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On Monday, TIAA-CREF and Emeriti announced that they (along with Savitz, a benefits administration company) would team up, using TIAA_CREF's expansive network...
Ronald Stockton, a political-science professor at the U. of Michigan at Dearborn, conducts research in a local cemetery: "I intend to keep teaching as long as I can...
As recently as five years ago, the swell of aging faculty and concerns about how to replace them were prominently featured in higher education publications...
Ever since the elimination of mandatory retirement for college and university professors in 1994, professorial career spans have lengthened...
EXTRACT: Collaboration on Retiree Health Benefits
July 12, 2011
TAMPA, Fla. - TIAA-CREF and Emeriti Retirement Health Solutions have...decided that they're stronger collaborating than they are in competition.
On Monday, TIAA-CREF and Emeriti announced that they (along with Savitz, a benefits administration company) would team up, using TIAA_CREF's expansive network of campus and individual clients and its marketing might to expand Emeriti's reach...Under the partnership, Savitz will handle many of Emeriti's back-end operations, administering group health insurance plans and handling record-keeping.
In an interview at the annual meeting of the National Association of College and University Business Officers here, officials of TIAA-CREF and Emeriti said their collaboration was designed… to increase the reach of both companies' retiree health programs…. Ken Cool, Emeriti's president, said it had attracted 50 member institutions and 26,000 individual customers in its six years of operation, and TIAA-CREF had "about a dozen institutions" - colleges and K-12 schools - using its program, said Doug Chittenden, senior vice president for institutional project management there...
But the partnership may be more important, Chittenden said, to the extent that it can "bring together a strategic focus on this important issue" of retiree health benefits, the looming costs of which many campuses have failed to acknowledge, as Jane Wellman and other higher education finance experts have repeatedly argued. Chittenden and Cool [noted]...that many institutions still had not recognized the significance of their retiree health care problem.
"The key is to get colleges and universities to recognize the importance of this process, and the need to fund today these future liabilities," said Chittenden.
Cool said that the partnership came about because Emeriti was looking to "take the next step" in its evolution and sought (through a competitive process) partners to help it expand its reach. He described the fit with TIAA-CREF as "natural" because the two share a nonprofit orientation.
Together, Emeriti and TIAA-CREF should have options for any institution, Cool said. "There is no one magical solution," he said. Different colleges need different approaches to their retiree health care issues, "and that's the flexibility we have to address together."
Ronald Stockton, a political-science professor at the U. of Michigan at Dearborn, conducts research in a local cemetery: "I intend to keep teaching as long as I can. I can't imagine myself not in the classroom and working with students."
By Kathryn Masterson
Like many deans, William A. Schwab would like to hire more new faculty members. But with a hiring freeze in place at the University of Arkansas's main campus, where Mr. Schwab leads the J. William Fulbright College of Arts and Sciences, his ability to hire full-time professors is limited, although the university's enrollment is growing.
Also complicating the hiring situation: Older faculty members are delaying retirement because the economic crisis took a bite out of their retirement portfolios. While a steady flow of retiring faculty members would free up money the college could use to hire new professors, "that's simply not happening," Mr. Schwab says. Nine percent of the college's 300 faculty members are 65 or older, and 5 percent are in their 70s and 80s.
"Until we start seeing turnover, we're limited in what we can do," he says.
That crunch is something other colleges are feeling, too, says Ronald G. Ehrenberg, a professor of industrial and labor relations and economics at Cornell University and director of the Cornell Higher Education Research Institute. He calls the situation a "double whammy": At a time when colleges are facing budget reductions that force cutbacks on hiring, they are also seeing a slowdown in the retirements that would free up money to hire.
Speculation about waves of retirements has gone on for years, as the faculty members brought in to teach the baby boomers, and now the baby boomers themselves, hit their 60s. The American professoriate is aging. Six years ago, the last time the National Study of Postsecondary Faculty was completed by the Education Department, the average age for full-time professors was 49.6 (54 for tenured faculty members). In 1993, the average age was 48 (51.9 for tenured professors). Today it's not unusual for colleges to have faculty members teaching and working in their 70s, or even 80s. At Cornell, where Mr. Ehrenberg works, 86 members of its 1,605-person faculty, or 5 percent, are 70 or older—twice as many as 10 years before, according to university statistics. Some 177 faculty members, meanwhile, are between the ages of 65 and 69.
