Approved by the: Faculty Senate - September 20, 2001
Administration - see note*
Board of Regents - PENDING

*The Administration supports the principles and objectives outlined in the Senate’s resolution. Executive Vice President and Provost Robert Bruininks and Vice President Carol Carrier have been charges with the responsibility to review the proposal, including the financial impact of implementation, and will make a recommendation to the President by March 15, 2002. The President will respond to the Senate proposal for a change to the Faculty Retirement Policy by March 31, 2002.


FACULTY RETIREMENT PLAN PARTICIPATION FOR CURRENTLY INELIGIBLE JUNIOR FACULTY

The University of Minnesota treats newly-hired untenured faculty members differently from other faculty members in terms of entitlement to participate in the faculty retirement plan. Assistant Professors can not participate during their first two years of employment. This requirement should be eliminated for the following reasons:

  1. If the retirement program were covered by ERISA, participation would be required.

  2. It has a potential negative effect on recruiting, particularly when competitive offers are being considered.

  3. It reduces a sense of shared interests and community among faculty members of varying ranks and seniority.

  4. No other major university surveyed differentiates between probationary and non-probationary faculty in eligibility to participate in their retirement plan.

  5. The ongoing cost of eliminating this discrimination is quite small–about $500,000 annually (.07% addition to the fringe pool).
Competitive Analysis

Wisconsin - participation immediate and mandatory, defined benefit plan.
Ohio State University - participation immediate (plan options available, DB and DC available), vesting requirements vary.
Indiana - immediate participation and vesting, DC plan.
Michigan - participation and vesting immediate, DC plan.
Michigan State University - participation and vesting immediate, DC plan.

Potential Loss for New Faculty

Assume a new faculty member has a salary of $60,000 that according to university policy would be the base from which contributions are made, will have a 35 year career, and will have an annual rate of return of 8% on retirement contributions. Foregoing the first two years of contributions reduces retirement assets by $245,000 at the end of the 35 year career.

The Committee on Faculty Affairs notes that no other Big Ten school has a waiting period and urges the Faculty Senate to adopt the resolution and ask the administration to change the plan eligibility rule accordingly.

This proposal has been endorsed unanimously by the Faculty Consultative Committee.

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