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Presentation to University of Alaska

Board of RegentsSeptember, 2008

EMERITI AS A STRATEGIC RETIREMENT BENEFIT

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Broader Context of Retiree Health Care

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INSTITUTIONAL CONTEXT OF RETIREMENT PLANNING

No mandatory retirement age

Increasingly delayed retirement decisions

Aging demographics coupled with expanded life expectancy

Negative impact of delayed retirement on UA’s workforce

needs

Increasing end-of-career compensation pressures

Explosive trend in the active health care plan

Rising health care utilization at the end of career

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Faculty Stay 18-36 Months Longer

No Plan Some Support High Support

Source: Mellon Faculty Retirement Project (2000)

Retirement Date

BEHAVIORAL IMPACT OF RETIREE MEDICAL ACCESS

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University of Alaska Compensation Impact

Delayed Faculty Retirements

Total Cumulative Excess Costs (salary/benefits) Incurred with Delayed Retirement for One Individual (monthly view)

$34,500

$69,000

$7,200

$14,400

$6,088

$12,176

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

month18

month19

month20

month21

month22

month23

month24

month25

month26

month27

month28

month29

month30

month31

month32

month33

month34

month35

month36

Additional Salary Additional Health Costs Additional Disability/Life/Pension/403b

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EMPLOYEE PERCEPTIONS - RETIREMENT SECURITY

Dwindling employer commitment to retiree benefits

Erosion of defined benefit retirement plans in all sectors

Escalating cost of all medical services

Worries about access to “good” insurance

Anxieties about financial impact of a catastrophic illness

Concerns about outliving retirement assets

Preoccupation with long-term care expenses

Frustrations with complexities of Medicare

Perceived lack of insurer commitments to local market

Loss of control over health care decisions

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HOW RETIREE HEALTH CARE EXPENSES ARE PAID

Other Gov’t Programs*

10%

*VA/Tricare 4%, Medicaid 4%, Other 2%

Source: The Employee Benefit Research Institute (EBRI) 2006 estimates from the 2003 Medical expenditure survey.

Individual Out-of-Pocket

20%

Private Insurance 19%

Medicare 51%

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The Emeriti Solution

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EMERITI’S VALUE PROPOSITION

A strategic purchasing alliance of, by, and for higher education

An innovative retirement benefit paradigm

• tax-advantaged savings/investment accounts

• nationally accessible retiree medical plans

• reimbursement benefit for other health expenses

An educational framework for integrating health planning into retirement decision making

A single source administrative structure

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403 (b) Pension Plan

501 (c) (9) EMERITI PLAN

Defined Benefit

Promise

RETIREMENT PARADIGM SHIFT

+

Defined Contribution

Account

Social Security

Medicare +NOTE: Emeriti is made possible through the generosity of The Andrew W. Mellon Foundation and The William and Flora Hewlett Foundation.

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EMERITI TRUST STRUCTURE

EMERITI HEALTH ACCOUNTS

EMERITI INSURANCE OPTIONS

Lifecycle Mutual

Funds

EMERITI REIMBURSEMENT BENEFIT

EMERITI’S RETIREMENT MODEL

Grantor Trust*

VEBA Trusts

Eligible out-of-pocket expenses incurred by

participants

Fidelity: Trust Administrator

Fidelity:

Investment Provider

Acclaris: Claims Processor

- Indemnity Medical Plans - Rx Plans - Medicare Part C Plan - Dental Plan

Aetna: Insurance Provider

*NOTE: Grantor Trust money can only be used for Emeriti Insurance Options

$

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Emeriti Plan Who Pays Contributions Earnings Payout

Required Employer Pre-tax Tax free Tax free

Strongly Encouraged

Employee Voluntary

After-tax Tax free Tax free

Optional by Plan

Employee Mandated*

Pre-tax Tax free Tax free

*Depending on the organization, your employer’s contributions may also include additional pre-tax amounts in lieu of compensation or other benefits.

TAX ADVANTAGES

Plan Options; Amounts into VEBA Trusts

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TAX ADVANTAGES

How to pay for $1,000 Out-of-Pocket Medical Expense

Tax-free withdrawal of $1,000 100 cents on the dollar Equals $1,000

Emeriti Health Account

Taxable withdrawal of $1,000 72 cents on the dollar (28%

federal tax does not include any state taxes)

Equals $720 To get $1,000 after tax would

require a withdrawal of $1,389

ORP Retirement Plan

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TAX ADVANTAGES

Employer-Selected, Special Contributions into Grantor Trust

Workforce Management Flexibilities

Retirement Incentives

Retention Opportunities

Recruitment Strategies

Special Transition Contributions

PAYER CONTRIBUTION EARNINGS PAYOUT

EMPLOYER ONLY (non-profit)

Pre-tax Tax free Tax free

NOTE: These special employer contributions may be made in any amount, but are limited to fully insured products.

