State Rep. Daniel Biss (D-Evanston) passed legislation out of the House on March 31 to eliminate pension double-dipping at public universities.
Pension double-dipping is the practice of returning to work as a retiree to simultaneously collect a pension and salary. Private universities operating on a defined contribution pension plan, a group which includes Northwestern, have built-in protections against these abuses.
The bill mandates that if a public university rehires a retiree, that retiree must reimburse the pension system for dues collected while he is earning a salary. Biss said curbing pension double-dipping is one step toward alleviating the state’s long-standing pension woes.
“Our pension systems allow for a lot of abuses,” Biss told The Daily on Monday. “Some of those abuses involve people returning to work entitled simultaneously to a salary and pension, and some of those abuses involve artificially bumping their pensions by late-career raises and job changes and so forth. There are a variety of different opportunities for abuse, and you can’t solve your whole pension problem just by going after one of them, but addressing them is the first step to addressing our broader pension problem.”
Biss said he did not want to give the impression most people in public universities take advantage of the system. However, it does happen with some frequency, he said.
“It varies, obviously, from university to university,” Biss said. “But when I first started asking around about this I kept hearing more and more examples, so it’s definitely not just one or two people. I think it’s fair to say the cost to the state of funding our state university retirement systems is substantial and places a very meaningful strain on our budget.”
University of Illinois at Urbana-Champaign spokesman Tom Hardy said although retiree rehires occur at public and private universities nationwide, it is a very limited practice at UIUC.
“University of Illinois has a policy regarding retiree rehires and our office of government relations has been working with Representative Biss on researching this subject and helping inform his legislation,” Hardy said.
Adding that those who retire and return to work are typically hourly workers – such as ushers at football games – Hardy said UIUC has policies in place that protect against widespread abuse of the pension system.
“(UIUC has) policies that basically limit how much time you can work as a retiree rehire, that spell out the kind of work that’s done. Again, typically it’s part-time in nature, and we publish a list of who those individuals are.”
NU, as a private university, will not be subject to Biss’ proposed bill even if it clears the Illinois Senate.
Pamela Beemer, NU associate vice president for human resources, said because the University operates on a defined contribution plan as opposed to a defined benefit plan, employees who return to work after retiring won’t get the retirement contribution in addition to their new salaries.
In a defined contribution plan, employees make contributions to their accounts during their working years and may withdraw from those accounts when they retire.
“If they are hired back, typically it’s more in a phased situation, and they typically aren’t working full-time or they’re working for a defined period of time, not just being re-employed and working for years after,” Beemer said.
She agreed university pension systems, public and private alike, have undergone particular strain in recent years as a result of the recession.
“In the last couple of years with the economic downturn, individuals in higher education, and certainly Northwestern is no different, the retirement account balances of individuals have dropped,” she said.