For certain, the decision to retire from a tenured position is a complex one that is not solely determined by money or the state of the economy. Many faculty members enjoy their teaching and research, and ever since mandatory retirement at age 70 for tenured professors was abolished in 1994, many see no reason to give up their work or university affiliation once they reach their 60s. In a TIAA-CREF faculty survey released last month, nearly one-third of those polled said that they expected to work until at least 70, compared with about a quarter of American employees in all fields. Of those who said they expected to retire after age 67, more than two-thirds chose personal preference, not financial necessity, as the main reason they planned to work later.
Evidence that the most recent economic downturn is having a noticeable effect on the retirements of older professors is still largely anecdotal. Not every college reports seeing a significant change in the age of retiring faculty members, but the issue is very much on the minds of administrators and individuals. Another TIAA-CREF survey, from last year, found that almost a quarter of faculty members ages 50 to 70 who were saving for retirement expected to retire later than they had planned, with an average delay of three years.
What does it mean if tenured professors are retiring later? People are living longer, and professors in their 60s and 70s may be doing the best work of their careers. Colleges don't want to lose those teachers and researchers at the top of their game. (Mr. Ehrenberg, for example, is a well-known, sought-after expert in higher education at age 64. He loves his work and teaching students, and says retirement would be "very, very hard.") And there's no guarantee that colleges will replace a retiring tenured professor with another tenure-track faculty member. In fact, the proportion of tenured and tenure-track jobs in the professoriate has continued to shrink over the last three decades. But colleges also need to bring in junior faculty members at the beginning of their careers. New professors bring fresh energy to a college, can rejuvenate a department, and may be doing work in the forefront of their fields, especially in rapidly changing areas.
And hiring new professors is one way colleges can improve the diversity of their faculty. Mr. Schwab, of Arkansas, points to his college's most recent group of new hires: 11 men and 10 women (which would have been an equal number of women and men, for the first time in the college's history, if one female candidate hadn't declined Arkansas's offer), one-third of whom are minority-group members. "Our goal as a college and university is to have a faculty and student body that reflects the diversity of society," he says.
Some universities have taken action to make retirement more attractive to those who might have been considering it before the downturn. Duke University, for example, created a central fund from which deans could borrow to add to the retirement packages of faculty members who may have been hesitant to leave because they lost some of their savings during the recession.
Since the downturn, the number of people retiring or leaving Duke for another institution has dropped by about half, says Peter Lange, Duke's provost. The university wanted to free up more money for hiring and take advantage of a tight job market in which competitors had slashed their hiring. Between 15 and 20 people took advantage of the added financial incentive, which requires them to retire by next June. Mr. Lange estimates that the program cost the university between $1.5- and $2-million; individual colleges will have five years to repay the central fund.
While Duke has slowed its hiring somewhat, it was able to run about 80 percent as many searches as it had in recent years. Another benefit, Mr. Lange says, has been that more faculty members have started conversations with their deans about retirement.
"Turnover is important for the constant renewal of your faculty," he says.
More colleges are looking at possible incentives to increase the number of people retiring, says Valerie Martin Conley, an associate professor of education at Ohio University who studies faculty- retirement trends. Not all have the money to offer early-retirement packages or incentives, such as allowing senior faculty members to work part time, and there aren't much data on such incentives that colleges can use to compare programs or adapt existing ones to their needs.
Ralph W. Kuncl, provost of the University of Rochester, says there are ways to facilitate retirement that can be a win for both the individual and institution. He believes the best strategy is to provide access to free, impartial financial advice. He also believes institutions can offer phased retirement that allows retiring professors to remain involved in the life of the university rather than go away entirely, because money isn't the primary reason older faculty members stay on the job.
"Their entire identity is tied up in being a scholar," Mr. Kuncl says. "To go from 100 to zero is unthinkable."
