Report and Recommendations for Phased Retirement Program

A Report of the Innovations in Faculty Work Life Committee

April 20, 2001

Innovations in Faculty Worklife Committee:

Institutional Members:
Robert L. Clark Professor, Economics and Business Management NCSU
Margery Coulson-Clark Assistant Vice Chancellor for Academic Affairs ECSU
Keith Howell Professor and Department Head, Public Health Education UNC-G
Judy Peel Associate Provost for Faculty Development NCSU
Peter Petschauer Professor of History ASU
Charles Williams Associate Vice Chancellor for Academic Affairs NCA&T

Office of the President:
Gretchen M. Bataille Senior Vice President for Academic Affairs
Betsy E. Brown Associate Vice President for Academic Affairs
David Edwards Associate Vice President for Legal Affairs
Kitty McCollum Associate Vice President for Human Resources
Ronald G. Penny Vice President for Human Resources

Executive Summary

The Innovations in Faculty Work Life (IFWL) Committee was charged by President Broad in July 2000 with providing a report and recommendation to the President's office by early spring, 2001, on whether to extend the University of North Carolina Phased Retirement Program for Tenured Faculty (PRP) as a pilot or adopt it as a continuing benefit for faculty at the 15 UNC constituent institutions where tenure exists (excluding the North Carolina School of the Arts). The IFWL Committee has reviewed survey responses from chief academic officers, deans, department chairs, and participating faculty for the first two years of the program, 1998 and 1999. In addition, the committee has benefited from the research of Dr. Robert Clark, an economics and business professor at North Carolina State University and member of the committee, who has examined personnel data files for faculty 50 years and older ! (the group likely to consider retirement, most of whom meet the age and service eligibility criteria for entering phased retirement) to determine the effect of the PRP on retirement patterns within the University.

Based on its research and discussions, the IFWL Committee recommends adoption of the Phased Retirement Program as a continuing benefit for eligible faculty. The committee also recommends a change in the criteria for eligibility under the PRP and makes several recommendations related to implementation and monitoring of the PRP. These recommendations and the committee's rationale for them are discussed below.

Background

In March 1997, the Board of Governors adopted the recommendation of the Committee to Study Early Retirement to establish a Phased Retirement Program for Tenured Faculty (PRP) at the 15 constituent institutions of the University of North Carolina where tenure exists. Eligible faculty were defined as full-time tenured faculty who were at least age 50 who had 20 years of service contributions in TSERS or ORP, or age 60 who had at least five years of service contributions and at least five years of service at their current institution. Phased retirees relinquish tenure and enter into a contract to work half time for 50% of their last year's salary. Responsibilities and schedules are individually negotiated at the campus level. The Board policy allowed each institution to set the length of the phased retirement contract period for all of its faculty between one and five years; most institutions chose a three year contract for PRP, while two institutions adopted a two-year contract period and one institution chose a five-year period. The goals of the program as proposed were "to promote renewal of the professoriate in order to ensure institutional vitality and to provide additional flexibility and support for individual faculty members who are nearing retirement" (Administrative Memorandum Number 370, May 16, 1997).

The expected outcomes of the policy included

  • Better personnel planning-institutions will be able to anticipate position changes and plan for them at an earlier time;
  • Enhanced recruitment and retention-institutions will realize an additional benefit available to tenured faculty members that should help in recruiting and retaining quality faculty members;
  • Increased quality of faculty-institutions will be able to fill tenure track faculty positions while retaining the skills and knowledge of experienced faculty on a half-time basis throughout their phased retirement period.

The Board approved a five-year trial period for the PRP and outlined issues that institutions needed to consider as they developed their policies and procedures within the Board-approved plan. In January 1998, the Board authorized and directed the President to issue policies and procedures to implement the PRP and to review and approve institutional procedures and guidelines. The President issued an Administrative Memorandum on January 22, 1998, containing the official policies and materials for the PRP. The Memorandum indicated that as institutions' policies and procedures were approved, the President would communicate to faculty the implementation of the program beginning in the 1998 fall semester. In July 2000, the President charged the Innovations in Faculty Work Life Committee with making a report and recommendation by early spring, 2001, about continuation of the program as a regular faculty benefit after the trial period.

