SUBJECT:

UC Pretax Transportation Program for Vanpooling

This Notice is provided to announce the availability of the Pretax
Transportation Program for vanpooling effective with paychecks issued on
Monday, January 4, 1999 (the first working day in 1999). Thus, all eligible
employees' payroll deductions for vanpooling may be taken on a pretax basis
up to the Federal and State allowable monthly limits.

Pretax vanpooling deductions will result in tax savings for eligible
employees which include both non-exclusively represented employees and
exclusively represented employees currently covered by collective
bargaining agreements. Application of the program to exclusively
represented employees not currently covered by collective bargaining
agreements would be subject to notice, meeting and discussing, consulting
or conferring, as appropriate.

Under the pretax program, payroll deductions for vanpooling would not be
subject to withholding for Federal and State income taxes, and FICA taxes
(i.e., Social Security and Medicare). The exact amount of savings realizedv will depend on the employee's Federal tax bracket and whether the employee
is subject to full or partial FICA coverage.

Payroll deductions for vanpooling will not be subject to withholding for
Federal and State income taxes, and FICA taxes. Under Federal law,
vanpooling and transit passes are subject to a single exclusion limit of
$65 per month. Therefore, the $65 limit applies whether these deductions
are established separately or in combination with one another. Conversely,
there is no exclusion limit for State tax withholding vanpooling or transit
pass deductions. If or when the University makes transit passes available
on a pretax basis, an announcement will be issued.

Reducing current taxable income for the proposed pretax program may impact
the maximum an employee can contribute annually to the Tax-Deferred
403(b)Plan and the Defined Contribution Plan After-Tax Account. Any
possible impact would depend on the employee's individual circumstances.

Pretax deductions do not affect the salary used in calculating benefits
under the University of California Retirement Plan (UCRP). The pretax
deduction process for vanpooling are similar to those tax savings programs
currently in place, such as medical insurance premiums for Prudential High
Option, UC Care, and Health Net.

Eligible employees who do not wish to participate in the pretax deduction
for vanpooling must complete and submit the University of California Pretax
Transportation Deductions Enrollment or Cancellation Form, UPAY 884
(8/98), to the Payroll Office at mail code 0952. This form is accessible
on the web at http://www.ucop.edu/payroll/forms.htm or by contacting the
Campus Payroll Office at (619)534-3249 or the Human Resources Office of
Policy Development and Quality of Work/Life at (619)534-9659.

General inquiries regarding the content of this Notice should be directed
to Jonnie Craig-Winston, Director of Policy Development and Quality of
Work/Life, at (619) 534-9659 or jcraig@ucsd.edu., by December 18, 1998.

Frequently Asked Questions (FAQs) have been attached to this Notice.
However, specific inquiries regarding the pre-tax deductions for
Tax-Deferred 403(b) Plans and the Defined Contribution Plan After-Tax
Account should be directed to the Benefits Representative designated for
each vice chancellor's area at (619)534-2816. Specific vanpooling inquiries
(Campus and Medical Center) may be directed to the Campus Rideshare Office
at (619)534-0883. Specific inquiries regarding payroll issues should be
directed to Eric Holmes, Campus Payroll Office, at (619)534-3249.

Rogers Davis Assistant Vice Chancellor Human Resources

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Procedures Governing Implementation of Pretax Transportation Program

Frequently Asked Questions and Answers:

The following questions and answers address the pretax payroll deductions
for vanpooling authorized under the University's Pretax Transportation
Program.

Definitions:

Q1. What types of transportation expenses qualify for pretax deductions?

A1. At this time, there are two types of transportation expenses that
qualify for pretax deductions: (1) parking expenses paid through payroll
deduction (up to the IRS limit of $175 per month) by employees to park on
the University's premises became effective with paychecks issued on
September 1, 1998; (2) vanpooling expenses paid through payroll deduction
(up to the IRS limit of $65 per month) will be effective with paychecks
issued on Monday, January 4, 1999 (the first working day in 1999).

Eligible Employees:

Q2. Do these pretax deductions apply to all employees?

A2. As of this date, employees in the CX (Clerical) bargaining unit are not
eligible for pretax transportation deductions, pending further negotiations
with the exclusive representatives of that unit.

Effective Date:

Q3. When will the vanpooling deductions be made available on a pretax basis?

A3. Vanpooling deductions will be taken on a pretax basis effective with
paychecks issued on Monday, January 4, 1999 (the first working day in 1999).

Tax Limits:

Q4. Is there a limit on the pretax deduction amount an employee may request
for vanpooling?

A4. Yes. Under IRS regulations, the amount of vanpooling expenses an
employee may exclude from his income is limited to up to $65 per month.
However, there is no exclusion limit for State income tax withholding for
vanpooling deductions.

Q5. If the value of an employee's pretax deduction for vanpooling does not
exceed the limit in any month, may the unused portion of the exclusion be
carried over to subsequent months?

A5. No. The limit is applied on a monthly basis. Any unused portion of
the exclusion cannot be carried over to another month. The pretax deduction
established for an employee must reflect actual expenses, up to the IRS
limit. For example, if an employee pays $50 a month for vanpooling, that
employee is entitled to a pretax deduction of only $50.

Q6. What action should employees take if they DO NOT want their vanpooling
deductions taken on a pretax basis?

A6. The employee should obtain and complete the Pretax Transportation
Deduction Enrollment/Cancellation (UPAY 884) form. The completed form
should be forwarded to the Payroll Office at Mail Code 0952. This form will
be processed on a prospective basis, subject to normal payroll deadlines.
The form is available at http://www.ucop.edu/payroll/forms.htm or at the
Campus Payroll Office at (619) 534-3247 or the Human Resources Office of
Policy Development and Quality of Work/Life at (619) 534-9659.

Q7. If an employee elects to have deductions taken on an after-tax basis,
can the employee change the deductions back to pretax at a later date?

A7. Yes. Under the IRS regulations governing these deductions, employees can
change their pretax election at any time. However, campuses may impose
limits on the frequency of such changes, if desired.

Retirement Benefits:

Q8. Will these pretax deductions affect an employee's Maximum Annual
Contribution (MAC) amount?

A8. The 1999 MAC calculation for these pretax deductions will be included
as a reduction to an employee's gross income, which may impact his/her 1999
MAC amount.

Q9. Will employees' participation in the pretax program affect their HAPC
(Highest Average Plan Compensation)?

A9. No. Participation in these pretax deductions will not affect the
salary used in calculating an employee's benefits under the University of
California Retirement Plan.

Q10. Will participation in the pretax program affect an employee's Social
Security benefits?

A10. Because pretax deductions lower the eligible earnings on which Social
Security benefits are based, there could be an effect on an employee's
Social Security benefits. If the deductions cause an employee's earnings to
fall below the Social Security wage base, then any Social Security benefits
received by the employee or family could be reduced if these earnings are
used to calculate those benefits.

Other:

Q11. If employees do not pay for their vanpooling through payroll deduction,
are they entitled to any tax benefits?

A11. No. Only employees who pay for these transportation (e.g.,
vanpooling) expenses through payroll deduction qualify for pretax benefits.