Mr. Kuncl, who hasn't seen a noticeable change in retirement age at Rochester during the recession (the average age is 67), cautions that institutions considering retirement incentives need to treat senior faculty members as individuals, and with dignity. A sense that there is a set number of people a college wants to retire to hit financial or diversity goals can create a toxic environment, he says.
Ronald Stockton, a professor of political science at the University of Michigan at Dearborn, says a bad economy isn't the main reason that professors like himself are still working. At 69, he's a productive researcher who just won a department award and loves teaching. He recently gave a lecture series on graveyards (a personal interest, in addition to his primary work on Middle East conflict and Arab-Americans) and led a three-hour tour of local cemeteries. He is now helping undergraduates create a guidebook to Muslim graveyards in the Detroit area, home to one of the oldest Arab-American communities.
"I intend to keep teaching as long as I can," Mr. Stockton says. "I can't imagine myself not in the classroom and working with students."
He believes universities should offer step-down retirement plans that would allow faculty members who wanted to keep teaching to stay on campus and teach part time, which would keep them in the classroom while freeing up part of their salaries to hire younger scholars. He made a proposal to that effect to his university several years ago when he was on his college's executive committee, he says, but it never went anywhere.
"The way you make it possible for people to leave is to find a way for people to stay," he says.
Not all universities are looking to hurry retirement of their faculty members. They believe age will take care of any bottlenecks in the coming decade or so, as the baby boomers grow older. Also, it can be expensive to replace them.
Jamshed Bharucha, provost at Tufts University, believes universities will see a substantial increase in the rate of retirements in the next 10 years, regardless of the state of the economy. He's been telling graduate students at Tufts to "hold tight."
But the wave of retirements, if it happens, could be a double-edged sword, Mr. Bharucha says. While it will be an opportunity to hire many new faculty members, Tufts doesn't yet have the up-to-date facilities that new faculty members in the sciences, technology, engineering, and math expect when they are hired. Tufts estimates the upgrades and renovations it will need to attract top candidates once the wave of retirements starts will cost hundreds of millions of dollars. The university is planning to make the upgrades in stages.
Tufts has talked about offering retirement incentives (the medical school offered buyouts before the financial crisis hit), but Mr. Bharucha says the university is not looking to hurry people through retirement.
"It's something we talk about, but I don't feel the sense of urgency," he says. "It gives us time to put in place the kind of facilities and infrastructure we're going to need to replace those retiring faculty members."
As recently as five years ago, the swell of aging faculty and concerns about how to replace them were prominently featured in higher education publications. Fast forward to the end of 2008 when many nearing retirement began replacing hopeful visions of financial security with the reality of dwindling retirement funds and decreasing home values. It is no surprise that today faculty members report they are remaining in the workplace longer than expected. Data from the TIAA- CREF Institute report "Managing Retirement in Higher Education" (April 2009), by research fellow Paul Yakoboski, revealed that of 1,002 near-retirees (ages 50 to 70) in the higher education sector, 27 percent expected to retire later than they had anticipated retiring one year prior. The typical (median) increase in expected retirement age among these individuals was three years.
While the two primary factors in the retirement decision-making process for most employees remain retiree health-care costs and the amount of money saved for retirement, ultimately career and retirement decisions are highly individual ones that are influenced as well by personal preferences about leisure and lifestyle, the work environment, and so on. An aging of the professoriate remains among the most important trends in higher education today, and many institutions have not adequately planned for large numbers of faculty retiring simultaneously. Nor have many institution leaders truly considered how they will strategically renew their faculty ranks within the coming decade.
What role can higher education HR leaders play in addressing the growing concerns of faculty members who are nearing retirement in the midst of a sluggish economy? How can HR leaders help their institutions get in front of economic recovery as more prosperous conditions, or at least a stabilized economy, may lead faculty members to retire at compounded levels—making up for the unexpected delays in their retirement brought about by the recession?
Institutional human resource practices, procedures, and processes are essential in the planning efforts at each stage of employment—recruitment, retention, and retirement. Yet, to do a better job of addressing the nuances surrounding faculty retirement in particular, we must include another “P”: perception. Because individuals have distinct needs and motivations, understanding the perspectives of those facing retirement decisions during the next several years will allow leaders to rise above mere analysis of general workforce demographics and trends to truly understand the dynamics at play within their own institutions.
