Come each November, something called “Open Enrollment” comes along at Drexel. You can elect to buy into any changes in your benefits that are offered during this period, or, by taking no action, you retain your previous benefits (though not necessarily their costs, of course).
This year is a little different.
Drexel has been quietly — very quietly — working on a new retirement plan for the past two to three years. The University sprang it on faculty and staff at the beginning of the fall quarter. You can take it, but you can’t leave it, since this isn’t a modification of the existing plan but a replacement of it “in toto.” You must “elect” the new plan, because the alternative is … nothing.
That’s just a bit Orwellian now, isn’t it? An election is, supposedly, a choice between options. Even in a political election you get to choose between the lesser of two evils, though you’re voting for evil either way. But the new Drexel retirement plan is sort of like the choice your mother gives you when you don’t like what’s on your dinner plate: “Okay, you can either eat it or go to bed hungry.”
Except that we aren’t children anymore, are we?
I inquired whether the faculty senate had approved the new plan, at least as regards faculty. Well, no, the senate had seen the plan (after it was finished, of course), and had, um, discussed it. But it didn’t have any right of approval because, well, employers can change their benefit plans at will. Shared academic governance at work, see?
Actually, I don’t. When I chaired a faculty senate at a former institution, my colleagues and I directly negotiated raises, benefits and employment conditions with the administration. The idea of springing a fully formed plan on the faculty to effect a major change in retirement benefits at the last minute would have definitely been a nonstarter.
Robert wouldn’t have liked it, nor would the chair of the faculty Benefits Committee, who knew more about the subject than the guy who wrote the Employee Retirement Income Security Act law in the first place. And no one wanted to mess with him.
So, what does Drexel’s faculty senate think about the new plan? Since it hasn’t communicated the slightest information about its deliberations to the faculty, it’s kind of hard to know. After all, this is a body so open in its dealings that you have to use a PIN to even gain access to its meeting agendas.
You’d think — maybe — that the senate would want to give its opinion to the faculty it supposedly represents on a subject like the replacement of its retirement plan. If it has, I haven’t heard it. But, really, does the faculty senate still actually exist?
It was AWOL when the University cut the customary lump sum retirement payment in half a couple of years ago. It has had nothing to say about years of merit salary increases that fall laughably short of the cost of living. It does have a website and an office. It holds its own elections. But is that proof of life?
I say all this without pleasure. I wrote the original draft of Drexel’s faculty senate charter, and I served in it for a while. I have devoted a fair amount of my academic career to collegial governance, and I believe strongly that any academic institution without it is a merely a corporation with a sweetheart tax dodge. But, we are where we are, and not at Drexel alone.
Let us then examine the new retirement plan together, at least as far as it is available. When I requested a copy of the plan contract — you know, the written statement of objectives, procedures and obligations that will reciprocally bind you and the University — I was told it hadn’t been written yet.
So, dear friends, you will be “electing” a new plan whose contents and conditions don’t legally exist. All you have is a partial and selective statement of intent. It’s less than a promissory note. How about betting your future on that?
Still, let’s make do with what’s been vouchsafed us. The present Drexel plan — the one being scuttled as I speak — is inadequate, we’re told, because it sets aside (upon vesting) only 11-13 percent of one’s paycheck toward retirement. That, according to insurers and actuaries, isn’t enough.
The proper percentage, they say, should be in the range of 15-17 percent. This is because retirees are living longer, and running up more expenses — medical expenses, in a word — than previous generations.
The old benchmark for retirement income was that it should be 80 percent of preretirement wages or salary. The new one is 85 percent, and, because of the elimination of defined benefit plans (once the norm) and the relative decline in Social Security payments, achieving and maintaining that level is a crapshoot for whose final responsibility universities have now washed their hands.
When I started out in academia, my defined benefit plan plus Social Security was designed to replace roughly 75 percent of my working income, leaving me with only five percent to chip in on my own to reach the 80 percent goal. That sounds like Nirvana today.
How is Drexel’s current plan structured? You have to contribute a minimum of two percent of your income as a share of the retirement pool, which the University matches on a sliding scale as you gain seniority with escalating contributions of seven, nine and 11 percent.
You can voluntarily increase your own share, but, if not, you max out at 13 percent (two percent plus 11 percent), of which 15.4 percent comes from your end, and 84.6 percent from Drexel’s.
That doesn’t sound bad, but it only gets you to a 13 percent layaway. You can, however, put in more money on your own, assuming that your Drexel salary lets you afford it. Under the old plan you could, for example, get to the new recommended savings threshold by putting in an extra four percent of your earnings.
Drexel wouldn’t match your new contribution, wouldn’t in fact add a dime: your new calculus would be six percent plus 11 percent equals 17 percent. Drexel would still be putting in most of the money, but your share of it would jump from 15.4 percent to 35.3 percent.
What this means, though, is that you could still reach the recommended 17 percent level under the old plan by self-funding.
Lots of Drexel employees couldn’t afford it, but some could. Thus, there was no need to change the old plan to reach the recommended contribution. How, then, does the new plan help you get there more painlessly?
The answer is, it doesn’t. The maximum University contribution is still 11 percent. What’s different is that Drexel will no longer put in more money than you do at the lower rates of employee funding. If you put in the minimum two percent, that is, you won’t get a seven or nine or 11 percent match from the University. You’ll get two percent, and, despite what the villain in Orwell’s “1984” would have you believe, two plus two is still no more than four.
But — isn’t that catastrophic? If salting away 13 percent of your income isn’t enough for a secure retirement, how can four percent be?
Well, the good news is that if you put in that six percent as in our previous example, the University will not only match you with six percent of its “own” money (of course, all the money is yours, because the University earns nothing but what your labor earns for it or what donors or granting agencies are willing to put into it because of your fine work), but it will add a so-called bonus sum of three to five percent.
That gets you back to 17 percent; it gives you, in fact, exactly the same result the old University plan offered before — but only for those high rollers able to pony up their six percent stake. For everyone else, just reaching the old 13 percent level will require a substantially higher personal contribution.
Work harder. Earn less. Have a more precarious retirement, if you can afford one at all. It’s the American way. Thanks to the new retirement plan, it’s the Drexel way too.
Heads we win. Tails you lose. And have a nice day.
Robert Zaller is a history professor at Drexel University. He can be contacted at [email protected]