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Recommendations for Retiree Medical Benefits

Retiree medical benefits are consuming a growing share of university resources and our current approach to funding these benefits is not sustainable. Since we initiated our review of OU retiree medical benefits in 2007, our annual retiree medical costs have increased by 46%, from $6.3 million in 2008 to $9.2 million in 2010. During this same period, the number of OU retirees has increased by 16%, from 1,767 to 2,056. Additionally the University's projected post-retirement benefit obligation of over $540 million has become of increasing concern to credit rating agencies. Faculty and staff have also expressed interest in knowing how we will address this increasing financial obligation.

After careful consideration of campus feedback and additional options, President Boren will make recommendations for retiree medical benefits to the Board of Regents on May 10 and 11, 2012. Click here to review the final recommendations. The proposed changes are consistent with the guiding principles followed throughout this multi-year analysis. The proposed changes:

  • Won't motivate current employees to accelerate their retirement decision in order to lock in a better benefit, as benefits are determined based on when an employee becomes eligible to retire rather than when they leave university employment.
  • While not totally insulating current retirees from the impact of change, introduces modest future plan design changes for Medicare plan participants.
  • Introduces the concept for future retirees, those who become eligible on or after January 1, 2016, that the university's contribution is tied more closely to years of service at retirement.
  • Retains a benefit that is significantly more valuable than most competitor organizations for employees hired before January 1, 2008.

These recommendations will allow OU to continue offering valuable medical benefits to retirees, while reducing the University's post-retirement benefit obligations by approximately 26%, from $542 to $400 million. Annual cost savings of $2.3 million, beginning in 2016, will result from cost-sharing, changes to the Medicare coordination method, and the gradual impact of introducing retiree premium contributions for those who become eligible to retire after 2015.