SLIDE 1 WHAT AFFECTS THE CHOICE OF RETIREMENT PLAN AMONG COLLEGE EMPLOYEES: EVIDENCE FROM THE UNIVERSITY SYSTEM OF GEORGIA
Rob Toutkoushian Institute of Higher Education University of Georgia
The project described received funding from the TIAA Institute. The findings and conclusions expressed are those of the author and do not necessarily represent official views of the TIAA Institute or TIAA.
SLIDE 2
Overview
Compensation is an important tool for institutions to
attract and retain employees
Most attention directed towards salary, but non-
salary compensation is also important
Retirement benefits can equal half or more of an
employee’s lifetime compensation
SLIDE 3 Retirement planning can be complicated:
Employees must make judgments about future events such as life expectancy, asset returns, career paths Risk aversion of the employee is a factor as well
SLIDE 4 Context for Study
States and colleges are moving away from DB plans
¡ States have trouble raising enough $$ to guarantee payouts ¡ Prefer to give money to employees and eliminate risk to
employer
We know little about how employees value different
types of retirement plans
¡ Usually offered either DB or DC by employer, but not both ¡ Choice of employer is a mix of salary, benefits, and other
considerations
¡ Do certain types of employees prefer one plan over the other?
SLIDE 5
Current Study
Statistical analysis of choice of retirement plan (DB
versus DC) for employees in University System of Georgia
Interviews with faculty who made the choice of DB
versus DC within last four years
SLIDE 6
Why Study Georgia?
USG employees are given the choice at time of hire of
a DB or DC plan
Both faculty and non-faculty staff have the option The DB and DC plans for USG vary significantly in
terms of the vesting requirements
SLIDE 7 Overview of USG Plans
Employee can lose lots of $$ in TRS plan if leave prior to vesting
SLIDE 8
Data
Faculty and staff employed as of 2015-16 Spans 30 public institutions in University System of
Georgia (most 4-year, some offer 2-year degrees)
Source: HR legacy system for USG Samples limited to years when employees could
choose between DB and DC plan (2009-2015)
SLIDE 9 Trends in TRS (DB) Enrollment
Note: Time trends are different for faculty and staff
SLIDE 10 Key Findings: (1) males prefer DC, (2) blacks prefer DB, (3) US Citizens prefer DB, (4) middle-aged faculty prefer DB, and (4) interest in DC fell over time
SLIDE 11 Key Findings: (1) males prefer DC, (2) blacks prefer DB, (3) middle-aged staff prefer DB, (4) married staff prefer DB, and (5) interest in DC grew over time
SLIDE 12
Qualitative Evidence
Interviewed 12 faculty members at one USG
institution to learn why they selected their retirement plan
Semi-structured interview protocol Faculty were hired within the last four years
SLIDE 13
Theme 1: Adequate Information – For Most
Most faculty indicated that they received enough
information to make an informed decision
However, several international expressed difficulty
with making the retirement decision
SLIDE 14 Theme 2: Career / Mobility
A major factor in retirement plan choice was related
to the faculty member’s mobility
Difference in vesting requirements was a major point
SLIDE 15 Discussion
Movement away from DB plans may appeal to
younger faculty; not as appealing for women and minority faculty
More research is needed on the effects of specific
parameters of retirement plans
¡ Vesting requirements ¡ Size of contributions ¡ “Fine print” items: keep or lose SS, caps on payouts, COL adjs
SLIDE 16 Discussion (cont’d)
Faculty tend to be more financially conservative /
risk averse
¡ Concern that giving too many options in DC plans may be
confusing to faculty and staff
Examine choice of default plan
¡ USG employees are defaulted into DB plan. Could move to
default in DC plan.
Hybrid plans (DC + DB) may be best; can appeal to
different types of individuals
