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New Retirement Planfor New Employees

Board of CuratorsOctober 20-21, 2011

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New Retirement Plan: Final Recommended Plan Design

Plan Design Elements New Retirement Plan Current Retirement Plan Defined Benefit Portion

Multiplier Formula 1.0% of Pay, average of 5 highest consecutive years of

salary

2.2% of Pay, average of 5 highest consecutive years of

salary UM Contribution 3.21% of salary 7.25% of salary

Vesting 5 years 5 yearsEmployee Mandatory

DB Contribution1% up to $50,000, 2% of amount

above $50,0001% up to $50,000, 2% of amount

above $50,000Minimum Value Accumulation

None 5% of pay per year with 7.5% interest

Defined Contribution Portion

UM Automatic Contribution

2% of Pay

UM Match 100% up to an additional 3% of pay

Vesting 3 years (need not be consecutive)

Estimated UM Contribution

7.4 to 7.7% of Pay 7.25%

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New Retirement Plan: Cost Comparison and Considerations

» New Retirement Plan Projected Total Additional Cost› 15 to 45 basis points higher-- as a percent of total salaries

By 2031:» 80% of employees will be in the new plan» Projected reduced unfunded liability of $300 million

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Year Low End Additional Cost High End Additional Cost

2013 $173,000 $518,000

2031 $2,231,000 $6,693,000

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New Retirement Plan: Re-employment Scenarios

Scenarios apply to employees, long term disability claimants and retirees who have left or leave University of Missouri (university) employment, and return to the university on or after October 1, 2012Considerations:»Did the employee vest in the Current Retirement Plan?»Did the employee cash out of the plan?

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Re-employment Scenario: Vested in Current Retirement Plan

Upon re-employment on or after October 1, 2012

» Vested employee who did/does not cash out: Return to Current Retirement Plan

» Vested employee who cashes out: Enrolled in the New Retirement Plan

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Re-employment Scenario : Not Vested in Current Retirement Plan

Upon re-employment on or after October 1, 2012

» Not vested: Enrolled in the New Retirement Plan› Those who do not cash out upon termination will

regain service credit if they meet vesting requirements› Those who cash out upon termination will not retain

service credit

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Summary of Recommended Action – New Retirement Plan for New Employees

A. The Board of Curators has reviewed information and recommendations at previous meetings.

B. The Board of Curators voted on June 17, 2011 to reaffirm to retired university employees, as well as to current university employees that the university has every intention of honoring the university’s obligations under its Current Retirement Plan.

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C. The Board of Curators is unable to predict with certainty future events and future pressures, economic and otherwise, which will face future Boards of Curators as they strive to govern the University of Missouri.

Summary of Recommended Action – New Retirement Plan for New Employees (continued)

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D. The Board of Curators also voted to plan to close the Current Retirement Plan to new university employees who commence employment with the university after September 30, 2012.

E. The Board of Curators hereby closes the Current Retirement Plan to new employees who commence employment after September 30, 2012, and establishes the New Retirement Plan prior to commencement date of October 1, 2012.

Recommended Action – New Retirement Plan for New Employees (continued)

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F. University employees who commence university employment on or after October 1, 2012 will be covered under the New Retirement Plan.

Re-employment scenarios were discussed previously.

Recommended Action – New Retirement Plan for New Employees (continued)

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G. The New Retirement Plan will be comprised of two separate retirement benefits.

1. Defined Benefit portion will be similar in structure to the Current Retirement Plan. › Includes multiplier formula of 1.0% of pay › Computation of highest average will be identical to

Current Plan› Vesting will be identical to Current Plan› Employee contributions will be identical to the

Current Plan

Recommended Action – New Retirement Plan for New Employees (continued)

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2. Defined Contribution portion will be established as an IRS 401(a) plan;

› Includes a university contribution of 2% of pay to employee-directed investment account;

› Vesting will be three nonconsecutive years of university employment beginning October 1, 2012;

› Employees may elect to make voluntary contributions which will be matched 100% by university contributions up to 3% of pay;

› Investment providers, funds and policies will be monitored by a university administration investment committee

Recommended Action – New Retirement Plan for New Employees (continued)

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Next steps – Recommendations to Board

» Vendor selection – December 8, 2011» Retirement Plan document revisions/additions –

December 2011; February, April and June 2012› Fiduciary roles and responsibilities – December 2011› Employee communications/education programs –

December 2011» Plan activation October 1, 2012

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