Executive Summary

In 1986 the U.S. Congress passed legislation amending the Age Discrimination in Employment Act (ADEA) of 1967 to prohibit mandatory retirement on the basis of age for almost all workers. The amendments included an exemption, which terminates at the end of 1993, permitting mandatory retirement of any employee who is serving under a contract of unlimited tenure at an institution of higher education and who has attained 70 years of age (ADEA, 1986, Section 12(d)).

In granting this exemption, Congress took a middle position between those who wished to extend full protection against age discrimination to faculty and those who feared that postponed faculty retirements would prevent colleges and universities from hiring new faculty, who are traditionally a source of new ideas. Some people were also concerned that an aging professoriate would grow increasingly ineffective but unremovable because of the tenure system. Administrators, faculty, policy makers, and others who recognize the importance of the nation's basic research system were particularly concerned about possible adverse effects on the research universities.

As a part of the 1986 amendments, Congress directed the Equal Employment Opportunity Commission to ask the National Academy of Sciences to conduct a study analyzing ''the potential consequences of the elimination of mandatory retirement in institutions of higher education'' (ADEA, 1986, Section 12(c)). The committee's central task—the subject of this report—is to establish whether the special circumstances of tenured faculty in higher education justify a continued exception to the national policy prohibiting age discrimination in employment. The task was complicated by its scope: to assess the effects of removing mandatory retirement on more than 3,200 colleges and universities and to assess the behavior, under



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Ending Mandatory Retirement for Tenured Faculty: The Consequences for Higher Education Executive Summary In 1986 the U.S. Congress passed legislation amending the Age Discrimination in Employment Act (ADEA) of 1967 to prohibit mandatory retirement on the basis of age for almost all workers. The amendments included an exemption, which terminates at the end of 1993, permitting mandatory retirement of any employee who is serving under a contract of unlimited tenure at an institution of higher education and who has attained 70 years of age (ADEA, 1986, Section 12(d)). In granting this exemption, Congress took a middle position between those who wished to extend full protection against age discrimination to faculty and those who feared that postponed faculty retirements would prevent colleges and universities from hiring new faculty, who are traditionally a source of new ideas. Some people were also concerned that an aging professoriate would grow increasingly ineffective but unremovable because of the tenure system. Administrators, faculty, policy makers, and others who recognize the importance of the nation's basic research system were particularly concerned about possible adverse effects on the research universities. As a part of the 1986 amendments, Congress directed the Equal Employment Opportunity Commission to ask the National Academy of Sciences to conduct a study analyzing ''the potential consequences of the elimination of mandatory retirement in institutions of higher education'' (ADEA, 1986, Section 12(c)). The committee's central task—the subject of this report—is to establish whether the special circumstances of tenured faculty in higher education justify a continued exception to the national policy prohibiting age discrimination in employment. The task was complicated by its scope: to assess the effects of removing mandatory retirement on more than 3,200 colleges and universities and to assess the behavior, under

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Ending Mandatory Retirement for Tenured Faculty: The Consequences for Higher Education new circumstances and at a future date, of nearly 300,000 current tenured faculty as well as an unknown number of future faculty members. It was further complicated by the need to evaluate the effects of something that had not yet occurred, since most of the states that have eliminated mandatory retirement have done so within the past few years. Although the committee could not avoid the exercise of its judgment in a matter of this complexity, it based that judgment on all the available relevant data it could obtain. The committee reviewed current faculty retirement patterns as well as studies projecting future patterns. The committee also examined college and university tenure, evaluation, and retirement policies. Institutional policies affect faculty retirement patterns, and changes in those policies could provide a basis for responding to the elimination of mandatory retirement. Thus, in order to estimate the costs and benefits of the potential elimination of mandatory retirement, the committee considered whether policies—both institutional and congressional—exist that would mitigate the potential adverse effects of uncapping. We base two key conclusions on our review of the evidence: At most colleges and universities, few tenured faculty would continue working past age 70 if mandatory retirement is eliminated. Most faculty retire before age 70. The few uncapped colleges and universities with data report that the proportion of faculty over age 70 is no more than 1.6 percent. At some research universities, a high proportion of faculty would choose to work past age 70 if mandatory retirement is eliminated. At a small number of research universities, more than 40 percent of the faculty who retire each year have done so at the current mandatory retirement age of 70. Evidence suggests that faculty who are research oriented, enjoy inspiring students, have light teaching loads, and are covered by pension plans that reward later retirement are more likely to work past age 70. These two conclusions underlie the rest of our conclusions and our recommendations. If mandatory retirement is eliminated, some research universities are likely to suffer adverse effects from low faculty turnover: increased costs and limited flexibility to respond to changing needs and to provide support for new fields by hiring new faculty. An increase in the number of faculty over age 70 or, more generally, an increase in the average age of faculty does not by itself, as distinct from reduced turnover, affect institutional quality. Available evidence does not show significant declines in faculty performance caused by age. At most colleges and universities, few faculty are likely to work past age 70. Therefore, eliminating mandatory retirement would not pose a