Findings of the Committee

(1) Goals and Projected Outcomes Based on surveys of participating faculty, the committee finds that the Phased Retirement Program has achieved the goal of providing "additional flexibility and support for individual faculty members who are nearing retirement." Participants indicate that they chose the PRP in order to make a gradual transition into retirement; some further indicate a desire to pursue other interests while retaining their teaching positions and continuing their research. Eighty-eight percent of participants in 1998 indicated that they were pleased with their retirement arrangements, and 92% indicated they would recommend the program to colleagues. Similar responses were received from faculty who entered PRP in 1999, although tabulations of responses are not yet completed. Chief academic officers, department chairs and deans are supportive of the program as a benefit to faculty.

While there is widespread support for the program, the actual number of faculty choosing to enter the PRP is relatively small. By the third year of the program, 244 faculty members had elected the PRP. Although numbers are small, the PRP accounted for a significant proportion of faculty retirees over three years. In 1998, 8.1% of faculty over 50 retired; an additional 2.1% of faculty over age 50 elected the PRP. The percentage of faculty over age 50 who retired increased to 9.3% in 1999; an additional 1.5% of faculty 50 and over elected the PRP. For 2000, the percentage of faculty over 50 who retired decreased slightly to 8%; however, an additional 1.8% elected the PRP, an increase in the percentage over the previous year (data reported to the IFWL Committee by Clark, March 2001).

Because participants must sign agreements that limit their employment through PRP to a fixed number of years, the program has allowed for better personnel planning within institutions, thus achieving the first of the expected outcomes of the program. The committee has been unable to determine whether the second expected outcome, the impact of PRP on recruitment and retention of faculty, has been met. However, since a number of other higher education institutions and states have initiated either early retirement incentive programs or phased retirement programs, the committee assumes that the absence of such a plan at the University of North Carolina would discourage some faculty from taking positions in the University. Without such a program, faculty retention would likely be impacted, especially for mid-career faculty who might be making long-range retirement plans. Information relevant to the third expected outcome of the program--increased quality of faculty--suggests that this goal has been only partially achieved.

While it was expected that institutions would be able to retain senior faculty who might otherwise have retired outright, Clark's research suggests that the program may have slightly accelerated the rate of retirement among eligible faculty members. Based on comparisons of the percentage of faculty over 50 retiring in the two years prior to the PRP's implementation and the percentage of faculty over 50 retiring (including those entering the PRP) after the program's implementation, Clark suggests that the program may have increased the retirement rate by about 2% (Linda S. Ghent, Steven G. Allen, and Robert L. Clark, "The Impact of a New Phased Retirement Option on Faculty Retirement Decisions," October 2000). In addition, survey responses received from chief academic officers, deans, department chairs, and phased retirees suggest that in many cases departments have not filled the full-time tenure-track positions vacated by phased retirees; in a survey of the CAO's concerning the second year of the PRP, respondents indicate that in many cases part-time faculty members are hired to assume the other half of the responsibilities of faculty who have entered the PRP. Deans and department chairs also cite the increase in part-time faculty as a concern related to the program.

While the guidelines for the program do not preclude hiring full-time replacements in the positions vacated by phased retirees, departments may decide not to seek full-time replacements until the end of phased retirement agreements for one of several reasons: the retired faculty members continue to teach courses in their academic specialties and a full-time replacement may not be needed; 50% of the phased retiree's previous salary may not be sufficient to hire a full-time replacement and supplemental funds may not be available; sufficient faculty positions (FTE) may not be available for both the phased retiree (0.5 FTE) and the full-time replacement (1.0 FTE).

