Presentation to

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EMERITI AS A STRATEGIC RETIREMENT BENEFIT
Presentation to University of Alaska Board of
Regents September, 2008
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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 UAs
  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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BEHAVIORAL IMPACT OF RETIREE MEDICAL ACCESS
Faculty Stay 18-36 Months Longer
Retirement Date
No Plan Some Support
High Support
Source Mellon Faculty Retirement Project (2000)
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University of Alaska Compensation Impact Delayed
Faculty Retirements
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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
Private Insurance 19
Individual Out-of-Pocket 20
Other Govt Programs 10
Medicare 51
Source The Employee Benefit Research Institute
(EBRI) 2006 estimates from the 2003 Medical
expenditure survey.
VA/Tricare 4, Medicaid 4, Other 2
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The Emeriti Solution
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EMERITIS 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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RETIREMENT PARADIGM SHIFT
Defined Benefit Promise
Defined Contribution Account

Social Security
403 (b) Pension Plan

501 (c) (9) EMERITI PLAN
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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EMERITIS RETIREMENT MODEL
EMERITI TRUST
STRUCTURE
EMERITI HEALTH ACCOUNTS
EMERITI INSURANCE OPTIONS
- Indemnity Medical Plans - Rx Plans
- Medicare Part C Plan -
Dental Plan
VEBA Trusts
Lifecycle Mutual Funds
Aetna Insurance Provider

Grantor Trust
Fidelity Trust
Administrator
Fidelity Investment
Provider
EMERITI
REIMBURSEMENT BENEFIT
Eligible out-of-pocket expenses incurred by
participants
NOTE Grantor Trust money can only be used for
Emeriti Insurance Options
Acclaris Claims
Processor
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TAX ADVANTAGESPlan Options Amounts into VEBA
Trusts
Depending on the organization, your employers
contributions may also include additional pre-tax
amounts in lieu of compensation or other
benefits.
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TAX ADVANTAGES
How to pay for 1,000 Out-of-Pocket Medical
Expense

Emeriti Health Account

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

ORP Retirement Plan

• 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

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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

NOTE These special employer contributions may be
made in any amount, but are limited to fully
insured products.
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TAX ADVANTAGE OF THE REIMBURSEMENT BENEFIT
Tax-free earnings can be used for reimbursement
of qualified medical expenses, such as

• 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)

Unlike a flexible spending account, any residual
balance stays in the employees account and
continues to grow tax free for future use
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.
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ADVANTAGES OF EMERITI INSURANCE

• 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

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EMERITIS BUILD YOUR OWN PLAN
APPROACH TO RETIREE INSURANCE COVERAGE
NEW in 2008

• Four Post-65 Medical Plans
• Choice of Two Medicare Supplement Plans
  (Original Medicare)
• Choice of Two Private Fee for Service Plans
  (Medicare Advantage)
• Three Medicare Part D Prescription Drug Plans
• Choice 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)

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EMERITI EDUCATIONAL COMMITMENTS

• Toll-free service center
• Dedicated website www.emeritihealth.org
• Printed enrollment materials
• Annual workshops on campus
• Periodic newsletters to active employees and to
  retirees

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Emeriti Funding, Services, and Fees
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CAMPUS POPULATIONS POTENTIALLY SERVED

• Prefunded Contributions for Active Employees
• Transitional Funding Support for Older Employees
• Insurance Access for Current Retirees

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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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EMERITI PROGRAM FEES
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
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Strategic Value of the Emeriti Program
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VALUE TO UA AND ITS EMPLOYEES

• Talent Management The Three Rs
• - Recruitment
• - Retention
• - Retirement
• Parity among Employee Groups
• - Equal opportunity for retirement security
• - Value-added employee benefit

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THINK STRATEGICALLY, THINK RENEWAL

• 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

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EMERITI CONTACT INFORMATION
EMAIL info_at_emeritihealth.org PHONE (866)
685-6565 (toll-free)
FAX [phone] (toll-free)
URL www.emeritihealth.org POS
T EMERITI Retirement Health Solutions 103
Executive Drive Suite 503
New Windsor, NY 12553
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ADDENDUM
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RETIREMENT BENEFIT DIFFERENCES
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POTENTIAL UNIVERSITY OF ALASKA COMPENSATION
SAVINGS via ORDERLY RETIREMENT
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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 Employers Emeriti Plan and the Emeriti
Program. For a full summary of the terms of your
Employers Emeriti Plan you must consult the SPD,
which will be provided to you upon enrollment or
upon request.
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Investment Adviser Status Emeriti 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.
Investment Decisions It 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.