Reconsidering Retiree Health Benefits

At a time when many colleges are concerned about the cost of paying for their employees' post-retirement health care, Dartmouth College is floating a plan that would scale back existing coverage for some employees and eventually cut it altogether for others.

Dartmouth says the move is a financial necessity and should not greatly affect immediate career decisions, but some are concerned that the college is creating a disincentive for its employees to retire. National surveys have found that a key reason for professors to delay retirement is their concern about paying for health care.

The issue gained prominence at Dartmouth in 2003, when trustees expressed concern over the college's future financial obligations. An existing college committee that represents a cross-section of employees formed a working group to make recommendations -- a version of which was presented at an open meeting this week.

Under the current setup, all eligible employees' health care expenses not covered by Medicare are covered by the college. The employee has to be 55 or older and have 10 years of continuous service. Under the proposed plan, which is still being discussed by faculty and administrators, Dartmouth would pay the full benefit for those retiring before July 1, 2009.

The plan would eliminate the so-called Medicare supplement for new employees hired after that date. For those hires who would have previously qualified for the benefits, Dartmouth would offer to match employee contributions to a "health savings fund" up to $3,000 total during their first five years -- and the fund would be portable.

For current employees, the college would cover anywhere from 40 to 85 percent of health costs upon retirement. To determine the coverage, Dartmouth would add the employee's age plus years of service, for a maximum total of 85 -- and that's the percentage that would be covered. (In other words, a 75-year-old professor with 20 years of service would be covered at no greater level than a colleague of the same age with 10 years of service.) The college also plans to institute a hardship plan during the transition.

"The principle is that we want the plan to have the least impact on retirees and the most impact on those who are further away so they can have the greatest opportunity to plan for this," said Adam Keller, executive vice president for finance and administration.

But Ron Green, a professor of religion and director of Dartmouth's Ethics Institute, said the plan would create a major financial problem for some employees and likely a work force logjam for the college.

"This is going to alter the way that people look at retirement decisions," Green said. "Various groups are trying to encourage people to consider retirement to make way for younger employees. This is going to have the exact opposite effect. We're adding higher deductibles and co-payments, and put it all together and a person will likely say, 'I get all this medical coverage as an employee. Why should I retire now?'"

Dartmouth will then face a situation in which older professors will hold onto their jobs for the benefits, potentially stifling upward mobility in the faculty ranks, he said.

Neither Green nor Keller said they would expect a rush of retirements before the summer 2009 deadline, largely because the financial gains of switching to full retirement are small for long-time employees. And Keller said the committee behind the proposal has said a logjam isn't a concern.

"For most senior faculty here, the change isn't a significant hardship for them," Keller said, adding that many have saved on their own and still have a desire to teach.

Still, some argue that the plan is coming at an inopportune time -- with rising costs of living and medical expenses -- for the college's employees. Green worries that lower-paid employees would be especially hard hit.

Keller said protecting those employees is of concern to the college, which could consider some type of sliding scale of coverage based on a person's income.

Green said the health plan seems to have been "handed down from on high," and that employees haven't had sufficient opportunities to comment on its merits. Earlier this week, faculty in arts and sciences had their say, and many were quite critical at the meeting. Several other employee forums are planned over the coming months, Keller said.