SMU supplements the health care coverage it offers during faculty and staff members’ working lives with a new program to create health care savings for their retirement years. The program takes effect Jan. 1, 2008; faculty and staff members began receiving information earlier this month through postal mail and a Department of Human Resources e-mail dated Aug. 30. Bill Detwiler and Don Vandewalle discuss the details under the link.
Average figures indicate that costs for Medicare cost-sharing, the Medicare premium, and non-covered services make up 49 percent of total retiree health care expenses, according to this chart from Emeriti Retirement Health Solutions.
The University is introducing Emeriti Health Accounts to help faculty and staff members create savings for the 45-50 percent of retirement health care costs, on average, that Medicare will not cover. (A couple retiring in 2007 at age 65 will need about $215,000 in savings to cover medical costs throughout their lives, excluding the cost of long-term care, according to Fidelity Investments.)
The new accounts strategically address an increasingly important issue in the larger academic community – the ability to retire on time, says Associate Vice President for Human Resources and Business Services Bill Detwiler. “In universities across the nation, there’s a growing phenomenon of faculty and staff staying on the job longer than they want so they can maintain their medical benefits,” he says. “The Emeriti accounts are designed so that faculty and staff members won’t have to postpone retirement just to be sure they can meet their health care needs.”
“The willingness of SMU to make such a progressive move has been quite heartening,” says Don Vandewalle, Management and Organizations chair in the Cox School of Business and chair of the University Benefits Council. The Emeriti program is the result of more than two years of review with multiple SMU constituencies, including the University Benefits Council, the Faculty Senate and the President’s Executive Committee, he says.
“I have very closely studied this new program, and the long-term benefits to faculty and staff colleagues are quite amazing,” Vandewalle says. Those benefits include the ability to save for retirement health care with the greatest possible tax advantages, a 100-percent match by SMU, vesting, and portability of funds for faculty and staff members who leave the University before retirement, he adds.
“With most organizations, leaving before retirement means giving up claim to health care retirement benefits from the organization,” Vandewalle says. “The Emeriti program also substantially enhances the quality of and options for health care insurance coverage during retirement.”
In offering the Emeriti Accounts, “SMU is also taking a long-term perspective by opting into a benefit that many employers are opting out of,” Detwiler says, citing figures indicating that 18 percent of employers offer retiree health benefits today as opposed to 60 percent 20 years ago. “This should put us at a strategic advantage in recruiting new faculty and staff members.”
The accounts allow faculty and staff members to use pre-tax income to invest and accumulate assets to pay for insurance premiums and other eligible health expenses in retirement. Investment fund choices and administrative services will be provided by Fidelity Investments. Medical benefits will be provided under Emeriti by Aetna, but a participant may elect to purchase health care from other vendors or to use their account accumulations as flexible spending accounts. The health accounts are completely separate from the SMU Retirement Plan.
Faculty and staff members age 40 or older will be enrolled automatically in an Emeriti Health Account, effective Jan. 1, 2008. The University will reduce pay by $50 per month on a pre-tax basis, and SMU will make matching contributions for as long as each member remains an eligible employee until retirement or for up to 25 years, whichever occurs first. Enrollees will choose how to invest their contributions among several Fidelity investment fund options and may also make unlimited, voluntary contributions to their accounts on an after-tax basis. Employee contributions are 100-percent vested immediately, with SMU contributions vested after 7 years of service.
Faculty and staff members should have received Emeriti enrollment kits at their homes no later than Sept. 5. Eligible individuals age 40 and older will be enrolled automatically beginning Jan. 1, 2008, and must contact Emeriti to select investment options and provide the names of any individuals to be named dependents on their accounts.
For more information, visit the Emeriti Web site at www.emeritihealth.org or call toll-free at 1-866-EMERITI (1-866-363-7484).