The University of Louisville Foundation paid U of L President James R. Ramsey $1.9 million in 2007 to compensate him for state retirement benefits he forfeited, according to the foundation's most recent filing with the IRS.
Ramsey, who became president of Kentucky's second largest public university in 2002, had spent 17 years working for state government, including serving as state budget director under former Gov. Paul Patton between 1999 and 2002. While working for the state, he accrued time in the Kentucky Retirement System.
But because he left the state job without the necessary number of years of service to be fully vested, the U of L trustees inserted a provision in Ramsey's contract calling for him to be compensated for the retirement benefits he left on the table when he took the U of L job.
The foundation, which manages the university's private donations and endowment funds, paid Ramsey a $1,935,299 lump sum in 2007, the year he would have been eligible to retire with full state benefits, said Robert Gunnell, senior partner with Peritus Public Relations who serves as spokesman for the U of L Foundation.
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"That was the amount that an actuarial firm calculated to make President Ramsey whole in his retirement account," Gunnell said. "It was all private money — foundation money. Nothing came from the university. Nothing came from the taxpayers."
Ramsey declined to be interviewed for this article.
Ramsey's total compensation from the foundation and the university for 2007 was nearly $2.5 million, according to the foundation's tax papers, which were filed with the IRS May 20, 2009.
That total included the $1.9 million retirement compensation, $140,000 in salary for being head of the foundation, more than $310,000 in salary as U of L president and a bonus of $105,000 paid by the foundation.
Since then, however, the economy has tanked, and critics of high executive pay have cast a harsh spotlight on pay and bonuses to corporate leaders and university presidents.
Ramsey declined to take the annual bonus from the U of L Foundation for the last two years.
This year, he is slated to earn a total of $456,000 from his foundation and U of L salaries. (Ramsey also receives payments for his service on the boards of directors for Texas Roadhouse restaurants and Community Trust Bancorp in Pikeville.)
In comparison, University of Kentucky President Lee T. Todd Jr. will earn a $304,000 salary plus $50,000 for his role as chairman of the UK Athletics Association board.
His original hiring agreement called for compensating Ramsey for his lost state retirement benefits, but it wasn't until federal tax law changes were made in 2005 that the U of L Board of Trustees moved to amend his contract to provide the lump-sum payment, Gunnell said.
Under the 2005 tax changes, the IRS could tax Ramsey on his retirement compensation when he was first eligible to retire—regardless of whether he received the funds or not, Gunnell said.
An arrangement to have the foundation cover lost retirement compensation appears to be a rare benefit in Kentucky.
"We're not aware of that specific example," said Sue Patrick, spokeswoman for the Kentucky Council on Postsecondary Education. "However, it's not uncommon for foundations to supplement presidential compensation in varying ways and for varying reasons."
Foundations often help supplement presidential pay and compensation to help "recruit top talent," she said.
The U of L Foundation, like every university endowment fund in the country, has been hit hard in the last year by the tanking market.
It hit a peak value of $777.6 million in May 2008, but plummeted to $550 million last October. It has since rebounded with the market to make back some of the value lost, Ramsey said in a September interview.