MSU will not offer post-retirement health care benefits to newly hired university employees on all levels beginning July 1, university officials announced Tuesday.
University spokesman Terry Denbow said the decision was made by MSU President Lou Anna K. Simon in light of the institution’s budget uncertainties as well as increasing health care costs. Neither current employees nor new employees who already have received such a commitment from the university will be affected by the decision.
The university’s current post-retirement health benefit liability is $1 billion, according to a memo written by Simon. The memo also mentions that liability is expected to double every 15 years until 2040 unless the costs are abated.
Post-retirement health benefits include a former employee’s health care costs that are paid by the university upon retirement. Simon was out of the state and unavailable for comment Monday.
MSU currently is the only Big Ten institution to offer fully paid retiree health care benefits, MSU Provost Kim Wilcox said.
Wilcox said MSU’s ability to continually offer such benefits has waned in light of state and university budget woes.
“It’s an increasingly difficult if not impossible expense for us to manage,” Wilcox said. “(We’re) trying to be as competitive as we can and be as wise with our management as possible.”
The matter arose briefly Tuesday during discussion at a Faculty Council meeting, where several faculty members expressed dismay that eliminating post-retirement health benefits for new employees will make MSU less able to recruit and retain talented faculty.
“My concern is … I think (post-retirement health benefits) are one of our recruiting factors,” said Bernard Zandstra, a professor of horticulture and a member of Faculty Council. “I think that would be a major mistake.”
Deborah Moriarty, a professor of music and chairwoman of the University Committee on Faculty Affairs, countered by saying higher salaries likely would be more effective for recruiting employees — particularly faculty — rather than post-retirement health benefits.
“It seems as though that is not as strong a recruiting tool as a higher salary would be,” Moriarty said at the meeting. “I think the feeling is that giving more money at the front end is possibly a way to keep our faculty strong and, really, reply to the market.”
The announcement marks the second change to post-retirement health care benefits for university employees in the past five years.
Beginning in 2005, the university eliminated such benefits for the spouses of newly hired employees. Prior to 2005, university employees’ spouses were covered under post-retirement plans, although those employees’ benefits were not affected by the 2005 decision.
“I think the MSU community really does understand the commitment to compensation,” Denbow said. “And I think our employees have a real sense of the challenges of compensation. This is a decision that ensures a competitive future.”
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