The University of Illinois could have a supplemental pension program in place by next June for employees who lost benefits to the recent state pension reforms.
Administrators are asking UI trustees for authority to explore the idea, starting with an enhancement to the 403(b) tax-deferred savings plan already in place for employees.
It would likely include some type of matching contribution from the university, administrators said, an effort that could cost the UI tens of millions of dollars.
"The highest priority of the university is to remain competitive in the higher education marketplace, to attract and retain the highest-quality faculty and staff," said Vice President Walter Knorr, the UI's chief financial officer.
A resolution reviewed by the UI Board of Trustees' Audit, Budget, Finance and Facilities Committee on Monday directs administrators to explore alternatives to the state-run pension plan for university employees, which will undergo several major changes next summer unless those reforms are overturned by two pending court challenges.
The reform plan approved by legislators and signed by Gov. Pat Quinn in early December reduced cost-of-living increases on pension payments for current and future UI retirees, raised the retirement age for employees under the age of 46 and capped the amount of earnings that could be applied toward pensions, among other changes. It also lowered employees' contributions to the pension program from 8 percent to 7 percent, to offset some of those changes.
But UI officials say they want to offer something to replace the benefits that many employees lost.
The university is still calculating the costs of providing a matching retirement program, said Avijit Ghosh, senior adviser to UI President Bob Easter.
Based on the UI's overall payroll, each 1 percent match would cost about $20 million if it were applied to all UI employees, though half of those workers are paid with sources other than state appropriations — grants, contracts, student fees or auxiliary system income, officials said.
The exact cost will depend on who is eligible for the program, said Randall Kangas, associate vice president for planning and budgeting, but "it will be a very significant amount."
"In any kind of matching program we have to decide what we can afford to match relative to the employee's contribution," Easter said.
Knorr said the university's contribution could be phased in over time and would vary based on the employee's salary and years of service. Employees who earn more than the new salary cap for calculating pensions also were hit harder by the pension changes.
"The challenge is working through all the nuances," Easter said. "There's some fairly significant issues that have to be resolved."
A task force with representatives from the three campuses is being created to explore the issue, Knorr said.
"We'll need to engage the faculty governance process, and that'll take most of the spring," Easter said.
The university also has to determine whether it can work through the existing 403(b) program with TIAFF-CREF and Fidelity or bid new contracts, Easter said.
Knorr said the UI will seek advice from external consultants, actuaries and lawyers to "make sure we put together something that is feasible as well as legal."
The hope is to have something ready for approval by the May board of trustees' meeting, before the pension changes take effect June 1, Knorr said.
"We have to make sure that we retain a retirement program that is competitive for our people," Ghosh said.
The full UI board will vote on Monday's resolution next week in Chicago.