(The following piece was prepared by Benefits Office staff to respond to frequently asked questions about the Special Retirement Incentive Program.)
Q: Why is MIT offering an early retirement window?
A: The Special Retirement Incentive Program was developed to accommodate the Institute's current budgetary constraints while offering greater financial security to those who have served MIT so well over so many years.
Q: How many people are likely to accept the retirement offer? Couldn't the loss of so many long-service employees result in many departments with insufficient staff or expertise?
A: It's impossible to predict how many of the approximately 1,385 eligible for the program (including part-time people at 50 percent or greater employment) will retire because so many factors go into each individual decision. When Harvard University offered a special retirement program to non-faculty employees in 1991, 40 percent of the eligible employees retired. The percentage at MIT could be higher or lower. Of MIT's 1,385 eligible employees, 294 are tenured faculty.
Before deciding to offer this program, the Institute had to determine that all possible outcomes were manageable. There is always a chance that one or more departments may be hit particularly hard by the early retirement of some valuable employees, but the Institute concluded that there is enough depth of staff overall to handle these losses and that the benefits of the program far outweigh the possible risks. To provide more time for adjustment when necessary, the actual retirement date should be mutually agreed upon by the employee and supervisor as long as the retirement takes place by September 30, 1996.
Q: What is the difference between the eligibility period and the election period?
A: The eligibility period is the time period which determines whether or not you can take the incentive. You must have 10 years of benefits-eligible service and be at least 55 years old by the end of the eligibility period, September 30, 1996.
The election period is the period during which you must tell MIT that you will take the incentive and retire from the Institute. You have from March 1 through April 30, 1996, to make your election.
Q: I had a break in my employment, so I'm not sure if I have the 10 years of service I need to be eligible for the program.
A: Employees who are eligible were notified in late December. A break in service will not prevent you from participating in the program as long as you have 10 years of benefits-eligible service before September 30, 1996. However, in order to qualify for retiree health benefits, you need to have worked at MIT for 10 years after age 45.
Q: Does part-time employment count toward the 10 years of service needed to participate?
A: You are generally credited with one year of service for each 12-month period of employment from your date of hire as long as you worked at least 50 percent time in a benefits-eligible position. You would not receive credit for periods during which you were paid through the voucher payroll, had an appointment as a visitor or were otherwise not benefits-eligible.
Q: What is being done about employees who had planned to retire before the program was announced?
A: Employees who would have retired during the period from December 1995 through March 1996 have been given the option of continuing to work (in consultation with their department) or taking a leave of absence without pay, in order to elect the window and receive their first pension check as of April 1. Anyone who retired prior to December 1, 1995, is not eligible for the special incentive.
Q: Do employees who otherwise satisfy the eligibility requirements but who are on a leave of absence need to return to active employment in order to take the special incentive?
A: Employees on leave without pay are considered benefits-eligible and therefore need not return to active employment in order to be eligible for the program. Their incentive will be calculated by looking back at their most recent paid service.
Q: If an employee reaches age 55 and/or 10 years of service late in the eligibility period, can that employee retire before actually attaining either criterion? For example, if an employee will be 55 on September 15, 1996 (and has 10 years of service) can s/he retire on July 1?
A: Employees are not required to wait until attaining either requirement before retiring, but they must meet both criteria by September 30, 1996.
Q: Will employees be able to take advantage of the early retirement supplements that already exist in the prior Retirement Plan for Staff Members (RPSM) and the Retirement Plan for Employees (RPE)?
A: Yes, although employees must meet the requisite age and service requirements by September 30, 1996.
The RPSM was recently amended to allow employees to be eligible for the early retirement supplement on the first of the month after reaching age 60, rather than having to wait until the July 1 after age 60 as previously.
Members of the prior RPE are eligible for the full age-65 RPE retirement benefit if they have 25 years of service and are age 55 or have 20 years of service and are age 62.
Q: Am I eligible if I am laid off during the program?
A: Yes, you are eligible if you are laid off during the Special Retirement Incentive Program. Employees whose layoff period ends between December 1 and February 29 will be given the option of going on a leave of absence without pay until the special incentive election period, at which point they could elect to take the incentive and begin receiving a pension check on April 1.
PENSION DEFERRAL AND REEMPLOYMENT
Q: Can I accept this retirement offer, get another job outside of MIT, and then defer payment of my MIT pension so that I can collect a bigger benefit later on?
A: You may defer collecting your MIT pension until a later time. However, you will want to take the Special Retirement Incentive and, if applicable, the Social Security bridge when you retire because neither of those two payments will grow if deferred.
Q: Can I accept this retirement offer and then continue to work at MIT part-time?
A: IRS regulations prevent employees from working at MIT before normal retirement date (the July 1 after age 65) while receiving their MIT pension; therefore, if you elect the incentive you may not return to work at MIT unless you have reached your normal retirement date. If you have reached normal retirement date you may be able to work on a part-time basis if you negotiate that arrangement with your department head.
MAKING THE ELECTION
Q: If I don't accept this retirement offer, am I likely to get laid off?
