Bill to prevent double dipping awaits Quinn signature
SPRINGFIELD — A bill that would place new limits on universities' ability to rehire employees who have retired is awaiting Gov. Pat Quinn's signature.
The measure, passed unanimously by the House and Senate late in the spring session, would force universities to reimburse the State Universities Retirement System for pensions paid to employees who are rehired after Aug. 1, 2013, work more than 18 weeks, and earn more than 40 percent of their final salary in a single academic year.
The bill, HB4996, was originally sponsored in the House by Rep. Daniel Biss, D-Skokie, and in the Senate by Chicago Democrats Heather Stearns and Jacqueline Collins.
It was intended to prevent manipulation of the pension system by employees who retire and then go back to their old jobs on a part-time basis to secure a hefty raise when pensions and salaries are combined, Biss said. The practice is referred to as "double dipping."
Employees who retire at age 60 are only allowed to earn the difference between their final salary and their pension if they decide to take a part-time job after retirement, he said. So if a worker was earning $100,000 at retirement, and his SURS pension is $75,000, his maximum earnings are limited to $25,000.
But the only restriction on workers who retire before age 60 is that they cannot earn more than their pension. So someone who retires at 59.5 under that same scenario could earn up to $74,999 in retirement, effectively receiving a 50 percent raise, he said.
That creates a "perverse incentive" for the university and employees to retire early, Biss said.
"You don't want people leaving at 59 so they can offload a portion of their compensation to the pension system," he said.
Biss said that happened recently at Northeastern University, where a senior administrator in his late 50s retired, then was rehired for his old job and wound up earning 50 percent more combined. In years past, some UI administrators also retired only to be hired back on a contract basis for a few years.
"It's a great deal for everybody except the taxpayers backing the pension system," Biss said.
Under the new law, if a retiree returns to teach several courses in a given year and earns half of his old salary, then the following year the UI would have to reimburse SURS for that employee's pension.
The bill was amended to push implementation back to the 2013-14 academic year.
Several exceptions are cited in the bill, including faculty who are paid with federal grants or other outside support, which benefits the university and its students, Biss said. The law also makes exceptions for medical emergencies or the death of a faculty member.
In one recent case on the Urbana campus, a faculty member had a health problem midway through the semester, so a retired professor was brought in to teach the remainder of the class, said Maureen Parks, UI associate vice president for human resources.
At the UI Chicago, a physician retired who had specialized in pediatric craniofacial surgery, repairing cleft palates in children. The UI hired another surgeon, but that doctor left after a year to move back to California, Parks said.
The retired physician has been brought back part-time to treat the children who were awaiting surgery at the UI Medical Center while the university conducts another search, Parks said.
The exceptions are particularly important given the growing number of retirements at the UI, she said.
"We wanted to make sure we'd be able to teach classes, keep the lights on, take care of patients and continue our research," she said.
Biss said he worked closely with officials from the UI, Western Illinois and Northern Illinois universities so that their concerns are reflected in the final version of the bill.
Biss said he doesn't mind if a professor comes back to teach for a semester, or perhaps one course a year. But he wants to avoid long-term manipulation of the system.
"Thanks in part to the university's input, I think the bill will accomplish that," he said.
The UI has had a policy since 2006 allowing the rehire of retirees to specific circumstances, such as faculty who conduct grant-funded research, or teach or provide patient care part-time, or those appointed "when other options are not feasible." The policy emphasizes that the UI will not rehire retirees solely to save money by shifting costs to SURS and says the board of trustees must approve any senior administrators who are reappointed to similar positions after they retire.
At the Urbana campus, retired employees can only be hired for a year at a time, cannot work more than half-time and must abide by SURS earnings limits.
But the new law has stricter limits and would require the UI to do further tracking to determine how long an employee works after retirement, and how much they're earning, and report that information back to SURS, Parks said. That would cover everyone from professors to extra help who come back and work at football games or Broadway shows at the Assembly Hall.
SURS will also have to provide additional records for employees who may have worked at another state university before retirement but now want to work part-time at the UI, she said.
"We don't necessarily know if somebody's retired from Parkland or Eastern or Illinois State," she said. "The onus is on the university, not the employee."
If the university fails to comply with the statute, it is subject to fines.
"It's going to be tough to administer," agreed William Mabe, executive director of SURS.
He said institutions need flexibility to fill vacancies, but SURS also needs young employees to maintain its financial solvency. Allowing retirees to return to help an institution through a transition is helpful, but "we don't really want to get in a situation where we don't hire new people," Mabe said.
(Note: An earlier version of this story had incorrect information about which conditions must be met before universities are liable for the pensions paid to employees they rehire.)
Text of bill: http://bit.ly/Nwp64N
Links to UI policies:
Trustees policy: http://bit.ly/LkFctD
Campus guidelines: http://bit.ly/MBczIE
In Sunday's News-Gazette: Number of UI employees entering retirement picks up.