UNIVERSITY PARK, Pa. – Across Penn State, 587 faculty and staff members have opted to take advantage of the Voluntary Retirement Program (VRP) that was offered Sept. 1. About 46 percent of the more than 1,270 faculty and non-academic staff who were eligible for the program have opted to participate in the plan.
“The response rate was strong and above industry standards of approximately 30-35 percent for this type of incentivized program,” said Nicholas Jones, executive vice president and provost. “This is an opportunity for strategic realignment of our work force and it offers us the ability to analyze our operations and decide how to invest our resources in the future to not only drive efficiencies, but to address various critical needs.”
There was significant analysis of the situation and focused consideration of Penn State’s long-term planning efforts before the retirement incentive package was announced, according to Jones. Eligible employees who were offered the VRP were selected based on many factors, primarily the business needs of the University, with assurances that the education mission would not be negatively impacted.
David Gray, senior vice president for Finance and Business, said that while the voluntary retirement program has freed up some assets for colleges, departments, campuses and units to reorganize their operations, University leaders are aware of the vast amount of institutional knowledge that each of these soon-to-be retirees possess.
“Those retiring have made significant contributions and have helped Penn State remain a world-class institution, and for that we are most grateful,” Gray said. “We know that units are taking a thorough look at their future needs and are undergoing careful succession planning. We have asked budget executives to look at each position on a case-by-case basis. There are exceptionally talented individuals across the University, some of whom will be considered to fill these roles.”
Of the 587 individuals taking this voluntary retirement, 364 are staff, 214 are faculty and nine fall into the administrative category. Staff deciding to retire had the option of requesting an end-of-calendar year retirement date in December 2016 or end-of-the-fiscal year date in June 2017. Preliminary figures show that 125 people will take the December option. All faculty participating in the plan have a June 2017 retirement date.
The provost noted that over time the University would eventually be able to realize the full benefit of the VRP, but a number of necessary costs must be managed throughout the process.
Jones said the compensation of those retiring amounts to about $67 million, with about $17 million of that figure being recaptured benefits costs. These amounts are estimates at this early stage, according to Jones, and initially, many of the soon-to-be vacated positions must be refilled.
Some additional hidden costs include not only the up-front cost of administering the program – which includes pay out of the annual salaries of those taking the VRP — but also future costs in such areas as recruiting, training and compensating any new staff. In addition, there may be temporary labor costs needed to fill in during the interim periods, and the hiring of new faculty brings with it extra start-up costs.
“An added benefit of the VRP is the timing, as it gives us a little more flexibility in managing a variety of business needs,” Gray said. “The VRP gives us some organizational elbow room, and allows us to rethink the way we do business.”
Gray said more information on those who will be retiring will be available in the coming weeks.