NORMAL — Illinois State University is expecting a larger number of faculty and staff to retire this year amid questions about the impact of pension reforms.
Greg Alt, interim vice president of finance and planning, said because of pension reforms, the university expected retirements would be up 20 to 30 percent over the typical year's total of about 100.
“But the numbers are starting to come in higher,” Alt said Tuesday.
The story is similar elsewhere across the state.
The State Universities Retirement System mailed out twice the number of retirement applications in March as it did a year ago for all schools, according to Beth Spencer, SURS communications manager.
“We currently have approximately double the amount of applications on file for May and June and anticipate a significant number to still be submitted,” Spencer said in an email reply to questions.
One reason for the uptick is a change in the way pensions are calculated for eligible people who retire after July 1.
Those who select what's called the “money purchase option,” which is based on such factors as age, money contributed and the interest it earns, could see a monthly annuity “much lower than the historic rate,” Alt said.
Instead of the guaranteed 7.75 percent interest rate that SURS has used to calculate the annuity, the amount would be tied to U.S. Treasury rates — currently about 4.5 percent — plus 0.75 percent.
Alt gave the example of a 57-year-old employee retiring before July 1 receiving $3,287 a month while the same employee would receive $2,230 if they retire after July 1.
To lessen the impact of the change for those near retirement and avoid a rush to retirement, the pension reform measure included a provision that was supposed to lock in the old rate as of July 1 for those eligible to retire on that date, even if they retired later. But the actual language in the bill that was signed set the lock-in date as July 1, 2013, rather than this year.
SURS noticed the errors and told the law's sponsors months ago, Spencer said. Corrective legislation has been drafted and universities as well as SURS are working to get the date changed to what was intended, according to Alt and Spencer.
In typical years, ISU pays out $2 million to retirees for such things as unused vacation, Alt said. If retirements are up 30 percent, ISU would need to pay out about $600,000 more than usual.
However, the university is not overly concerned. Alt said, "Many of these people would be retiring in a few years anyway."
University spokesman Eric Jome said, “We see spikes and then we see troughs, and over time it averages out."
Jome noted that there were 164 retirements in fiscal year 2012 because of a change in formulas, but the following year, only 38 people retired.