HIGH COST STALLED RETIREMENT OPTION

Changing Southeast Missouri State University's early retirement program to comply with federal law could have resulted in retirement costs of about $9.5 million over the next 10 years.

Art Wallhausen, assistant to the president at Southeast, said the cost estimate was made by consultants with Coopers and Lybrand, a major accounting firm with offices in St. Louis and other cities.

The consultants estimated it would cost the university on average around $900,000 a year over the next decade, although much of that cost, perhaps $3 to $4 million, would likely be borne in the first two years were the program to be revised to meet federal age-discrimination laws, Wallhausen said.

But instead of bringing the program into compliance with age-discrimination laws and assuming that cost, Southeast's Board of Regents halted the early retirement program Thursday.

Wallhausen said the analysis by Coopers and Lybrand showed that it would be costly for the university to bring the program into compliance.

He said Kala Stroup, Southeast's president, recommended that the program be terminated because "to bring it into compliance would be unaffordable and change the entire purpose of the program."

Implemented in 1987, the retirement program was designed to allow faculty and staff at Southeast to retire early, between the ages of 50 and 62.

But the school's attorney, Joseph J. Russell, and the consulting firm said the early retirement program violated recently revised federal age-discrimination laws by not allowing people over 62 to participate.

Wallhausen said that to bring the program into compliance would require the university to eliminate the age limit.

"It no longer would be early retirement, it would be a retirement subsidy program," he said.

The consultants based their estimate strictly on the university's current personnel and who would be eligible if the age limit of 62 were eliminated.

University officials, with the regents' blessing, hope to negotiate acceptable individual retirement agreements with the 16 employees who have applied for early retirement for the 1993 fiscal year.

Since 1987, 56 faculty and staff members have retired early from the university at a cost to the university of $2.8 million. Of the 56 people, 32 were faculty members, Wallhausen said.

Under the plan, those employees taking early retirement received a cash benefit based on their individual salaries for their last year of employment.

The benefit was determined by using a multiplier based on the number of years of service to the university.

In order to qualify, university employees not only had to meet age requirements, but also had to have been employed at Southeast for at least 15 years.

In addition to the cash benefit, paid through an annuity, retiring employees received basic life and health insurance coverage for a period of up to five years or to age 65, whichever came first.

Wallhausen said that Southeast's early retirement program was not set up for budgetary reasons. "It wasn't designed for budgetary savings," he said.

"Ours was not really designed as a downsizing program. It was designed to give some flexibility in hiring," he explained.

Wallhausen said that the early retirement program provided greater faculty turnover, which, in turn, allowed the university to hire new personnel where most needed.

The program, however, also led to some reduced costs where positions were not filled following retirements, said Wallhausen. But he added, "There is no real way to gauge the actual savings as a result of this plan."

"We have reduced a total of about 30 faculty positions," he said, noting that some of the reduction in personnel came as a result of early retirements.

"It really was to everyone's benefit in a time when the university was trying to downsize," said Wallhausen. "The decrease in enrollment in the mid-1980s left us with more faculty than could be justified on a student-faculty ratio basis. So this was a way of reducing those faculty numbers with the least amount of personal trauma."

Shelba Branscum, a faculty member in the human environmental studies department and a member of the Faculty Senate, said the elimination of the early retirement program would not be a big concern to most faculty.

"I don't think it would be a big deal to the faculty in general," she said. "When you are looking at programs to cut out, that (early retirement) only affects a few people along the way."

But Al Robertson, a longtime faculty member in the earth science department and a member of Faculty Senate, said that elimination of the program is a concern to those university employees who had been contemplating early retirement.

Robertson said he knows of several university employees who had planned to take early retirement.

"I am concerned about the people who have applied for this," said Robertson.

In particular, he pointed out, there's concern that the 16 individuals who have applied for early retirement for the coming fiscal year won't be able to get as good a deal under any individually negotiated agreements.

Wallhausen said last week that such individualized agreements probably will provide the retiring employees with less of a benefit package than was contained in the early retirement program.

Robertson said he knows of one faculty member on the retirement list who won't retire early if medical coverage is not included in the benefits.

Both Robertson and Branscum said the issue of the program's legality did not come as a surprise to faculty. He said the issue surfaced about a year ago.

Without an early retirement plan, the only option for university employees wanting to retire early is to reach individual agreements with the institution, said Wallhausen.

"Even without a formal program," he said, "you can always do an individual contract with someone, subject to board approval."

But Wallhausen said the regents have not set any guidelines for that (beyond dealing with the current 16 individuals). "So right now, it is really in limbo."