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University Benefits — Communications

Frequently Asked Questions (FAQ’s) Related to Potential Benefit Changes — Last Updated:  6/25/2008

(Most recent additions will appear at top of list)

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Questions and Answers

Why are changes in fringe benefit policies and underlying costs critical to the University's future vitality?

Fringe benefits and energy are the fastest growing major elements in the UI’s overall budget.  Both must be managed or there will be serious consequences in the capacity to recruit new faculty and staff as well as to provide competitive salary increases.  To place this into perspective, the fastest growing portion of fringe benefits was UI contributions to faculty and staff health care flex spending accounts, which grew by 350% since 2000.  Benefits are a greater and greater portion of overall faculty and staff compensation.  In FY2009, just the year to year growth of fringe benefit rates required a special General Education fund expense increase of $4.2 million.  This equates to having an average of 35 additional tenure/tenure track faculty, or 51 additional professional staff, or a 1.35% salary increase for all faculty and staff.  The same economic issues also govern UIHC, the student housing system and all other University units.

How much money reverts to the University from the spending accounts each year? How is it used?

It varies every year, but over the last eight years it has averaged approximately $2,000,000 per year. Federal regulations restrict how this money can be used. These funds help fund the operational expenses of the Flexible Spending Account program, the Wellness program, and help fund the University’s required health insurance and other insurance reserves.

What should new recruits/hires be told about future benefits?

Recruits and new hires should be made aware of both the current benefit programs, and the FRIC proposal to change future benefits, as described on the Benefits web site.  However, it should be made clear that decisions regarding benefits for 2009 have not yet been made.

Why does the FRIC proposal appear to position some families against other employees and family types?

Individuals and families are treated differently under the current benefit program.  Future program structures need to consider the existing differential treatment, through an open and thoughtful process. 

Can I as an individual add additional monies into the spending accounts?  What are the advantages?

Yes.  Individuals who have used all of their credits (and those without credits) are encouraged to contribute to a flexible spending account if they believe they will have eligible expenses.  When used correctly, spending accounts can offer considerable tax savings – subject to program maximums and forfeiture if not used.  Please check the flexible spending account area of the benefits office website for more information: Http://www.uiowa.edu/hr/benefits/spendacct/index.html

How will dual spouse couples be treated under the FRIC proposal, where one is in the Flexible Benefits program and the other is covered by one of the state health plans or a student health plan?

Changes in coordinating these other insurance plans with the University’s Flexible Benefit program have not been made. 

How does the University of Iowa Flexible Benefits program compare with peer institutions?

University of Iowa peer institutions provide insurance benefits under a more traditional model, without the use of a flexible benefits program.  The FRIC proposed plan provides a general use credit beyond the primary insurance benefits, thus exceeds what is offered now by peer universities. 

Where can I find my current Flexible Benefit Credits and how they are calculated?

You can find your current flexible benefit credits in a number of places:

You can find out how your flexible benefits credits are calculated by visiting the Flexible Credits Area of the Benefits Office Website: http://www.uiowa.edu/hr/benefits/flex_credits.html

The fringe benefit rate for merit staff is much higher than the rate for faculty and professional and scientific staff.  So why is the University trying to reduce the benefit costs of the Flex Benefit system?

The State of Iowa health insurance claims are higher than those of the University of Iowa health insurance plans.  The merit staff health insurance benefits are negotiated by AFSCME and the expenses are higher due to the higher premiums.  Additionally, the fringe benefit rate is expressed as a percentage of salary, and the average merit salary is less than the average faculty or professional & scientific employee salary.  The University needs to control the costs of the faculty, professional and scientific and merit supervisory exempt benefits while keeping the program as a leader among our peers.

Will a reduction in Flexible Benefit Credits impact the funding for University wellness programs, since those have been supported by unused benefit credits?

A reduction in funding to the wellness program is not anticipated as wellness is funded through various programs within benefits.  Wellness has also demonstrated a positive return on investment for both the University and its employees.    

What controls how individuals use the funds allocated to the spending account funds?

The use of funds allocated to a spending account is controlled by Federal regulations and to a limited extent, by the employer.

What was the Hewitt consultants report and how was it used in reviewing the current benefits program?

The report is a product of their review of the University’s benefits program and a comparison with other employers with an emphasis on other universities.  The report was used to begin the generation of ideas and discussion for the benefit review conducted by FRIC.  The report is available at:
http://www.uiowa.edu/hr/benefits/benefits09/hewitt.html

How much was spent on the Hewitt consultants for this report?

Hewitt was paid $52,690 to conduct the review and subsequent report.

Are the health insurance premium rates known for 2009?

No - these are expected some time in August or September.

Did FRIC analyze income level and the total impact of the benefit changes?

No. 

Will individuals have the option to “buy up” the benefit level for Long-term Disability Insurance?

This option was included in the FRIC proposal. 

What models did FRIC consider besides the proposal they put forward?

FRIC considered many models, including those proposed in the Hewitt report. 

Has the FRIC proposal changed based upon the feedback they have received?

FRIC has not revised its proposal since it was forwarded to the University Administration. There was a faculty forum that provided feedback to FRIC before their final proposal was put forward, and some of that feedback was integrated into the final FRIC proposal.

Can I continue to pay for my long term disability insurance on an after tax basis?

No.  Under the FRIC proposal the Long Term Disability (LTD) insurance product will no longer be part of the Flexible Benefit system.  Instead, the University will pay the premium directly.  There is no option for the employee to pay any of the premium cost.  Under IRS rules, an employer paid LTD benefit makes the funds paid to a disabled employee taxable.

