U may chip in 3% less for new employee retirement

New faculty and P&A employees would have to pay more out of pocket.

Evelina Smirnitskaya

The University of Minnesota may look less attractive to prospective faculty in 2012 should a proposal to slash University contributions to retirement get approval.

In an attempt to generate long-term savings, the University is considering cuts to retirement funding for all the new faculty and professional and administrative employees âÄî something that could create recruitment challenges and a chasm between new and existing employees.

The current proposal is to decrease the money given by the University to 10 percent, raising employeesâÄô input to 5.5 percent. Employees would get the same amount for retirement each year, but more would come out of their own pockets.

Currently, in addition to salary, the University pays 13 percent of each faculty and P&A employeeâÄôs salary for retirement while the employees contribute about 2.5 percent directly from their paychecks.

Under the proposal, a professor making $100,000 a year would get $10,000 for retirement benefits from the University instead of $13,000. To fill the gap, $5,500 would be deducted from the professorâÄôs salary instead of $2,500. The total yearly retirement benefits âÄî $15,500 âÄî would stay the same.

The proposal would bring the school in line with other large public universities, many of which spend less on retirement benefits.

If passed by the Board of Regents at its July meeting, the new plan could save the University $3 million the first year and increase to $10 million annual savings by the fourth year. It would take effect in January 2012.

âÄúThe idea is that we want to stay competitive, but we want make sure that our plans are similar to whatâÄôs being offered by other institutions,âÄù said Lori Ann Vicich, spokeswoman for the Office of Human Resources.

Compared to schools like the University of Michigan, where the schoolâÄôs contribution is 10 percent of a salary, or the University of TexasâÄô 6.4 percent, the University of MinnesotaâÄôs current 13 percent sticks out.

Vicich said the change will be a chance for the University to âÄúalign itself with the market.âÄù

With decreased benefits, some units within the University might find it necessary to increase salaries, Jacqueline Singer, OHRâÄôs retirement director, said.

But thatâÄôs highly unlikely in the current budget crunch.

If salaries do go up, it will help recruitment, said law professor Fred Morrison, a member of the University Senate Benefits Advisory Committee and one of many people consulted about the proposal. But he said if the salaries are not âÄúequivalently changed,âÄù prospective faculty will look elsewhere.

The ability to recruit, and even to retain, faculty is a major concern, said Dan Feeney, chairman of the University Senate Retirement Subcommittee.

âÄúWe just came out of a very extensive planning exercise in order to be a top public research institution,âÄù he said, âÄúand then all of a sudden now weâÄôre starting to have pay freezes and retirement cuts.âÄù

Changing benefits for existing employees was also considered, but Feeney said that with the current wage freeze and previous reductions, the cut could be too much.

ItâÄôs common for such policy changes to only affect new hires, which can create a distinction between employees âÄî and some resentment, said John Curtis, director of the Office of Research and Public Policy at the American Association of University Professors.

Combined with a growing gap in benefits and compensation between private and public universities, some prospective faculty are starting to favor private schools, Curtis said.

âÄúI definitely think itâÄôs going to be a continuing challenge for public colleges and universities to be able to hire the best faculty âÄî and keep them.âÄù