Part-time faculty pose health care coverage challenges

The world of higher education has long seemed like the land of ideal working conditions — tenured professors teaching classes on a leafy campus, with sabbaticals and such as the norm — but like the rest of the working world, even post-secondary institutions have had to come to grips with modern economic realities.

The impact of employees staying longer in the workforce has hit academic institutions hard, as many colleges and universities also try to figure out how to effectively track part-time instructors’ hours or provide retirement help to increase lifetime income for all employees.

And the increased need for health regulatory reporting due to the Affordable Care Act  — along with changes to retirement preparedness efforts — have left unforeseen side effects on higher education. In 2015, the ACA’s employer mandate takes effect for all employers; this includes employees that work in the varied world of academia.

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One of the top concerns for higher educational institutions has been to figure out how to effectively report hours of adjunct faculty — essentially contract workers — without facing a penalty. The prevalence of adjunct faculty has changed the look and feel of most colleges and universities. Using data from the U.S. Department of Education, the American Association of University Professors said in its annual report on the economic status of the profession for 2013-14 that part-time faculty grew by 286% over a 35-year span ending in 2011.

At the same time, full-time tenured and tenured track employees grew by just 23%. There was also 369% growth in full-time nonfaculty positions over the same period, including HR, training, labor relations specialists, lawyers, buyers and purchasing agents.

The AAUP says that more than 50% of all college faculties currently hold part-time appointments. From a benefits standpoint, this results in a large portion of the workforce that is likely ineligible for coverage. On top of the assumed tenured or tenured-track faculty, other employees include athletic coaches, student employees and other staff.

“There is range of different kinds of employees that other employers don’t have to consider, and that raises concerns for the colleges and universities,” says Edward I. Leeds, counsel at Ballard Spahr. “If [schools] provide particularly rich coverage to employees, whether they are faculty or staff, that’s going to be a concern for everybody. We will have to see what comes between now and 2018.”

Leeds alludes to the ACA’s excise tax — a 40% tax on employers that provide high-cost health benefits to their employees. The tax comes into effect in 2018.

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“The ACA has a couple of components that have kept universities and colleges up; the first one is the adjunct professors. There were no rules,” says Norm Jacobsen, Sibson Consulting’s higher education benefits team leader. Some additional clarity came in February, when federal guidance noted that it is reasonable for adjunct faculty to be credited “with 2¼ hours of service per week for each hour of teaching or classroom time as a reasonable method for this purpose.” Also, staff meetings fall into this category.

Health benefits changes

For the most part, the ACA has ushered in changes to health care benefits for higher ed employees. Recent data from the College and University Professional Association for Human Resources finds that approximately 62% of respondents are tailoring a plan to effectively follow the Internal Revenue Service guidance on reporting adjunct faculty hours. Fifty percent of their part-time staff and 80% of their part-time faculty work less than 30 hours a week, according to the nearly 600 public and private institutions surveyed.

“We do know that campuses around the country are assessing how they work with their adjuncts, in terms of managing hours and the impact that might have on whether or not the adjuncts are afforded the opportunity to participate in health care,” says CUPA-HR CEO Andy Brantley. “I think [later] in 2015, we will have a lot better data of what campuses have done in working with their adjuncts.”

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But there have been some changes, too. CUPA-HR’s 2014 Employee Healthcare and Other Benefits in Higher Education Survey notes that 41% of respondents have increased the employee’s piece of the premium cost due to the ACA. Also, 26% have increased in-network deductibles, and an increasing share for prescription and dependent coverage is now being shouldered by more employees.

“What the ACA has really done is sort of set the light bulb off to everybody on campus, not just HR. There’s got to be some substantial changes to not just the co-pays and deductibles but, overall how people utilize the plan, and their health and well-being,” says Jacobsen. “In higher ed, they are paternalistic. It’s a process, but it’s opened up the process for change.”

Retirement readiness?

Meanwhile, another fear on our country’s campuses is the millions of baby boomers that are prolonging their retirement in order to remain in the workforce. Fidelity Investments data indicate 74% of baby boomers plan to delay their retirement past the age of 65, or plan to never retire at all.

According to Brantley, campus and university administrators are working to figure out this problem.

“I do know that there is clear evidence of both the departure of a number of faculty or staff who are of retirement age, and also the challenge of those who chose to remain in the workforce and what that means for the opportunity of succession planning and the people moving up to different levels of responsibility,” he says.

Eventually, the facts all lead to a need for proactive change in college retirement planning, says David Ray, managing director and head of TIAA-CREF’s institutional retirement plan sales. Typically, the higher education  industry has used 403(b) retirement plans to support future lifetime income needs. At the end of 2013, the investment company estimated that 403(b) plans and 457 plans collectively held $1.1 trillion in assets.

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“One of the things that has been so beneficial in higher education was that they designed a retirement system around defined contribution that led to a fairly high level of retirement confidence in faculties that have been in that program for some period of time,” Ray continues. “But if 50% of your faculty and staff are not eligible for those benefits, retirement confidence is likely going to go down.”

Traditionally, the revenue model for higher education has remained with tuition and endowment donations, as well as a dependence on state and city funding for some.

But Ray explains that since “the cost of insurance is going up, the average age base of a university faculty is going up, and therefore the costs relating to those people is increasing as well.”