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 (Jan. 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 Jan. 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 temporary employees.
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