Changes to one of Rensselaer’s pension plans offered to participants has upset the Faculty Senate, as they feel that benefits once promised to them have been revoked.
Rensselaer offers an option of two different pension plans to participants. The Defined Contribution Plan, which is based on the employer and the employee each making a financial contribution, and the Defined Benefit Plan, which offers both a fixed and variable feature formula, and is the plan causing a controversy among faculty and administration.
The Defined Benefit Plan has two features which pensioners may choose from: a fixed option, where the money given to them remains constant no matter what, or the variable annuity option, where the money is tied to the market, varying with an equity index, and can end up being more or less than the amount given through the fixed option depending on the success of the market.
Recently, Rensselaer hired an international consulting firm, Watson Wyatt, to review the Defined Benefit Plan. They recommended that it be altered. “One of the features under the Defined Benefit Plan is being amended,” said Curtis Powell, Vice President of Human Resources. “The ‘variable annuity feature’ is being amended. It’s not a clear-cut ‘we put in this much.’ It’s based on actuary assumptions.” According to Powell, changing the variable annuity feature is an attempt to equalize the amounts given through the two options offered under the Defined Benefit Plan. “Initially, benefits for the Defined Benefit Plan and the Defined Contribution Plan should be the same,” he said.
The initial benefits in the Defined Benefit Plan’s variable feature will be reduced by fifteen percent, beginning July 1, 2005, in an attempt to make the amount earned through the fixed feature and the variable feature of the Defined Benefit Plan the same in the long run. “This makes it actuarial[ly] equivalent in the end,” said Powell. In an e-mail to Rensselaer faculty and staff that addressed the growing discontent over the change in the variable annuity feature, Powell emphasized that “…the primary objective of a pension plan is to provide a stable and secure income after retirement. It is increasingly expensive for Rensselaer to maintain a generous pension plan with complex benefit features.”
Despite assurances on the part of the administration that pensioners would not be losing money if in the future they were to opt for the variable feature, the Faculty Senate doesn’t feel comforted. Bruce Nauman, President of the Faculty Senate, said: “No. It is a real cut. The affected people will get fifteen percent less every year for the rest of their lives.” Even though the Faculty Senate disapproves of the alteration in the plan, Powell feels that the purpose of the change has been largely misunderstood. “Inaccurate, misleading, threatening communication by individuals who are not experts in the management of pension plans further complicates the intended purpose of the proposed changes,” Powell said in the same e-mail addressed to faculty and staff.
Out of the 410 active pensioners, only about 40 to 60 participants would be affected by this change, but the Faculty Senate is still concerned, demonstrated through a recently passed resolution that said, “retirement benefits, once promised, should not be reduced.” Powell responded: “I think they’re looking at it from principle: they don’t want anything to change. They’re using this issue to try to drive a wedge between this faculty and the administration. Look at the effectiveness of their governing body—the Faculty Senate. Why aren’t they effective in working with this administration?”
Although Powell feels the purpose of the change has been misconstrued, Nauman thinks it’s more than clear enough. “Mr. Powell and Sam Hefner, Chairman of the Board, both told us the motivation was to save money,” Nauman said. “It is a shame that the administration is financing The Rensselaer Plan by reducing benefits promised to pensioners.”