While many institutions collect and compile demographic data about their workforce, often the data are not analyzed beyond what they suggest about trends in turnover, retention, or productivity. As such, a broad range of workforce information can go overlooked, including generational concerns about retirement and their implications for institution retirement programs and benefits.
Earlier this year I surveyed faculty members from four smaller independent higher education institutions in Virginia to gain a better understanding of faculty views and concerns about retirement, including what they felt most impeded their plans for retirement. With the exception of age and gender categories, participants could opt out of any questions. Faculty members responded to additional questions in the survey specific to their retirement concerns or needs.
Health-care concerns. Among the most interesting findings of the study was the primary role health care played in respondentsʼ concerns about retirement and their decisions to delay retirement—more so than pure economic factors. For instance, 90.3 percent of those surveyed agreed that the availability of health care insurance upon retirement would make them better prepared. Additionally, the rising cost of health care was deemed more critical as a retirement concern than either insufficient retirement planning or recent market changes. See Table 1: Faculty Concerns About Retirement. (Important to note is that data collection for this survey occurred as the national initiative to pass the health-care reform was headed for a vote, and this likely had some impact on the survey results.)
And yet, by some indications there is a downward trend afoot in the number of institutions offering retiree health care. The November 2006 TIAA-CREF Institute report, “The Retiree Health Care Challenge,” cites research by the institute revealing that 12 percent of the 75 percent of colleges and universities indicating that they sponsored a retiree health plan in 2004 were likely to discontinue the offering within five years. Those looking to continue their programs planned modifications such as tightening eligibility, eliminating subsidized coverage for future retirees, and capping employer contributions and increasing retiree contributions for premiums and out-of- pocket expenses.
One takeaway for institution leaders is that the availability and cost of health care remains a key issue for retiring and retired faculty and is likely to be an important aspect of any early-retirement incentive program that may be offered. Even as institution leaders and human resource professionals develop strategic approaches to retirement benefits for a changing workforce, uncertainties about retirement among near-retirees must be addressed. Short-term budgetary concerns can easily overshadow what may be a valuable piece of the retirement planning puzzle considered essential to near-retirees in particular.
Phased retirement. When asked whether they felt a phased retirement plan would better prepare them for retirement, 54 percent of participants responded “yes” versus 22 percent who said “no” and 24 percent who werenʼt sure. (Many respondents were still uncertain about when they would retire.) Phased retirement options can potentially address some of the uncertainty that exists in retirement planning and provide some meaningful criteria and policies that add fairness and transparency to the process. This may become even more critical as institutions begin to experience an uptick in faculty retirements. Without a cohesive retirement plan, the problems associated with a mass exit of older employees could become a costly liability to the financial stability of the institution. For instance, inadequate retirement planning from an institutional standpoint could result in unintended consequences such as hiring unplanned replacements, an imbalance in the offerings of deals to faculty such as buyouts or early retirement options, a lack of continuity in faculty knowledge, and academic program inconsistency.
Retirement revisited. While the mass exodus of faculty anticipated a few short years ago was sharply curtailed by the economic recession, there is no doubt that a wave (or a series of ripples) in faculty retirements will again emerge, as a significant segment of this employee population is set to retire from full-time work within the next five to 10 years. See Table 2: Faculty Retirement Projections. Even as institution leaders attempt to manage the flow of faculty retirements in the near term, they must begin now to engage in comprehensive planning to develop retirement programs and benefits that will attract and retain quality younger faculty members.
Important to bear in mind is that the concerns expressed by faculty about health-care costs and availability werenʼt exclusive to those nearing retirement but were evident among all age groups. In terms of higher education recruitment, the security of a retiree health-care plan or supplement to the nationwide Medicare program may be an important benefit to consider offering to all faculty members. Equally important to remember is that a “one size fits all” retirement program is not realistic for most institutions today. A retirement benefits package that addresses the concerns of only one generation such as those nearing retirement may not adequately address the needs of younger faculty and of evolving family structures. Offering a variety of venues to encourage employee retirement and health-care savings allow all faculty to find what works best for them. Because the variety of program alternatives each bears a cost, every institution must likewise determine what best fits its mission and budget. A necessary first step is for human resource professionals and other institution leaders and decision makers to evaluate their particular workforce needs, using data that can assist them in faculty recruitment, retention, and retirement planning.
