TO: Andy Hauger, Chair
Faculty Policies Committee
FROM: Cliff Gardiner, Chair
Employee Benefits Committee
RE: End-of-Year Report
DATE: April 29, 2002
The Employee Benefits Committee met seven times during the 2001-2002 academic year. We directed our attention to the following matters:
· adding retirement investment options for ASU employees, both staff and faculty
· gathering information about the two primary retirement plans (TRS and ORP) available to employees
· communicating information to employees about retirement plans
The Committee passed a number of recommendations pertaining to these matters. They are presented later in this document.
Membership of the Committee
The membership of the Employee Benefits Committee for 2001-2002 was as follows:
Fred Barnabei, Vice President for Business and Student Services (ex-officio)
Max Brown, Staff
Carolyn Cannon, Staff
Barbara Coleman, Faculty Policies Committee (ex-officio)
Cliff Gardiner, Faculty (Arts & Sciences)
Beth Fanning, Faculty Policies Committee (ex-officio)
Don O’Neal, Director of Personnel Services (ex-officio)
Chris Terry, Faculty (Arts & Sciences)
Gina Thurman, Staff
Patty Waggy, Staff
Ron Weber, Faculty (Education)
Brigitte Ziobrowski, Faculty (Business Administration)
The Committee members performed admirably in carrying out the year’s work. The Committee also benefitted from the assistance of Dan Whitfield, Associate Vice President for Business Operations, who attended meetings at the request of Vice President Barnabei. We were especially indebted to Chris Terry, who served as secretary; Don O’Neal, on whom we called numerous times for special projects; and those individuals who served on the very active Subcommittee on Retirement Benefits (Brigitte Ziobrowski, Chair; Peter Basciano, COBA; Barbara Coleman; Gordon Eisenman, Education; Karen Hayes, Arts & Sciences; and Gina Thurman).
Recommendations of the Committee
The following recommendation was unanimously passed on March 12, 2002:
1. The Employee Benefits Committee recommends that Fidelity Investments and the Vanguard Group fund families be afforded the opportunity to provide 403(b) and 457(b) investment accounts to eligible employees at Augusta State University.
The following recommendations were passed unanimously on April 23, 2002:
1. While the Committee believes that employees’ retirement benefits should, like health coverage benefits, be reviewed periodically, we recommend that such reviews be conducted on an as-needed basis by future Employee Benefits Committees.
2. From our investigations this year, it seems clear that the levels of awareness and understanding of retirement investment options among both faculty and staff are not optimal. The fact that only 109 of 547 eligible employees participate in SRA accounts suggests that greater efforts should be made to educate employees about the benefits available to them. We recommend the following:
a. Printed information about institutional options for SRA’s and 457(b) accounts distributed annually to all employees.
b. Oral informational presentations to employees at appropriate occasions such as the beginning-of-year convocation, faculty meeting, or forum conducted by the staff council.
c. Expanded, readily accessible, and user-friendly information about retirement benefits on the Personnel Office website. A “frequently asked questions” (FAQ) page, for instance, would be extremely helpful and would reduce the number of calls made to the Personnel Office. Currently, two links are provided for retirement information: one for the Teachers Retirement System of Georgia and one for the Optional Retirement Plan that isn’t operational. There is no mention of Supplemental Retirement Annuities or 457(b) accounts.
d. Expanded information about SRA’s and 457(b) accounts in the Open Enrollment booklet. The Committee realizes that employees can make changes in these accounts at any time during the year, but we believe that employees review their benefits more carefully during open enrollment and it would be an opportune occasion for disseminating this information.
3. The Faculty Policies Committee has requested recommendations about the adequacy of information provided to new employees about each retirement plan (i.e. ORP or TRS). We recommend that the following be communicated to new faculty prior to their choice of retirement plan.
a. The percentages of employee and employer contributions to faculty in the TRS and ORP plans have differed in the past, and these percentages are subject to change year-to-year. The minimum employer contribution is 4%. The historical comparisons of all retirement contributions from 1991 to present should be provided to new faculty.
b. From 1991 to 2001, an additional employer contribution was made to TRS to compensate that retirement system for each faculty member who elected to participate in the ORP. In the past, this compensation was associated with lower employer contributions to ORP participants.
c. The compensatory contribution to TRS was discontinued in March of 2001. Currently, in fact, the employer contribution to ORP participants exceeds that for TRS participants. By law, however, the board of trustees of TRS may reinstate the compensatory contribution if the actuarial health of their retirement system changes.
d. Employees participating in the TRS plan will be allowed to apply up to two years of unused sick leave toward their retirement benefit. The Optional Retirement Plan does not include this provision.
Request from Faculty Policies Committee
On April 3, 2002, the Committee received a request from the Faculty Policies Committee to look into a number of issues relating to the Optional Retirement Plan and the Teachers Retirement System. The request is reproduced below (different font signals the content of the request from Faculty Policies). Responses from the Employee Benefits Committee are interspersed.
The Faculty Policies Committee requests that the Employee Benefits Committee continue to gather information about the TRS and Optional Retirement Plans that are made available to faculty. Specifically, we would like the committee to examine the following:
1. What kind of information are new employees provided about each retirement plan? Please secure copies of materials that are distributed to new employees. Is the information complete enough to ensure that new employees can make a responsible choice? If in the committee’s opinion it is not, please provide the Faculty Policies Committee with recommendations on how the current procedure might be improved.
