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University of Pennsylvania New Retiree Medical
Benefits Program

To the University Faculty, Staff and Retirees:

We are pleased to acknowledge the set of recommendations on the Retiree Medical Benefits Plan put forward by the Retiree Benefits Task Force and the Human Resources Division and reviewed by the Personnel Benefits Committee of the University Council, the Council of Deans, the Academic Budget and Planning Committee, and the Faculty Senate. They were published for comment in the Almanac on March 15, 2005. The recommendations have now been forwarded to us for review and action.

On the Tax-Deferred Retirement Plan (TDR), we accept the following recommendation:

•  The University will make no changes in the current TDR contribution policy.

On the Retiree Medical Plan, the following will be effective as of January 1, 2006:

With regard to plan design, the University will:

•  Retain the current medical plan options with the exception of the UPHS/Keystone/AmeriHealth Point of Service Plan for retirees under the age of 65.

•  Add a new Aetna Indemnity Plan for Medicare-eligible retirees.

•  Carve out the prescription drug plan to Caremark and offer Medicare-eligible retirees the ability to elect a medical plan and a prescription drug plan. In addition, retirees will be able to opt out of Penn’s prescription drug plan to enroll in the Medicare part D program should they wish.

•  Cease availability of Independence Blue Cross 65 Special, as currently structured, upon retirement of new hires who start on January 1, 2006 and later.

With regard to premium subsidies (for both the medical and prescription drug plans), the University will:

•  Retain the medical and prescription drug plan 100% subsidy rate for retirees and their spouses/partners who left service prior to July 1, 1996.

•  Eliminate the current graded subsidy for medical and prescription drug plans based on age at retirement. Instead, there will be a single 60% subsidy rate for eligible retirees after July 1, 1996 and their eligible spouses/partners. This subsidy will be based on the lowest-cost medical plan premium for pre-65 retirees and the lowest-cost indemnity plan premium for Medicare-eligible retirees.

•  Subsidize retiree medical and prescription drug plan premiums of new hires starting on January 1, 2006 at 60%; spouses/partners will be subsidized at 30%.

With regard to benefit eligibility, the University will:

•  Adopt a “Rule of 75” which states that age and service must total at least 75 to be eligible for retiree medical benefits, with a minimum of age 55 and 15 years of service or age 62 and 10 years of service.

•  Apply a “Rule of 75” to all other retiree benefits including the tuition program, group life, and two new benefit offerings, namely a dental plan, and a long-term care plan.

•  Extend the current eligibility requirements (age 55 and 15 years of service or age 62 and 10 years of service) to current employees until December 31, 2008.

With regard to benefit policies, the University will:

•  Introduce an annual selection period when eligible retirees can make changes in plan options.

•  Implement a requirement that medical coverage must be elected at least 60 days prior to the last day of service. Those who do not enroll during this period will permanently waive participation in the program.

•  Cover eligible dependents enrolled on the last day of the retiree’s employment. Those who retired before July 1, 1996, who can currently add new dependents, will no longer be able to do so after December 31, 2005.

•  Require retirees who return to work at Penn to join a plan for active employees in order to comply with legal requirements. On subsequent termination, the policies, procedures, and premiums in effect at the second termination date will apply.

•  Reinstate medical and prescription drug plan coverage for a retiree in payment arrears only when premiums past due are paid within 90 days of the date the premiums were first due. Thereafter, coverage will be permanently cancelled.

For more complete information on the decisions of administration with regard to the Retiree Medical Program, please see Attachments 1 and 2.

Other Information

Prescription Drugs

•  The annual out-of-pocket maximum for prescription drugs will be $1,500 per individual and $4,500 per family. These amounts will be in effect for calendar year 2006 and are subject to change.

•  Medicare-eligible retirees will have the ability to opt out of Penn’s prescription drug plan to enroll in the Medicare Part D program.

•  A mail-order program for long-term or maintenance prescriptions will be introduced on January 1, 2006. Retirees will then have access to lower minimum co-pays and three-month supplies available by telephone or the web and delivered to their homes. The coinsurance and co-pays of the new plan are shown in Attachment 3.


•  A voluntary discount dental plan with Aetna will be introduced.  Retirees who enroll and visit a participating provider can anticipate an average discount of 28%. The charge for those who enroll in 2006 is expected to be $4 per month for individual coverage and $7 per month for family coverage.

Long-term Care Plan

•  A new group Long-term Care Insurance Plan with John Hancock will be introduced effective January 1, 2006. This plan will be offered to employees, retirees and other eligible family members. Premiums, which will be based on age, will be determined by John Hancock.    

These changes to the Retiree Medical Plan will, in our view, offer Penn retirees a competitive and cost-effective benefits package. We also believe that these changes are in accordance with the principles proposed by members of the Retiree Task Force and will help fulfill the University’s mission and goals.

Amy Gutmann, President

Ronald Daniels, Provost

Craig Carnaroli, Executive Vice President

Please note that the University reserves the right to change, amend or terminate any of its benefit plans at any time and for any reason.



  Almanac, Vol. 52, No. 4, September 20, 2005


September 20, 2005
Volume 52 Number 4


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