Early retirement resolution
Chancellor Mark James presented his recommendation regarding changes to MCC’s retirement program at the MCC board of trustees meeting on Thursday, May 12, 2011. The board accepted the chancellor’s recommendation and passed the resolution unanimously.
Chancellor Mark James presented his recommendation regarding changes to MCC’s retirement program at the MCC board of trustees meeting on Thursday, May 12, 2011. The board accepted the chancellor’s recommendation and passed the resolution unanimously.
Here is the PowerPoint presentation delivered by Vice Chancellor Tuesday Stanley regarding the state of MCC’s budget, including information on the early retirement program. (To view the second slide, click on the triangle 'play' button on the right-hand side of the slide. To view in a larger format, click on the "view in slideshare" icon in the lower left-hand corner of the slide.)
Early retirement and budget overview board
Chancellor's recommendation
Here is a concise summary of the chancellor’s recommendation regarding changes to MCC's early retirement program. (To view the second slide, click on the triangle 'play' button on the right-hand side of the slide. To view in a larger format, click on the "view in slideshare" icon in the lower left-hand corner of the slide.)
Chancellor's recommendation
Here is a concise summary of the chancellor’s recommendation regarding changes to MCC's early retirement program. (To view the second slide, click on the triangle 'play' button on the right-hand side of the slide. To view in a larger format, click on the "view in slideshare" icon in the lower left-hand corner of the slide.)
Chancellor's early retirement rec details
Click here to view the agenda item as it will appear in the board packet for the MCC board of trustees meeting on Thursday, May 12, 2011.
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MCC's early retirement program is very expensive to operate and the current budget situation has forced us to re-evaluate the terms of the program. Below are proposed changes to the early retirement plan and the data that helped inform the development of those proposals.
The six scenarios (as of March 16 2011)
Six early-retirement-benefit scenarios, including the three original scenarios/options (outlined further down on this page), were presented to the Budget Response Team on Friday, March 11. The slide below, which is an actuarial (i.e. financial projection) spreadsheet based on calculations and analysis by The Hay Group, outlines the financial figures associated with each scenario. (To view this slide in a larger, more readable format, click on the "view on slideshare" emblem in the lower right-hand corner of the slide.)
Click here to view the agenda item as it will appear in the board packet for the MCC board of trustees meeting on Thursday, May 12, 2011.
________________________________________
MCC's early retirement program is very expensive to operate and the current budget situation has forced us to re-evaluate the terms of the program. Below are proposed changes to the early retirement plan and the data that helped inform the development of those proposals.
The six scenarios (as of March 16 2011)
Six early-retirement-benefit scenarios, including the three original scenarios/options (outlined further down on this page), were presented to the Budget Response Team on Friday, March 11. The slide below, which is an actuarial (i.e. financial projection) spreadsheet based on calculations and analysis by The Hay Group, outlines the financial figures associated with each scenario. (To view this slide in a larger, more readable format, click on the "view on slideshare" emblem in the lower right-hand corner of the slide.)
MCC actuarial report 3.21.11
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The three (original) proposals (as of February 2011)
Analyses and Reports
Development of the proposed changes to the MCC's early retirement package was accompanied by detailed analysis of their potential impact on both employees and the district budget. Following are various analyses and reports that informed the development of the changes. For answers to frequently asked questions on the proposed changes to the early retirement program, visit the FAQ tab.
2. This Hay Group Report shows the findings from a Hay Group study of the costs associated with the early retirement program.
3. This past early retirement analysis reports data on MCC's early retirees starting in the year 2000.
4. This current and future early retirement analysis lists estimated retiree insurance benefit expenses for 2011, the number of eligible employees to retire through 2017, and the costs associated with those: (Note: to view this slide in a larger, more readable format, click on the "view on slideshare" emblem in the lower right-hand corner of the slide.)
5. This Teaching Costs spreadsheet illustrates MCC's expenses for salary and benefits for full-time faculty and for early retirement faculty.
6. This Projected Retirement Benefit Liability graph illustrates the projected increase in MCC's retirement benefit liability costs through fiscal year 2015, under the current arrangement. "Retirement benefit liability" is a combination of what MCC pays for insurance for early retirees and the projected liability MCC will accrue for for future early and regular retirees.
Here are the details of each scenario:
Scenario A (the existing early-retirement benefits system)
Scenario A (the existing early-retirement benefits system)
This scenario depicts the costs of the early retirement program as it exists now and is presented as a means of comparison. The present value of this option is $66 million.
Scenario B** (early retirees are given a choice between health ins. or incentive pay)
This scenario was added to the list of options based on feedback provide by employees over the last several months. This would give employee the option between two early retirement benefits – health insurance OR incentive pay. The present value of this option is $22 million.
Scenario C (no subsidy for health insurance and incentive pay)
This scenario represents no subsidy for both the health insurance and incentive pay benefits for early retirees. The present value for this option is $13 million.
Scenario D** (early retirees would receive incentive pay but not health insurance)
This scenario would only maintain the incentive pay benefit. Feedback provided to the BRT representatives suggests that employees would not prefer this choice. The present value of this option is $24 million.
Scenario E** (early retirees would receive health insurance but not incentive pay)
This scenario would only maintain the health insurance benefit. As with Scenario D, feedback provided to the BRT representatives suggests that employees would not prefer this choice. The present value of this option is $20 million.
