Approved by the:
Faculty Senate - October 3, 2002
Administration - PENDING
Board of Regents - PENDING
New tenure track assistant professors must be employed for two years before they can join the Faculty Retirement Plan. The funds that would be contributed to the retirement plan have been given to their colleges by Central Administration. Currently, however, the funds in the colleges are used for "other" purposes. In contrast, P&A staff whose salary exceeds $55,000 join the Faculty Retirement Plan at time of hire. It also should be noted that no other Big Ten University has a waiting period for new faculty.
If new tenure track faculty received their retirement benefits for the first two years of their employment at the University, an analysis indicates their retirement income could be as much as 17% higher than under the present plan.
Because of compounding, the first two years of retirement contributions play a very significant role in the retirement benefits of a faculty member. A simple analysis, using reasonably conservative and historical values for salary increases and growth of retirement funds from investment gains, shows the importance of these contributions. Thus, providing the first two years retirement benefits would result in an increase of 13-17% in a faculty member’s retirement plan after a thirty-year career. Our retirement program, which many of us boast about as being among the very best in the nation, is drastically reduced by this loss.
If there is a need for taking money from individuals’ retirement accounts, then the colleges would be better served taking money from the last years of a faculty member's service, rather than the first two years. Thus, because of "the power of compounding," the first two years of retirement investment provides more in the final retirement balance to an individual than the last eight to ten years of retirement contributions in a thirty-year career and the last twelve to thirteen years over a 40-year career.
Not being able to provide retirement benefits for starting tenure track faculty has resulted in some programs placing new hires in P&A status, where they can start their retirement program immediately, and then moving them over to faculty status after a few years. This procedure, in our view, is not the way to handle the issue. Rather, since the retirement funds are already available in the colleges and in many cases in departments, we believe the University should immediately grant retirement benefits to all starting tenure-track faculty.
The Senate Committee on Faculty Affairs had asked the administration to drop this two-year waiting period for new faculty. Unfortunately this has not, as yet, been approved. SCFA believes the waiting period puts the University at a disadvantage in recruiting. It also believes the difference between faculty and P&A appointments in terms of initiation of retirement plans is unfair and ill-advised.
SCFA recommends to the Faculty Senate that it ask the administration and the deans to reconsider their position on this issue. In view of the importance of the first two years of contributions to the retirement plan, the Committee once again urges that the waiting period for Faculty Retirement Plan be eliminated for new tenure-track faculty.
Adopted unanimously May 14, 2002.