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A Letter From the Chancellor Regarding Benefit Changes for Nonunion Staff

February 9, 2011

Dear Colleague:

At its meeting on Feb. 7, 2011, the University System of New Hampshire board of trustees’ financial affairs committee recommended to the full board of trustees that changes be made to the USNH employee compensation and benefits program. While the board will not make a final decision on these recommendations before its meeting on Feb. 17, we recognize the importance of these programs to our employees and want to provide you with an overview of what is under consideration, the process used to arrive at these recommendations, and the timing of when they could become effective. 

As you likely know, the board is actively looking at a number of ways to respond to the pressure of the current economic climate in which we operate, and what many expect will lead to reduced Legislative appropriations for the upcoming biennium. These pressures, combined with ongoing and significant financial challenges, require us to look for efficiencies and cost reductions across the entire university system.

The Financial Affairs Committee recommendations are projected to reduce the annualized net cost of our total compensation by $8-9 million, with some savings being available in fiscal year 2012.  If approved by the board of trustees, the first of the changes will be effective in July 2011, with additional changes taking place on Jan. 1, 2012 and beyond. 

The recommended changes result from a comprehensive review by a board-established trustee subcommittee on total rewards that included external benchmarking, a funding analysis of medical plan costs and an employee preference survey. While the focus of this review was cost management and optimization of resources, the process specifically looked for ways to minimize the impact on employees and their perceived value of their benefits and compensation. As a result, many of the proposed changes impact new hires but not current employees.

Recommendations may have implications for collective bargaining strategy and there are clear employee expectations that USNH will maintain its commitment to equitable compensation and benefits across all faculty and staff, whether or not unionized.

Here is a summary of what has been recommended for current employees:

  • Reduce employer contributions to the 403(b) retirement plan effective July 1, 2011, with an estimated annualized savings of $1.8 million.
  • Convert USNH HMO and POS medical plans from fully insured to self-funded plans effective Jan.1, 2012. This change will enable us to bid our pharmacy costs to improve the discount rate USNH receives to provide the benefit. The two changes are expected to result in an annualized savings of more than $3 million with little or no impact on the medical benefit received by employees.
  • Authorize the chancellor and the presidents to work with the System Personnel Policy Council (SPPC), employee councils and human resource departments to reduce the annualized cost of our medical plans by $2 million through modification of plan design. The changes under consideration (increased co-pays, deductibles and/or contributions to the cost of the plan) are the same ones tested in the employee preference survey. Employee preferences expressed in the survey will serve as the basis for finalizing the plan design changes to be effective Jan. 1, 2012.
  • Eliminate the current $500 employer contribution to employee Health Reimbursement Accounts (HRA) effective Jan. 1, 2012, for annual savings of $1.5 million.
  • Take steps to ensure performance-based distribution of any salary increases beginning in fiscal year 2012.
  • Make other changes to enhance the employee experience, including an additional Roth option in the retirement plan, access to financial planning services and to a post-65 Medigap coverage for retirees, and enhanced performance management and training. It is also recommended that policies on workplace flexibility be reviewed.

Many of the recommended changes are the direct result of employee feedback received through the employee preference survey. More than half of all non-union faculty and staff participated in the survey, which combined employee preferences with estimated reward costs to determine the changes that will affect perceived value least while achieving meaningful cost savings.

Cost benefit analysis of survey findings strongly suggested that changes to base pay, time off and longevity benefits would negatively impact perceived value of the overall program much more than the resulting savings warranted. As a result, changes to time off and longevity were recommended only for newly hired employees, not current employees. Employees also expressed clear and strong preference for greater linkage between pay and performance and the need for enhanced performance management, which weighed heavily into recommendations around performance management, recognition and training investments.

More detailed information will be shared immediately following the Feb. 17 board meeting.  In addition, we will be working directly with your human resource departments to provide ongoing updates and information about these changes in advance of their effective dates.

We know that you greatly value the USNH compensation and benefits package and believe the trustees have acknowledged this in the care taken to arrive at these recommendations.  In order to best serve our students in these challenging fiscal times, we must make strategic cost reductions.  These changes – we believe – strike the right balance between the need to maintain competitive compensation for our colleagues and the importance of keeping the cost of education for our students as low as possible. 

Thank you for your cooperation and assistance throughout this process.

Ed MacKay

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