January 18, 2001
Regents approve retirement plan improvements
By Brad Hayward
In an effort to reward current employees and further enhance the university's competitive
position in recruiting future employees, the UC Board of Regents today (January 18)
approved improvements of "age factors" in the University of California
Retirement Plan (UCRP). These improvements will increase retirement benefits for
faculty and staff who retire from the UC system in the future.
The UCRP will be amended, effective January 1, 2001, to reflect the new age factors.
The factors will start at 1.1 percent at age 50, increasing in increments of .14
percentage points per year to 2.5 percent at age 60, remaining constant thereafter.
Overall, the new age factors will be between 1 percent and 20 percent higher than
the previous factors, varying at each retirement age.
The age factor is used to determine the percentage of an employee's highest average
three-year salary the employee will receive from his or her UCRP pension after retiring.
The age factor, multiplied by the employee's years of service, results in the percentage
of monthly income to be provided in retirement.
"This improvement to our retirement plan is an important part of our efforts
to reward faculty and staff for their years of service and to enhance UC's recruitment
and retention of a high-quality workforce," said Judith W. Boyette, UC associate
vice president for human resources and benefits. "We believe this action will
be important to both current and prospective UC faculty and staff."
As it replaces employees who leave the university and adds positions to keep up with
student enrollment growth, UC faces a particularly tight labor market in California.
Today's workforce is both highly mobile and highly cognizant of the components of
"total compensation," including retirement benefits, when evaluating employment
opportunities. For this reason, UCRP is an important tool in recruiting faculty and
staff.
UC does not anticipate that the new age factors will create a significant increase
in retirements. A small increase may occur, attributable to UCRP members delaying
their retirements in recent months in anticipation of these improvements. However,
by progressively increasing the age factors at older ages, the plan promotes retention
of current faculty and staff by providing higher retirement benefits to those who
retire later. In addition, the maximum age factor, for those retiring at age 60 and
above, itself has been increased from 2.41 percent to 2.5 percent.
The California Public Employees' Retirement System adjusted its age factors last
year.
The UCRP proposal was adopted by the regents after extensive consultation within
the university community and the completion of a comprehensive UCRP asset/liability
study.
The regents today also approved a one-time, ad hoc cost-of-living adjustment to restore
the purchasing power of retirement benefits for some UC retirees and survivors of
active or retired staff and faculty. UC has provided these adjustments periodically
to ensure that retirees' benefits are not significantly eroded over time. Historically,
adjustments have been made to ensure that purchasing power does not fall below 75
percent of original purchasing power. The regents' action today will restore purchasing
power to the 85 percent level, effective Jan. 1, 2001, for UC retirees and survivors
with retirement dates of July 1, 1985, and earlier. (The benefits paid to those who
retired after July 1, 1985, continue to maintain a purchasing power above 85 percent.)
In addition, the regents today also approved UCRP changes that may affect certain
active "Tier Two" members and members with a "Plan 02 noncontributory
balance." Details on these actions, and more information for employees interested
in the age factor changes, will be available on the university's web site at www.ucop.edu/bencom/.
UC is pursuing several other initiatives aimed at enhancing its ability to recruit
and retain talented employees. For instance, the university is seeking funding to
continue improving the market competitiveness of its staff salaries, and the regents
recently approved a program extending UCRP eligibility to qualified "casual"
employees.