Gathering baseline demographic data and information from faculty about their needs and concerns can help institution leaders make balanced decisions as they seek creative retirement program benefits to serve as a tool for recruitment and retention of new faculty as well as offer a smooth transition for those nearing retirement. Ultimately, strategic retirement planning is critical not only for those employees for whom retirement is imminent, but also for those located anywhere along the retirement spectrum—from the newest hire to the most senior tenured professor. While attempts to determine workable alternatives to retirement planning may be effective temporarily for an aging population, a comprehensive strategic retirement plan is required for attracting and retaining quality faculty members for the long haul.
So, how can HR facilitate effective planning of faculty retirement through normal attrition or a formally structured phased retirement program? Here are three key steps.
Analyze your workforce. Categorize each generation. Determine the potential of a mass exit if all faculty members above age 65 retired tomorrow. How would this impact the institution not only in terms of cost of replacement, but also in the benefits arena and distribution costs of existing retirement plans in place? This view will be different for each institution, depending on the plans offered and the demographics of the workforce. However, gaining this essential overview will allow administrators to work collaboratively with human resources to budget for estimated future hiring needs. This also provides a visual map for reallocating resources within the university while remaining committed to the universityʼs mission and culture.
Ask faculty members at different levels, within different disciplines, and within various age groups, what they envision as an effective retirement plan. Faculty at one institution may envision the ideal plan very differently than those at another institution. Yet, without researching needs to gain this valuable input, the assurance that any plan will be effective is a shot in the dark. For instance, while a phased retirement plan may be deemed the best benefit to assist near-retirees with retirement planning, what specific components are important to them within the plan design? Is health care offered to retirees of the institution, and if not, can it be? Has there been discussion about how this could be implemented into the faculty retirement plan?
As one example, my university is among more than 50 institutions that offer the Emeriti Retirement Health Solutions Program. While this is still relatively new (the plan was first offered in 2007), we are beginning to use this plan to offer eligible faculty and staff members retiree health- care options with a variety of plan designs and alternatives, plus insurance premium costs at attractive group rates. An institutionʼs contribution is a demonstration of commitment to the program. Our hope is that over time, individuals who are in the Emeriti program will realize the potential of saving for health-care retirement needs. Long term, the Emeriti program can provide a level of security in a health-care plan available upon retirement as well as the funding resource to meet health-care needs, such as those typically available in a pre-tax, flexible health-care spending program. This is an example of a program that addresses the potential concern for retirees faced with rising health-care costs for themselves or their dependents upon retirement. While this is one example of a program that can be used, other options and solutions exist to address retirement needs.
Research what other institutions are doing to benchmark your activities against industry best practices. Annual surveys, articles, and data about higher education faculty retirement planning—including plan administration, design, and overall costs—are available through TIAA- CREF, AAUP, EBRI, CHERI, SHRM, and CUPA-HR, among other organizations. Keep in mind that what you see may not always be what you get. A program that looks good on the surface could be an administrative nightmare with hidden costs or requiring complicated coordination among other benefits.
While no one knows exactly what may unfold with regard to the scope and pace of faculty retirements during the next several years, workforce data can help leaders project best- and worst-case scenarios for faculty replenishment and enable their institutions to become more adaptive and creative with meeting future faculty retirement needs. If there is a silver lining regarding the recession, perhaps it is that it has allowed higher education retention and retirement rates to remain fairly stable. While this has provided a bit of breathing room with regard to faculty replenishment, this is no time for HR or other institution leaders to delay responding to a dramatic turnover of faculty members certain to take place within the coming decade.
What drives individuals toward final decisions about when to retire often entails a long and complex thought process specific to each person. While compiling the current demographics of your workplace is fairly easy using indicative payroll data, and while analyzing that and other data is likewise a fairly transparent process, understanding the hearts and minds of your employees is much more complex, requiring a new strategic role that HR must embrace and nurture within the institution.
