, we will begin an extensive education process to help employees understand the details of the plan and to assist in making election decisions for the fall.

Thank you again for your comments and suggestions as Dartmouth faces its challenges while maintaining a vision of excellence for faculty, staff, and students.

Last Updated: 6/3/10