University Times

SAC workshop outlines some things to consider

Pitt staff are very interested in their retirement benefits, if a packed William Pitt Union Ballroom Nov. 21 is any indication.

Assistant Vice Chancellor for Human Resources John Kozar and Aynsley Jimenez, supervisor of benefits, gave a presentation on retirement benefits as part of a new season of Staff Association Council brown-bag seminars.

The Office of Human Resources gets about 17,000 calls a year from faculty and staff concerning retirement benefits, said Kozar. Employees also can visit the HR retirement website: www.hr.pitt.edu/retirees.

“Do what you can to save as much as you can,” Kozar told the capacity crowd of 150 registrants. “It certainly can dictate your lifestyle.”

Today, he noted, 90 percent of faculty and staff use Pitt’s defined contribution benefit plan, contributing 3-8 percent of their salary to the savings plan of their choice while they work. Until an employee has worked 1,000 hours or more across three calendar years and becomes vested, the University only matches those contributions at 100 percent, or dollar for dollar. After that, the University matches the contribution at 150 percent, or $1.50 for every $1 placed in savings. In other words, if you are putting away 8 percent of your salary, the University contributes an amount equal to 12 percent of your salary.

There also is an accelerated savings option for employees ages 52-65 who are fully vested and contributing at least 8 percent of their salary to the plan initially (an amount that may be lowered later). Under the accelerated plan, the University increases its match from 12 percent to 14.5 percent for up to 10 years or age 65, whichever happens first. Pitt’s match stops altogether when this milestone is reached, although you may continue to contribute to the savings plan yourself.

Kozar urged those thinking of, or planning for, retirement to seek free on-campus consultations with representatives of TIAA-CREF or Vanguard, the organizations with which Pitt employees accumulate their retirement savings: “They can help you with projections and what you might need to maintain a certain lifestyle,” Kozar said, including the possibility of creating annuities that will pay out guaranteed cash each year for the rest of your life.

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If your hire date was prior to July 1, 2004, you must be 62 to retire from the University. If you were hired on that date or later, there is an additional requirement: Your age and years of service must add up to 85 before you can retire. Employees accumulate one point for each year of age plus one point for each year worked. Thus, if you were 50 when hired, you would need 35 additional points to reach 85, and would have to work 17.5 years to acquire those 35 points at two per year.

If your spouse or partner is under 62 when you retire, he or she is eligible for the same health-care benefits enjoyed while you were an active employee — but at the full cost of the premiums, including the portion the University normally pays for active employees’ coverage. Thus, many eligible retirees choose to work until their partner is at least 62, when they will only need to pay the staff portion of the premium (the portion not covered by the University).

The key to affording health-care coverage upon retirement is using your Defined Dollar Benefit (DDB) plan, which gives individual monthly credits from the University to you as well as to your spouse (if married prior to retirement) or domestic partner, if he/she is at least 62 and the retiree is enrolled in the University’s medical coverage — even if the spouse/partner has health care coverage from his/her employer or elsewhere. In the latter case, if a spouse/partner’s medical coverage is discontinued, he or she may elect the University’s coverage (paying an amount equal to an active employee’s cost, if the spouse/partner is 62-64, or using DDB credits if the spouse/partner is 65 or older).

DDB credits start accumulating for you and your eligible spouse/partner when you retire. These credits can be banked if you are covered under your spouse/partner’s medical insurance.

For those retiring in 2014, the retiree and his/her spouse/partner each would receive $365 a month in DDB credits; these amounts are reviewed by Pitt, which can increase them annually by as much as 5 percent.

Retiring between 62 and 65 presents a special case. If you choose to remain on the Pitt health insurance plan you had as an active employee, you won’t begin accruing DDB credits until you move to the retiree health plan at age 65. Alternatively, if you no longer elect Pitt’s active-employee health care when you retire between 62 and 65, you can start accumulating DDB credits, which can be used right away to pay for the premiums of a retiree health care plan from Pitt.

