Post-retirement health benefit cost is too big to ignore

04-13-2010

Michigan State University has long been guided by principles blending our need to be competitive among our peers, fair to our employees, and good financial stewards to all our stakeholders. Compensation––salary and benefits––that reflects the marketplace is a key component.

One persistent concern over the past few years has been the growing cost of post-retirement health care benefits. Ours happen to be relatively generous––and in fact at a level that is no longer the norm. Michigan State is currently the only Big Ten university to offer fully paid retiree health benefits to new hires.

The long-term financial liability this benefit represents to us is estimated today at $1 billion and is expected to double every 15 years. If left unchecked, it will diminish our unrestricted assets and available working capital and impair MSU’s access to bond financing for critical projects.

This was acknowledged back in 2005, when negotiations with labor representatives anticipated the need to join other employers forced to eliminate support for post-retirement health care benefits.

As we face financial challenges known all too well by residents of Michigan, the time to make this change has come. Michigan State will no longer offer post-retirement health benefits to employees hired after July 1, 2010. This action has no impact on current employees or retirees.

This change is part of a long-term solution that will enable Michigan State University to operate on a sustainable financial basis that is consistent with the practices of our peer institutions and our financial capacity. I encourage you to follow the link below to read more about this decision.

Shaping the Future: Change in Employer-Paid Post-Retirement Health Benefits For Employees Hired On or After July 1, 2010

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