Faculty Benefits Committee Meeting Minutes
September 11, 2006, 10:30 – 12:00 PM
Present: Lee Sheiner, Bettina Cothran, Bill Ballard, Chuck Donbaugh, John Grovenstein, Michael Chang, and Blair Funderburke
o The committee reviewed the memorandum to Provost Chameau on 5/25/06. On 5/26/06, however, the Provost announced that he was leaving Georgia Tech and subsequently no response was provided; the committee resolved to resubmit the memo to Provost Schuster (see attached).
· Sabbatical Report
o Chang reported that he had not yet drafted the report summarizing investigations by the committee over the last three years regarding faculty leaves of absence.
· Election of Committee Chair
o Michael Chang was elected Chair for AY 06/07.
· Employer contribution rate change to ORP
o The committee was briefed on the TRS decision to change the ORP employer contribution rate from 9.66% to 8.13%. Donbaugh explained the process TRS uses for setting rates and referred the Committee to his 9/1/2006 memorandum (attached) to Georgia Tech’s ORP plan participants for more details. Grovenstein mentioned he had received substantial communications from faculty expressing their lack of understanding and displeasure with the new rates, noting however, that both categories of responses decreased significantly after Donbaugh’s 9/1/2006 memo. The committee, while recognizing the unpleasing decrease in rates, conceded that there was little opportunity for raising concerns to the Board of Regents about the actuarial process used to set the rates. The Committee did recommend, however, that in the future, OHR err on the side of providing too much detailed information regarding how employer contribution rates are fixed and that they use the 9/1/2006 memo as a template for future communications regarding any rate changes.
· Committee Agenda for 2006-2007
o The Committee discussed the following topics for possible inclusion on the Committee’s agenda for 2006-2007:
o Domestic partner benefits
þ Annual compensation review
þ Potential to offer a Roth 403(b) plan
þ Retirement plan contribution structure relative to our peer institutions
þ Childcare study – is there need and value for an additional center?
þ Ability to provide and consistency in providing benefits to Georgia Tech international faculty and to faculty that deploy to other countries for extended periods of time. This topic to include a review of liability issues associated with faculty traveling with students.
With the exception of the topic of domestic partner benefits, the above topics were accepted for inclusion on the 2006-2007 agenda. With respect to domestic partner benefits, the Committee was briefed on an initiative by faculty at Georgia State University to develop a strategy for obtaining health benefits for unmarried partners. It was concluded that the GSU approach is in a very early stage and is still considering many approaches that the Benefits Committee here at Georgia Tech has considered in the past and rejected as untenable in the current political climate. The Committee will continue to monitor GSU’s effort and may elect to join in that USG-wide initiative at a later time, but the Committee at this time elected not to revisit this topic (last considered by the FBC during the 2003-2004 AY).
· Grovenstein noted that Open Enrollment will be delayed this year to begin mid-November and run through mid-December. This decision is made by the Board of Regents and the Governor’s office. The delay will challenge OHR and the various vendors to have changes processed and effective by the January 1 activation date.
· For the remainder of the semester, the Committee elected to meet the second Wednesday of each month. The next meeting will be 10/11/06, 10:30-noon.
To: Dr. Gary Schuster, Provost and Vice President for Academic Affairs
Cc: Faculty Benefits Committee (Dale Atkins, Bettina Cothran, Chuck Donbaugh, Jean Hudgins, Lee Sheiner, and Leanne West)
From: Michael E. Chang, Chair Faculty Benefits Committee
At its 27 April 2006 meeting, the Faculty Benefits Committee unanimously voted to recommend that Post Doctoral Fellows be granted General Faculty status. As members of the General Faculty, postdocs would be eligible to participate in the Optional Retirement Plan (ORP), which offers immediate vesting. In contrast, the current classification of postdocs as staff employees requires their placement into the Teachers Retirement System of Georgia (TRS), which has a ten year vesting requirement. Rarely do postdocs remain employed for the required ten year TRS vesting period. Thus, the Institute is not providing an effective retirement plan for this group of valued employees – and this is the motivation for this recommendation.
In examining this issue, the Committee noted that the employer match for the ORP is currently 9.66% and that the employer match for the TRS is 9.24%. In FY2007, the employer match in ORP will change to 8.13% with TRS holding at 9.28%. Considering the number of postdocs at Georgia Tech (204 as of February 2006), this difference in cost to the Institute was considered to be minimal. An additional financial concern regards the accrual of vacation time – 14 hours per month for General Faculty, versus 10 hours per month for staff employees. This increase in vacation time is notable, however, the Committee considered postdocs warranted equal treatment with the General Faculty due to the nature of their contributions to the Institute and their strong “peer-like” relationships with the Academic, Research, and General Faculty.
