The University of New Mexico

NEWS RELEASE

 Media contact:  Susan McKinsey, 505-277-1807
                                                                                                                                     mckinsey@unm.edu

March 2, 2009

UNM to Establish Policy on Deferred Compensation
“A good tool when used strategically”

Recognizing the need for comprehensive policies in the awarding of compensation to its contract employees, The University of New Mexico has begun drafting a policy on deferred compensation.  UNM President David J. Schmidly has said publicly that the lack of such a policy is “simply unacceptable” and needs to be strengthened based on best practices.

Deferred compensation is an arrangement in which a portion of an employee’s income is paid out at a date after which it is actually earned and is typically part of retirement planning.  The primary benefit of most deferred compensation is the deferral of tax. 

Employees planning for retirement often ask to have a portion of their salary paid in the form of deferred compensation, and employers sometimes use deferred compensation as a means of securing an employee’s services for a defined period of time.  UNM contracts provide for a total forfeiture of the deferred compensation if the employee’s service terminates prior to a defined date after which the deferred compensation “vests.”  

“Deferred compensation is a recognized component of a total package of salary and benefits and it’s a good tool when used strategically,” said Helen Gonzales, UNM Vice President for Human Resources.  “Many universities allow senior contract employees to defer a portion of their income to retirement.  These plans encourage employees to complete their contracted terms as these payments are subject to forfeiture.”

Currently, 33 UNM employees are contractually scheduled to receive deferred compensation in amounts ranging from $5,000 to $180,000, with the majority at $20,000 or less. These deferred compensation payments, which total approximately $1 million, represent .001% of the University’s total payroll of $554 million.  All are subject to forfeiture if the individual employees terminate their employment with the University before expiration of their contracts.

 “We’ve significantly reduced the number of deferred compensation contracts over the years, especially in Athletics,” said Gonzales.  Of the 33 individuals currently receiving deferred compensation, 11 are employed by Athletics and will receive a combined $400,333 in deferred compensation under their existing contracts.  Five individuals are employed by the Health Sciences Center and will receive a combined $163,068.  Seventeen are employed on main campus and will receive a combined $476,800.  More than half of the deferred compensation is funded from sources other than Instruction and General funds. 

The new policy, which will be recommended to the Regents following the standard notice and-comment period open to campus, will establish guidelines for which employees would be eligible to receive deferred compensation and define the circumstances under which the deferred compensation arrangements could be granted.  The new policy is being developed following a study by the Division of Human Resources of other Universities'best practices in this area. 

Once implemented, the new policy would affect all future awards of deferred compensation, including the renegotiation of existing contracts.

UNM’s Division of Human Resources will present its review of deferred compensation best practices at the Regents’ April meeting, with a campus-wide discussion and review of the proposed new policy to follow.