Copyright © 2011 Albuquerque Journal
University of New Mexico Foundation officials recently proclaimed that moving away from UNM to independent status would save the state’s Public Employees Retirement Association pension fund “$100 million-plus” over time.
But state officials say that estimate is speculative and based on “funny math.” And in any case, it’s the wrong pension fund.
Foundation trustee Carl Alongi in a July 22 op-ed article published in the Journal, discussed benefits of the 2008 decision to separate UNM Foundation operations from the university. He wrote that employees no longer eligible for the state’s Public Employees Retirement Association pension will save the fund more than $100 million.
Alongi said last week that his reference to PERA was a mistake and that it was the Educational Retirement Board pension plan affected by the switch.
The savings estimate was based on an assumption that all of the foundation’s 86 employees would leave behind ERB retirement benefits earned before the 2008 transition. The calculations were based on an average salary of $60,000.
“That’s funny math, because we’re not getting in the contributions. They’re ignoring the investment earnings we would have on the money,” ERB Executive Director Jan Goodwin said.
When foundation workers transitioned from being state UNM employees to private foundation employees, they stopped accruing new ERB pension benefits.
Employees who worked for the state for more than five years were given the option of keeping their previously earned retirement benefits and collecting payments after age 65, or withdrawing their own contributions to the fund for a private plan and leaving behind what UNM paid on their behalf.
Employees with less than five years were given their contributions back. All employees were given a one-time 3 percent raise to offset the lost ERB benefit and a private retirement account.
Goodwin said the foundation’s stated savings are speculative and don’t account for all the employees who retained some benefit from the ERB. For example, a 10-year employee earning $60,000 who left UNM to join the foundation could still receive $14,000 per year from ERB when he or she retires at age 65.
At least 17 foundation workers have chosen to remain UNM employees to continue to accrue new retirement benefits and qualify for maximum pension.
Foundation spokeswoman Wendy Antonio said the $100 million savings assumption was a “quick estimate.”
“A number of different parameters can be applied to calculate a variety of savings estimates in terms of variables, but the point still holds: saving public dollars is important right now, and this transition was a step in the right direction,” Antonio wrote in an e-mail.
The pension fund savings are unclear, but the foundation’s transition did save UNM money by limiting retirement contributions, Alongi said.
UNM contributing to the ERB on behalf of its employees currently pays nearly 9.2 percent of salary. The foundation, however, limits its private retirement fund contributions to 4 percent, saving about $365,000 in annual benefits payments on its $7 million yearly payroll.
“The (pension savings) assertion was probably badly worded. It’s saving the University of New Mexico money not to have those 80-some employees,” Alongi said.
The foundation this year reported raising $83 million in gifts and pledges on behalf of UNM, $5 million more than the group’s $78 million goal.
— This article appeared on page C1 of the Albuquerque Journal