The Committee further considered the impact of postdocs on faculty governance. If postdocs were granted General Faculty status, as a group they would constitute only 8% of the governing population (204 postdocs, 1074 instructional faculty, 985 research faculty, and 292 general faculty). Seeing that the inclusion of postdocs would not lead to any imbalances, the Committee considered participation by the postdoc community in faculty governance to be a benefit. The Committee also found that all other University System of Georgia Research Units grant postdocs General Faculty Status. Based on this, and without verifying the status of postdocs at other peer institutions outside of the USG, the Committee believes Georgia Tech could be at a competitive disadvantage when recruiting postdocs, as the inability to effectively use the retirement benefit equates to a nearly 10% decrease in compensation.
Finally, it should be noted that should postdocs be granted General Faculty membership, the change in retirement plan eligibility would only apply to newly hired employees. Short of terminating an employee and removing them from the employee roll for three months or more, there is no way to switch an employee from the TRS to the ORP. This is unfortunate for the current postdocs already here at Georgia Tech, given the transient nature of the position, however, this will be resolved as the postdoc community turns over in the next 2 to 5 years.
The Faculty Benefits Committee respectfully submits this recommendation to you, the Provost, for further consideration and next steps.
To: Georgia Tech Participants in the Optional Retirement Plan (ORP)
From: Chuck Donbaugh
Associate VP-Human Resources
Date: September 1, 2006
I wanted to follow up on John Grovenstein’s August memorandum as many of you have asked for clarification as to why the employer contribution to your ORP account will change from the current 9.66 % to 8.13 % effective January 2007.
The employer contribution to the ORP is related to the employer contribution to the Teachers’ Retirement System (TRS) by Georgia Law. The employer contribution to TRS is composed of three parts – administrative cost, unfunded liability, and normal cost contribution. Normal cost contribution is the amount necessary to fund the benefits that TRS members will accrue during the upcoming year for an additional year of service credit. This value is actuarially determined and is a function of several variables including number of participants, age of participants, service of participants, income of participants and the assumed rate of return on the TRS investments. The law legislates that the employer contribution to ORP be equal to the normal cost contribution to TRS.
In determining the TRS employer contribution, the normal cost is added to the administrative cost and then the unfunded liability is added or subtracted depending on whether an increase or decrease in employer contribution is needed to fund the plan’s obligations. For example, at June 30, 2004 the calculation for the 2005 employer contribution was calculated as follows:
Normal Cost – 9.66 %
Administrative cost – 0.15 %
Unfunded Liability – Minus 0.57 %
Total TRS employer contribution – 9.24 %
The employer contribution to ORP was 9.66 %, the normal cost number.
At June 30, 2005, another actuarial study was completed on TRS. The normal cost was calculated to be 8.13 %. The administrative cost was included in the normal cost for the first time. The unfunded liability cost went to positive 1.15 % and the employer contribution to TRS calculated at 9.28 %. The employer contribution for ORP was set at the normal cost of 8.13 %.
Plan Year 2007 ORP “Normal” Contribution—-------------8.13%
Total Employer Contribution------------------------------------8.13%
Plan Year 2007 TRS “Normal” Contribution-----------------8.13%
Plan Year 2007 TRS Unfunded Accrued Liability---------1.15%
Total Employer Contribution------------------------------------9.28%
In a recent memorandum addressed to the Presidents of the University System of Georgia, Chancellor Erroll B. Davis stated
“…It is important that we understand that the recent change in normal contribution rates to the ORP was not made in some punitive manner towards participants; rather, the retirement system simply acted as directed by its statute. The larger answer, of course, is that comparisons should probably not be made between defined contribution and defined benefit plans. This situation has, however, brought to light that the ORP statute has not been revised in almost ten years. I intend to ask state policy maker to review the ORP statue in general and the setting of the employer contribution rate in particular to eliminate similar situations going forward…”
To view the full text of the Chancellor’s August 31, 2006, ORP Memorandum, copy and paste the following link to your web browser:
To view the full text of a recent TRS Actuarial report, explaining in more detail how the normal contribution rate is set, copy and paste the following link to your web browser:
If you have further questions, both John Grovenstein and I are available to assist.