A version of this article originally appeared in the AAUP magazine Academe.
When mandatory retirement was made illegal by amendments to the Age Discrimination in Employment Act (ADEA) in 1986, college and university administrations worried about the choices that might be made by their tenured faculty. They sought, and got, an exemption to the ADEA, which allowed higher education institutions to decide whether to impose a retirement age of 70. The exemption was in effect until December 31, 1993. Since then tenured faculty have been free to retire or not retire at any age.
To prepare for the eventual end of the exemption, many colleges and universities decided to try a different approach. They offered incentives to make earlier retirement more attractive or, in some cases, more possible. The incentives took the form of cash or other benefits, and (typically) were made available to faculty who had worked for a specified number of years and had reached a specified minimum age. In order to encourage qualifying faculty members to consider and accept the incentive package, many colleges and universities also set a maximum age at which the extra benefits would be available.
Setting a maximum age became a matter of controversy. If there is a maximum age at which a benefit is allowed, then there would be older employees who would be denied a benefit that younger employees may receive. Some argued that this was a violation of the ADEA and the Older Workers Benefits Protection Act (OWBPA).
The OWBPA, adopted in 1990, had clarified that early retirement incentive plans would be not be in conflict with the ADEA if they were offered in connection with defined benefit plans (plans in which the employer commits to the payment of a certain level of benefits for the lifetime of retired employees.) But many faculty members participate in defined contribution plans (in which they and their employers contribute to a fund which is invested on their behalf, and which may become an annuity upon their retirement.) There was no specific language in the law that related to defined contribution plans.
So in 1993, colleges and universities began seeking legislation to settle the controversy. AAUP had supported the lifting of the mandatory retirement law, coupled with a recommendation that universities and colleges be permitted a tool to encourage (but not coerce) retirement. Therefore, AAUP joined with the colleges and universities in support of legislation that would allow for voluntary retirement incentive plans.
The Higher Education Act, Title IX D now provides the following:
Higher education institutions will be permitted to offer voluntary retirement incentive plans to tenured faculty and other tenured employees.
Institutions are permitted to reduce or end the offer of incentives at a certain age, but are prohibited from reducing or terminating any other benefits on the basis of age.
The benefits offered under this Act will have to be in addition to any retirement or severance benefits that had been offered generally to similar employees within the last year.
Virtually every employee will have a chance to qualify for the top benefit offered under one of these incentive plans because:
Faculty who qualify for the plan, but are already past the beginning of the "age window" when a new plan is adopted will have the right to consider for six months whether they want to retire (within a year) and claim the top benefit.
Faculty who don't qualify when a new plan is adopted because they haven't worked for the required number of years will have six months to consider accepting the top benefit whenever they do meet the years-of-service requirement.
As they consider these incentive plans, senior faculty should keep in mind that they are both valuable and expensive to their institutions. If they choose to retire, their experience will be difficult if not impossible to replace. To preserve the quality of the faculty and the institution, retiring faculty should join with continuing faculty to press for preservation of tenured positions.
Upon retirement, senior faculty members release substantial resources for the college or university to use in other ways. Since the institution has a financial interest in encouraging earlier retirement, faculty members should seek expert advice to help them make the best choices in their own interest--and in the interest of the continuation of the enterprise of higher education to which they have devoted many years.
by Ruth Flower, Director, AAUP Government Relations
October 14, 1998