President Elson S. Floyd, Ph.D. - 2/2/09
The Voluntary Early Retirement Incentive
From the beginning of the effort to cut our university’s budget to meet today’s economic realities, I have stressed the importance of protecting current faculty, administrative/professional and classified staff to the greatest extent possible.
Within this context, however, it is important to note that about three-quarters of our budget is spent on personnel. Facing a cut in our state allocation of 12 percent, and perhaps more, we simply will not be able to balance our budget for the upcoming biennium without some significant reduction in employee costs. We need to think creatively about how those reductions might be made.
One possible tool in that effort is the Voluntary Early Retirement Incentive (VERI). I submitted a preliminary proposal for such a plan to the Board of Regents for discussion last week and have also discussed it with some members of the university community. The regents were supportive of the concept; our administration will continue to work through the details with an eye toward having a plan finalized to go back to the regents for their approval in the next few weeks.
This is not a new concept. Buyouts and early retirement incentives have become increasingly common, both in the public and private sectors, as our nation’s economic situation has worsened.
VERI would be available to faculty and staff 55 years of age and older who have been members of the WSU Retirement Plan for at least 10 years. Our analysis shows that approximately 600 employees meet those criteria.
As a retirement incentive, the university would place $18,000 in a tax-exempt medical expense account to bridge the gap for Medicare eligibility or simply to provide tax-free money to help defray medical costs. The $18,000 figure is roughly equivalent to three years of medical coverage for a single individual.
Classified employees are not members of the WSU Retirement Plan; they are covered instead by one or more state retirement plans. Extending the voluntary retirement plan to classified employees would require legislative action. If the regents approve VERI, we will move forward on that front as well.
How much would we save through this effort? We project the maximum budget impact of the faculty and staff portion of the plan at more than $52 million. In reality, while we believe the cost savings could be significant, we recognize that full amount will not be achieved. The plan is voluntary. Each individual would have to decide whether to take advantage of it. For each person who did retire, we would then have to determine whether that position would be refilled. Some retirees would have to be replaced, but the goal of the plan is to reduce our workforce significantly through voluntary actions as opposed to layoffs.
If we take a final plan to the regents and they approve it, we will hold open forums which will allow people considering retirement to discuss the details with retirement plan administrators.
To be eligible for the retirement incentive as currently defined, an employee would have to apply between March 1 and June 1 and retire no later than June 30, the end of the current fiscal year.
The experience, loyalty and dedication of our long-time WSU employees are among this university’s greatest assets. I certainly appreciate that commitment during these uncertain fiscal times. At the same time, the looming budget shortfall is forcing us to take steps we otherwise would not. If this plan becomes a reality, I encourage all those who qualify to take a careful look at it.