Faculty and staff who had 403(b) retirement plan cuts last year will receive a one-time payment of 5% of their fiscal year 2022 salary, according to President Mark Reed, Ed.D., in a Nov. 4 announcement to faculty and staff.
Last year, St. Joe’s reduced its maximum employer contribution to the 403(b) retirement plan from 10% to 5%, according to the university’s fiscal year 2021 audited financial statements. That reduction was first announced to faculty and staff in a May 29, 2020 email from Zenobia Hargust, chief human resources officer. Employees were also informed in that email about temporary reductions in pay.
On June 1 of this year, 2021, the maximum employer contribution of 10% was reinstated. A 403(b) account is a tax-deferred retirement account that is similar to the more well-known 401(k) retirement plan, but the 403(b) is only available to employees of nonprofit and government entities, explained Jackson Mills, Ph.D., assistant professor of finance. The Nov. 4 announcement regarding the one-time payments caused confusion among faculty, said Amy Lipton, Ph.D., professor of finance and president of Faculty Senate. Todd Erkis, visiting professor of finance, said some of the uncertainty comes from not knowing what to do with the payment.
“Some people are going to be more focused on their retirement, some people are going to need the income more,” Erkis said. “It’s really going to be an individual situation.”
Faculty and staff were provided additional information about the one-time payments in a Nov. 11 university announcement from Hargust.
According to the announcement, “the temporary 5% 403(b) reduction will be paid as a one-time discretionary payment to impacted employees” and the payment “will be calculated using the base compensation of your primary position.”
The payments will be included in Nov. 30 paychecks for exempt and salaried employees and Dec. 3 for non-exempt and hourly employees.
The announcement added that the one-time payments are taxable.
Retirement contributions are generally not taxable.
Following the Nov. 11 announcement, Erkis said in an email to The Hawk that he appreciates the university is making these payments, even if they do not necessarily equate to contributing to the 403(b) plan.
Matthew Gustafson Ph.D., associate professor of finance at The Pennsylvania State University, said he would expect people to invest or save if they receive a retroactive lump sum payment.
“Unless you have pressing needs, it is probably not best for your long term satisfaction to go out and spend the money on consumption right away,” Gustafson said.
This is especially true for people with lower incomes, Gustafson said.
“Saving a lump sum payment like this is probably more important for lower income employees since they are less likely to have the opportunity to save as regularly,” Gustafson said.
Lipton said while she appreciates the university paying back the contribution reductions, she and members of the Faculty Senate are concerned about the longer lasting effects of these payments.
“We’re concerned that coming into the new fiscal year [the payments will] lead to more budget cutting in the spring of next year to sort of even it out,” Lipton said. “We’re [then] really not better off in terms of having the resources to deliver a good student experience.”
Lipton also said faculty were concerned they were not involved in the decisions regarding the reductions, or the payments.
“Our first concern was that the decision was not made in the spring when the university had a surplus at the end of last fiscal year,” Lipton said. “We didn’t find out about that decision until recently. And then, neither the decision in the spring nor this decision were made in consultation with either of the two faculty committees, ABFC or the faculty on PBC.”
When asked if the university involved the Advisory Board on Faculty Compensation (ABFC) and the Planning and Budget Committee (PBC) in the decision process, Gabrielle Lacherza, associate director of public relations wrote, “Financial discussions with the PBC are confidential.”
Steven Hammer, Ph.D., associate professor of communication studies, is a member of ABFC.
“Much of the conversation among faculty in the last couple of weeks regarding money and finances has revolved around a frustrating realization that another economic forecast by the university was drastically incorrect in our favor, and we had hoped for a situation like the previous year where that miscalculation was realized and rectified,” Hammer said.
On May 14, the university had announced that employees would receive a one-time payment equal to the temporary salary reductions made in fiscal year 2021.
“This year that wasn’t made right until a lot of faculty became increasingly frustrated and vocal about the situation,” Hammer said. “And then we of course received an email acknowledging that and trying to make that right.”