Despite uncertainty about the extent to which the program has achieved all of its goals and expected outcomes, the committee finds that the PRP is a valuable benefit for faculty members nearing retirement and, therefore, makes the following recommendation:

Recommendation 1: The committee recommends that the University of North Carolina adopt the PRP as a continuing benefit for faculty at 15 UNC constituent institutions, with the Board of Governors reserving the right to modify, suspend, or discontinue the program, subject to appropriate notice and procedures within the University. In examining the impact of the program for TSERS and ORP participants, the committee noted that the original eligibility requirements for the program paralleled those for early retirement benefits under TSERS. The service requirement of 20 years has no relevance for vested ORP participants, for whom there is no service requirement for drawing retirement benefits, but is relevant for TSERS participants to receive a reduced retirement benefit. The committee believes a revision of the eligibility requirements for ORP participants is in order and recommends the following:

Recommendation 2: The Committee recommends that eligibility requirements for the program be revised to the following: tenured full-time faculty members who are at least 50 years old, have at least five years of service at the current institution, and are eligible to receive retirement benefits either through the North Carolina Teachers and State Employees Retirement System (TSERS) or under the UNC Optional Retirement Program (ORP). (2) Program Implementation The committee identified several concerns resulting from the details of program implementation among participants in the PRP, chief academic officers, deans, and chairs and makes several recommendations related to program implementation. Survey responses indicate that some faculty members did not fully understand the implications of enrollment in the PRP for salary increases, earnings limitations, health insurance continuation, and other benefits. Because phased retirees have left their previous positions and entered into a new contract with the institution, their salary for the first year of the program is fixed at 50% of their previous year's faculty salary. While they are eligible in subsequent years for bonuses and salary or merit increases based on performance, the salary in the phased retirement agreement cannot be increased in the first year. To remain eligible to receive their retirement benefits, TSERS participants are limited in the amount they can earn after retirement to 50% of their compensation reported to the Retirement System during the last 12 months of service preceding the effective date of retirement; however, the manner in which this amount is calculated and the implications for summer! school pay and other additional compensation are not clear to some PRP participants. Similarly, there is confusion among some participants about payment of premiums and available health insurance benefits, especially for participants who elect to defer receipt of retirement benefits when they enter the PRP. These areas of confusion can be addressed by revising the materials sent to institutions and potential phased retirement participants.

Recommendation 3: The committee recommends that the staff of the Office of President revise the materials distributed by institutions to participants to address issues of concern, including confusion about the contracted salary for the first year of participation, the determination of the 50% cap on earnings for phased retirees in TSERS, and the implications for health insurance premiums and other benefits under the PRP. Surveys of chief academic officers, deans, and department chairs revealed concern that in their policies and practices, institutions had not anticipated some problems in implementation, particularly related to the length of the contract period, the definition of responsibilities and schedules for phased retirement participants, institutional, school, and departmental caps on the number of faculty allowed to participate in the program, and definitions of the limitations on participation based on preserving academic program quality. Issues related to assignments and schedules can be handled in negotiating the terms of individual phased retirement agreements; other issues are related to institutional policies established at the beginning of the trial period. Following three years' experience with the program, institutions are now in a position to reconsider some parts of their institutional program guidelines.

Recommendation 4: The committee recommends that before the end of the five-year trial period, institutions be asked to review and revise as appropriate their Institutional Guidelines previously approved by the President of the University, including the length of the contract period and the departmental, school, or institutional caps limiting the number of faculty members who can participate in the PRP, in accordance with the initial participation guidelines approved by the Board of Governors. Survey responses from academic administrators also revealed concern about the need to identify FTE for phased retirement participants and for replacement faculty. Extensive discussions with Finance staff at the Office of the President produced no easy solution to this dilemma, which could be seen as affecting one of the expected outcomes of the program: to increase the quality of faculty by filling tenure track faculty positions while retaining the skills and knowledge of experienced faculty. In addition, replacing faculty who have entered the PRP with part-time faculty adds to the decline in the number of tenured and tenure-track faculty while increasing part-time faculty within the University. The Senior Vice President for Academic Affairs has identified the increase in non-tenure track faculty as a concern and has appointed a committee to study the issue. Like all employees paid by the state, phased retirement participants must be accounted for in the institutions' reports on positions and salary funds. The committee concluded that the FTE issue should be handled at the institutional management level; however, institutions may have more flexibility in identifying FTE for phased retirees and their replacements than they currently assume.

