University of California, San Diego
October 12, 2001
SUBJECT: UC Proposes Special Retirement Savings Option
The University of California Office of the President (UCOP) announced today a proposal (attached below and also accessible at http://www.ucop.edu/bencom) to be presented to the UC Regents that will give eligible employees additional personal funds by way of a special retirement account. The special account, called a Capital Accumulation Provision (CAP) accrual credit, would be available to all eligible UC employees who are members of the University of California Retirement Plan (UCRP). The CAP accrual credit being proposed would be calculated at three (3) percent of the employee's eligible "covered compensation."
To be eligible to receive the CAP accrual credit, employees must be active UCRP members on the date specified in the proposal. If approved by the UC Regents in November, the CAP accrual credit could be in place by the summer of 2002.
Questions may be directed to Jackie Edwards, Benefits Manager, at firstname.lastname@example.org or at (858) 543-2816.
UC Proposes Special Retirement Savings Option
(Oakland, CA - October 12, 2001) Due to the recent economic downturn and resulting decline in state revenues, the University of California received significantly reduced state funding for 2001-2002 salary programs. In an effort to mitigate some of the disappointing effects of this year's salary shortfall and to recognize employees' continuing contributions-especially during the present economic difficulties-university administrators will be presenting to UC Regents on November 14-15 a proposal that would give eligible employees additional personal funds by way of a special retirement account.
"All our employees work very hard to help make UC a premier educational institution and they deserve to be recognized appropriately. Given this year's unfortunate constraints on salary increases, we are very happy to have found a way that could give employees some additional funds", said Joseph Mullinix, Senior Vice President for Business and Finance. He added, "It's essentially a form of deferred compensation, and while it won't change employees' incomes immediately, it will give a boost to their finances later on."
The special account, called a Capital Accumulation Provision (CAP) accrual credit, would be available to all eligible UC employees who are members of the University of California Retirement Plan (UCRP). For each eligible employee, the CAP accrual credit being proposed would be calculated at 3% of the employee's eligible "covered compensation" (compensation used for the purpose of determining benefits under UCRP) for a specified period of twelve months. This amount would then be put into a special account in UCRP where it would earn interest until the employee retires or leaves University service.
For example, an employee who receives $35,000 in covered compensation during the specified twelve months would receive a CAP accrual credit of $1,050. This CAP accrual credit would then be held in a separate CAP account for that employee under UCRP, and would earn interest at a specified annual rate based on the interest rate used to value liabilities under UCRP (currently 7.5%).
To be eligible to receive the CAP accrual credit, employees must be active UCRP members on the date specified, which could be as late as June 30, 2002. This would include UCRP members on sabbatical or approved leave of absence. Disabled, Retired, and Inactive members would be excluded. The eligibility dates for this proposed accrual credit have not been finalized.
If approved by UC Regents in November, six to eight months of retirement system programming would be required and the CAP accrual credit would be expected to be in place by summer 2002.
Eligible UCRP members previously received CAP accrual credits in the early 1990s, during another period when the state's budget was under severe pressure. The CAP provides a supplement to other UCRP benefits; eligible members receive their CAP balance when they retire or leave University service.