Treasury orders cuts in Hebrew University pensions

Hebrew University
Hebrew University

This is the first time the Finance Ministry has demanded a cut in unfunded pension benefits at any public institution.

Senior employees at the Hebrew University of Jerusalem have been receiving an unfunded pension package estimated at NIS 8-10 million upon retirement, and most of them have continued working afterwards at colleges, or in various consultation jobs.

The Ministry of Finance is demanding that Hebrew University transfer management of the unfunded pensions of its retirees and employees to an external fund, while at the same time making its pension terms less generous, sources inform "Globes." The change means a cut in benefits for those with unfunded pensions: both those who have already retired and those still working at the university. The ministry's demand is likely to have far-reaching consequences, because this is the first time that it is demanding a cut in unfunded pension benefits at any public institution, benefits that are very costly. If carried out, this demand will also have legal consequences, because the Ministry of Finance is in effect demanding the reopening of wage and pensions agreements.

The Ministry of Finance said in response, "The ministry is assessing the matter of unfunded pensions, and the actuarial liability and its consequences for all the universities, including Hebrew University, while considering various alternatives for dealing with the matter."

Hebrew University said in response, "Hebrew University wants to find a solution for its unfunded pensions. We have received no request from the Ministry of Finance to transfer management of unfunded pensions to an external fund, or for a cut in benefits."

Last week, a "Globes" investigative report revealed the shocking financial state of Hebrew University. The university is effectively bankrupt and in need of growing support from the state higher education budget, which will total NIS 9.5 billion in 2015. An actuarial report prepared a year ago estimated the university's unfunded pension liabilities at NIS 12.6 billion, while the annual unfunded budget payments are at least NIS 600 million annually - almost a third of the university's estimated NIS 2 billion budget. In addition to their unfunded pensions, the university's employees have benefited from a series of exceptional benefits, such as surplus years bonuses for those with over 30 years seniority, early retirement at age 60 and a severance pay bonus amounting to six months' salary for each year worked. Furthermore, the unfunded pension benefits were exceptional in comparison with the pension terms in the public sector. After only 10 years of employment, those eligible for an unfunded pension at the university accumulated 33% of their most recently monthly salary (3.5% per year), a ratio that most employees in Israel barely obtain after 30 years of work. The pension bracket thereafter falls to about 1% a year for the next five years, then rises again to 2% in the remaining 15 years, up to the usual ceiling of 70% of the most recent salary.

Based on these benefits, upon retirement, senior university employees benefited from an unfunded pension package estimated at NIS 8-10 million, and most of them continued working afterwards, usually at colleges or in various consultant jobs.

The Hebrew University receives NIS 1.4 billion in public funds, amounting to 71% of its budget. The rest comes from student tuition and donations. The budget distribution by the Council for Higher Education budget planning committee effectively shows how the public is subsidizing the university's huge pension payments. The Council for Higher Education gave Hebrew University NIS 293 million last year under the general heading of "sharing in the university's recovery and cost-cutting plans," more than double the amount received by Tel Aviv University and the Technion Israel Institute of Technology, but Hebrew University did not actually recover or cut costs. The most stunning fact, however, is that the universities are budgeted per humanities student, for example. While the universities receive almost NIS 33,000 per humanities student from the higher education budget, the budgeted colleges receive an average of NIS 24,000 per student - another way of subsidizing the universities' high pension payments.

Unfunded pension payments are not confined to Hebrew University; they also exist at Tel Aviv University and the Technion, although the problem is less severe there.

Published by Globes [online], Israel business news - www.globes-online.com - on November 19, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

Hebrew University
Hebrew University
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