Kelly J. Samson-Rickert is human resources and benefits manager at Shenandoah University, Winchester, Virginia. E-mail: email@example.com.
In his excellent essay on the dour state of the academic job market, "We Need to Acknowledge the Realities of Employment in the Humanities" (The Chronicle Review, April 4), Peter Conn writes with admirable candor about the aging of the professoriate. Something like 7 to 9 percent of the faculties at private research universities, he estimates, are now over 70, well past traditional retirement age. This has had the effect of blocking opportunities for younger scholars.
Ever since the elimination of mandatory retirement for college and university professors in 1994, professorial career spans have lengthened. The outsized salaries and benefits of very senior scholars occupy budgetary lines that might otherwise be freed to hire twice as many or more junior replacements. While there is no guarantee that an administration will fill a particular line when a professor retires, let alone add new ones, the aging of the professoriate on the whole indisputably diminishes opportunities for young scholars.
This situation risks a bitter, senseless war of resentment: youth against elders. But after pinpointing the problem with unusual lucidity, Conn drops the topic. Among his several recommendations as to how universities should recalibrate to meet the jobs crisis, retirement is not mentioned once.
This disconnect is symptomatic. In a 2007 survey of 567 colleges and universities conducted by Valerie Martin Conley for the American Association of University Professors, only 19 percent of institutions held that the retirement of older professors was an important institutional matter. The very same survey found that 96 percent of institutions considered recruiting new professors important. In actuality, the two objectives are indistinguishable. Institutions are constrained in their ability to hire new professors at the assistant and associate levels so long as full professors increasingly work past 70.
Retirement is a hiring issue. Retirement is central to the renewal of the American university.
The academy has yet to devote adequate imagination or will to the retirement of scholars at the senior level. Fear of age-discrimination lawsuits may be to blame, in which case an irony is evident: Strictures meant to inhibit generational discrimination have had the effect of diminishing opportunities for a whole generation of scholars. (I write as a 44-year-old historian who has accepted employment abroad, in part because of circumscribed American opportunities.)
Scholars who wish to keep teaching late into life have the indisputable legal right to do so, and they deserve to do so without suffering the slightest aspersion. But institutions can and should do much more than they do now to make a timely retirement alluring. While most institutions of higher education have adopted at least one or two measures to promote faculty retirement, some have failed, surprisingly, to use even the most basic. Many others have not gone beyond the most obvious. A concert of compelling incentives, creative brainstorming, and integrated planning is demanded to encourage retirement.
Universities and colleges should consider the following options, some of them time-tested, to encourage prompt retirement:
Provide retirement guidance at every level. Faculty members should from the very outset of their careers be given sound financial counseling and inspired to envision their retirement. Anticipation is imperative; preparation cannot be left until age 50 or 60. Multiple scenarios should be used to illustrate the vibrant range of retirement possibilities—including travel, volunteerism, and continuing professional productivity, even including new careers. We ought to find an entirely new word for "retirement," given that so many retirees now stay intellectually active for decades, not retreating from the life of the mind. I have in mind, for example, my friend the late Morris Slavin, who after retiring from Youngstown State wrote works on the French Revolution published by Harvard and Princeton University Presses while he was in his 70s. Given extended life expectancy, many retirees today probably think in terms similar to those often attributed to Oliver Wendell Holmes: "Old age is 15 years older than I am." Institutions should enable financial advice well into retirement and tabulate opportunities in community service and paid consulting for emeriti with well-honed skill sets.
Offer buyouts or extra payment. Institutions ought to offer a buyout or cash payment for those retiring promptly. These bonuses may be structured in various ways. One is suggested by the plan at the University of Rochester, where full-time faculty members with lower salaries receive higher buyouts than those with higher salaries. This follows the reasoning that under the university's merit- pay system, pay correlates with productivity. The university benefits if lower-paid faculty members retire to make way for starting-level scholars; it will not suffer if high-profile maximum performers remain around for a few years. Another idea is to reduce the tax hit by permitting a rollover of the buyout sum into an IRA.
