Retirement incentives for eligible faculty

By Matt Kelly

The U.Va. Board of Visitors’executive committee and state officials have approved a faculty retirement incentive program in an effort to help the University meet budget-cutting targets.

Photo by Peg Campbell

The plan, approved by the board on Dec. 9, was OK’d by the state secretary of education, with minor revisions to clarify language, and reviewed by the state attorney general, according to Vice President for Finance Yoke San Reynolds.

The incentive plan offers two options to eligible faculty members who apply this spring. One offers half pay and full benefits for a 50 percent reduction in work for up to two years, then full retirement. The second option is a straight buy-out, with the retiree receiving a full year’s salary, paid out over 12 months, and whatever the University would have spent on his or her health insurance. The dean would determine how the retirees’ workload would be handled within the constraints of the school’s budget, said Reynolds.

The plan is open to roughly 300 full-time faculty members who are at least 55 years of age with 15 years continuous service to U.Va. However, an application may be rejected if the retirement would have an impact on the University’s core mission. The plan is not available for classified staff, and any incentive program for them would originate with the state, Reynolds said.

“Although we would like the budgeted savings, we are also very conscious that there are not many areas that can redistribute the workload of the eliminated position without significant impact on the University’s mission,” she said.

The incentive program is part of U.Va.’s response to $93.5 million in state cuts for the 2002 to 2004 budget years. The board recently increased tuition for the spring semester by $385, and deans and department heads have been given budget reduction targets for their areas. It may initially cost U.Va. up to $2 million per year paid out of funds already appropriated for the retirees’ salaries. Savings, which should equal the cost of the incentives, would start to accrue in the second year of the program.

Thomas Gausvik, chief human resource officer for the University, is preparing a one-page summary of the incentive plan to distribute to faculty and staff.

Michael J. Smith, chairman of the Faculty Senate, said he had not seen the plan but the senate’s executive committee would discuss it.

“This will certainly occasion great interest among the faculty,” he said. “I presume the Faculty Senate will have an opportunity to consider the proposal and offer its reactions.”

Reynolds said the plan was not to drive out faculty but provide something for which people could apply and for which only a small number will be accepted. Each department has been given budget-cutting targets, some of which will be attained through reducing positions or cuts in other areas.

The incentives must be paid from money already budgeted for the retiree’s position. Any resulting savings would be returned to the provost or executive vice president, or credited toward budget reductions. Reynolds said deans may be depending on personnel reductions for savings. With the hiring freeze in place, she said, many departments have vacant positions they could count toward budget cuts.

She also noted that the General Assembly could make its own reductions in the state budget. “Then it would be a whole new ball game,” she said.

U.Va. introduced a retirement incentive program in the early 1990s as part of its reaction to state budget troubles, Reynolds said. That plan offered only the half-time phase out and did not have a buy-out option. There is currently no retirement incentive plan in place at U.Va. Virginia Tech has an incentive plan, which Reynolds said differs from U.Va.’s plan because most of Tech’s faculty is on the state retirement system, while U.Va. has its own faculty retirement program.
“This is not going to generate a lot of savings, but it can be a useful tool for the deans and department heads,” Reynolds said of the plan.

Under the plan, applicants must file with their dean or department head by Feb. 28. If recommended by a dean or department head and approved by the provost or executive vice president, a separation agreement would be sent to the applicant, to be returned by April 1. Retirements could be effective as early as May 2003.