College unveils new retirement incentive plan

by Turia Lahlou | 12/18/08 10:13pm

Dartmouth announced a new retirement incentive plan for staff members on Dec. 11 " a move that represents the College's latest attempt to address its budget shortfall in the wake of the recent financial crisis. The plan, coupled with a hiring freeze announced in November, is part of the College's strategy to reduce spending without firing employees, according to Adam Keller, vice president for finance and administration.

Under the incentive plan, employees over age 55 with 10 years of continuous service will be offered the opportunity to retire from the College with an additional six months of pay following the last day of employment. There are approximately 600 employees eligible for the program, including 150 staff members over 60 years old, Keller said.

Employees who decide to retire under the incentive plan must notify the College of their decision by Jan. 16, and must leave Dartmouth between January and August 2009.

The new plan does not apply to faculty members, who have an existing retirement option connected with the tenure process.

"How much reduction and the fewer staff positions we can get voluntary will affect how we make plans in reduction in force after this, which is why the window is so limited," Keller said.

The retirement incentive plan is the result of employee suggestions for reducing compensation expenses, according to Traci Nordberg, Dartmouth's chief human resources officer. The plan allows the College to support staff members who have made the decision to retire, or who are considering retirement, she said.

The College, Nordberg explained, is neither encouraging nor discouraging any employee from taking advantage of the new incentive program, which will in no way alter other retirement benefits.

"The intention is to be responsive to employees and give them more choice and control over their retirement, and to give us the opportunity to have some moving parts in the budget," she said.

Although 40 to 50 College employees retire in a typical year, this year's staff retiree total was expected to be lower than the average because of ongoing financial turbulence, Nordberg said.

The incentive plan may allow the College to maintain " or possibly increase " the number of retirees, she said.

"We have no target, no expected number," Nordberg said.

North Carolina State University professor Robert Clark, who researches labor economics, economics of aging, pension and retirement policies, said the generosity of incentive retirement programs helps to determine their efficacy in cutting payroll.

"Is six months' pay for someone who is 55 incentive if the likelihood of finding another job is small?" he said. "How many people take that kind of offer, you will see, but I don't think it is a significant incentive."

Clark also cautioned that losing staff may mean less efficient service.

"What you are doing is increasing the workload of the remaining staff, or you allow stuff to go undone that was being done before," he added.

Nordberg said that there is "no fast rule" about filling the vacancies that result from the staff retirements. Vacant positions, she said, will be individually assessed, as they have been for the past few months.

"We certainly need to replace some positions, and others give us the opportunity to move things around within departments," Nordberg said.

Keller and other College administrators are preparing a budget plan for January's Board of Trustees meeting that will include the number of employees who have decided to retire.

The plan will also include possible methods identified by the College's deans and vice presidents to reduce spending, a review of institutional decisions about compensation increases and capital projects, and ideas to increase administrative efficiency, Keller said.

"We can have a better sense of what other more dramatic changes we have to make and to what extent we can minimize those," he added.

College administrators are also exploring an initiative that would ask some staff members to work with their supervisors to reduce their work hours and thus overall compensation, Keller said. Employees would shift from full-time to three-quarters time, change their weekly hours, or take time off in the summer.

Dartmouth is not the first college or university to institute a retirement incentive plan in response to the economic crisis. The University of Minnesota announced a similar program in May, offering staff members three years of medical and dental coverage after employment as an incentive to retire, according to a University press release.

The Rhode Island state college and university system also recently completed its own retirement incentive program, paying 90 employees a total of $2.3 million in incentives and $18.8 million in unused sick, vacation and other pay for retiring between May 1 and Sept. 30 in an effort to cut payroll expenses, according to The Providence Journal.

In a separate effort to reduce spending, the College announced on Dec. 8 that the renovation of Memorial Field's west stands, which was originally scheduled for November 2008 through August 2009, will be postponed.

"This is an effort to reduce some outlays," Keller said. "We were going to have to borrow money to redo the west stands and the plan that we have now greatly reduces the need for the money."