Home Contributed U.S. School Districts Offering Early Retirement Incentives for Faculty Members
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U.S. School Districts Offering Early Retirement Incentives for Faculty Members

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The average age of retirement is about 63 years old. For teachers and those working in the education field, the average age of retirement in the U.S. is approximately 59 years old. And across the country, more and more schools and universities are offering retirement incentives for various reasons: some good and some more unfortunate.


In California, according to Pasadena News Now, the Pasadena Unified School District is offering early retirement packages for its union members in order to reduce layoffs throughout the district.


United Teachers of Pasadena (UTP) is currently negotiating with Pasadena Unified in the wake of an upcoming budget deficit. Negotiations were previously halted after the union demanded pay raises from the money that was allocated for early retirement. The district wasn’t able to comply with the union’s demands, however, because of its current fiscal situation.


“I’ve never heard of the district ever doing on [offering an early retirement plan] and then somehow, calculating the savings and then give that back in raises or to go towards their healthcare costs,” said Scott Phelps, school board member. “That, to my knowledge, has never, ever been done in any supplemental retirement incentive in any district anywhere, and that doesn’t make a lot of sense.”


During these retirement offerings, both the school district and the individuals receiving the retirement packages need to keep in mind both retirement savings and whole life insurance plans. Most policies require that insurers provide advanced notice of a nonrenewal with the notice requirement ranging between 10 and 75 days, depending on jurisdiction and other circumstances surrounding the nonrenewal.


Keep in mind, either the individual or the insurance provider can decide whether or not to renew the policy once expired. Additionally, as far as the universities are concerned, the Internal Revenue Service (IRS) can audit any company tax return within three years of filing, and it can collect back taxes owed for up to 10 years.


“There are many ways to withdraw money from a policy, each with different consequences, so it’s very important you work with an experienced broker with superior knowledge of whole life,” said Ed Gaelick, a financial consultant with PSI Consultants in Glen Rock.


The Times Free Press reports that in Chattanooga, Tennessee, the Hamilton County school board also approved early retirement incentives for both longtime teachers and administrators.


Board officials estimate that roughly 150 faculty members are expected to take advantage of the board’s early retirement incentive package — which will have a hone-time cost of $6.5 million. Though if more than 150 faculty members were to take the package, those costs will be covered with an additional $1.9 million.


The savings generated by the retirement incentive are projected to be worth about $20,000 per person. There are, however, three tiers to each offering: the first tier giving employees 25% of their annual salary (if they’ve been employed at the district for 25 years or more); the second tier is for employees who have worked between 20 and 24 years for the district and would receive 20% of their annual salary; and the third tier is for employees who are at least 65 years old and have worked for the district for 10 or more years and would get 15% of their annual salary.


Board chairman Steve Highlander is concerned that the incentive would drain the district of highly qualified and experienced educators.


“I’m not saying that I am against it — there seems to be a lot of positive things about it — but I am concerned that we may lose some of our strongest people,” Highlander said.


Lastly, though many more districts across the country are dealing with similar situations, West Chicago educators have been organizing and picketing during a last-ditch negotiating effort to reach new contract agreements.


According to the Daily Herald, the proposed 4-year contract would increase salaries for West Chicago High School teachers an average of 12.6%.


“It’s an exhausting, stressful situation,” said school board President Gary Saake. “I think people need to really take a breath, relax a little bit and let’s get it ratified and approved, and then maybe it’s time to start thinking about how we go forward.”


Additionally, the teachers agreed to actually phase out a retirement incentive that would give them a 6% salary increase during their final four years of employment. The district will eliminate the incentive packages when the contract experiences at the end of the 2020 – 2021 school year.