Tips for Creating an Effective Early Retirement Plan for Employees

This blog post was contributed by Linda Harber, retired CHRO from George Mason University and active CUPA-HR contributor.

Planning an early retirement program for your institution is a vital part of human resource strategy and operations and can help position HR as a strategic leadership partner, especially during times like these. That said, developing an early retirement program can either be one of the best things HR does or one of the worst. The key to success is planning ahead and communicating well with key stakeholders.

Here are several ways to develop an early or voluntary retirement program that fits both the employees and the financial needs of your institution.

• Partner with your retirement vendors and benefits attorneys for the best experience building a legal program. Research any state or federal laws that could impact your program.
• Get feedback and input from the people you’re trying to attract with the early retirement program. The feedback can be formal or informal. Asking for input from your investment committee or benefits committee are two great places to start. You’ll already have a good working relationship with these faculty and staff, and their input will be essential. If you have more time, focus groups work great.
• Look into alternative retirement plan (ARP) and American Council on Education (ACE) resources to help build the program. Colleagues at CUPA-HR are also a wonderful source of support and information.
• Research the governance road your program will have to take. Early determination of the road to approval is vital for setting a proper implementation date and communications. Examples of governance groups could include faculty and staff senates, academic councils, deans and/or department chair groups and your institution’s governing board. It’s important to know if there are separate committees within these many groups that must review, approve and vote on the program before implementation. It’s helpful to create a timetable that allows the required groups’ approval and input. At a public institution, make sure to add any out of university approvals that may be required also. Doing this step early in the program development process is much better than later.
• Develop a cross-organizational team to provide support. Include members from the provost’s office and academic and administrative areas, as well as individuals with budget or financial expertise.
• Involve HR staff. As soon as something is developed, it’s helpful to train or cross-train the HR staff on the plan. This is more than just a benefits program!
• Add a well-being piece to the communication and counseling for interested applicants. Money is important, but choosing to transition to retirement is about more than just money. Having staff trained in the total retirement support process is very helpful to any implementation. Scheduling additional retirement planning sessions to include support from Social Security/Medicare and well-being options is also important.
• Determine who will make the decision of accepting or denying the early retirement participants. Where does this decision rest? Will it be the department head, dean, vice president or someone else? This may seem simple, but at a complex university it never is. Is this decision final, or can it be appealed? What if someone had already communicated a retirement decision? Can they still opt into this program?
• Think about other materials that need to be developed. Development extends well beyond the program or policy itself. Implementation guidelines with a timetable for the institution and the applicant, application documents, communication materials, in-service training for the HR staff (and any qualified helpers) — all of these must be developed.
• Obtain data on age, years of service, salary, diversity demographics by school, department, and tenure or non-tenure status for faculty. This data is important for planning and projecting costs and numbers. This step should be done early in the planning process.
• Choose two deadlines and processes to break up the impact on both the university and the HR department if your institution is large and has a large number of potential applications. You can break it down alphabetically or by staff and faculty. Breaking up a big program helps prevent massive “brain drain” in some schools and units.
• Consider the cost and maintenance of healthcare for your plan. Employees will not voluntarily retire if they won’t have affordable healthcare for themselves and their families. It’s important to include transition funds for healthcare costs.
• For teaching faculty, consider a step-down program for classes and research. Be prepared to be asked about part-time work opportunities after retirement. Make sure you research and discuss this question before you communicate to potential applicants. Verify state and federal policies before finalizing the answer.
• Don’t forget retirement celebrations. When employees decide to take the early retirement program, they’re retiring after years of service to the institution. Celebrate them and those who helped build and support this transition program.

Related resources:

Furloughs, Layoffs and RIFs — Best Practices in Policy Development in the Wake of COVID-19 – CUPA-HR Webinar |  May 6, 1:00-2:00 p.m. ET  |  Sponsored by AIG 

CUPA-HR COVID-19 Resources on Workforce Planning and Reduction in Force (see Crisis Management and Business Continuity)

Retirement Planning Toolkit (CUPA-HR members-only resource)

Impact of the Economic Recession on Student Enrollment and Faculty Composition in U.S. Higher Education: 2003-2018 (CUPA-HR Research Brief)

The Challenges of an Aging Higher Ed Workforce (CUPA-HR Research Brief)

The Aging of Tenure-Track Faculty in Higher Education: Implications for Succession and Diversity (CUPA-HR Research Brief)