'Titanic' problem spelled out for trustees
Senior faculty make it clear many ready to 'vote with their feet' on pension issue
URBANA — University of Illinois Professor Albert Valocchi is, by his own admission, "really struggling right now."
The civil and environmental engineer recently learned that if he continues working at the UI after July 1, his pension could decrease by as much as 12 percent.
"I don't want to retire. I have an active research group," he said.
And yet he's now facing that decision after learning more about language in the pension law that changes the guaranteed earnings rate for those who have pensions with a money-purchase option.
"It creates a lot of consternation," said Valocchi, who wants to stay in Champaign-Urbana, but also has received job offers from national laboratories.
Worried about a possible mass exit of faculty and staff, university officials on Friday trotted out several senior faculty during a special board of trustees meeting.
Trustees convened the video- and teleconference in Urbana, Chicago, Springfield and Rockford to hear more about a plan to create a supplemental retirement plan but also send a message to legislators about how faculty and staff are negatively affected by changes coming to those with the money-purchase option.
UI chemistry Professor Ken Suslick had this message for the board:
"This university is sinking like the Titanic. ... The board of trustees has failed to protect the university from the state legislature," he said.
Suslick, who has spent 36 years — his entire career — at the university, expects to retire on May 30. He believes many more faculty will "vote with their feet" and either retire or accept jobs elsewhere in the next few years due to changes in the pension law.
"The state, to me, has demonstrated itself to be an unreliable employer and no longer deserves my services," Suslick said.
Materials Science and Engineering Department head David Cahill has some years before he retires, but said he expects he'll face the decision in the next year or so on whether or not he should take his money out of the State Universities Retirement System and leave the UI for another higher education institution.
"I certainly don't want to leave the university because of the perverse incentive. I love the university," he said.
Chancellor Phyllis Wise on Friday also shared several examples of professors who said they either were retiring or weighing outside job offers. Many of them run research groups, employ graduate students and postdoctoral researchers and bring in millions of dollars of grants.
"We're not only losing great faculty and great teachers and scientists and scholars, we're also losing a huge amount of grant money," Wise said.
"The impact is broad-spread across higher education," UI President Bob Easter said, adding that he has spoken with presidents of other state universities about the issue in recent weeks.
On Friday, the board reviewed a framework for an additional 403(b) retirement plan, one that would look like a 401(k) and involve the university and employees making contributions to it, but the most urgent issue before trustees has to do with the money-purchase option.
The pension bill signed by Gov. Pat Quinn late last December included a provision that changed the guaranteed investment earnings rate for employees who use the "money purchase" annuity option when they retire. Instead of a guaranteed rate of 7.75 percent a year, employees would receive a rate based on the 30-year U.S. Treasury bond rate as of July 1, 2014, plus 0.75 percent. Today, that rate would be about 4.25 percent, said Avijit Ghosh, senior advisor to Easter.
The law outlined a "floor" for employees who work past July 1, so their benefits would not be cut below what they would have earned as of June 30 of this year. The problem is, the way it was written in effect pushed that date back to June 30, 2013.
The UI has about 5,400 employees across the three campuses who are eligible to retire, and 60 percent to 65 percent could be affected by the money-purchase option glitch, Ghosh said.
"This is a watershed moment for us. Every day we delay in getting that corrected, the worse the situation becomes," he said.
Ghosh called it a "technical mistake" and "a correctable situation."
Kennedy offered an apology to the professors and said he and other university officials will urge legislators to pass follow-up legislation to edit the language.
"As chair of the board I want to apologize to the entire faculty for allowing this to get this far, for putting our entire university at risk and putting the future of our state at risk — I apologize for that failure of leadership on our part. And we will try to do what we can to move from where we are today to a much better outcome," Kennedy said. He called on faculty leaders, the UI Alumni Association and others to voice their concerns to those in Springfield.
The board next meets May 14 in Springfield, and Kennedy said he hoped to have "concrete progress" by then.
"I'm optimistic something will get done. But it needs to get done sooner rather than later," Easter said.
Trustees expressed support for a supplemental 403(b) retirement plan, one that would be available to SURS-eligible employees. But they did not vote on a specific plan yet. Ghosh said he hoped to submit a proposal to the board in May and would like to offer it to employees "as early as possible."