By Katie Quaranta
The Ohio University Board of Trustees Resources Committee heard proposals Thursday for retirement and employment separation incentive programs that the university could deploy to help weather difficult economic times.
The university is considering an early retirement incentive program for employees covered by the Ohio Public Employees Retirement System; an early retirement incentive for those enrolled in an alternative retirement plan; and a voluntary employment separation plan for employees with 15 to 23 years of university service.
The measures are designed to reduce compensation expenses and minimize mandatory layoffs if the economic climate further deteriorates or the state is forced to cut funding to higher education, said Bill Decatur, senior vice president for finance and administration.
“The state budget situation is probably the worst we have seen, but we have a lot of unknowns at this point,” he said. “We’re putting everything on the table. ... Our priority in all of this is to protect our academic mission.”
The board will hear a resolution today that would grant President Roderick J. McDavis the authority to trigger the incentives after Gov. Ted Strickland releases his biennial budget Feb. 3. If the budget news is better than expected, McDavis could delay implementation of some or all of the programs.
Luis Lewin, associate vice president for finance and administration for human resources, presented the plans to committee members. Details are as follows:
• The OPERS incentive proposal consists of a one-year service credit with additional incentives -- including six months’ life insurance coverage and a $5,000 lump-sum payment or a six-month extension of current medical coverage -- for those who announce their retirements within 90 days after the plan is implemented. However, as mandated by law, employees would have a full year to decide whether to participate.
Eligible employees must be at least 55 years old with at least 25 years of service; at least 60 years old with at least five years of service; or any age with 30 years of service. University officials estimate that about 100 employees, or 25 percent of the 396 who are qualified, would participate.
An OPERS incentive plan is mandatory under state law if 50 or more employees are dismissed, but otherwise optional. The other two plans, however, are optional strategies under any circumstances.
• For those who chose an alternative plan to OPERS, the university would offer eligible employees -- those who are at least 59½ years old as of June 30 -- 75 percent of one year’s current salary and an additional year of medical coverage and life insurance. The salary would be paid in installments over 60 months. Employees would have 90 days to accept the offer after it is announced. Again, the university estimates that 25 percent of 64 eligible employees would participate.
• The voluntary employment separation plan would compensate employees who have worked for the university for 15 to 23 years and decide to voluntarily terminate their employment. Employees would receive one year of medical and life insurance and a one-time payment of $60,000 for faculty and $50,000 for administrators. The payment for classified employees would be capped at $25,000. The amounts are payable over eight years. Lewin recommends the university give eligible employees 60 days to choose to participate. The university estimates about 100 of 754 eligible employees would take advantage of the offering.
All of these incentives have initial costs, but Lewin said the university could expect immediate savings under the alternative retirement plan offering and a return on investment within the next two years for the other two plans as long as the university takes care not to fill too many vacated positions.
“It takes a significant amount of work to make sure the positions do not come back,” he said.
Several trustees expressed concern that eliminating too many positions could jeopardize the university’s ability to fulfill its mission. Decatur responded that the unprecedented economic situation will require the university to fundamentally restructure the way support units function. The university is already exploring shared services initiatives and ways to strategically redeploy workers to ensure units operate as efficiently as possible.
“If we are looking at significant reductions in force, we can’t do business the same way,” Decatur said “Out of all of this, we have to make some very strategic decisions about which positions we keep and which ones we abolish.”
According to McDavis, the plans are part of a larger array of contingency strategies that can be enacted once more is known about the size of the budget gap the university will have to close.
“We see this as a tool, another set of options, to bring forward as part of a comprehensive plan to respond to the challenges we may face,” he said.