Emeriti Retirement Health Solutions

As an introduction to the Emeriti Retirement Health Benefit, the following memo was destributed to all Employees when the Program was introduced:

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October 26, 2006

RE: Announcing a New Type of Benefit to Address an Important Retirement Need for You and Your Family

Dear Ithaca College Employee:

There is growing concern nationally about the future ability of Medicare to provide the same level of benefits as it does today. Currently, Medicare covers just over 50% of health care costs for those over 65, and medical expenses continue to rise. The new Medicare Part D benefit, which was effective January 1, 2006, will help with some of the expense for prescription drugs, but, on average, individuals will still have to pay about half of their prescription drug costs. Clearly, we will all need to save more and review carefully our health insurance coverage and ability to pay out-of-pocket medical expenses in retirement.

We are pleased to announce that beginning January 1, 2007, Ithaca College has adopted a new, comprehensive retiree health plan developed by Emeriti Retirement Health Solutions, a nonprofit consortial endeavor created by higher education leaders through the generous financial support of The Andrew W. Mellon Foundation. Ithaca College's Emeriti Program will help you to prepare for and meet your health care costs in retirement, including access to quality, comprehensive insurance, for yourself and your eligible dependents.

The key components of the new Program and the implementation date for a phase in of the Program during 2007 are:

• A tax-advantaged way to invest and accumulate assets to meet future retiree medical expenses — the Emeriti Health Accounts — with mutual fund choices and administrative services provided by Fidelity Investments®. The target date for the establishment of accounts is June 1, 2007 with the college contributions retroactive to January 1, 2007.

• A specially-designed health insurance program building upon the foundation of Medicare — the Emeriti Health Insurance Options — underwritten by Aetna Life Insurance Company and its affiliates. Eligible retirees who are age 65 and over will be able to join the plan as of January 1, 2007 with the enrollment period beginning on November 15, 2006.

• An innovative tax-free way to pay for other qualified out-of-pocket medical expenses — the Emeriti Reimbursement Benefit — administered by Acclaris, Inc., a third party administrator. This component of the program is scheduled to begin June 1, 2007.

Ithaca College will begin making contributions for all benefit-eligible active employees beginning at age 35 to help pre-fund the retiree health benefits that may become available to you and your family under the terms of the plan. You will also have an opportunity to make voluntary contributions as early as age 21. You will determine how the funds will be invested, choosing from several investment options. This is called a "defined contribution" funding approach, which means that the amount of funds available to you under the plan in retirement is determined by the contributions made to your Emeriti Health Accounts and the investment performance of those contributions. This approach is similar to our TIAA-CREF retirement plan in terms of how it is funded. In both our TIAA-CREF retirement plan and the Emeriti Program, Ithaca College makes before-tax contributions on your behalf during your working years, and any earnings accumulate tax free. However, the two plans are quite different in terms of how benefits are paid out. Under the retirement plan, distributions can be used for any purpose you choose, but they are generally taxable as ordinary income. In contrast, the balance in your Emeriti Health Accounts is available in retirement only for payment of health insurance premiums and reimbursement of other qualified medical expenses; but these amounts are paid out tax free, which can mean significant savings over paying medical expenses and health insurance premiums with retirement plan distributions. (Any contributions that you elect to make to the Emeriti Program are contributed on an after-tax basis; at retirement the full value of the assets are available to be paid out tax free to cover your medical expenses and insurance premiums.)

Ithaca College is proud to be part of this new opportunity. You will receive an invitation this coming spring to attend an informational meeting about the Emeriti Program. Representatives from Fidelity Investments, Aetna and Emeriti will be on hand to review investment options, health insurance coverage information, and specific details of Ithaca College's Plan. You will also receive an informational packet in the spring about the Emeriti Program, with important details about critical steps you will need to take. Please take time to review this material when it arrives.

We urge you to attend one of the informational meetings to be held in the spring, to watch for the packet in the mail, and to take advantage of the informational resources available through the Emeriti call center and website at www.emeritihealth.org. In the interim, if you have any additional questions, please don't hesitate to contact Cheryl Freer, Director of Benefits, x-3245.

Yours sincerely,

Carl Sgrecci
Vice President, Finance and Administration