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Pre-65 health insurance premiums

Supplemental insurance deductibles, co-insurance, co-pays

Vision, dental, hearing care

Over-the-counter drugs

Long-term care insurance

Medical expenses associated with nursing or in-home health care services

Medicare premiums and cost shares

Other post-65 insurance premiums (if Emeriti coverage is not elected)

NOTE: A wide range of health care expenses apply for tax-free reimbursement as long as they satisfy the requirements of Section 213 (d) of the IRS Code.

Unlike a flexible spending account, any residual balance stays in the employee’s account and continues to grow tax free for future use

TAX ADVANTAGE OF THE REIMBURSEMENT BENEFIT

Tax-free earnings can be used for reimbursement of qualified medical expenses, such as:

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Guaranteed issue group health insurance coverage

A menu of options to fit your personal needs

Catastrophic protection

Prescription drug coverage

Nationwide access

Annual enrollment choice

Foreign urgent or emergency care

Preventive care

Builds on the foundation of Medicare

ADVANTAGES OF EMERITI INSURANCE

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Four Post-65 Medical PlansChoice of Two Medicare Supplement Plans (Original Medicare)

Choice of Two Private Fee for Service Plans (Medicare Advantage)

Three Medicare Part D Prescription Drug PlansChoice of Formularies

Choice of Coverage in the “Gap”

Choice of mail order and retail pharmacy supply

One Optional Dental Plan

Pre-65 Retiree Health Plans (coming in 2009)

EMERITI’S BUILD YOUR OWN PLAN APPROACH TO RETIREE INSURANCE COVERAGE

NEW in 2008

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1. Toll-free service center

2. Dedicated website www.emeritihealth.org

3. Printed enrollment materials

4. Annual workshops on campus

5. Periodic newsletters to active employees and to retirees

EMERITI EDUCATIONAL COMMITMENTS

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Emeriti Funding, Services, and Fees

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I. Prefunded Contributions for Active Employees

II. Transitional Funding Support for Older Employees

III. Insurance Access for Current Retirees

CAMPUS POPULATIONS POTENTIALLY SERVED

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OTHER POTENTIAL BENEFITS

Potential Savings from more timely retirements

Potential Savings on Active Health Plan

Competitiveness

Greater opportunity for instructional renewal

Combinations of the above

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EMERITI SERVICES

Legal Structure

Plan Design

Evaluation Tools (Funding Models)

Plan Documents

Regulatory Compliance

Communications to employees and retirees

Enrollment and ongoing education

Negotiation of insurance rates and plan provisions

Service and performance monitoring of partners

Ongoing evaluation and feedback from members

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1. Required one-time institutional implementation fee: $25,000.

2. Optional institutional cost sharing of participant fees: Emeriti account fee: $4.00/mo.

Fidelity record-keeping fee: Actives $1.67/mo., Retirees $6.25/mo.

Fidelity investment management fees: variable

Reimbursement benefit claims processing fee: first 4 submissions free, thereafter $6.00/bundle of receipts

EMERITI PROGRAM FEES

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Strategic Value of the Emeriti Program

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■ Talent Management: The Three “Rs”

- Recruitment

- Retention

- Retirement

■ Parity among Employee Groups

- Equal opportunity for retirement security

- Value-added employee benefit

VALUE TO UA AND ITS EMPLOYEES

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■ Value of Group Sponsored Consortium Based Insurance

- Guaranteed issue, fully portable

- Flexible menu of options, annual choice by retiree

■ Single Source Solution

- Comprehensive approach (savings and insurance)

- Integrated service delivery (enrollment, communications, education) - Reduced administrative responsibilities

THINK STRATEGICALLY, THINK RENEWAL

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EMAIL info@emeritihealth.org

PHONE (866) 685-6565 (toll-free)

FAX (866) 686-6565 (toll-free)

URL www.emeritihealth.org

POST EMERITI Retirement Health Solutions 103 Executive Drive – Suite 503

New Windsor, NY 12553

EMERITI CONTACT INFORMATION

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ADDENDUM

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RETIREMENT BENEFIT DIFFERENCES

