RIT Makes Changes to Employee Benefits Policies
by Abby Bratton | published Oct. 9th, 2018
This year RIT announced a series of changes being made to university staff and faculty health care benefits, as well as the guidelines for retirement eligibility. Some of these changes are already in the process of being rolled out; others will not go into effect for over a year.
“In our communications to employees when we talked about the benefit changes, we emphasized ... the fact that we have to look at balance,” explained Judy Bender, assistant vice president and director of Human Resources. “We have to look at the balance of providing competitive salaries and benefits ... [and] the cost of tuition for our students. It’s a lot of that — trying to do the best for both.”
Of the revisions made to the institution’s benefits policy, Bender outlined three in particular that are expected to impact a significant portion of university employees. The first of these changes alters the way retirees who are eligible for Medicare (those over the age of 65) receive their benefits. Under the previous structure, four healthcare plans were available to this population of retirees living in the Rochester region, while those who did not live locally had an option between two plans.
“The plans were fairly expensive and they continued to go up pretty significantly in cost over the years,” said Bender.
For the past two years, a human resources team has been researching other options and listening to input from a benefits advisory group composed of faculty and staff. The alternative they settled on was a Medicare Exchange program, which provides a variety of plan options. It allows retirees and their spouses or partners to choose different coverage, which was not allowed under the prior system. Funding for the new plans is done through a “health reimbursement arrangement” — essentially, an account where both the retiree and their partner receive contributions.
These funds can be shared between the two people so that if one requires more medical attention they are able to cover it with their partner’s contribution. If excess money remains in the account at the end of the year, it will roll over into the next year. Benefits contributions can be put towards dental, vision care or out-of-pocket costs. This marks another difference from the prior plan, which only offered premium support. This Medicare Exchange policy has already been introduced to the population of retirees over 65 years of age.
The second significant change will affect pre-medicare retirees (those under the age of 65), who participate in the same plans that current employees do. As of right now they also have the same cost-sharing arrangement as employees. However, RIT found that this group of retirees uses the cost-sharing service more frequently, and has opted to begin increasing cost-sharing for the under-65 retiree population as a result. The increase, which affects only the retirees’ portion of the cost-sharing and not the total cost, will begin in 2020 and continue to increase by 20 percent annually for a five-year period.
“The reason we are waiting a year is because it is a cost increase and we recognize that people in retirement ... have a budget, and they need to think and plan and be prepared,” Bender said.
The last of the primary modifications will be to RIT’s retirement eligibility rules. Employees who are over the age of 45 as of Jan. 1, 2019, as well as those who have 10 years of full-time service or 15 years of part-time service, will still be able to retire under the current rules. The rest of the faculty and staff population, as well as new hires, will be held by a new set of guidelines. The retirement age will move from 55 years to 62, and the service requirement is shifting from 10 to 15 years for full-time employees and 15 to 20 years for part time employees.
Some smaller changes will also be going into effect. The university is revising the manner in which they credit past service upon rehiring employees. Under the new model, past service for the university will only be credited if the time the individual worked for RIT was longer than the time they’ve spent away from it. Information on all of these changes can be found on the RIT Human Resources website.
Reasoning Behind the Revisions
Dr. James H Watters, RIT’s senior vice president for Finance and Administration commented on the new policies.
“[The university trustees] have been f
For the current fiscal year, RIT is operating with a gross budget of 834.9 million dollars — but not all of that money can be used at the university's discretion. 205.2 million dollars go towards student financial aid. A significant percentage of funding is given to the university for sponsored research, meaning that RIT is contractually obligated to use it for specific purposes. Likewise, the use of government funding for NTID is highly regulated. Revenue from auxiliary services (such as housing, dining facilities and the bookstore) is primarily used to maintain those services.
"So when you take it all down, you know, we’re sitting at around 373.5 millions dollars of true funds which management of the university has some discretion over,” Watters says. “Then when you look inside that 373 million dollars, 317 million of that is people. The staff, faculty and student wages of the university, and all the benefits that go along with that. So clearly your largest component of the expense of running the university ... is related to the human resource operation of the university and the people required, because we are a human enterprise.”
Of that 317 million, about 77.8 million dollars are specifically put towards benefits for employees. Watters stressed that in order for the university to retain its staff and faculty, as well as drawing in new hires, it is important to provide both benefits packages and salaries that are competitive with other schools. To ensure this, Bender and her team perform an annual benchmarking process, looking at employee compensation in comparison to other institutions. In places such as the university’s retirement benefits packages, Watters is confident that the university can afford to "dial that back" without falling behind competitors, especially considering that the present value of future pledges RIT has made to provide retirees with support was over 200 million dollars and posed a financial liability to the school.
“Human resources has to be just part of the total picture that you're viewing with that lens of trying to be fair and balanced in the approach," Watters stated.
News of the changes to the benefits policy came not long before another university announcement: the launch of “Transforming RIT: The Campaign for Greatness,” a fundraising campaign with a one-billion-dollar goal. But as with the university’s current operating budget, Watters explains that much of the money being raised comes with strings attached. Sponsored research and government funds (like the state money that was given to RIT for construction of the new MAGIC center) are “not really budget-relieving,” because they must be used for specific purposes.
Other donations are often not fully discretionary either.
“Donors will fund what they believe in, what they see to be important to the mission of the institution ... most donors aren’t open to the idea of just generally giving the institution money and saying, ‘You spend it on whatever you want.’ They pretty much are very directive in their cause or what they believe in,” Watters said.
However, he expressed that the campaign is more broadly helpful in that it reduces some of the pressures of cost-cutting, allowing money that would be put towards these donation focus areas to be used instead wherever it is most needed.
"Clearly, if you're going to fulfill the mandate of the university trustees to control expenses — to look at ways in which you can do things smarter, better, faster and cheaper than you did them yesterday ... you have to look at the total balance of where the university spends its money,” Watters summarized. “Human resources is one of those areas.”