Resolution: Self-insurance Reserve Funds for University Operations

Whereas, at a Faculty Senate meeting on January 24, 2006, then-Associate Vice President of Human Resources Susan Carkeek presented a proposal being advanced by Administration to convert the health insurance plans offered to UNM employees to a system of self-insurance that would be internally funded, but with claims administration and provider networks contracted to outside third-party administrators (TPAs), rather than continuing to purchase health insurance from external entities; and

Whereas, it was the understanding of the Faculty Senators present at that meeting that the funds under the self-insurance plan would be segregated from other University revenues and used exclusively for the benefit of UNM faculty and staff in order to provide for their health care needs; and

Whereas, up until this year such funds were in fact kept segregated from other UNM funds, and the aggregate of employee- and employer-paid premiums and any other funds received under the self-insurance plan accumulated as a surplus above that which was necessary for an actuarially calculated reserve; and

Whereas, operations budget planning for the 2016 fiscal year resulted in the Administration projecting a substantial deficit; and

Whereas, the Administration proposed, and the Board of Regents approved, use of approximately $3 million from the self-insurance reserves to balance the budget; and

Whereas, the document entitled REGENTS OF THE UNIVERSITY OF NEW MEXICO PREMIUM ONLY PLAN dated June 27, 2014 has as its stated purpose to allow the Plan to qualify as a "Cafeteria Plan" within the meaning of Section 125 of the Internal Revenue Code of 1986, as amended, and that the benefits which an Employee elects to receive under the Plan be excludable from the Employee's income under Section 125(a) and other applicable sections of the Internal Revenue Code of 1986, as amended; and

Whereas, Section 3.2 of said document entitled APPLICATION OF CONTRIBUTIONS states that “As soon as reasonably practical after each payroll period, the Employer shall apply the Salary Redirection to provide the Benefits elected by the affected Participants”; and

Whereas, Section 5.4 (e) of said document, entitled “Cost Increase or Decrease” states, in part “If the cost of a Benefit provided under the Plan increases or decreases during a Plan Year, then the Plan shall automatically increase or decrease, as the case may be, the Salary Redirections of all affected Participants for such Benefit”; and

Whereas, Section 6.1 of said document, entitled PLAN ADMINISTRATION states, in part “The operation of the Plan shall be under the supervision of the Administrator. It shall be a principal duty of the Administrator to see that the Plan is carried out in accordance with its terms, and for the exclusive benefit of Employees eligible to participate in the Plan” [emphasis added]; and

Whereas, subsection (e) of the aforementioned Section of said document states that duties of the Administrator include “To keep and maintain the Plan documents and all other records pertaining to and necessary for the administration of the Plan”; and

Whereas, Section 8.9 of said document, entitled FUNDING, states in part that “Unless otherwise required by law, contributions to the Plan need not be placed in trust or dedicated to a specific Benefit, but may instead be considered general assets of the Employer until the Premium Expense required under the Plan has been paid” [emphasis added]; and

Whereas, the Faculty Senate Operations Committee has received a legal opinion from an esteemed member of the Faculty of the School of Law advising that the transfer of funds from self-insurance reserves, which were in part derived from employee pre-tax contributions, obligates employees to pay increased federal, state, social security, and FICA withholding; obligates UNM to increase its own contribution to social security and FICA on behalf of each employee; and represents a Breach of Contract with respect to the stated salary contained in the contracts of those faculty and staff employed under contract; and

Whereas, the Faculty Senate is greatly concerned that the transfer of self-insurance reserve funds to the operating budget of the University may serve as a precedent for future such actions; and

Whereas, the Faculty Senate, by unanimous vote at the meeting held April 28, 2015 instructed the Operations Committee to draft a resolution expressing the Senate’s concern over the transfer of self-insurance reserve funds to the operating budget of the University and to present said resolution to the Faculty Senate for a vote of approval;

Now be it therefore Resolved, that transfer of self-insurance funds for uses other than for employee benefits not be permitted in the future but rather that funds in excess of required actuarially determined reserves be used to decrease premiums for both employees and the University; and

Resolved, notwithstanding the above, that the Faculty Senate expresses its appreciation of the good-faith gesture made by the Administration in providing a “premium holiday” for one month during fiscal year 2016 to all employees as partial compensation for the use of self-insurance reserves for purposes other than employee health benefits.

Adopted this 26th day of June 26, 2015 by majority vote of the Faculty Senate.