Don O’Neal provided the following statement regarding dissemination of retirement information (italics indicate Don’s statement):
Retirement information is given orally and in written form to new faculty members. Listed below is a breakdown of what is provided both written and oral.
Faculty members are given (in writing) the following in their new hire packets:
a. Information Pamphlet on Retirement Program Options*
b. TRS Booklet*
c. TRS Application*
d. TRS Declination Form*
e. ORP Company Packets for TIAA-CREF, VALIC, American Century, and Fidelity (includes investment options and enrollment applications)
f. ORP Election Form*
Faculty members are informed (orally) of the following during their orientation:**
1. The employer and employee rates for both TRS and ORP participants
2. The length of time it takes to become vested for TRS (10 years) ORP (day one)
3. To contact the ORP companies for any questions in reference to the ORP packets
4. Once they have elected to enroll in an ORP company, their decision is irrevocable.
5. Their retirement forms must be turned into the Personnel Office in 60 days or they will automatically be enrolled in TRS.
** All of the information that is given orally is in the Information Pamphlet that is provided in their new hire packets.
* Included as attachments B, C, D, E, and F to this report.
On April 23, 2002, the Employee Benefits Committee recommended that additional information be communicated to new faculty prior to their selection of a retirement plan. (See Recommendation # 3 in this report, above.)
2. Provide information on the state-level ORP Committee. What are its responsibilities? Who is on the committee?
On April 29, 2002, Don O’Neal spoke with William H. Wallace, Jr., Associate Vice Chancellor for Human Resources, about the ORP Committee for the university system. The objective of that committee is to evaluate the current investment programs offered to ORP participants by the four companies authorized to provide ORP accounts to participants of that plan and to consider whether changes ought to be made. Mr. Wallace chairs this committee, but we know little more about the composition of the committee.
3. Could the committee, as much as possible, provide the Faculty Policies Committee with a narration of how the ORP plan was originally developed. How has it evolved to the present time? Please include policy statements, an explanation of the law, and the table that details percentages paid to and for TRS and ORP employees. What was the source of funding for the TRS compensation for ORP people from 1991 until 2001? What about the contribution in the form of a delayed pay raise that all employees, including ORP employees, made to fund sick leave for TRS employees?*** If there is other information that the committee feels is important to share, please do so. For example, can TRS compensation for ORP people be reinstated?
The Optional Retirement Plan (ORP, also known as the Regents Retirement Plan) was created to provide an alternative to the Teachers Retirement System (TRS) of Georgia. The ORP went into effect in the fall of 1991. Unlike the TRS plan, which requires 10 years of service for the vesting of participants, the ORP offers immediate vesting of retirement contributions, portability outside the University System of Georgia, and personal control over one’s retirement investments. The TRS is administered by its own Board of Trustees. The ORP is administered by the Board of Regents (BOR) of the University System of Georgia; it is available only to faculty within the University System. New faculty must make a choice between these retirement plans within 60 days of being hired.
As participants in both plans know, there are important differences between the two plans beyond those noted above. Participants in TRS, a defined benefits plan, receive from TRS a fixed retirement benefit based upon their highest-paid years of service within the TRS system. Participants electing to participate in the ORP, a defined contributions plan, receive retirement benefits based upon the accrued value of their personal retirement investments.
There are other differences between the plans. The state law that established the ORP recognizes the fact that the actuarial health of the TRS system changes over time and makes provisions to ensure that TRS can meet its obligations to its participants. In accordance with this fact, the law provides for TRS to receive compensatory payments from the University System of Georgia for faculty who in 1991 elected to cease participating in TRS and faculty who were hired after 1991 and chose not to become members of TRS.
Consequently, there have over time been differences between the percentages of employer contributions made on behalf of faculty in the TRS and ORP plans, and in the percentages of contributions made by employees in these two plans. (See Attachment A for a comparison of all contributions in both retirement plans from 1991 to the present.) From 1991 to 2001, an additional employer contribution was made to TRS to compensate that retirement system for faculty who elected to participate in the ORP instead of TRS. This contribution was based on a percentage of the salary of each ORP participant at each institution. On Attachment A, this contribution is referred to as the “Employer Rate for ORP Participants Paid to TRS.” During those years when this compensatory contribution was paid to TRS, employer contributions to ORP participants were calculated at a lower percentage than those made on behalf of TRS participants.
A ten-year time frame, beginning in 1991, was established for the exercise of the compensatory employer contribution to TRS. Accordingly, this contribution was discontinued in March of 2001. Now, in fact, the employer contribution to ORP participants exceeds that for TRS participants. By law, however, the board of trustees of TRS may reinstate the compensatory contribution if the actuarial health of their retirement system changes.
Employees of both plans should be aware that the percentages of employer contributions are subject to change from year to year. The percentages for employer as well as employee contributions are not set at ASU; they are established at the state level. ASU’s source of funding for employer contributions is from state allocations to the Board of Regents and then to system institutions.
One last difference between the TRS and ORP plans involves sick leave. Employees participating in the TRS plan will be allowed to apply up to two years of unused sick leave toward their retirement benefit. The Optional Retirement Plan does not include this provision.
***On April 26, 2002, Vice President Barnabei sent me the following statement with regard to this issue: “There was a delayed pay raise in 1997. This was mandated by then Governor Miller who wanted the university system to pay for the sick leave policy rather than having TRS pay for it. The source of funding for the sick leave policy is TRS. I assume that it has to come from employer and employee contributions as well as return on investment of funds.”
cc: Vice President Bompart, Library