Senators at the April 14 Urbana Academic Senate meeting unanimously supported a resolution asking the U. of I. Board of Trustees to offer university employees a supplemental retirement program.
The resolution, submitted by the Urbana campus ad hoc compensation review committee, was presented by committee chairman Jeffrey Brown, a finance professor.
Brown said the resolution is a response to a competitive analysis comparing U. of I. retirement contributions to peer institutions as well as a response to the state’s changes in the university employee pension program. Changes include last year’s Illinois Senate Bill 1, which revamped the state-funded pension system and reduced long-term employee retirement benefits when it became law. He said a supplemental plan is needed if the university is to stay competitive in employee hiring and retention.
“A lot was lost from SB 1,” he said. “The first thing we want to do is set expectations for current and future employees.”
The compensation review committee will review the campus’ salary and benefits package and compare those numbers against a long list of peer universities, including Big Ten members.
“We’re taking a data-based approach and a fairly exhaustive look,” Brown said, adding they will consider all levels of benefits for all employee classes before making any final recommendations to the board of trustees.
Much work is left, Brown said, noting that finding and compiling comparative data, especially for specialized faculty members and academic professionals, is a time-consuming process “that may prove beyond the scope of the committee’s report.”
“It depends on how well we can shake our colleagues at other institutions to obtain additional information,” he said, adding he expects to submit a final report to the board for consideration by the end of this semester.
The resolution was prepared based on the committee’s preliminary findings that retirement system-matching contributions at the U. of I. severely lag those of other Big Ten institutions. In fact, when other university’s Social Security contributions are considered, Illinois contributes just more than half of leading Big Ten contributor University of Minnesota and is 10 percentage points behind the last on the list, Indiana University.
The disparity is even worse for Tier II employees, who trail Tier 1 contributions by a full percentage point even after considering a benefits “salary cap” instituted by provisions within SB 1.
He cautioned, however, that these comparisons are based on contribution levels rather than benefit levels, and that especially when comparing to Social Security, it may not be necessary to achieve complete parity on contributions to remain competitive, “although the gap must be significantly closed.”
“Even when comparing the U. of I. to the one other Big Ten School that is not covered by Social Security – Ohio State – our total contribution rate is about 10 percentage points lower,” he said.
Brown said a supplemental program, most likely including automatic employer contributions to all employees or some type of employee/employer matching vehicle, would not solve the comparative institutional inequities, but would be a big first step in beginning to correct them. One of the problems the university faces because of SB 1 is the benefits salary cap, which created a “short-term incentive to retire.”
“No matter how you slice it, we’re at a competitive disadvantage,” he said. “We think (a supplemental program) is critical for everyone. But whatever we do here is going to have to be financed by existing campus resources. We have to do something; we need to do more.”
The resolution also makes note of the shifting political and legal winds in the state with wording designed to give the university flexibility in any future supplemental plan if court challenges to SB 1 are successful or if the competitive environment changes.
Roy Campbell, the SEC chair, said the findings in Brown’s report will be used in conjunction with the findings of the senate’s budget review committee. That committee currently is studying university finances and setting funding priorities, information that may be used to answer Campbell’s question, “Can we actually afford an increase in retirement benefits?”
