Remarks from William Nordhaus of Working Group report at FASS meeting on November 19, 2020
Mr. Jacobson introduced William Nordhaus to talk about the Retirement Incentive Report that he has been working on with the Interschool Working Group on a draft report. Mr. Nordhaus noted that the University announced in August 2020 a retirement package called the Retirement Incentive Plan for tenured faculty 70 years or older and applies to all schools, and covers 177 faculty in the University, with 82 in the FAS. He also noted that even if one is not in the specific category of tenured faculty 70 years or older, this issue will probably concern members of the faculty at some point in the future, and it would be beneficial to know how this current situation is handled.
He noted that the Plan was discussed by the FASS, and it was decided that it was something that the FASS should look into. Therefore, he said, the Senate organized an Interschool Working Group composed of six faculty members from four schools – three members from the FAS, including himself, Howard Bloch and Steven Wilkinson. The Interschool approach will be useful because we have often been met with concerns that our reports only apply for FAS and not to other schools, and since the Working Group covers other schools, this is a good way to have a full faculty review of this report. He noted major concerns with the plan:
1) It was developed behind closed doors and without any faculty consultation or advice.
2) The salary component of the plan is roughly comparable to the post-70 incentive plans of other universities, however the non-salary components are less favorable and in some cases far less favorable than at other universities.
3) The basic timetable of the incentive plan is extremely tight and inflexible – one must sign on by the end of February 2021 and retire by the end of June 2021. There are no extensions in the plan, one way or the other. He noted that many faculty have devoted their entire lives to working and teaching at Yale, and the plan asks them to make a life-changing decision in a few months in return for a cash hand-out. In the Group’s view, it is not a respectful way to deal with the faculty. One of the group’s recommendations is that Yale develop a more flexible approach to the timing, the phasing and the incentives related to tenured, senior faculty.
4) This incentive plan ignores the issues of tax planning. He noted that payment is all in a lump sum in 2021 and doesn’t take into account that this is likely to be a high tax year (or more technically, a year with a high marginal tax rate). The Group recommends that the University offer alternative payout structures which allow the deferral of payment to later years and spreading payments over multiple years.
5) He noted that the payment bases the payout on the 2020/21 academic year salary. Since salaries were frozen this academic year, it lowers the payment in this year relative to what salaries would have been under normal salary growth. Therefore, he said, the Group recommends that any plan adjust for the salary freeze.
6) He noted there are important issues relating to health benefits, pension contributions, special use accounts and other similar items. He said these issues are complicated, so he is simply noting them and will not discuss them in detail.
7) Another issue he noted was regarding accrued paid leaves of absence. The Plan makes no mention of the treatment of leaves that will be accrued as of June 2021, and the Working Group recommends that the University develop a plan to deal with accrued leaves.
Mr. Nordhaus said that these are some of the major concerns and flaws that the Working Group has found. He then summarized the philosophy and basic stance of the plan. He noted that the incentive plan was developed during the pressure and chaos of the pandemic in the spring and summer of this year, and it is understandable that many features may have been overlooked. He said in terms of the basic structure and long-term interests of the University, the plan does not solve the longer-run issue of an effective retirement plan. He said that broadly speaking, we think that Yale needs to respond more robustly to the reality of the end of mandatory retirement. That change has completely transformed the relative bargaining power of faculty and universities. In an earlier era, he noted, universities could just tell faculty the terms of retirement – they could lead them to water and they could make them drink. Now, he said, they must induce faculty to retire by making retirement more attractive than remaining an active member of the faculty.
He noted that, aside from retirement, an innovative plan that induces early retirement will contribute to improving faculty diversity by making way for younger emergent scholars and teachers. He said the emphasis in diversity plans has always been to increasing people coming in the pipeline to make room for the new and to provide better balance of the faculty. So, he said, a critical part of any diversity strategy is a robust incentive plan for people to retire.
Mr. Nordhaus said that from the point of view of faculty, and from letters he has received since this report was made public, the Plan does not speak to the main concerns of faculty. Faculty have spent many years at Yale and are devoted to the institution, their research, and their scholarship. They love the shared space in their departments and schools, they like to see their current and former students, and they want to be around their colleagues. In an attractive retirement program, he said, retired faculty will be allowed to retain the attachments that brought them into the academy in the first place. Specific components of an attractive plan will allow them to have an office in their department or school, the ability to teach and supervise students, the means to be part of the intellectual life of the school, and the ability to continue research. He said retirement should not be like a forced exile to a foreign land, where you leave the familiar and cherished attachments of a lifetime behind you – it should be something that you look forward to. Therefore, he said, the Working Group believes that emphasizing the continual relationship of a faculty member to the University is a key part of an effective retirement strategy, and the group recommends that the University develop more inclusive options for community affiliation for retired faculty.