Scenario F (early retirees would receive health insurance and would have 3 years from the date of ERT eligibility to give notice to HR)
This scenario was added to the list of options based on feedback provide by employees over the last several months. This scenario would be similar to Scenario E with the exception of a longer window of notice after the employee reaches early-retirement eligibility. The present value of this option is $28 million.
** Scenarios B, D and E follow the rule of 80 (age + years of service = 80) and opt for retirement within that year.
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The three (original) proposals (as of February 2011)
The three proposals under consideration are as follows:
- Proposal # 1 – Special/Incentive Pay: MCC provides a one-time payment equal to 50% of final contract or salary capped at $50,000. The insurance benefit is discontinued and ERT units are eliminated. (The early retirement incentive pay does not include overload pay, overtime pay or benefits for any employee group.)
- Proposal #2 – Health Insurance: MCC provides a health insurance subsidy for the retiree at the rate of the current active employee. Retirees can purchase health insurance for their dependents at the college’s full premium rates; there is no MCC-paid subsidy for dependent coverage. The health insurance subsidy for the retiree continues until they reach Medicare age. Special/incentive pay and premium pay are eliminated.
- Proposal #3 – Neither: Special/incentive pay, retiree insurance benefits and premium pay are eliminated.
Analyses and Reports
Development of the proposed changes to the MCC's early retirement package was accompanied by detailed analysis of their potential impact on both employees and the district budget. Following are various analyses and reports that informed the development of the changes. For answers to frequently asked questions on the proposed changes to the early retirement program, visit the FAQ tab.
1. This Early Retirement Package Analysis outlines the following:
- requirements of early retirement;
- annual costs of current early retirement plan; and
- the components of the plan.
MCC | |||
MCC Officers | |||
Strategies to Close the Budget Gap - FY2012 and Beyond | |||
Current Early Retirement Plan and Costs | |||
Requirements of Early Retirement | |||
I. | Ten (10) consecutive years of service to MCC | ||
II. | Age 55 | ||
III. | Thirty (30) consecutive years of service regardless of age | ||
Annual Costs of Current Early Retirement Plan | |||
I. | Special payment (aka Incentive pay) | 700,000 | |
II. | Insurance benefits | 2,600,000 | |
III. | Premium pay (in excess of adjunct pay) | 1,600,000 | |
4,900,000 | |||
Components of Early Retirement | |||
I. | Special Payment | 700,000 | |
A. | Formula based on age and current wage at retirement | ||
1. | 75% of final contract or annual salary if taken at age 55; reduced by 5% for every year over age 55; | ||
increased 1% for each year over 15 years of service to the district up to a maximum of 10% | |||
for early retirees 62 years of age or less at time of early retirement | |||
B. | Payout option of lump sum or two installments | ||
C. | Details of cost: | ||
1. | Average amount of early retirement incentive pay over past five years | 700,000 | |
2. | Average number of early retiree's over past five years | 19 | |
3. | Average incentive payment per retiree | 37,000 | |
4. | Average age of early retirees over the past five years | 59.50 | |
II. | Insurance Benefits | 2,600,000 | |
A. | 100% Employee (Individual) and 50% of dependent premium thru age 65 for | ||
health, vision, dental and group term life | |||
B. | OPEB includes the future insurance cost of the current work force - the primary component (85%) of the OPEB cost. | ||
C. | Average cost per employee, per month | 700 | |
III. | Premium Pay for Reemployment | 1,600,000 | |
A. | Up to 9 work units per term and 13.86 work units per fiscal year. | ||
B. | Bumping rights - Assigned following the placement of FT faculty with full load and | ||
and before part time or overload assignments. | |||
C. | Details of cost: | ||
1. | Cost per work unit | 2,349.94$ | |
2. | Estimate work units by retiree's per year (based on fall 2010 schedule) | 953 | |
3. | Avg premium pay to retirees | 2,239,000$ | |
4. | Pay required for course to be taught by straight adjunct | (739,000) | |
1,500,000$ | |||
Payroll taxes | 100,000 | ||
1,600,000$ | |||
5. | Estimated number of individuals impacted | ||
a. | Estimated work units | 953 | |
b. | Maximum number of work unites per person | 13.86 | |
69 | |||
2. This Hay Group Report shows the findings from a Hay Group study of the costs associated with the early retirement program.
3. This past early retirement analysis reports data on MCC's early retirees starting in the year 2000.
4. This current and future early retirement analysis lists estimated retiree insurance benefit expenses for 2011, the number of eligible employees to retire through 2017, and the costs associated with those: (Note: to view this slide in a larger, more readable format, click on the "view on slideshare" emblem in the lower right-hand corner of the slide.)
5. This Teaching Costs spreadsheet illustrates MCC's expenses for salary and benefits for full-time faculty and for early retirement faculty.
6. This Projected Retirement Benefit Liability graph illustrates the projected increase in MCC's retirement benefit liability costs through fiscal year 2015, under the current arrangement. "Retirement benefit liability" is a combination of what MCC pays for insurance for early retirees and the projected liability MCC will accrue for for future early and regular retirees.
Chancellor Mark James presented his recommendation regarding changes to MCC’s retirement program at the MCC board of trustees meeting on Thursday, May 12, 2011. The board accepted the chancellor’s recommendation and passed the resolution unanimously.
Here is the PowerPoint presentation delivered by Vice Chancellor Tuesday Stanley regarding the state of MCC’s budget, including information on the early retirement program. (To view the second slide, click on the triangle 'play' button on the right-hand side of the slide. To view in a larger format, click on the "view in slideshare" icon in the lower left-hand corner of the slide.)
