University of California at Berkeley: A Retirement Plan Gone Awry

Few schools have successfully developed retirement plans on which Harvard might use as a blueprint from which to plan its upcoming system.

In fact perhaps the only retirement plan implemented at a major research university worked too well--and is subsequently called by most unsuccessful.

In 1990, as a result of a state budgetary crunch. California decided to reduce the size of its university system. So the University of California implemented the first of three rounds of the Voluntary Early Retirement program (VERIP).

The program offered faculty retired early additional years of combined service and credit increasing the university contribution and effectively paying retired faculty from the state's retirement fund.

And the faculty at Berkeley the oldest in the University of California's

By the end of the third VERIP have in 1994, early 30 percent of Berkeley's 1,577 faculty had left the university according to Berkeley Patricia McBroom. The engineering school and English and history departments were particularly had if, according to observers at the school.

Berkeley has managed to replaced many of those who left, but still has 15 percent fewer faculty than just five years ago.

At the time of the third were of early retirement, Berkeley chancellor Chang-Lin Tien was still trying to put the best possible face on the departures.

"I see retirement as an opportunity to rebuild academic programs and to expand into emerging fields of knowledge such as the establishment of the new School of Information Management Systems," he said in a 1994 speech.

But the wide-spread belief is that the retirements hurt the University.

"They worked too well." McBroom says with a chuckle today. "We lost more then are really wanted to.

In addition, one local newspaper reported at the time that Tien had threatened to resign if the Incentives were not instituted.

Harvard administration the Berkeley case as an example of the dangers that could result from offering overly generous retirement programs. A Corporation decision last spring reduced the University's pension contribution by one percent.

"You may end up cutting off your nose to spite your face," says Joseph J. McCarthy, associate dean of FAS for academic planning, arguing against an overly generous plan.

Berkeley's situation was different from Harvard's of course, because the University of California was operating under a much tighter budget constraint.

Other private schools, Yale and, the University of Chicago have established programs in response to the new federal regulations but Berkeley's program alone is old enough to serve as a tried case.