RETIREMENT INCOME 403(b) Plan-Available Now

RETIREMENT HEALTH CARE Plan-Available with Emeriti

General income protection Dedicated health security

Unrestricted distributions for any purpose

Qualified distributions for eligible medical expenses

Tax-deferred earnings Tax-free earnings

Fully taxed at distribution Tax-free disbursements for qualifying medical expenses

Taxable, unqualified death benefit (assignable to any designated beneficiary)

Tax-free lifetime asset distribution for health care (assignable to eligible spouse, partner, other federally defined dependents)

Residual balance is payable to estate Residual balance reverts to plan

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POTENTIAL UNIVERSITY OF ALASKA COMPENSATION SAVINGS via ORDERLY RETIREMENT

EMERITI RETIREMENT HEALTH SOLUTIONSPotential University of Alaska Compensation Savings via Orderly Retirement

Compensation Differential:

Full Professor Assistant Professor Replacement

Annual Salary1 Annual Salary1 Differential85,000$ 62,000$ 23,000$ Annual

Full Professor Assistant Professor Replacement

Benefits Percentage2 Benefits Percentage2 Differential $22% 22% 5,060$ Annual

Full Professor Assistant ProfessorPEPM Health PEPM Health Replacement

Insurance Cost3 Insurance Cost Differential800$ Month 400$ Month 400$ Month

9,600$ Annual 4,800$ Annual 4,800$ Annual

Totals 113,300$ 80,440$ 32,860$ Annual

Notes: 1) Provided by University of Alaska2) Estimate of pension, and other benefits as a percentage of salary; excluding healthcare 3) Aetna costs for Emeriti Pre-65 - 2009 average premium for mid level plan - Alaska

Assumptions:Approximately 50 full-time staff over the age of 60 of which 15 are Full Professor faculty

If 5 of these faculty members could be induced to retire and replaced with Assistant Professors, the annual compensation savings = 164,300$

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Emeriti Retirement Health Solutions provided this information and is responsible for its content. The Emeriti Program, Aetna Life Insurance Company, Fidelity Investments, HealthPartners (in Minnesota), and Acclaris Inc., are independent corporations and are not legally affiliated.

The full name of Emeriti Retirement Health Solutions is The Emeriti Consortium for Retirement Health Solution, an Illinois Nonprofit Corporation.

Emeriti Retirement Health Solutions is not an insurance company, insurance broker or insurance provider.

Summary Plan Description (SPD)This presentation is intended to provide you with a brief summary of some of the details of your Employer’s Emeriti Plan and the Emeriti Program. For a full summary of the terms of your Employer’s Emeriti Plan you must consult the SPD, which will be provided to you upon enrollment or upon request.

A benefit program of, by, and for colleges, universities, and higher education-related tax-exempt organizations.

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Investment DecisionsIt is your responsibility to select and monitor your investments to make sure they continue to reflect your financial situation, risk tolerance and time horizon. Most investment professionals suggest that you reexamine your investment strategy at least annually or when your situation changes. In addition, you may want to consult an investment adviser regarding your specific situation.

Unless otherwise noted, transaction requests confirmed after the close of the market, normally 4 p.m. Eastern time, or on weekends or holidays, will receive the next available closing prices.

Recordkeeping and shareholder services for the Emeriti Program are provided by Fidelity Investments Tax-Exempt Services Company, a division of Fidelity Investments Institutional Services Company, Inc.

Strategic Advisers, Inc., a subsidiary of FMR Corp., manages the Fidelity Freedom Funds

Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges and expenses. For this and other information, call or write Fidelity for a free prospectus. Read it carefully before you invest.

An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although money market funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in these funds.

Investment Adviser StatusEmeriti Retirement Health Solutions is a registered investment adviser for purposes of selecting the range of investment options for the Emeriti Program, selecting the investment manager for employer and voluntary employee contributions, and providing these and other impersonal educational materials to plan participants. Emeriti does not provide advice to participants about their individual investment selections.

The participation interests in the voluntary employee contribution VEBA trusts associated with the Emeriti plans (the “Interests”) may be treated as securities under various state securities laws. The offering of these Interests is subject to compliance with any applicable state law. For residents of Georgia, the Interests are being offered in reliance on paragraph 13 of Code Section 10-5-9 of the Georgia Securities Act of 1973, as amended (the “Georgia Act”). The Interests may not be sold or transferred except in a transaction which is exempt under the Georgia Act or pursuant to an effective registration under the Georgia Act.