Allow for phased retirement. In phased-retirement offers, teaching load is reduced at a prorated salary in return for a commitment to waive tenure at a specified date. Such a plan allows faculty members to test-drive retirement. In the course of doing so, many find they enjoy their newfound freedom and retire earlier than projected. Universities also ought to consider permitting retired faculty members to teach occasionally on a per-course basis; this permits the institution to draw on the talents of seasoned teachers while reducing their cost to nominal levels. Studies show that faculty members consider incremental options far more attractive than straight buyouts.
Offer continuing benefits. A health-insurance bridge to age 65 is invaluable for early retirees. All retirees appreciate retaining institutional perks such as library borrowing, e-mail access, parking, tuition remission, discounted event tickets, fitness-center access, campus voice mail, and secretarial assistance. Lab space is critical for scholars in the natural sciences. New building design should include more attractive office space for retirees—private cubicles rather than dumping rooms. Early retirees might be permitted to keep travel and research funds for five or 10 years if they maintain an active research agenda (defined, say, by at least one significant publication annually when averaged over a rolling three-year period). Such gestures make retirement attractive by minimizing the loss of valued prerogatives and cost little when compared with the alternative of retaining aging faculty members at the top of the salary scale.
Reconsider pension plans. Contributors to defined-benefit (or traditional) pension plans tend to retire early. That is because they reach a point where there is no further marginal financial advantage in working. Contributors to defined-contribution retirement accounts, however, find that because of their late-career earning power they are able to amass staggering holdings for themselves or their heirs, particularly with employer matches. Defined-contribution plans, therefore, create a disincentive to retirement. While a wholesale move back to defined-benefit pension plans is unlikely, institutions might consider hybrid or combined plans. Such a combination would begin by providing a minimal defined-benefit plan to all faculty members and then offering a choice of either a more generous additional defined-benefit plan (making this the default option) or a supplemental defined- contribution plan. Such an arrangement would mean that at least a significant part of every faculty member's pension would be in a defined-benefit plan, diminishing the compelling financial incentive to work late into the sunset years. (Of my proposals, this may elicit the strongest objections, given the present defined-contribution vogue. It is, nevertheless, worth putting on the table for contemplation.)
Create a culture of appreciation. Discussions of retirement are often blind to intangibles of meaning, dignity, status, and community that underlie so many anxieties and hopes of individuals facing this important life decision. But these elements are axiomatic in the decision making of many potential retirees and should be engaged, not overlooked. Both altruism and desire for recognition, for example, might be satisfied by naming a one-year postdoctoral fellowship after each retiring faculty member, turning every retirement into a celebration of a life of service and a torch-passing to the next scholarly generation. Professional associations and foundations should consider setting aside grants and awards for retirees in the same way that certain grants now benefit writers of first books or junior scholars. That would validate post-employment scholarly life and support retirees who maintain active research agendas but often lack grant opportunities. Likewise, departments and programs should invite retired colleagues to present papers or tap them to introduce visiting speakers, signaling appreciation for their achievements and wisdom. If retirement is not isolating, if it need not mean cutting oneself off from academic life, it will be perceived not as the end of the line but as a path of continuity.
Many senior academics I know are perfectly happy to reach retirement and liberate themselves from committee meetings, grading, and other chores, leaving them with more time to focus on what really matters about the life of the mind. Given the right mix of financial incentives, positive moral reinforcement, and a welcoming atmosphere, an even higher proportion should be willing to make way for the next generation of scholars. Universities must seek every possible way to make retirement attractive by the age of 65 or 70, both by allocating the necessary resources and by fostering a culture inclusive of those who have given lifetimes of dedicated service to higher education and still have so much to offer us.
Christopher Phelps is an associate professor of American intellectual and cultural history at the University of Nottingham.
With the recent passage of the healthcare reform bill, many employers and HR leaders are looking for answers about the effect on health-savings accounts and retiree healthcare, in general.
"HSAs have done pretty well in healthcare reform," says Mike Thompson, a principal at PricewaterhouseCoopers in New York, noting the new legislation generally leaves intact the legal and tax structure of the HSAs.
