The University Record, January 31, 1994

Assembly members discuss flexible benefits proposal

Editor's Note: See page 3 for article on public forums.

By Mary Jo Frank

“We’ll have to take sabbaticals just to figure out our benefits,” quipped Louis G. D’Alecy, professor of physiology, at last Monday’s Senate Assembly meeting.

He was one of a number of faculty members who admitted finding flexible benefits confusing.

Any move to flexible benefits will need to come with ongoing employee education, clear enrollment forms and an easy way for people to enroll, David J. Anderson, professor of electrical and computer engineering and co-chair of the Flexible Benefits Advisory Committee, told Assembly members. The committee has recommended that the executive officers adopt a flexible benefits plan. Its recommendations were published in the Jan. 17 Record.

Provost Gilbert R. Whitaker Jr. said no decision has been made on implementing flexible benefits. He expects to receive a final report from the advisory committee, including faculty and staff reaction to the committee’s recommendations, prior to spring break.

“Our goal is to improve peoples’ lives here,” Whitaker said.

Joining Anderson in the flexible benefits discussion was Roy Penchansky, professor of health services management and policy, who questioned some of the committee’s recommendations and expressed concerns about details not addressed in the flexible benefits proposal.

One of those details—pricing—will come later through the bidding process from benefit vendors, explained Anderson, who added that he expects reactions from faculty and staff to the flexible benefits proposal to be used by the administration to fine tune it, a process that will continue if the plan is implemented.

English Prof. Leo McNamara asked if a perceived lack of faculty interest in flexible benefit discussions might be due to “the considerable high degree of satisfaction with current benefits” and suspicions about a new plan.

Anderson agreed that faculty and staff are very satisfied with existing benefits and that there is a high degree of suspicion about what might happen if the University shifts to flexible benefits.

“Don’t start with the idea that we can’t improve our benefits,” Penchansky advised his colleagues. “We need to look at our ability to give more value and security for the dollars.”

Key questions, Penchansky said, are:

  • How much is contributed in flex dollars (paid by the University) to the account from which employees are able to buy benefits?

  • What are the prices of specific benefits and how will those prices change over time?

  • Are the benefits being offered ones that are needed?

  • Does the flexible benefits plan provide the security net needed by members of the University community?

    Benefits can be priced one of two ways, Penchansky said, based on what the vendors charge or “value pricing,” in which a consultant comes up with a price based on enrollment patterns.

    A straight pricing system based on the vendor’s bid rather than “value pricing” would take away concerns about manipulation of flex dollars. “No one would have to worry about hanky-panky. It would clear the air a lot,” Penchansky said.

    He worries that the proposed flexible benefits plan doesn’t include minimum life insurance for everyone. Given the low cost of life insurance and the consequences of a person with a family dying without it, Penchansky said that requiring an employee to have a policy that would provide at least six months’ salary makes sense. He acknowledged that many U-M employees don’t have life insurance under the current system.

    Penchansky also encouraged the committee to pare down the number of options it recommends. “In an attempt to sell flex benefits, the committee has included lots of junk, something for everyone,” said Penchansky, who cited vision care, housecleaning services and homeowners insurance as examples of benefits that have been suggested but are not needed.

    Penchansky, who led the opposition to a flexible benefits proposal introduced several years ago, said he can’t judge the new plan without answers to his questions but added, “This is a lot better than the previous plan.”

    Administrative costs are also a concern. Penchansky said the previous consultant who developed the plan that was dropped had estimated it would cost $500,000 to administer. Penchansky thinks it now would be closer to $1 million.

    Although he too is concerned about potential costs, Anderson said, “I have more faith in the technology.”

    Referring to the committee’s recommendation to introduce an attendance incentive while reducing sick leave from 15 days to 12 days, George I. Shirley, the Joseph Edgar Maddy Distinguished University Professor of Music, said, “Philosophically I have a problem penalizing people who are sick.”

    Anderson said the committee’s thinking was that in cases in which employees are sick for a period of time, the sick leave will lead into long-term disability. The three-day reduction in sick leave days would have a negative impact on persons whose illnesses occur a few days at a time throughout the year, he noted.

    The committee recommends that every participant receive $125 as attendance incentive flex dollars for the first year that the flexible benefits plan is in place. The sick leave used in fiscal year 1994–95 would determine the incentive dollars for the 1996 calendar year of the plan; the sick leave used during the following fiscal year would determine the incentive in calendar year 1997. Under the current proposal, a person who used three days or less of sick leave would receive $250 in flex dollars the next year. The amount of attendance incentive flex dollars would decrease as the use of sick leave days increased.

    Thomas E. Moore, professor of biology, said he is concerned that a flexible benefits plan that gives participants cash for the flex dollars they don’t use will encourage employees to underinsure.

    Answering concerns that lower paid employees might opt out of benefits to increase take-home pay, Anderson noted that the U-M’s benefits plan is a major reason many lower-paid employees work at the University.

    Assembly Chair Henry Griffin said he hopes Assembly members will vote on the flexible benefits plan recommendations at their Feb. 7 meeting.