The COVID-19 pandemic has continued to take a financial toll on Valparaiso University. In order to help alleviate some of the budget deficits, Valpo released an Early Retirement Incentive Plan (ERIP) to faculty and staff. The plan provides a one-time offer for eligible faculty and staff to voluntarily retire.
Two eligibility options are available: 55 years of age and 20 years of full-time university service or 62 years of age and 10 years of full-time service at Valpo. Faculty are considered educators and professors. Tenured faculty who choose the ERIP will receive a two-year base salary payout, while untenured members who participate will be given a one-year base salary payout.
“It’s probably approximately 55%, of the 98 eligible, are faculty and approximately 45% are staff. A vast majority of those faculty that are eligible, I’d say 95% of them, are tenured faculty,” said Darron Farha, the University’s Vice President and General Counsel.
Faculty and staff that accept the ERIP have two choices for securing their salary payouts. The first option is to receive a lump sum payment in July 2022. Faculty could also decide to split the payout, receiving half in July 2022 and the remaining in January 2023. The latter option is said to have potential tax benefits, but individuals are encouraged to confirm with their tax advisors.
Decisions are required to be made and finalized by March 18, 2022. Those who accept will end their employment on June 30, 2022. Workshops and forums will take place in Feb. to help faculty and staff make an informed decision. Representatives from Teachers Insurance and Annuity Association (TIAA) insurance company and third-party experts on social security benefits and Medicare plans will be in attendance.
“We didn’t go into this with a quota, or a number that this had to happen or not happen because it’s just so hard to predict right now how many are going to take it and couple with what the enrollment numbers are going to look like this year,” Farha said. “When you have a drop in enrollment, it hangs around for four years.”
Although this is a one-time opportunity to accept the ERIP, the faculty handbook includes two early retirement plans. These are always available to faculty that qualify.
“One is a phased retirement where it’s over one to three years where each year they [the faculty] teach a little less and less. They get less pay, but full benefits over that period of time. Or there’s a retirement payout that pays them 56% of their salary, but continues their health insurance until they’re Medicare eligible,” Farha said.
In terms of academics, programs affected by faculty participating in the ERIP will be known after the March 18 decision deadline. Regardless of who accepts the ERIP, replacement hires will be evaluated on a case by case basis, meaning necessary positions could get refilled.
“It’s [the ERIP] going to happen right in conjunction with the strategic plan. The university is doing strategic planning this semester that will conclude at the end of the semester. So depending on who takes it and who doesn’t and what comes out of the strategic plan, it may be a time then to allocate other strategic endeavors. It’s just hard to say right now until we know who’s taking it and what programs are being hit the most or the least,” Farha said.
The University is using this voluntary method of cutting down costs in an attempt to balance the budget deficits. There are two ways to make up a budget deficit: cost cutting or increasing revenue. Since the increase in revenue would be largely determined by upcoming enrollment numbers, Valpo is focusing on the cost cutting option.
“The future of Valpo is strong. There are challenges ahead, but Valpo is ready because our past difficulties have made us stronger and more prepared for the future. The ERIP will help enable Valpo to meet these challenges by giving our eligible faculty and staff a choice to leave this university on their terms. It also honors the service and commitment these faculty and staff have shown Valpo. We hope that enough eligible faculty and staff take this voluntary ERIP so that we can reach the personnel cost savings we need to help fill the budget deficit. Those cost savings may also allow us to start the process of increasing the compensation and benefits of the faculty and staff who remain at Valpo,” Farha said in a faculty and staff-wide email.