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Ending Mandatory Retirement for Tenured Faculty: The Consequences for Higher Education threat to tenure. Colleges and universities can dismiss tenured faculty, provided they afford due process in a clearly defined and understood dismissal procedure, with the burden of proving cause resting with the institution; however, dismissal of faculty members for poor performance is rare now and likely to remain rare. In response to larger concerns about faculty performance, the committee recommends that faculty and administrators work to develop ways to offer faculty feedback on their performance. Colleges and universities hoping to hire scholars in new fields or to change the balance of faculty research and teaching interests will need to encourage turnover using mechanisms other than performance evaluation and dismissal. Retirement incentive programs are clearly an important tool for increasing turnover. They should be considered by any college or university concerned about the effects of faculty working past age 70, including reduced faculty turnover and increased costs. Colleges and universities can target such programs to fields or disciplines in which turnover is most needed, and they can limit participation to control both turnover and costs. The committee emphasizes that retirement incentive programs and individual retirement incentive contracts must be entered into freely and without coercion, when seen by both the institution and the individual as beneficial. The committee recommends that colleges and universities offer retirement incentive programs and individual retirement incentive contracts only to tenured faculty aged 50 and over. Retirement incentive programs now used in higher education are commonly designed for faculty in their 60s. By extending participation in these programs to faculty aged 50 and over, colleges and universities could benefit by increasing faculty turnover and in planning for faculty retirements. Congress has clearly authorized retirement incentive programs that include a minimum age for participation, that are offered for a window of time, and that provide bridge payments until retirees are eligible for Social Security benefits. Congress and the responsible federal agencies could assist colleges and universities further by clearly preserving additional options. The committee recommends that Congress, the Internal Revenue Service, and the Equal Employment Opportunity Commission also permit colleges and universities to offer faculty voluntary retirement incentive programs that: are not classified as an employee benefit, include an upper age limit for participants, and limit participation on the basis of institutional needs. We believe that financial concerns should not be pivotal in faculty retirement decisions. Faculty pension, health insurance, and other retirement policies should create neither disincentives to retirement nor inadvertent incentives to postpone retirement.

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Ending Mandatory Retirement for Tenured Faculty: The Consequences for Higher Education Therefore, we recommend that: colleges and universities offer pension plans designed to provide retired faculty with a continuing retirement income from all sources equal to between 67 and 100 percent of their preretirement income; TIAA-CREF, other private pension plan providers, and state retirement systems work with institutions of higher education to develop pension plans that provide continuing retirement incomes within the committee's suggested range; and Congress, the Internal Revenue Service, and the Equal Employment Opportunity Commission adopt policies allowing employers to limit contributions to defined contribution plans on the basis of estimated level of pension income. We suggest a maximum as well as a minimum goal for inflation-protected pension income in the interest of best allocating scarce resources and limiting inadvertent incentives to postpone retirement. If colleges and universities save any funds by limiting institutional pension contributions, they can redirect them to other benefits for retired faculty, such as health benefits and programs for retirees. Inadequate or expensive retirement health coverage creates a disincentive to retirement. We recommend that administrators and faculty seek affordable ways to improve retirees' medical coverage, such as redirecting funds from other retirement benefit programs or establishing tax-sheltered health savings plans for faculty to save for their own retirement health costs. Faculty members who are considering retirement may be reluctant to give up regular contact with students and colleagues or such faculty privileges as access to a laboratory or library. We recommend that colleges and universities seek opportunities for retired faculty to maintain their contacts with colleagues, the institution, and their field of scholarship. Retirement planning assistance also can ease the transition to retirement and make retirement a more attractive option. The committee recommends that all colleges and universities assist their faculty in planning for retirement. The ADEA Exemption The committee believes that if colleges and universities, with assistance from Congress and regulatory agencies, states, and pension plan providers, vigorously pursue these recommendations, all but a few institutions will adjust to the elimination of mandatory retirement without significant effects. The few universities at which a high proportion of faculty members are most likely to work past age 70 will particularly need the congressional

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Ending Mandatory Retirement for Tenured Faculty: The Consequences for Higher Education and regulatory actions we recommend: clarifying retirement incentive options and revising pension policies. The committee also believes that some aspects of eliminating mandatory retirement are clearly beneficial. Most obviously, faculty gain freedom in deciding when to retire. Eliminating mandatory retirement would be in keeping with the general intent of the ADEA to extend protection against age discrimination. In this report the committee has examined a number of practical steps that are available or could be made available to address the problems raised by the elimination of mandatory retirement. The committee recommends that Congress and regulatory agencies, states and pension plan providers, and colleges and universities take these practical steps. Given that these steps can be taken, there is no strong basis for continuing the exemption for tenured faculty. The committee recommends that the ADEA exemption permitting the mandatory retirement of tenured faculty be allowed to expire at the end of 1993.

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