Curators name themselves sole pension fund trustees
Editor's note: This is the first in a three-part series titled "UM employee pensions: When a promise isn’t an obligation."
For years, University of Missouri employees have been suffering through a string of UM Board of Curator decisions that have been described as an erosion of benefits. This year alone, the University’s Board of Curators has effectively eliminated future Cost of Living Adjustments (COLAs) for retirees and has cut 10 days from paid time off for active employees.
Curator Greg Hoberock, for one, is concerned that UM benefit programs have become “so high that we are not sustainable long-term” and describes himself as a proponent of “pounding on” benefit increases. He was the perfect choice of like-minded curators to chair the Finance Committee.
One of that committee’s six formal 2022 goals is to “Get fringe benefits under control.” (To satisfy those MU fans who “bleed black and gold,” one of the remaining five goals is to “continue to invest in athletics.”) This prevailing curators’ attitude toward employee benefits may be placing at risk the entire defined benefit UM retirement pension plan affecting 32,300 employees, retirees, and beneficiaries.
Some background is necessary. The retirement plan was adopted in 1958 after enabling state legislation was passed in 1955. The one-sentence decree gave the Board of Curators wide latitude in designing and administering the plan provided it did not expect the State of Missouri to pay for it.
It was permitted to use any existing monies that the board controlled to fund the plan, including any core allocation to the university, tuition received, football receipts, unrestricted gifts, etc. However, the legislature made it clear that they could not be expected to provide any additional resources to fund a retirement trust nor would they have any obligations to university retirees after they leave employment.
The curators adopted a retirement plan that named themselves (and only themselves) as trustees of a fund established to provide retirement benefits. Sole, exclusive trustees. I know of no other university where the trustees of the pension fund are identical to the Board of Curators (or board equivalent) responsible for setting all policies of the university.
According to the Boston College Center for Retirement Research, “as of 2018, on average, over half of [public pension] board members were [pension] plan participants, 15 percent were exofficio members, and 31 percent were members of the general public.” Importantly, 37% were elected.
UM is quite unique in having no trustees who are plan participants, either active employees or retirees, and having all members being unelected political appointees of the governor. To reiterate, the majority of pension fund trustees in other institutions are plan participants (active or retired employees). UM has none.
Fund trustees are important because, according to the National Association of State Retirement Administrators (NASRA), of which Missouri is a member, the first and foremost role of trustees is that they are “fiduciaries, and as such, are responsible for acting solely in the interest of plan participants.”
“Solely” means to the exclusion of everything else. Curators have multiple financial responsibilities that represent interrole conflicts of fiduciary interests. This is particularly troublesome when there are no other voices among pension fund trustees (i.e., employees or retirees) to counterbalance these curator competing motivations.
In the absence of state constitutional requirements or “property rights” providing ownership of the trust to plan participants, any protections provided to retirement plan participants defaults to those provided by the “contract clause” (Article I, Section 10) of the U.S. Constitution. Without special provisions provided in a UM employment contract, which some fortunate high-profile employees have, the governing contract is the UM “Collected Rules and Regulations” (CRRs).
The CRRs are thousands of pages of dense legalese. Except for a few university lawyers, few employees have probably read them or even know the document exists. They are written by the Board of Curators and are often amended requiring only five concurring votes from the nine-member board.
The primary section of the CRRs that governs the defined benefit pension plan, and is the employee’s pension contract with the university, is 107 pages long.
With massive investment losses in the pension trust fund experienced during the Great Recession of 2007-2009, the curators added a “required employee contribution,” of between one and two percent of pay, to what until then had been a defined benefit plan exclusively paid for by the university.
It was a mandatory donation without the ability to opt-out. However, the UM administration did not call it an involuntary pay cut. They called it a “reduction in Salary to Members.” Salary reductions are a retained right of the curators who, in a contentious CRR amendment, also delegate this authority to campus chancellors.
The mandatory donations to the Pension Trust Fund provided an immediate cash influx to a Pension Trust Fund otherwise teetering toward financial disaster. Moreover, it did so without increasing member benefits at all. As many expected, the pay cut was not rescinded after the recession crisis was over. The annual employee contributions continue to this date.
The last benchmarking of the pension plan was conducted in 2009. It was rated/ranked last among 15 peer universities, including Iowa, Iowa State, Kansas, and Nebraska. In 2017, the pension plan was closed to new members and replaced with a “defined contribution plan,” an alternative type of plan preferred at most universities over the defined-benefit pension.
However, 15,900 active UM employees and 11,000 retired employees and their beneficiaries remain pension plan participants and have an enormous financial interest in the existing Retirement Trust Fund.
One might think that the benefits held in the Pension Trust Fund are guaranteed by the university and the State of Missouri. But one would be wrong. As argued thus far, the governor-appointed Board of Curators has enormous, unshared, unilateral responsibility to dictate the provisions of the UM pension plan and its future distribution of financial benefits. UM employees and retirees must rely on the good intentions of the nine curators if their pension expectations are to be met.
Art Jago is Professor Emeritus of Management, Trulaske College of Business, at the University of Missouri. He is a former chair of the Department of Management, but now receives a university pension check each month after 23 years of service.
This article originally appeared on Columbia Daily Tribune: Curators name themselves sole pension fund trustees