The University of Michigan Senate Assembly Advisory committee on Financial Affairs Minutes of October 3, 1989 Meeting Members Present: Danielson, Edwards, Grosse, Hickey, Hollingsworth, Roehl, Savit, Snyder, and Weingarten Members Absent: Others Present: Kauffman Burnett, Thiel, Thiry, and Womack Professor Hickey introduced himself to the Committee as the new chair for 1989-90 and then introduced the new members of the Committee. He distributed the list of possible agenda items put together by SACUA. Since there often is a question of the role of the various SACUA committees and the overlap between them, Prof. Hickey clarified that the charge to the Financial Affairs Committee is to advise and consult with the Vice President and Chief Financial Officer on matters of finance. The intent is to focus on policy issues and major agenda items of the Vice President. Professor Hickey then outlined as follows a format for the committee meetings: suggested 1. Announcement and information items. 2. Outline of decisions that need to be made. 3. Discussion. Vice President Womack and any appropriate staff would join the meetings for sections 2. and 3. The Committee was in agreement with this format. 1. Set Committee Agenda for 1989-90. Some questions were raised regarding the Active Issues from the SACUA list as to whether new members would be given some background information on these items so they would know the current status and also whether wisdom might have already been given on some of these issues. Prof. Hickey indicated that those items listed are still active and that although some of them have been discussed, the "wisdom" has not yet been given. He then reviewed the list with some brief comments on each item.
-2- ACTIVE ISSUES 1. Costs of Higher Education. Ongoing. 2. Personnel Issues: Implications of the Tax Reform Act of 1986. Ongoing. 3. Parking Policies, including Rate Schedules and Transportation Alternatives. Last year the Committee addressed the need for more parking. This year it needs to look at broader issues, such as alternative ways of financing parking, differential rates, and use of satellite parking lots. 4. Recycling and Environmental Concerns: Hazardous waste Issue, with possible Task Force Formation: Energy Management. An Environmental Protection Task Force is scheduled to be appointed this week by Vice President Womack. One possible idea would be to invite the chair of the task force to attend one of our Committee meetings to discuss the approach of the task force to some of these issues. Regarding recycling, there is a brand new program which has just been started by Housing. 5. Campus Safety and Security: Campus Image and Issues of Free Speech. Since Prof. Snyder is a member of the Task Force on Campus Safety and Security, he reported that the Task Force would probably have its recommendations ready by January or February of 1990. They are currently conducting a telephone survey of 1200 people. 6. Diversity Issues, including Affirmative Action Hiring and the UM1 S Minority Purchasing Program. The Committee could help make suggestions on the matter of policy and procedures related to hiring and also regarding the challenges that are faced in the Plant areas. 7. Anticipated Expense Budgets for 1989-90. Prof. Hickey will check into this item as he was not sure of its nature.
-3-8. Auxiliary Services: whether to be provided by the University or private business; possible decentralization. The Committee needs to look at the possible decentralization of some of these services and whether some of them should be spun off to academic units or to outside contractors. CONTINUING CONCERNS 1. Escalating Costs of Fringe Benefits, especially for Health Care. a. Costs to the University b. Costs to employees at varying salary levels (including parking fees) 2. Changing University policies on retirement in response to changes in tax laws and TIAA-CREF. Items 1. and 2. are on the agenda for this meeting. 3. Child Care and Dependent Care as Employee Benefits. There are other committees addressing these issues and the Financial Affairs Committee should receive copies of their reports. 4. Continuing Interest in Proposed Changes in lim Safety and Security Operations. This is covered under number five in Active Issues. 5. Impact of the Michigan Educational Trust. There was discussion of this matter by the Committee last year. Additional information should be available after this year's registration period. Discussion then took place as to the actual role of the Committee. It was felt by some of the returning members that in the past there was more receiving of information than providing of advice and that the Committee was not really included in the decision making process. The Committee members were in agreement that they want to be a sounding board for the Vice President and also facilitate decision making and perform in more of an advisory role than has been done previously. Prof. Danielson also pointed out that it will be important to offer advice to the Vice President in a timely fashion as he is considering issues rather than to stick too much to a set agenda and miss deadlines that Dr. Womack may have for decision making.
-4-2. Schedule Meetings for Remainder of Fall Term. The meetings for the remainder of the Fall term will be in Vice President Womack's Conference Room from 2:00-3:30 p.m. on Tuesday, November 7 and Tuesday, December 5. 3. Review of University Policy Issues Related to the Escalating Costs of Fringe Benefits and New Retirement Options. Dr. Womack introduced Mr. Donald Thiel, Assistant Personnel Director-Staff Benefits, and Mr. James Thiry, Director of Personnel, to outline the retirement and fringe benefit issues which are as follows: Retirement 1) Diversification (Calvert, Fidelity) 2) Lump Sum Payout Fringe Benefits 1) Cafeteria Benefits 2) Costs and Cost containment Mr. Thiry gave the Committee some background on the retirement situation indicating that the traditional position of double matching employee contributions has been under study by a committee for several months. The recommendations from that group are to give people choices in where they place their contributions. Currently it is possible to diversify supplemental contributions but not base contributions. Mr. Thiry said it is expected that by the first quarter of 1990 TlAA-CREF will take themselves out of the decision making process and allow employees to cash out their retirement; however, it will be up to the individual institutions to decide if that will be allowed. The question was asked whether there would be any additional costs associated with diversification and lump sum payouts. Dr. Womack responded that there is no additional cost at the point the deduction is made. However, since a pension plan historically has been defined as an annuity you cannot outlive, if lump sum payout is allowed, then it is no longer a pension plan. Therefore, there would be costs associated with the problem of people using up their money and then coming back to the University for assistance. Also, whenever there is a cash out policy, an amount needs to be set asides for reserves which also is a cost. Mr. Thiel stated that there are costs for the Staff Benefits Office as these changes would require more time for advising retirees and/or survivors.
-5- Mr. Thiry summarized the discussion by stating that there are several possible choices that could be made with regard to these issues. Regarding diversification into Calvert and Fidelity, a decision could be made to put in only the employee's 5% or part of that amount or both the employee's and the University's portions or some part of that amount. Regarding lump sum payout, there are options of allowing 100% cash out or perhaps only some percentage of that. The discussion then turned to the remainder of fringe benefits and the proposed cafeteria plan. The Committee was advised that Iowa and Indiana have already adopted this type of plan and that Purdue will be moving to a cafeteria plan this year. Prof. Snyder was concerned that with this type of plan employees can choose an array of benefits that do not adequately cover them. Mr. Thiel indicated that the Cafeteria Plan Committee had looked at the possibility of a core plan and then the ability to build from that core. Prof. Weingarten wondered what the impact of a cafeteria plan would be on single parents. Mr. Thiry replied that currently there this disproportional spending on married people with dependents. Mr. Thiel indicated that he would provide for the Committee copies of the executive summary of the Alexander and Alexander Feasibility Study of Flexible Benefits. It was agreed that the discussion of both the retirement issues and the fringe benefit issues would take place at either the November or the December meeting. seb 10/26/89 cc: SACUA MSA