Trustees approve change to Purdue retirement plan
WESTVILLE, Ind. - Purdue's board of trustees on Friday (April 9) approved a change to the university's retirement benefit plan designed not to impact total compensation levels for current employees while generating future savings and keeping the university competitive with peers in hiring new talent.
Under the plan, which will take effect Jan. 1, the university would reduce its retirement contribution to 10 percent and require employees to contribute 4 percent. The university would then increase the budgeted salaries of affected employees with the goal of maintaining total compensation levels, said Al Diaz, Purdue executive vice president for business and finance, treasurer. The plan applies only to those employees - faculty and exempt-status staff - who are part of the TIAA-CREF retirement plan.
"Our goal, based on input from members of the university community, was to create a plan that would continue to allow employees to contribute to a retirement plan without negative compensation or tax consequences," Diaz said. "In the end, we will have a retirement system that is more consistent with our peer institutions, is sustainable and makes our job offers to new employees more compatible with our peers."
An additional retirement account element would be established for the mandatory employee contribution, said Luis Lewin, Purdue's vice president for human resources.
"This type of account would provide key benefits for employees," Lewin said. "First, it would be a pre-tax contribution, making it subject only to the Federal Insurance Contributions Act (FICA) tax and not income tax. Second, since it is a mandatory employee contribution, those dollars would not be counted as part of the overall amount employees are permitted to voluntarily contribute to their retirement fund."
The framework for the revised retirement system was based on information contained in a compensation market analysis conducted by Hewitt Associates LLC. The report found that at Purdue's West Lafayette campus salaries for faculty, exempt and non-exempt employees were competitive with the market across the board. However, Purdue's retirement income benefits for faculty and exempt staff were 140 percent to 210 percent of that provided by peers.
"The findings in the Hewitt report confirm that this plan will move us in the right direction, both in terms of mitigating the impact on current employees and in terms of being competitive in the marketplace moving forward," Diaz said.
"The new plan is a more elegant and equitable solution than previously considered options. In general, the input I've received on campus about the plan has been positive."
Implementing the plan will require changes to be made to the university's payroll system, which means there are additional details that will still need to be addressed. Diaz said more information about plan implementation should be available in late summer or early fall.
Under the current retirement plan, no employee contribution is required, and Purdue pays in 11 percent of the first $9,000 in salary and 15 percent for additional salary above $9,000.
Writer: Brian Zink, 765-494-2080, firstname.lastname@example.org
Sources: Al Diaz, 765-494-9705, email@example.com
Luis Lewin, 765-494-7395, firstname.lastname@example.org
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