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Faculty Retirement Incentives Unveiled

12.2.09


Updated for Harvard Medical School details December 4, 2009.

Several Harvard schools, led by the Faculty of Arts and Sciences (FAS), today announced retirement incentives aimed at senior faculty members. Some 180 individuals University-wide, out of a recent census of 1,507 full, associate, and assistant professors (excluding appointments in the affiliated hospitals), are eligible for the offers. Those being informed about the new retirement incentives today come from FAS and the faculties of divinity, education, medicine, and public health. (The University announcement appears here. Data on the number of faculty members come from the 2009 annual report of the Office of Faculty Development & Diversity.)

 FAS appointees are disproportionately represented, accounting for 127 of the retirement offers, reflecting:

  •  its size (FAS has 720 faculty members, or 47 percent of the University total); and
  • its heavy weighting toward more senior, full professors: 520 senior and 200 junior faculty members, a 2.6 to 1 ratio, a level exceeded only by the law and divinity faculties (for the professional schools as a whole, the figures are 504 senior and 310 junior faculty members, a ratio of 1.6 to 1). 

As FAS faculty members learned today in e-mails from their dean, Michael D. Smith, the incentive is offered to tenured professors who will be at least 65 years old by next September 1, and who will have completed at least 10 years of service by their retirement date. Qualifying faculty members who choose to retire under the program must elect by next June 30 to do so under various schedules:

  • retire in one year (receive a one-year paid sabbatical and retire June 30, 2011);
  • retire in two years (maintain half-time teaching and service obligations over two years—receive the equivalent of two paid sabbatical terms over that time—and retire June 30, 2012); or
  • retire in four years (receive full salary for the first year, and then step down to half salary but full-time retirement contributions for the succeeding three years; teach half time all four years; retire June 30, 2014).

In effect, faculty members are receiving incentives in the form of transition time to make personal, professional, and financial arrangements while their salaries continue or are stepped down. No capital fund is being allocated to cover the costs. The details of the programs offered by the professional schools closely follow this model, with the exception of Harvard Medical School, where different compensation and practice norms exist; there, a "Voluntary Faculty Enhanced Retirement Program" offers eligible professors a lump-sum payment equal to 125 percent of annual salary paid upon retirement by June 30, 2011, or a 100 percent lump sum for those who take a two-year option and retire by June 30, 2012. The faculty program thus differs from the buyout offered to University staff members last spring. In that case, eligible personnel were offered lump-sum payments equal to a year’s salary, plus monthly stipends and medical insurance up to normal Medicare retirement age; the costs were covered by using excess funds in the assets of the defined-benefit pension plan.

Because none of the faculty members who choose the retirement incentive would depart from FAS’s payroll during this or the next academic year, the near-term financial consequences of their decisions are nil. Longer term, of course, decisions by senior faculty members to retire represent the potential for significant savings for FAS, as well as the opportunity to replenish the FAS ranks by hiring junior professors at a time when financial constraints generally are reducing hiring. Dean Smith has indicated that hiring would be below the rate of attrition in the future, causing the faculty ranks to shrink.

Beyond the implications for FAS’s future salary budgets from any retirements--whether the slots are left empty, or are subsequently filled by junior or senior appointments--faculty members typically represent other costs, including support staff and use of office or laboratory space (space constraints are already squeezing the School of Engineering and Applied Sciences, according to Smith’s recent annual report). The incentive offer makes explicit that faculty members considering retirement, like colleagues who already have emeritus status, would be able to undertake limited teaching duties, continue to work with their current graduate students, and have access to office or other space, subject to certain constraints. They do not receive continuing administrative staff support. Those minor expenses aside, the faculty members’ individual decisions about the timing of their retirements have large collective implications for FAS’s financial options in the years ahead.

Some retirement incentive has been expected ever since the University, and especially FAS, first grasped the magnitude of Harvard’s emerging financial constraints, caused by the sharp reduction in the value of the University endowment and subsequent reduction in funds from that source for academic operations. In the fiscal year ended June 30, 2009, FAS relied on endowment distributions for 55 percent of its operating revenue. (For the Divinity School, the figure was 73 percent. Harvard School of Public Health is the unit most dependent on sponsored-research support, and so derived only 15 percent of its income from endowment distributions; it is offering a retirement incentive to 18 of 73 tenured faculty, out of the school's larger cohort of 134 senior and junior faculty members. The education and medical schools were, respectively, 28 percent and 29 percent endowment-dependent. The medical school is offering the incentive program to 18 faculty members, out of a total of 176, and the education school to 10 professors out of a total of 48.)

As it tries to close a budget gap estimated at $110 million in the fiscal year beginning next July, FAS has chartered six working groups charged with identifying ways to pursue the faculty’s core research and teaching missions in more effective—and cost-effective—ways. Their reports are now being forwarded to Smith and will form part of the basis for his budget submission for the fiscal year. As noted, any professorial retirement decisions will not affect budgets this year or next, but they do provide flexibility in planning for subsequent years, in part by providing administrators with a surer sense of the likely size and composition of the faculty itself. (The removal of mandatory retirement ages for tenured faculty members, effective in 1994, has complicated faculty planning and renewal at educational institutions nationwide. Most of Harvard’s peer institutions apparently have since developed incentive programs to encourage voluntary retirements, so today’s announcement is innovative primarily in the immediate environs. Harvard Business School has had its own, distinctive program in place since the mid 1990s.)

Because FAS members need not elect the program for several months, there are no estimates of the incentives’ likely results; Smith has indicated that some faculty members contemplating retirement may have deferred while waiting for the details of any incentive program to be unveiled.

One development worth watching will be any distributional effects: although FAS did not provide any age data by academic division, compared to other fields, the humanities faculty is more highly skewed to senior than junior professors: 155 full professors versus 48 junior professors (3.2:1). In contrast, the social sciences mix is 175 senior to 67 junior professors (2.6:1) and the natural sciences, 137 senior to 67 junior professors (2.0:1). The smaller engineering and applied sciences faculty has 53 senior members and 18 junior professors (2.9:1).

The offers go to 18 percent of the faculty overall, and nearly one-quarter of the senior faculty members. The average age of tenured FAS professors is 56 years; but 24 percent of those full professors are 65 years old or older.

It is hard not to be struck by a coincidence. FAS is extending its retirement incentive offer to 127 faculty members. During the decade from academic year 1999-2000 to the present, its population grew by a net of 122 members, rising from 598 to 720. (Hiring overall was at an especially brisk pace, because the growth came on top of 20 to 30 appointments each year needed to compensate for the normal attrition from retirements, the departure of junior faculty members not awarded tenure, or other departures to other institutions.) This was the first consequential growth in FAS about 40 years, and was perhaps the faculty’s highest academic priority and its proudest achievement in recent years. The offer of retirement incentives will hardly repeal that progress--it is unlikely that anything like all of those eligible will enroll; but an inflection point in FAS faculty growth has clearly been reached.

 

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