Blog - Strategic Applications for Early Retirement Incentives

 Keenan Blog

Strategic Applications for Early Retirement Incentives

September 19, 2017

Staffing management for California schools presents multiple fiscal and strategic challenges. Employees are long-term investments, but short-term financial trends can impact employment expenses. School districts need versatile tools to make ongoing adjustments in response to economic realities. Early retirement incentives provide effective methods to respond to budget considerations that lead to difficult personnel decisions.

Common needs for early retirement incentives

Let’s examine a few situations that often affect school districts’ staffing reactions in a changing environment.

Many districts today are encountering a large decline in pupil enrollment and face faculty layoffs. Due to the seniority rules governing reductions in staff, many of those laid off are teachers who have just started their careers. Naturally, they must seek other work to earn a living and, unfortunately, a significant number of those may never return to teaching. This seriously diminishes the efforts schools have made to recruit quality talent they will need in the future.

Staffing expenses – from salaries and benefits, to statutory retirement contributions and workers’ compensation – rank at the top of school budgetary concerns. When these costs are rising while enrollment and corresponding state funding are dwindling, pressure on district budgets multiplies. District administrators can find it very difficult to keep ahead of fluctuating revenues and cash flow.

Evaluating the impact

Early retirement incentive programs can be applied in response to any of these typical circumstances. But to achieve a desirable outcome, it is critical to apply early retirement incentives strategically. Assessing the cost/benefit impact of implementing an early retirement incentive along with the district’s demographic profile is essential.

The demographics determine whether there are a critical number of eligible early retiree candidates to generate savings. Salaries differ greatly by employee group, and therefore, the district should evaluate a range of benefit options for each group to ensure the most appropriate, comprehensive offering to reach the participation levels needed.

Part of the retirement decision includes how each retiree will obtain health insurance benefits moving forward. The financial incentive and providing the retiree cost-effective ways to purchase health coverage becomes a major part of the equation. Engagement of the participants and their represented groups in this part of the evaluation and planning can go a long way in optimizing participation as well as reinforcing the perception for all stakeholders that the program is a win for everyone.

Timing is of the essence

The question of when to offer an early retirement incentive is another strategic decision.  Districts will want to be proactive in understanding their range of options and the potential return on investment, so that the timing is not strictly dictated by the immediate financial situation. In relation to the school year and annual staff notification calendar, there may be reasons to offer an early retirement incentive in either the Fall or Spring.

For an offering during the Fall, human resources will have sufficient time to recruit positions they will need to fill as a result of early retirements. This timing also gives the district more time to reach out to early retiree candidates with education and counseling about their opportunities.

A Spring offering can help prevent the incentive offering from getting lost in the holiday shuffle. It can also allow organizations to consider the staffing actions that take place during the year. In some cases, this approach can help the district get a clearer picture on the decision to offer the early retirement incentive and the structure the offering should take.

There is a range of staffing budget solutions that a school district can build into an early retirement incentive offering. You will want to analyze your workforce, payroll and benefits to determine how to align incentives with your organizational objectives and help you reach the financial results you are seeking.

About Jeffrey Mizokawa
Jeffrey Mizokawa is Assistant Vice President in our San Clemente office. In addition to providing consulting and account services for clients, Jeff has also been closely involved in benefits product development and the implementation of new customer programs.

If you have any questions, please contact Isaac Stern at 310.212.0363 ext. 3608 or