Purdue retirement and savings plan changed for new non-exempt hires

WEST LAFAYETTE, Ind. - Purdue's Board of Trustees on Friday (May 10) approved placing future non-exempt employees in a defined contribution retirement and savings plan, providing a competitive retirement savings program while reducing costs for the university.

New non-exempt employees, which are essentially those on hourly pay, hired on or after Sept. 9 will be enrolled in the new Retirement and Savings Plan. According to estimates, Purdue could reduce costs by more than $2 million annually by the plan's fourth year.

The move is designed to remain competitive, to enact best practices such as using a defined contribution plan to reduce expenses by providing for matching employer contributions that encourage employee savings, and to leverage Purdue's existing retirement plan infrastructure with Fidelity, said Luis E. Lewin, vice president for human resources. Current non-exempt employees will remain in the state's defined benefit plan through PERF, the Public Employees' Retirement Fund.

For employees in the new plan, Purdue will make an employer base contribution of 4 percent of earnings, and the employee will be automatically enrolled in a 403(b) voluntary contribution plan at a rate of 5 percent. Purdue will match that voluntary contribution up to an additional 4 percent.

The plan provides a portable benefit after "cliff vesting" at three years of employment, meaning that vesting occurs all at once, not in steps. The portable benefit means participants can roll funds into other plans if they move to employment outside Purdue.

"In designing a retirement program, an important consideration is to ensure retirement adequacy, which means to model a program that can provide replacement income between 70 and 90 percent of the employee's working earnings," said Bradford Klink, a partner with Aon-Hewitt, a consulting firm that assisted in Purdue's planning. "The components of the Retirement and Savings Plan provide the foundation for future employees to have a solid retirement benefit that will serve them well throughout their career."

The plan will apply to benefits-eligible clerical, service, and operations and technical employees hired or rehired on or after Sept. 9.

In other business, trustees also approved a change to the Purdue president's retirement plan.

Purdue presidents previously participated in an independent retirement plan structured by the university. Trustees, at the request of President Mitch Daniels, have eliminated that plan and changed the policy to permit the president to participate in the standard university plan.

The changes to the president's plan are retroactively effective to Jan. 13, 2013. 

Writer: Dan Howell, 765-494-2028, dhowell@purdue.edu