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A Death Benefit Lives On

A Death Benefit Lives On
September 20, 2010

In these economically trying times, most colleges are tightening their purse strings, and many administrators are standing behind unpopular decisions. But Dartmouth College administrators took so much flak for a recent budget cut that they reversed it — sort of.

The college backtracked on its somewhat sudden elimination of retiree death benefits — a one-time, $5,000 payout to the family of any eligible retired employee who dies — after retirees learned last month that the college was planning to cease payments completely on Jan. 1. They, along with their families, union members and local media, called the budget cut unfair and significant. The college even found itself facing the suggestion that its policy change might affect the end-of-life choices of some retirees.

So on Wednesday, Dartmouth announced in a letter to college employees that it would reinstate the benefit to current retirees and anyone who retires through Dec. 31, even if they die years into the future.

Steven Kadish, executive vice president and chief financial officer at Dartmouth, maintained that eliminating the benefit would have been an appropriate budget cut. But he said the public's objections, which included some "really terrific input" and "very objective and clear presentations," made clear the benefit's importance to the planning and decision-making of retirees and their families.

The retiree death benefit is "not common at all" in higher education, said Andy Brantley, president and CEO of the College and University Professional Association for Human Resources. He said employers must "constantly evaluate the benefits that they provide" to ensure they're serving every employee as best they can.

However, "It is typical that colleges and universities will do their best to give as much notice as possible regarding any pending benefits changes," Brantley added. "This is obviously an attempt by Dartmouth to do so."

Kadish said the rarity of the policy did factor into its elimination.

And in last week's letter to employees, Kadish and Provost Carol Folt wrote that the college's strategic plan involved examining benefits. "It was the intention that all employees and retirees collectively share in the changes necessary to return Dartmouth to sound financial footing," they wrote.

The policy was part of "$8 or $9 million" in benefits cuts Dartmouth made as part of its strategic plan, an attempt to close a $100 million budget gap by 2012, Kadish said. The death benefit costs $150,000 to $200,000, "maybe as much as $300,000," annually. Dartmouth is in a position to close this year's budget gap of $54 million.

The college won't have to make any additional cuts this year to pay for the cost of temporarily reinstating the death benefit, Kadish said. "We'll be able to absorb this. I don't know how yet, but we're going to figure out how to find an offset for this expense."

One of the most pronounced critics of the initial benefit elimination was the local Valley News, which went so far as to suggest that between now and Jan. 1, "end-of-life decisions could be influenced."

"This may seem unlikely, but it's not so hard to imagine that a terminally ill retiree might consciously, or subconsciously, make decisions about care that reflected the absence of the death benefit and the effect on his or her family," the paper wrote in a Sept. 1 editorial titled "Broken Promise: Dartmouth and death benefits."

Of course, recent developments make this point a non-issue. But Kadish was still disturbed by the editorial's implications. "I can't imagine that anyone would be making a health care or life decision based upon this," Kadish said. "It was just a really ill-considered statement."

The death benefits policy was established in the 1960s and grew over time, Kadish said, though nobody at the college can say how it got started.

The financial officer sees a moral to this story, which was articulated in the letter last week: "As always, we encourage current employees to take advantage of life insurance benefits and to take the option of continuing these after leaving Dartmouth."

 

 

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