A: No employee will be laid off as a penalty for not taking the retirement offer. Any decisions made about layoffs will reflect the need for staff reductions independent of the Special Retirement Incentive Program. Employees eligible for the program are no more or less likely to be laid off than other employees.
Q: Do you think I should accept this offer?
A: This is a personal decision. To discuss the possible consequences of your decision, you are encouraged to seek professional advice from sources such as a financial advisor, an attorney or a Benefits Office retirement counselor.
Q: How long do I have to make my decision? What happens if I change my mind after I've signed the election form?
A: To receive the special retirement incentive, you must complete the election form between March 1 and April 30, 1996. You may change your mind during the seven days after you've signed the form, but once the seven day period has passed, your decision to retire will be considered final and irrevocable.
Q: When will I begin receiving my Social Security retirement benefit? How do I find out how much it will be?
A: As Social Security is currently designed, you can begin receiving your full Social Security benefit at age 65 or a reduced benefit as early as age 62. The retirement incentive program includes a payment of $500 per month until you are 62 to act as a bridge to your Social Security benefit.
The Social Security benefit payable at age 62 is about 80 percent of your age 65 benefit. Your personalized statement, which will be sent to you in mid-February, will show the estimated Social Security benefit you could begin receiving at age 62 based on your current pay level and certain assumptions about your prior earnings.
To have the Social Security Administration calculate your benefit based on your actual earnings history, you need to send them a request form. You can call the Benefits Office to request this form; it will also be included with the program brochure you will receive in late-January. It will take three to six weeks to receive your estimate. If you are 65 or over, the Social Security Administration may have already calculated your benefit. You can call (800) 772-1213 to find out.
There will be a number of informational meetings held in the first quarter of 1996; a representative from the Social Security Administration will be speaking.
Q: Won't I receive a larger pension if I continue to work at MIT until age 65?
A: You would receive a larger pension if you continue to work since you would accrue more years of service, and you may be continuing to make contributions; however, you would have to work a number of years to accrue the same total benefit you'd get by taking the incentive now.
Q: What health plan benefits could I receive as a retiree?
A: If you have 10 years of benefits-eligible service after age 45, you are entitled to maintain your individual or family health coverage at the subsidized rate until you reach age 65. At age 65 or more, you will be covered by an individual or family Medicare supplement program provided by MIT. MIT currently pays the full cost of Medex III and Harvard Community Health's supplement plans, and contributes the same amount toward similar coverage at Tufts. MIT reserves the right to change health care benefits or carriers which could affect employees and retirees in the future.
Q: What happens if I don't qualify for retiree health coverage?
A: If you are under age 65, you are eligible for up to 18 months of benefits through COBRA by paying 102 percent of the group rate for your plan. If you are over age 65, you need to enroll in Medicare Part B, and you may want to consider purchasing an individual medigap policy.
Q: What happens to my eligibility for the Children's Scholarship Program (CSP)? What if I have an outstanding educational loan when I retire?
A: If you are eligible to participate in the CSP as an active employee, you retain that eligibility into retirement. If you have an educational loan outstanding, you should contact the Bursar's Office to arrange payment methods.
Q: How are incentive payments taxed?
A: The payments will be paid through the MIT Retirement Plan as monthly annuities and will be subject only to federal and Massachusetts income taxes (if you are a Massachusetts resident). If you are not a Massachusetts resident, consult your tax advisor.
Q: My spouse works at a company which has had several "open window" programs during the last few years. If not enough employees accept this time, will MIT increase the benefit or offer the program again next year?
A: Regardless of how many employees retire under this special program, MIT has no plans to offer any similar retirement incentive again in the foreseeable future.
FACULTY EARLY RETIREMENT INCENTIVE PLAN
Q: If I am a faculty member age 67, can I accept the age 60+ plan as well as the age 65+ plan and obtain the sum of their financial incentives?
A: No, you may choose either the 60+ plan and retire by October 1, 1996, or the age 65+ plan which permits you to be rehired with the agreement of your department head, but you may not choose both plans.
Q: If I take the age 65+ plan and am rehired, can I continue to be a principal investigator on contracts?
A: Yes, assuming that your department head agrees.
Q: I understand that a faculty member can only be rehired one year at a time if s/he takes the age 65+ plan. Is this so?
A: The terms of your agreement may include your being rehired for a period up to five years, although your department head must agree to that arrangement.
Q: May my department head offer me an additional cash incentive to retire beyond that available in the age 60+ or age 65+ plans?
A: Department heads may not offer a cash incentive beyond that provided by the plans. They may, however, offer some support for research if funds are available.
Q: If I retire, my department would like to replace my position with an appointment to be made in the spring of 1996; however, this appointment is not included in the FY97 Five Year Plan. Can my position be replaced?
A: Department heads may submit Five Year Plan revisions to their deans as needed during March and April 1996. Departments should submit a revised TBA plan to their deans, for submission to the provost, no later than May 15, 1996.
A version of this article appeared in MIT Tech Talk on January 24, 1996.