Colleges bank on early retirement to balance budgets

Ted Sherarts
Ted Sherarts, 75, recently retired from St. Cloud State University after 43 years of teaching photography. Sherarts had the opportunity to take several early retirement offers over the last 20 years, but he kept working.
MPR Photo/Tim Post

Minnesota colleges hope to use early retirement as a way to help balance their budgets.

Higher education officials say offering retirement incentives to older employees is a better option than laying off younger workers. But some wonder if early retirement has much appeal in these tough economic times.

Most days you'll find Ted Sherarts taking photos near downtown St. Cloud's Lake George. Sherarts has snapped the same photo of the city's skyline, from the same spot, nearly every day for seven years.

Sherarts, 75, taught photography at St. Cloud State University for 43 years. He has plenty of time to concentrate on his own photography now. He retired less than two months ago, after passing up early retirement incentives in years past.

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"I went against the advice that most of my colleagues gave me and that is to retire as soon as you can, because the incentives were out there to retire early," Sherarts said.

Next month, the MnSCU board of trustees is expected to come up with another package of incentives to try to convince people like Sherarts to get out earlier.

Under the program, employees who are 55 and older and have worked for MnSCU at least five years, can retire. Their health benefits would remain in place until they turn 65. In addition, some employees could receive a cash payment. Presidents at each college would determine who would be eligible for the early retirement deal.

Gail Eckel
Gail Eckel, 62, worked at the University of Minnesota for 18 years before retiring this spring. Eckel took an early retirement package that will pay her U of M health benefits until she's 65.
MPR Photo/Tim Post

Bill Tschida, vice chancellor for human resources at MnSCU, said he understands why the promise of health care coverage might encourage workers to leave their jobs a few years early.

"The major impediment you hear to people separating or retiring is the cost of health insurance and how are they going to make those payments once they stop working," Tschida said.

Encouraging retirement is a way to decrease payroll and benefits obligations when budgets are tough, letting schools avoid at least some layoffs.

The U of M just wrapped up its own retirement incentive program.

"It was huge for me, because they paid for our healthcare for three years," said Gail Eckel, who recently retired from the U of M.

Eckel worked at the U of M for 18 years, the last 12 spent in the president's office. She retired a month ago.

The University of Minnesota retirement incentive allowed Eckel to retire at 62. She'll keep her U of M healthcare benefits until she's eligible for Medicare at the age of 65.

"I figure it's about $36,000," she said. "Because I figured it would be about $1,000 a month to have health care."

The U's retirement incentive option or RIO as it's called, just ended with 449 employees retiring under the program.

Carol Carrier, the U of M's VP for human resources, said it relieves some pressure as the school looks to reduce its overall budget.

"With the budget situation we'd like to encourage as much natural attrition as possible so that people don't have to lose their jobs if they don't want to leave," Carrier said.

Carrier said if the positions of all 449 who retired went unfilled, it would save the U nearly $35 million.

Of course many of those positions will need to be filled, but Carrier doesn't know just how many at this point. Still, the U will save money by replacing some of the newly retired employees with younger, less experienced and lower paid employees.

Does the U's experience mean MnSCU can expect similar results from its proposed retirement incentive?

"It has real potential but I think we have to be cautious in what we expect to get out of this program," said Russ Stanton, a lobbyist for the Inter Faculty Organization, the union that represents 3,300 MnSCU faculty.

Stanton is in favor of the retirement incentive and said it would likely mean fewer layoffs as MnSCU deals with shrinking state funding.

But he thinks employees worried that the poor economy has hurt their pension plan, might just keep working.

"A lot of them think that holding on to their job is their best security right now," he said. "So I'm not sure how this is going to work but it's worth a try."

Stanton said when colleges ask their most experienced employees to retire early, they risk losing workers with years of valuable experience. But, he said, that's better than laying off younger employees with plenty of energy and new ideas.