UNA Deserves Flexibility to Gain & Retain Talent

By Tim Melson

When it comes to collegiate football programs, university athletic departments are provided significant flexibility to attract, recruit, and retain the most talented athletes available. Why? Because the strongest players and the most skilled coaches bring victories on Saturdays in the Fall.

The same approach should apply to the management of our very talented university faculty and staff. If schools can have options and flexibility to get the best talent in athletics, then why shouldn’t they also have the same freedom to attract the very best in the classroom or on the campus?

Regional public universities like the University of North Alabama (UNA) currently struggle to win the hiring battle with other universities and employers, because all of UNA’s employees are locked into participating in one retirement plan, the state public employee pension system.

Under the state pension plan, an employee must work for 10 years before they can fully vest into the pension. That means if you leave after 6 years, you get your contribution back with a little bit of interest, but the pension system keeps the lion’s share of the account, including the university’s matching contribution and all of the earnings on your retirement account.

For example, let’s take an employee at UNA that earns $50,000 annually and leaves after 5 years of service with an employee contribution of 6.5% and an investment account that earns 6.0% annually. She would receive $17,251 upon leaving under the current pension system. If that same employee had the option of a portable 403(b) plan – the public equivalent of a 401(k) plan – she would receive $38,840.

Which option would you choose for yourself?

For these reasons I introduced Senate Bill 247, which simply gives UNA – my alma matter – the ability to provide an option for new employees at UNA to choose between the traditional defined benefit pension plan that UNA currently offers through RSA or a defined contribution 403(b) plan for new employees. Defined contribution retirement accounts are common in the business world and you probably have one or had one in the past.

A 401(k), the most common type of defined contribution plan, is a flexible retirement account a person can keep even after leaving their current employer. It is important to note that, if this bill passes, new employees at UNA could still choose to stay with the current pension plan. My proposal simply offers a choice for employees who would benefit from the portability of a 403(b) plan.

Most regional college executive staffers and senior professors do not stay at one school for 10 years, nor do many in the private sector for that matter. So if an academic leader is weighing a job offer from UNA versus a similar school in Georgia, the ability to offer a flexible 401(k)-like program instead of the state pension program could be the difference in them accepting the job at UNA or not.

Opponents of my proposal say this change will further exacerbate the $10 billion unfunded liability of the state pension system. I say that if we can’t hire or retain the best and brightest talent, we’ll have fewer employees paying into the state pension system anyways.

Further, the number of employees that we’re talking about here is minuscule, with UNA estimating about 25 new employees per year who will choose to participate in the plan. On top of that, UNA has agreed to continue paying the unfunded liability for all of its employees that participate in the state pension plan.

I don’t want to see some systemic political problem in Montgomery affecting UNA’s ability to be the best institution of higher learning and research it can be. If it’s good enough for the private sector to offer both defined benefit programs side-by-side with defined contribution retirement programs, it should be good enough for our universities.

Senator Tim Melson is a Republican representing District 1 in the Alabama Senate, which includes parts of Lauderdale, Limestone, and Madison Counties. He is a retired anesthesiologist and current farmer.