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Q&A: Retirement contributions? Yes, they start in mid-April

Contributions by employer and employee are set to resume in mid-April as UC attempts to restore the UC Retirement Plan’s long-term viability.

Today, after a nearly two-decade-long period when neither employer nor employee members contributed, the UCRP is only 95 percent funded on a “smoothed basis” (to account for market volatility during the preceding five years) and significantly less so on a market-value basis (based on the July 2009 valuation).

Thus, the Board of Regents decided to restart contributions. Here are questions and answers about the restart, based on information from the UC Office of the President:

When will I see the contribution on my paycheck? — From May 12 to June 1, depending on how often you get paid.

How much? — The same amount that you are now required to contribute to the defined contribution plan, or DCP — about 2 percent for most employees — through June 2011. So, until then, you will see no effect on your take-home pay. (Safe Harbor plan participants do not belong to the URCP, and will continue to make mandatory contributions to the DCP.)

Is the amount likely to go up? — Yes. As previously announced, employer and employee contributions are expected to increase over time in order to sustain the pension fund. The annual cost for an additional year of service for active members is about 17 percent of pay — this is the combined total amount that UC and employees eventually should be contributing each year to cover the annual increase in liability. Ultimately, UC’s long-term approach is intended to be similar to the CalPERS approach (at the present time, most CalPERS members contribute from 5 percent to 7 percent of pay).

How much is UC contributing and where will the money come from? — 4 percent beginning April 15, from all of the sources that go to employee salaries, including the medical centers, contracts and grants, the Department of Energy, the state and other payroll sources.

What happens if the state does not provide funding? — UC and its employees will begin contributions regardless. If state money does not come through, each campus must cover the state share from other sources.

My union has not agreed to contributions. What happens to my pay? — You will continue to make mandatory contributions to the DCP while collective bargaining continues.

How do I keep track of my contributions? — Your contributions will be held in an individual account, earning interest at 6 percent annually (at the present time). Your contributions will be shown on your pay stub and online (At Your Service). The employer contributions will go in a general account, on behalf of all members.

If I leave UC employment, what happens to my contributions? — You can leave them on deposit in the UCRP, roll them over or take direct payment. If you are vested (five or more years of service credit) and you take your contributions, you forfeit a lifetime pension.

What happens to my defined contribution plan account? — Your mandatory contributions will stop when UCRP contributions begin. Your existing balance in the DCP belongs to you, and you can continue to manage those funds through Fidelity Retirement Services.

You may continue to make voluntary contributions to the DCP After-Tax Account, or pretax contributions to the 403(b) Plan or the 457(b) Plan. For more information, contact Fidelity Retirement Services: (866) 682-7787 or .

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Dave Jones, Dateline, 530-752-6556, dljones@ucdavis.edu

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