Finance and Administration - Board of Trustees - The University of ...

Finance and Administration Committee - V. Annual Report of the Treasurer, 2011 - InformationFunding PolicyPlan members are noncontributory. The university’scontributions for JCRS-A members were calculated using thebase salary amounts of $26,209,414.76 for fiscal year 2011, and$28,923,540.87 for fiscal year 2010. Contribution requirementsare established and amended by state statute. The contributionsare included in the ORP amounts. University contributionsto fund the state supplemental benefit totaled $3,907,605.09in fiscal year 2011, and $3,765,844.24 in fiscal year 2010.Contributions met the requirements for each year.C. DEFERRED COMPENSATION PLANSThe University of Tennessee offers its employees threedeferred compensation plans. The university, through the Stateof Tennessee, provides two plans, one established pursuantto Internal Revenue Code (IRC), Section 457, and the otherpursuant to IRC, Section 401(k). The third plan is administeredby the university and was established in accordance with IRC,Section 403(b).These plans, available to all university employees, permit themto defer a portion of their salaries to future years. The deferredcompensation is not available to employees until termination,retirement, death, or unforeseeable emergency. All costs ofadministering and funding these plans, with the exclusion of the$50 monthly university match for the Section 401(k) plan, arethe responsibility of plan participants.Since Section 457 and 401(k) plan assets remain the propertyof the contributing employees and a third party administratoris used to administer the plan assets, they are not presented inthe State of Tennessee financial statements. In fiscal year 2011,the university provided a $50 monthly match from unrestrictedfunds for employees making a minimum monthly contributionof $50 to the Section 401(k) plan. During the year ended June30, 2011, contributions totaling $18,503,853.21 were made byemployees participating in the plan, with a related match of$5,508,820.48 made by the university. During the year endedJune 30, 2010, contributions totaling $17,928,489.64 were madeby employees participating in the plan, with a related match of$5,499,232.59 made by the university. In accordance with theIRC, employee contributions through the 403(b) plan remain theassets of the employee. In addition, the amounts withheld fromemployees are remitted directly to third-party administrators.Therefore, these employee contributions are not reflected in theuniversity’s financial statements.Note 12: Other Post-EmploymentBenefitsHealthcare is the only “other postemployment benefit”(OPEB) provided to employees. The State of Tennesseeadministers a group health insurance program which providespostemployment health insurance benefits to eligible universityretirees. This program includes two plans available to highereducation employees – the State Employee Group Plan andthe Medicare Supplement Plan. For accounting purposes,the plans are agent multiple-employer defined benefit OPEBplans. Benefits are established and amended by an insurancecommittee created by Section 8-27-101, Tennessee CodeAnnotated. Prior to reaching age 65, retirees may participate inthe State Employee Group Plan. In previous fiscal years, prior toreaching the age of 65, all members had the option of choosinga preferred provider organization (PPO), point of service (POS),or health maintenance organization (HMO) plan for healthcarebenefits. However, as of January 1, 2011, the insurance planstructure was changed and as a result, all members now havethe option of choosing between the standard or partnershippreferred provider organization plan for healthcare benefits.Subsequent to age 65, retirees who are also in the state’sretirement system may participate in a state administeredMedicare supplement that does not include pharmacy. The statemakes on-behalf payments to the Medicare Supplement Planfor the university’s eligible retirees; see Note 20. The plans arereported in the State of Tennessee’s Comprehensive AnnualFinancial Report (CAFR). The CAFR is available on the state’swebsite at http://tennessee.gov/finance/act/cafr.html.SPECIAL FUNDING SITUATIONThe State of Tennessee is legally responsible for contributionsto the Medicare Supplement Plan that covers the retireesof other governmental entities, including the University ofTennessee. The state is the sole contributor for the universityretirees that participate in the Medicare Supplement Plan and,therefore, is acting as the employer.FUNDING POLICYThe premium requirements of members of the State EmployeeGroup Plan are established and may be amended by theinsurance committee. The plan is self-insured and financed ona pay-as-you-go basis with the risk shared equally among theparticipants. Claims liabilities of the State Employee GroupPlan are periodically computed using actuarial and statisticaltechniques to establish premium rates. Administrative costs ofthe plan are allocated to plan participants. In accordance withSection 8-27-205(b), Tennessee Code Annotated, retirees inthe State Employee Group Plan pay the same base premiumas active employees in the plan adjusted for years of service.Retirees with 30 years of service are subsidized 80%; 25 years,70%; and 20 years, 60%. Retirees in the Medicare SupplementPlan have flat-rate premium subsidies based on years of service.For 30 years of service the subsidy is $50 per month; 25 years,$37.50; and 20 years, $25.32153