1. OPEN – C&HR – 1 June 13-14, 2013 OPEN – C&HR – 1 June 13-14, 2013 Board of Curators Compensation and Human Resources Committee June 13-14, 2013

2. OPEN – C&HR – 2 June 13-14, 2013 Total Rewards Ad Hoc Task Force (Information Item)

3. OPEN – C&HR – 3 June 13-14, 2013 Task Force Charge  Charge: Development and communication of recommendations regarding the Total Rewards Program for employees and retirees and to facilitate communication  Components:  Includes all health and welfare programs  Preserves the value of current retirement plans  Does not include mandatory programs or salary and wage decision  Representative of employee, retirees and community

4. OPEN – C&HR – 4 June 13-14, 2013 Health Care Reform (PPACA) Update

5. OPEN – C&HR – 5 June 13-14, 2013 UM Cost Impact of PPACA YearProvisionsCost impact 2010-2011 Adult child coverage to age 26 No lifetime dollar limits/restricted annual dollar limits on essential health benefits No pre-existing condition exclusions for enrollees under 19 First-dollar preventive care coverage $864,000 No impact Minimal impact 2013 W-2 issued (using 2012 information) Additional Medicare tax & unearned income contribution $2,500 cap on pretax contributions to health FSAs Minimal impact No impact to UM 2014 Employer mandate Revenue raisers Transitional reinsurance fee (TRF) PCORI tax Positioned to avoid penalty, risk of non-compliance $39M $2.4 Million TRF $43,623 PCORI 2015-2017 Automatic enrollment – required to enroll eligible employees in a plan To be determined 2018 Excise Tax To be determined

6. OPEN – C&HR – 6 June 13-14, 2013 UM Population Population# of employees Benefit Eligible19,100 Non Benefit Eligible18,670 Total37,770 University of Missouri Population

7. OPEN – C&HR – 7 June 13-14, 2013 Definitions  Fully Benefit Eligible – based on primary job  75 percent FTE and a 9 month or greater appointment  Eligible for all benefit plans  Variable Employee – based on all concurrent jobs  Individual whose appointment is less than a 75 percent FTE, and/or does not have a 9 month or greater appointment  Eligible for medical if averaging 30 hours or more per week during the measurement period

8. OPEN – C&HR – 8 June 13-14, 2013 Eligibility Changes  Clarify employment status definitions in CRR 320.050 to comply with “Shared Responsibility” provisions in PPACA  Fully benefit eligible academic appointment  Fully benefit eligible regular employee  Variable employee  Retiree  Student  Update eligibility language in Medical, Dental, Long-term Disability and Flexible Benefits Plans

9. OPEN – C&HR – 9 June 13-14, 2013 Eligibility Changes – All Health and Welfare Benefit Plans  The sponsored adult dependent of an employee or retired employee, so long as the employee or retired employee does not have a spouse  Criteria:  Same principle residence for at least 12 months  Over age of 18  Not currently married  Not related to employee  Not Medicare eligible

10. OPEN – C&HR – 10 June 13-14, 2013 Retirement Plan Assumptions

11. OPEN – C&HR – 11 June 13-14, 2013 Cost Impact of Changes in Assumptions AssumptionChangeImpact Future MortalityPeople are living longerIncreased cost Termination of Employment Overall turnover decreased/vesting increased Increased cost Retirement RatesPeople are waiting to retireDecreased cost Future SalariesActual increases in past 5 years lower than assumption Decreased cost Investment ReturnLowering expected return on investments Increased cost Disability ratesDisabled members earning service creditNo change The net impact to the Required Employer Contribution is an additional $6.3 million.

12. OPEN – C&HR – 12 June 13-14, 2013 Investment return assumption Investment Consultant ALM Study April 2012 Investment Consultant ALM Update Q1 2013 Assumptions Recommended by Actuarial Study Expected Investment Return8.00%7.40%7.75% Expected Inflation2.30%2.40%2.75% Total Expected Real Return5.70%5.00% Based on the latest available Public Fund Survey data, the median expected real return assumption was 4.50% (based on 126 plans with $2.7 trillion in plan assets). When comparing the investment consultant’s expected investment returns to those utilized in the University’s actuarial study, it is important to look at the real return expectations (gross expected returns less assumed inflation). Due to different time horizons, inflation assumptions will often be different between the two.

13. OPEN – C&HR – 13 June 13-14, 2013 Downward trend of return assumptions 7.77% Current Average Return Assumption (top 126 public pension plans)

14. OPEN – C&HR – 14 June 13-14, 2013 Amortization of Unfunded Liability As of 10/1/2012 Actuarial Accrued Liability$3.3 billion Actuarial Value of Assets$2.8 billion Unfunded Liability$0.5 billion The Retirement Plan has historically amortized any unfunded liability over a 20 year period using the level dollar method. A switch to a 30 year amortization period was reviewed. While a switch could result in a 0.30% reduction in the required contribution rate in the near term, it would ultimately lead to higher annual costs for the Plan in later years.

15. OPEN – C&HR – 15 June 13-14, 2013 Upcoming GASB Changes Beginning in FY 2014, the annual income statement expense associated with the Retirement Plan will be largely governed by new Governmental Accounting Standards Board guidance for public pension plans. The actuarial assumptions just discussed will continue to drive the amount of required contributions to the Plan each year. Currently, the required contribution and the annual expense are the same; that will no longer be the case going forward.