Some experts say the reform bill may lead to more employees enrolling in HSAs since companies may opt to offer such a benefit as a way to avoid the penalty on organizations that do not provide healthcare benefits to workers.
However, budget cuts for Medicare could increase the amount of money needed to pay for medical expenses in retirement. While a provision to phase out the so-called "donut-hole" in pharmaceutical coverage under Medicare Part D "actually will mitigate some of the cost" for retirees, overall, "people should expect to pick up a bigger part of the burden over time," Thompson says.
And, he notes, "we still haven't dealt with the solvency of Medicare."
At the same time, healthcare reform should accelerate the number of employers that are dropping retiree healthcare coverage, according to experts. "I don't think we're going to return to the days where the employer's going to provide total health security for life. That's too big a promise for employers," Thompson says.
All of which means there may be more uncertainty in store for today's employees as they try to save for retiree- healthcare expenses. HSAs cannot offer much comfort.
Such accounts will not be sufficient to pay for the expected medical expenses in retirement, according to new research from the Employee Benefit Research Institute in Washington.
That's because the legal contribution limits and low interest rates restrict the amount of money HSAs are able to accumulate, compared with the enormous amount needed to pay health bills during retirement.
"It certainly is no surprise," says Paul Fronstin, a senior research associate at EBRI. "You can only put in so much by law. It's just not enough." "HSAs can be part of the tools," Thompson agrees. "It's helpful, but not enough."
EBRI analyzed the use of HSAs to generate savings needed to cover retirement-related health-insurance premiums and out-of-pocket healthcare expenses, using both estimated Medicare payments and earlier EBRI research on retiree health costs.
For example, if a 55-year-old man in 2009 contributed $3,000 to his HSA and contributed the $1,000 catch-up contribution each year for 10 years, a total of $48,300 would be in the account after 10 years (assuming a 2-percent interest rate). If the interest rate was 5 percent, $55,100 would be accumulated after 10 years.
But that amount is only about one-third of what's needed -- at best -- since EBRI estimates that a 55-year-old man in 2009 needs between $144,000 and $290,000 by the time he reaches age 65 to have a 50-percent chance of being able to cover premiums and out-of-pocket expenses for Medigap and Medicare Part D.
In fact, an HSA can only accumulate between 16 percent and 32 percent of the total needed to have a 50-percent chance of being able to cover healthcare expenses, according to EBRI. For a 90-percent chance, the maximum HSA savings would only cover between 7 percent and 16 percent of the total needed. Women would need to save more because they live longer, on average, than men.
In addition, keep in mind that any HSA distributions before retirement will "erode the value of the account," making it harder to save the total amount needed in the retirement years, Fronstin says.
Medical expenses in retirement are high because people tend to have more health problems as they age, and Medicare does not cover many items, such as routine dental care, hearing aids, eyeglasses, routine physical exams and custodial care in a nursing home. Once enrolled in Medicare, beneficiaries cannot continue making contributions to an HSA.
Thompson agrees: "Costs are significant outside of what Medicare pays. It's a serious issue." Tips for Employers Human resource leaders should carefully consider the way they market HSAs to employees.
"If they're selling this to their workers as the solution for paying for healthcare in retirement, it's just not going to cut it," Fronstin warns. He recommends teaching employees about other ways to save for retirement, such as getting the maximum employer match in the 401(k), which many workers don't do. Employers "need to present the comprehensive view of really what it's going to take" to pay for healthcare in retirement, he says. Thompson agrees more education is needed.
"People often undervalue, underestimate, health expenses in retirement," he says. "They don't know what Medicare doesn't pay for.
"Where we're headed is an era where people have to take more accountability for their personal security. It used to be the employer took care of [workers] for life. ... Employees haven't always picked up the ball and prepared themselves adequately," Thompson says.
Employers need to create "an enabling environment, so people are aware of the risks they face as they enter retirement," Thompson says, noting that if older workers are not well-prepared for retirement, employers could see too much "job lock" when those employees don't retire.
"It's a fair assessment to say, under any assumptions, people aren't saving enough," he says.