Re-Engineering II Analysis



Re-Engineering II Analysis

Benefits for Future Employees

I. Scope

The initial scope of this subcommittee was to “reduce future benefits costs for new employees (retirement, retiree health, tuition remission, etc.).” After reviewing the benefits landscape, the committee expanded its scope to look at reducing benefits costs for all employees, both current and future hires. This decision was made because:

• Reducing benefits costs for future employees will not create significant savings in the short-term (i.e. next few fiscal years), thus not achieving objective of Re-engineering II

• Creation of new rules/programs for incoming employees only will create second class/tier of employees

• Implementing rules for all employees is more equitable way to share impact of budget shortfall

• Retention of grandfathered benefits for current employees and creation of new plans for new hires will make benefits administration more complex (and hence more costly)

It should be noted, however, that several of our proposals would only affect future employees.

This committee also reviewed the recommendations from HRPAT and UBAT as well as options that may have been considered by either/both groups but were not formally recommended based on the scope of their respective charges. This committee focused on the options with the most significant budget savings achievable by FY 2011.

II. Current State

NYU spends approximately $144 million annually on benefits for its employees (please see Appendix A for pie chart of spending). 84% of this is spent in three areas: health (medical/Rx $57 million, other health $6 million), retirement ($42 million), and tuition remission ($22 million). The remaining spend is either statutory (worker’s comp, unemployment, disability) or contractual (union pension) in nature, thus not affording many opportunities for reduction.

III. Benchmarking

NYU’s benefits package[1] is generally competitive with its peer institutions when considered in its entirety. Certain areas, however, are significantly richer than peer institutions, particularly in the area of tuition remission. Appendices A through C contains charts which compare NYU to peer institutions for the following benefits: 1) tuition remission for employees, spouses/domestic partners, and dependent children, 2) medical plan vendors/strategy survey, and 3) retirement plan benefits.

IV. Analysis and Options

When determining what benefits to eliminate or reduce, the subcommittee considered the following questions:

• Will the reduction of this benefit accrue significant financial savings versus the impact to the employee population as a whole?

• Will the reduction of this benefit affect a large or small population of current employees or retirees?

• Will the reduction of this benefit make us less competitive in comparison to our peer institutions?

• Can this reduction be implemented in a timely fashion (within the next 12 to 18 months)?

Our recommendations are opportunities where: 1) there are significant savings opportunities and 2) low potential negative impact is expected. They are:

• Eliminate Retiree Tuition Remission: This will affect a small population (only 23 retirees currently utilizing the benefit), with a significant savings opportunity. HRPAT also recommended. Estimated Annual Savings: $600,000 to $1,000,000

• Eliminate Spouse/Domestic Partner Tuition Remission Completely: This benefit was recently reduced to 50% as recommended by UBAT; given most of our peer institutions do not offer this benefit at all, we recommend eliminating it entirely. Estimated Annual Savings: $1,000,000

• Reduce Employee Graduate Tuition Remission to 75%: We believe this change will not unduly affect our competitiveness versus peer institutions, although it may make it more difficult to recruit top administrators as they are the primary users of this benefit. HRPAT also recommended. Estimated Annual Savings: $1,400,000

• Increase Employee Tuition Remission waiting period from 3 to 6 months: This change makes sense as it will match up TR eligibility with the current probationary period for new administrative hires. It also fits within original charge of looking at benefits for new employees. HRPAT also recommended. Estimated Annual Savings: $250,000

• Implement a two-year waiting period (with waiver) for 403(b) plan: This recommendation also fits within original charge of committee. This change will only affect new hires, and should not affect faculty recruiting as it retains the waiver allowing new hires who previously worked at an educational institution to waive into the 403(b) without having to wait two years. Estimated Annual Savings: $2,400,000

• Consolidate Health Insurance Providers by Eliminating Oxford HMO: The Oxford HMO is the most expensive health insurance option with the fewest number of participants and the highest monthly premiums. There would still be the Aetna HMO option for those employees who prefer an HMO option. Reducing NYU’s health plan vendors to two (United and Aetna) will also increase efficiency in the benefits department as it will be one fewer plan to have to administrate and one fewer vendor to manage. It is not believed that this will affect NYU’s competitiveness in recruiting. Estimated Annual Savings: $215,000

• Eliminate 50% Employee Fee Reimbursement Program: This is a program that covers 50% of registration fees for employees using graduate or undergraduate tuition remission. It was started in Spring 2007, so it does not have a long history. HRPAT also recommended eliminating. Estimated Annual Savings: $550,000

• Eliminate Bonding Leave for Administrators and Staff: The bonding leave program grants employees six weeks of paid leave for the birth/adoption of a child. This is a recent benefits addition (2004) and has been used by a small number of code 100 employees (48 in 2008). This benefit is not offered at peer institutions or at many NYC companies. Estimated Annual Savings: $350,000

This subcommittee also recommends two changes where it did not have the data to determine the savings, but determined that they are good policy regardless of the savings amount:

• Implement a one-year waiting period for tuition remission for dependent children: This would only affect new hires, and seems a reasonable period to wait before being allowed to participate in this generous program.

• Implement limitation that all dependent children must be matriculated and enrolled by the end of calendar year where age 25 is attained: This change would align the tuition remission benefit with other benefits rules regarding dependent children (i.e. healthcare eligibility).

The subcommittee also considered a number of savings opportunities that it does not recommend due to their potential for highly negative effects, either in terms of competitiveness in recruiting or the burden imposed on current and future employees. They are listed in Appendix D so the range of options considered can be seen.

Total Estimated Annual Savings: $6,515,000-$6,915,000

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[1] Please note that we are only considering benefits to non-union employees, as union employee benefits are contractually negotiated.

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