Why do we need to change the current benefit program??

The current program is financially unsustainable. The costs of benefits have increased significantly in recent years.  These cost increases have been magnified by the design of the current Flexible Benefit program.  The cost increase to support flex credits for health insurance have increased 70% in the past five years.  In order to continue to provide a benefit program that will support the recruitment and retention of faculty and staff, we need to make changes in order to better manage future cost increases.

Why is this proposal the only option looked at?

This is not the only option looked at.  The proposal recommended by the Funded Retirement and Insurance Committee (FRIC) reflects the committee’s work during the past academic year.  The design of the proposal recommended by FRIC most closely aligns with the design principles and goals adopted by the committee through their months of work.

What is FRIC?  How are members selected and what is their role in the University’s system of shared governance?

FRIC is the Funded Retirement Insurance Committee, one of the charter committees of the University, composed of faculty and staff representatives selected by the Staff Council and Faculty Senate.  As a charter committee it is part of the University’s shared governance structure.  The charge of this committee is to suggest and review faculty and staff retirement programs and insurance programs.    This is a challenging role. 

Why is this coming to our attention now?

FRIC has been working on these issues throughout the past academic year.  Their work had not been widely publicized because FRIC had not made a specific recommendation until recently.    

Who is covered by Flexible Benefits?

All regular faculty, professional and scientific, and supervisory exempt merit staff.  Professional employees represented by SEIU participate in the Flexible Benefits program under the same terms and conditions as other faculty and staff.

Are retirement benefits changing?

No.  The only changes under consideration for 2009 involve the insurance and benefits provided under the current Flexible Benefits program.

Does this mean University benefits are being cut?

The cost of FRIC’s proposal is projected to be the approximately the same in the first year as that of the current Flexible Benefits Plan, plus an increase for the cost of health insurance.  This is not an overall cut, as the University will continue to spend more on benefits each year. 

If it will cost the same, why do it?

The revised plan design will save money in the future by reducing the rate of future cost increases. 

Who will benefit under the design being considered?

 A majority of employees will benefit under the proposed benefits design.  University contributions for health insurance will be 100% for singles and are increasing from 75% to 80% for all other family statuses.  Under the proposal, newer employees will not have to wait for their disability insurance to ramp up over five years and their dental insurance will be covered at the full 80% rate without the three year wait for the full University contribution.   

What about employees who have health insurance outside the University or who are double spouse employees (spouse/partners that both work at the University)?

Employees who used University health insurance and dental insurance contributions to fund other benefits would, under the FRIC proposal, see a reduction in the University monies available to spend on other benefits.  In addition to the General Benefits Credit of $90 per month, employees who have health insurance coverage other than through the University of Iowa benefits system would receive a Shared Savings Credit of $200 monthly to use for their personal benefits needs. In addition to the General Benefits Credit for each employee, double spouse employees would receive the benefit of free health and dental insurances.

How would the proposed plan reduce the cost of future benefits cost increases?

The current Flexible Benefits plan magnifies increases in insurance premium costs.  This design, when coupled with increasing medical expenses, created unsustainable increases in overall program cost.  Over the past five years, the flexible credits to support health insurance have increased 70%.

What is meant by “discretionary” or “extra” credits?

Under the current system, some employees have credits remaining after purchasing the basic insurance products, e.g. health, dental, life and long term disability, and some employees have discretionary credits because they are covered by their spouse/domestic partner’s employer benefit plan.  These credits can then be used at the individual’s discretion for other benefits.  Not all employees currently have credits remaining after the purchase of insurance products, nor do they have any discretionary credits to address their individual needs.

What is the General Benefit Credit included in the FRIC proposal?

The General Benefit Credit would be an amount provided to all staff and faculty to use at their discretion toward the purchase of benefits not otherwise provided by the University.  For example, they could be applied to the 20% employee premium cost of family health or dental insurance, the purchase of additional life or accidental death and dismemberment insurance, or toward a dependent care or medical spending account.

What are the Shared Savings Credits under the proposal?

Individuals who have health insurance, but are not enrolled in a University health insurance plan would receive an additional $200 per month in Shared Savings Credits as an incentive to remain with their current insurance provider. Individuals who elect not to enroll in the University’s dental insurance plan would be provided an additional $25 per month in Shared Savings Credits.

Finally, individuals who elect to receive only $50,000 in life insurance (when this is less than two times their salary) would receive an additional $40 per month in Shared Savings Credits.   The life insurance option would be in effect for the first year, but would be subject to further review for continuation into subsequent benefit years.

Would the double spouse credit be eliminated under the proposal?

No, but it would change.  Double Spouse employees would continue to receive the benefits of free health and dental insurance for themselves and their dependents.  Both Spouses would receive the General Benefits Credit.     

Why would the contribution to life insurance change?

The change would bring our benefits program in line with the market, including other Big Ten universities, and would help to fund the General Benefits Credit. 

Why would the LTD benefit level change to 60%?

In order to provide coverage effective upon employment, the benefit level would change to 60%, which is the most common coverage level in the Big Ten and the local market. 

Would the health plans themselves change also?

No.  There would be no fundamental changes to the actual health insurance plans under the proposal.

Why is Dental III being eliminated?

The plan is being eliminated due to low enrollment.

What are the advantages of the proposed design for faculty and staff?

The advantages for faculty and staff would be in making the benefits program more financially sustainable over time, while the University continues to fund salary increases, new positions, and other strategic needs. 

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