Myth Busting of Retirement & Separation IncentivesCategories: Early Retirement Incentives,National Developments,New England Developments,PARS News
Voluntary retirement and separation incentives have delivered critical fiscal savings and operational efficiencies for thousands of school districts, but they have to be properly analyzed, designed, and implemented by specialists like PARS and used infrequently. Below we break down 3 of the most commonly held “myths” of incentives:
- “Incentives are too expensive”
An incentive should only move forward if it results in budgetary and cash flow savings as soon as employees retire or resign. This is a problem if paid out in a lump sum cash payment, so we recommend IRS tax deferred vehicles that allow districts to spread the cost over time – typically 5 years based on IRS rules. Also, the analysis must factor savings over natural attrition only and treat those who would go out in a given year without an incentive as a cost. Without factoring in these various assumptions, savings can be overinflated and the incentives can become costly.
- “Incentives are politically unpopular”
When crafted properly, incentives are a win-win for employees, labor groups and administration. They can avoid more adverse cuts, layoffs of newer staff, and furlough, while keeping resources in the classroom. Incentives must have buy-in and approval from all stakeholders including employee groups prior to moving forward and they must create savings.
- “Incentives Create Work for Staff”
To minimize the burden on HR and finance staff, we advise working with a specialist in incentive programs such as PARS, which can handle the analysis, plan design, employee communications, implementation, and ongoing benefit payments.
For more information on our services, please contact:
Maureen Toal, Executive Vice President
Kathryn Cannie, Senior Manager, Eastern Region