Recommendation 5: The committee recommends that the staff of the Office of the President continue to work with campuses to address the issue of hiring full-time replacements for faculty electing the PRP, including the need to identify FTE for participating faculty and the sources of funds for replacement positions. While the IFWL Committee feels it has enough information on which to base its recommendation that the PRP be adopted as a continuing faculty benefit beyond the initial five-year trial period, the committee recognizes that changes in retirement plans and retirement patterns as well as new issues or problems related to the program are likely to emerge in the future. Committee members have received a number of inquiries about whether the PRP could be extended to University employees other than tenured faculty members. Given its charge, which is to advise the President on faculty employment policies, the IFWL Committee does not feel qualified to recommend extending the program beyond its current scope.

Recommendation 6: Based on its charge from the President, the committee recommends that it continue to monitor the impact of the PRP through information gathered from periodic surveys of participants and institutional representatives and from other sources and report to the President every three years (or more frequently as appropriate) on its monitoring of the PRP. Timeline The five-year trial period for the PRP ends with academic year 2002-2003; the continuing program would begin academic year 2003-4. Application to enter the continuing PRP must be made at least six months but not more than 11 months before the commencement of the 2003 fall semester: from approximately September 2002 through January 2003. If the committee's recommendations are approved, the committee suggests, then, the following timeline for implementation of its recommendations:

  • January 2002: Office of the President staff develop revised sample agreements and other materials for participants and send them to campuses.
  • March 2002: Revisions of PRP Institutional Guidelines due from the 15 constituent institutions to the Office of the President.
  • June 30, 2002: PRP Institutional Guidelines approved by the Office of the President.
  • September 2002: Application period for the continuing PRP begins, for participation to begin at the commencement of the 2003 fall semester.

Summary of Recommendations

Concerning the Phased Retirement Program for Tenured Faculty: Based on its study, the Innovations in Faculty Work Life Committee recommends

  1. that the University of North Carolina adopt the PRP as a continuing benefit for faculty at 15 UNC constituent institutions, with the Board of Governors reserving the right to modify, suspend, or discontinue the program, subject to appropriate notice and procedures within the University.
  2. that eligibility requirements for the program be revised to the following:
    tenured full-time faculty members who are at least 50 years old, have at least five years of service at the current institution, and are eligible to receive retirement benefits either through the North Carolina Teachers and State Employees Retirement System (TSERS) or under the UNC Optional Retirement Program (ORP).
  3. that the staff of the Office of President revise the materials distributed by institutions to participants to address issues of concern, including confusion about the contracted salary for the first year of participation, the determination of the 50% cap on earnings for phased retirees in TSERS, and the implications for health insurance premiums and other benefits under the PRP.
  4. that before the end of the five-year trial period, institutions be asked to review and revise as appropriate their Institutional Guidelines previously approved by the President of the University, including the length of the contract period and departmental, school, or institutional caps limiting the number of faculty members who can participate in the PRP, in accordance with the initial participation guidelines approved by the Board of Governors;
  5. that the staff of the Office of the President continue to work with campuses to address the issue of hiring full-time replacements for faculty electing the PRP, including the need to identify FTE for participating faculty and sources of funds for replacement positions;
  6. that the IFWL Committee continue to monitor the impact of the PRP through information gathered from periodic surveys of participants and institutional representatives as well as from other sources and report to the President every three years (or more frequently as appropriate) on its monitoring of the PRP.