If your health care is covered by your spouse/partner when you  retire at any age, you can’t use DDB credits to help pay those premiums, but the DDB credits will continue to accumulate for possible future use. Later, you could join a University-sponsored retiree health plan if you can prove you’ve had continuous and comparable coverage with another plan to that point.

If you have quit Pitt’s health insurance plan and take the DDB credits upon retirement, however, enrolling later in a retiree health insurance plan will give you monthly premiums equal to the full cost of the insurance: both the retiree’s normal share and the University’s share.

DDB credits accumulate, month to month and year to year, even if you are covered at the beginning of retirement under your spouse’s or partner’s benefits, and will amass until your death. But they cannot be used for dental, vision or other insurance costs, such as the Medicare Part B premium — just for paying the cost of maintaining coverage in Pitt’s retiree health insurance plans.

If you are taking advantage of Pitt’s retiree health insurance, and the costs of medical insurance premiums exceed your monthly credit, you must pay the difference out of pocket. But that won’t likely be the case: “They are keeping up with the cost of health care,” Jiminez said.

“Probably 80 percent of our retirees don’t pay a penny out of pocket toward premiums,” Kozar noted.

And, he added, if you are covered under the Panther Gold program as an active employee, “you probably won’t notice much of a difference” in benefits under the UPMC for Life HMO, which is selected by 90 percent of those who retire at 65 or older for their health insurance. It will cost only $260 a month in 2014, which will leave retirees with a $105 surplus every month during that year.

Although this surplus ceases to exist upon your death, a surviving spouse’s surplus would be particularly useful, because his or her credits stop accumulating three months after your death. Then, your surviving partner could continue group coverage by paying 100 percent of the University’s cost, using accumulated DDB credits or cash. The surviving spouse/partner also would be eligible for continuing health care coverage under the federal COBRA law, although that would likely be the most expensive option, Kozar said.

Retirees may choose among several health insurance plans; the second most popular is Freedom Blue PPO from Highmark, which gives higher benefits for “preferred providers” in Highmark’s network. Other types of health insurance Pitt offers “pick up where Medicare leaves off,” Kozar said, offering supplementary coverage to government-mandated benefits.

He urged potential retirees to apply for Medicare three months before they turn 65.

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It is rare for a private employer like Pitt to offer health coverage to retirees, Kozar noted: “It’s really a dinosaur, I hate to say.” But Pitt even offers dental and vision insurance to retiring employees. “These programs are pretty popular,” he said, with about 75 percent of active employees and about 50 percent of retirees participating.

Dental insurance from United Concordia will cost retirees $15.96 a month individually in 2014, and it covers preventive and diagnostic care at 100 percent reimbursement. Vision insurance from Davis Vision is similar to current employees’ Fashion Excellence vision coverage, at a cost of $6.98 a month next year.

Retirees also are eligible for up to $15,000 in life insurance, at $1,500 for every year of service, up to 10 years.

“That’s guaranteed coverage if you’re moving it,” Kozar said, so no new exams will be required. “What I hear from insurance carriers, that’s a dying — that’s a bad term — that’s coverage that keeps on being reduced.”

Optional Pitt life insurance may be continued as well — as long as you already have the coverage before retirement. “Probably the most critical thing is, as you become older, it’s harder to obtain life insurance coverage,” he said.

If you already had long-term care coverage as an active employee, you may continue this coverage upon retirement by paying for premiums directly to the insurance carrier, Unum, since payroll deductions have, of course, stopped. “You’re paying for a benefit you may never use, or you may not need for 30 years,” Kozar cautioned, but added that long-term care facilities can cost $3,000 a month and up, and “the government does not pay for long-term care.”

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Not all retirees are choosing to be covered by Pitt’s retiree medical plans, noted Jimenez.

“A lot of our retirees are getting full-time jobs and picking up benefits there,” she said, or gaining coverage under their spouse or partner’s insurance.

If you’re within a decade of retiring, concluded Kozar, or if you’re actively contemplating retirement, he recommended speaking with someone in his office “to make sure you’re on the right track toward retirement. We can certainly talk to you in person, by phone — whatever you’d like.”

—Marty Levine