The University Record, April 25, 1994

Flexible Benefits Advisory Committee Reports and Recommendations April 25, 1994

The Flexible Benefits Advisory Committee was appointed by Executive Vice President and Chief Financial Officer Farris W. Womack and Provost and Executive Vice President Gilbert R. Whitaker Jr. in May 1993. The Committee was charged to investigate the feasibility of a flexible benefits program for the University.

Towers Perrin, a national benefits consulting firm, was retained to assist and advise the Committee on the intricacies of benefit matters and functions. The Committee then carefully formulated the objectives for a flexible benefits program to serve as the foundation upon which such a plan would be built for the University. Refer to Appendix A.

A number of focus groups and briefing sessions were hosted by the Committee, Towers Perrin representatives, and other dedicated staff during the summer and fall of 1993. These sessions enabled the Committee to obtain a sense of what the University community understood about benefits in general and how a flexible benefits plan might be perceived at the University of Michigan. These discussions were held in the context of the drafted objectives. During this time, the Committee also employed a series of surveys to gather data from the University community reflecting attitudes, desires, and knowledge about current benefit plans and flexible benefits.

With the results of the surveys in hand and the experience of the focus groups, the Committee worked rapidly to create a detailed prototype plan. This plan was published in The University Record on Jan. 17, 1994, and sent to the homes of all flexible eligible faculty and staff. Refer to Appendix B.

Immediately following the publication of the prototype plan, a number of briefings with question-and-answer sessions were held throughout the Ann Arbor, Flint and Dearborn campuses. Five open forums were held for those who could not attend these sessions. Faculty and staff were also urged to communicate directly with members of the Committee by e-mail or by whatever method was comfortable. And they did.

A telephone survey of 800 faculty and staff was conducted in March 1994. This survey was carefully structured and stratified (with advice from experts from the Institute for Social Research) to provide a reliable sample of the faculty and staff eligible to participate in a flexible benefits program. The results indicated that a majority of those surveyed felt that the University should proceed with flexible benefits. Refer to Appendix C. These results, along with all foregoing communications and responses, constitute the basis for our recommendations.

After much consideration and careful thought, the Committee recommends the following:

1. That the prototype flexible benefits plan published in The University Record in January 1994, as modified here, be the foundation for a University plan to be designed and evaluated for implementation in January 1996. Modifications to the prototype are described in Appendix D. These modifications are in response to concerns and questions raised by the University community and represent a positive response to those issues most frequently or most forcefully made. We also understand that such a plan cannot respond fully to all of the many issues raised. Continuous monitoring and evaluation must also be part of the overall program.

2. The current benefit plans should incorporate in 1995 some of the suggested improvements that were received positively during the exposure and communication process. These include:

— New dental option (in addition to current plan)

— Vision option

— Short-term disability plan

— Expanded group life insurance plan (to replace current plan)

— Dependent term life insurance

These enhancements to the current plans will be optional, at participant selection, and will be fully paid by participants. (University contributions to the current dental plan and for group life will continue.) General descriptions of these plans are in Appendix E. As with any new benefit plan, a certain number of enrollments will be required, which will be negotiated with the insurance carriers.

In addition, the Committee recommends that the benefits staff, and others as appropriate, begin immediately to investigate the following plan improvements.

— Group purchase plans (auto and home owners insurance and legal services)

— Separation of prescription drugs, mental health and substance abuse from medical plans

The Committee also observed that a number of issues need further analysis and evaluation. These issues arose in the course of our discussions with the University community. While they could not easily be incorporated into the benefit plans in the near future, these concerns deserve to be seriously considered. In order to facilitate this process, our Committee recommends that the Provost and the Executive Vice President and Chief Financial Officer appoint a committee responsible for general oversight and policy on benefit matters. This committee would monitor and guide the implementation and further development of the flexible benefits program. The committee should be authorized to cause other groups or committees to be organized to investigate certain pertinent issues related to benefits. Such issues include:

— Health care coverage pricing

— Paid time off

— Tuition for dependents

— Child care

— Retiree/survivors benefits

The Committee urges the acceptance of our recommendations. Should they be approved, our next steps would be as follows:

— Proceed quickly to incorporate the plan improvements for 1995.

— Continue to communicate with and educate the University community about the proposed full flexible benefits program for 1996 and the choices that will be available to participants.

— Mount an effort now to develop a pricing and credit policy and practice for medical coverage.

These efforts would be simultaneous and would draw on the talents of staff, advisory groups and our consultants, as appropriate.