Collaboration on Retiree Health Benefits

Once competitors, TIAA-CREF and Emeriti team up to promote their products and persuade colleges that a major liability is looming.
July 12, 2011

TAMPA, Fla. -- TIAA-CREF and Emeriti Retirement Health Solutions have apparently decided that they're stronger collaborating than they are in competition.

Two years ago, TIAA-CREF, the pension and investment giant, announced that it would create a new division to help colleges help their employees save for health care coverage after they retire. The Retirement Health Care Savings Plan was designed to give colleges (and TIAA-CREF's other nonprofit clients) ways to shrink the unfunded liability that many of them have in their defined-benefit retiree health plans and while still providing post-retirement health care coverage to their employees.

And it was also framed as direct competition for Emeriti, a nonprofit company founded in 2005 to provide just those services to colleges and their workers.

On Monday, TIAA-CREF and Emeriti announced that they (along with Savitz, a benefits administration company) would team up, with TIAA-CREF using its expansive network of campus and individual clients and its marketing might to expand Emeriti's reach, adding the organization's offerings to its own fledgling retiree health product. (Under the partnership, Savitz will handle many of Emeriti's back-end operations, administering group health insurance plans and handling record-keeping.)

In an interview at the National Association of College and University Business Officers here, officials of TIAA-CREF and Emeriti said their collaboration was designed -- obviously -- to increase the reach of both companies' retiree health programs, which have struggled to gain customers. (Ken Cool, Emeriti's president, said it had attracted 50 member institutions and 26,000 individual customers in its six years of operation, and TIAA-CREF had "about a dozen institutions" -- colleges and K-12 schools -- using its program, said Doug Chittendon, senior vice president for institutional project management there -- short even of the 15-20 that Chittendon predicted the company would attract in 2009, its first year.)

But the partnership may be more important, Chittendon said, to the extent that it can "bring together a strategic focus on this important issue" of retiree health benefits, the looming costs of which many campuses have failed to acknowledge, as Jane Wellman and other higher education finance experts have repeatedly argued. Chittendon and Cool said that the relatively small number of colleges that had signed on with either company showed that many institutions still had not recognized the significance of their retiree health care problem.

"The key is to get colleges and universities to recognize the importance of this process, and the need to fund today these future liabilities," said Chittendon.

Cool said that the partnership came about because Emeriti was looking to "take the next step" in its evolution and sought (through a competitive process) partners to help it expand its reach. He described the fit with TIAA-CREF as "natural" because the two share a nonprofit orientation.

Chittendon said that TIAA-CREF would add Emeriti's services to its own array of offerings when its network of campus consultants work with colleges and their employees on retirement issues, and that an individual college's circumstances will determine whether Emeriti's program or TIAA-CREF's own would be the better fit. Emeriti's approach has been embraced almost exclusively by private colleges; public institutions whose employees are in state-funded pension plans, and do not have control over those funds, often cannot set up the Emeriti health accounts into which the employees and institutions pay funds to provide for eventual retirees' health care, Chittendon said.

Together, Emeriti and TIAA-CREF should have options for any institution, Cool said. "There is no one magical solution," he said. Different colleges need different approaches to their retiree health care issues, "and that's the flexibility we have to address together."


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