Pension Design in the Post-Mandatory Retirement Era.

Until the beginning of 1994, federal law permitted mandatory retirement of tenured faculty at age 70. The Committee on Mandatory Retirement in Higher Education, formed by the National Research Council, was charged by Congress to examine potential effects on colleges, universities, and faculty members of ending the exemption for tenured faculty under the Age Discrimination in Employment Act. The committee concluded that at most colleges, few faculty would work beyond age 70 but that a proportion at research institutions would continue, and that pension design could help institutions cope with this situation. The committee strongly recommended that institutions consider re-designing pension plans, institute a range of income replacement ratios and benefits related to service, and address the issues of benefit portability and normal retirement age. The committee stressed the importance of maintaining the purchasing power of retirement income, possible through a variety of annuity payment methods such as graded payment and variable annuity accounts. In response to administrator concerns about rising costs, placing limits on benefits was proposed. Voluntary retirement incentives that reduce overstaffing, control costs, and offer flexibility for partial or phased retirement were suggested. The role of health insurance availability and cost in retirement decisions was also considered, and institutional assistance to faculty in planning retirement and maintaining links with the academic community were recommended. (MSE)