Retirement Incentive
Golden Parachute

Last year the idea of offering a retirement incentive for thirty year certified employees of the Loudon County School system first came up. The idea was to offer a certain amount of cash, one time, to those teachers and others who qualified for the program. At this same time, some board members learned for the first time that retiring personal who qualified were already being paid around $165 per month allowance for their medical, life and dental insurance from the time they retired till the age of 65.

At that time, the retirement incentive plan was put on hold to work on incorporating the current insurance benefit into the proposed retirement incentive plan. The discussion was that continuing the retirement stipend for a final year might be enough of an incentive. However, at last Thursday's school board meeting, a majority of the board voted to continue the insurance payment in addition to a lump sum payment of around $13,000.00.

The idea of a retirement incentive to save money is a proven action. But a lot of factors come into play. The idea is, the incentive would encourage the most senior teachers/certified employees to retire. Those highest paid employees would then be replaced with lower paid employees. If all the factors happen as proposed a lot of savings could be realized. The savings depend on how big the incentive actually is and if those senior employees are actually replaced with much lower paid employees.

Under the current school board plan, the retiree will receive a lump sum payment of around $13,000.00 plus the insurance supplement till the age of 65. If the retiring employee were age 55 when they retired, their their insurance costs would be nearly $20,000.00 plus the $13,000.00 lump sum. These figures could be slightly higher or lower depending on the employees age and current pay.

As a board member, my position was to offer either or but not both. Offering both options severely limits the perceived savings claimed by the incentive plan and could even actually end up costing the school board additional money they don't have. Pryor to the board's vote on the new incentive plan, the board currently has an obligation of nearly $225,000.00 in insurance payments obligated to previous retires. Depending on how many qualified employees actually take the retirement incentive this year, there are about 35 who qualify, along with the lump sum and the long term insurance the long term cost to the school board could be more than a million dollars. But, if all the stars align just right, the savings in reduced payroll could be greater than the cost. Of course, that's a big if.

Even though the current crop of retires will receive the lump and the insurance payment this year, the board is set to take up the issue of the insurance payments continuing beyond this year at their March 1st meeting. If the board decides to continue to make the insurance payments in coming years, any savings on the retirement incentive will be lost.

Retirement Incentive

Hugh G. Willett

The Loudon County school board voted to pass an early retirement incentive package for teachers Thursday, although some aspects of the deal have yet to be worked out.

The board voted 7 to 2 to allow teachers with 30 years of service – 20 years of which must be within the Loudon system – to retire early with a one time bonus payment of 25% of their salary.

According to board member Ric Best, studies have shown that teachers with the required years of service will retire an average of four years early when offered the incentive package.  As many as 30 teachers in the Loudon system might be eligible.

The savings from having highly paid senior teachers retiring early to be replaced by lower paid junior teachers is projected to more than offset the cost of the incentive package.

Before voting the board heard from several concerned residents, including Richard Truitt, who said he was concerned about the cost and the effectiveness of the retirement program.

“I’ve said it before and I’ll say it again,” Truitt said. “The number one priority for Loudon County is paying benefits for county employees.

Loudon resident Pat Hunter, said she was concerned that the retirement plan might encourage the best, most experienced teachers to leave the system.

Hunter also said she was concerned that many of the teachers who took the early retirement might come back on the payroll at half-pay, continuing to draw full benefits.

“If they bring these teachers back part-time we won’t be saving any money,” she said.

The board was split on a decision about whether or not to allow teachers accepting the retirement package to continue to receive about $150 per month in health benefits until age 65. 

Currently it is the policy of the school system to pay health benefits for retirees until they reach 65. Most teachers accepting the plan would be in their mid to late 50’s and still draw as much as $1800 per year in health benefits.

Board member Van Shaver said he was concerned that the combination of one time incentives payments of about $13,000 when combined with additional health benefits, might severely limit the cost savings expected from the program.

“When you add five to ten years of health benefits we get real close to not saving anything,” he said.

Board member Lisa Russell said she was concerned that the board did not have accurate figures on the cost and benefits of the program.

Schools Director Jason Vance made the case to the board that the issues of incentive payments and health benefits should be considered separately.  Retiring teachers expect to have their health benefits paid until age 65. It would be unfair to take that benefit away in order to implement the retirement plan.

“Board member Bobby Johnson Jr. agreed, saying he would not support taking the health benefits away under any circumstances.

The issue of continuing health benefits was referred to a committee for a decision at another board meeting.

Also under consideration was the issue of how long to offer the incentive package. Board members Shaver, Russell and Chairman Scott Newman said they thought the incentive package would work best as a one time offer.

The board voted 6 to 3 not to extend the program for multiple years at this time, but to put the issue up for consideration next year.