University of California Retirement and Savings Program
Academic employees whose appointments are at least 50 percent time for a year or more are eligible for membership in the University of California Retirement Plan (UCRP). UCRP is a defined benefit plan that provides retirement, survivor and disability income, as well as a lump-sum death benefit. Academic employees who became UCRP members after April 1, 1976, are automatically covered by Social Security. Both UCRP members and the University pay Social Security taxes. UCRP benefits are funded from University and member contributions and the investment earnings thereon. Members can be eligible for benefits from UCRP and Social Security.
To become fully vested -- or, eligible for a future retirement benefit -- members must earn five years of UCRP service credit. Once vested, members remain eligible for a retirement benefit even if no longer working for UC. Members may retire as early as age 50.
Monthly lifetime retirement benefits are based on a formula which uses the member's UCRP service credit, average of the highest three consecutive years salary, and age at retirement. Upon death, a portion of the benefit is automatically continued to the member's surviving spouse or other eligible survivor(s). If the member wishes to provide additional survivor benefits for the spouse or another person, the member's retirement benefit will be reduced depending on the option chosen by the member at retirement. In lieu of monthly retirement benefits, members may elect a lump sum cashout.
Members must meet certain requirements to be eligible for disability benefits (which are available through UCRP membership), and for preretirement survivor benefits. Disability benefits are based on the member s service credit and salary level at the time of the disability. For members with Social Security coverage, if death occurs before retirement, survivor benefits for the member's eligible survivor are 25 percent of final salary.
Retirement, survivor and disability benefits are reduced slightly to account for University contributions to Social Security.
University of California Defined Contribution Plan
The Defined Contribution (DC) Plan provides savings and retirement benefits based on employee contributions plus any earnings on those contributions. The DC Plan has separate accounts for pretax and after-tax contributions. The Pretax account contains required contributions of UCRP members deducted from pay before taxes are calculated. Income taxes are not paid on contributions or earnings until the money is withdrawn. The After-Tax account contains voluntary contributions deducted from taxable earnings, but taxes on any earnings or interest on contributions are deferred until the money is withdrawn. The DC Plan accepts rollovers of distributions from UCRP and other qualified 401(a) and 401(k) plans. Participants can direct Pretax or After-Tax DC Plan contributions into one or more of six UC-managed investment funds, whose objectives range from maximizing interest income to longterm capital appreciation. Participants can also direct contributions to mutual funds offered by Fidelity Investments. Plan and Internal Revenue Code (IRC) rules limit the amount employees may contribute each year, restrict access to the money, and may impose tax penalties if the money is withdrawn before age 59-1/2.
University of California Tax-Deferred 403(b) Plan
Employees can further supplement their retirement income and reduce current taxes by participating in the Tax-Deferred 403(b) Plan. Pretax dollars are deducted from pay and may be directed to one or more of six UC-managed investment funds. Participants also have the option to direct some or all of their contributions to mutual funds managed by Fidelity Investments and the Calvert Group. Taxes on contributions and earnings are not paid until the money is withdrawn. Distributions from other employers' 403(b) plans can also be rolled over into the University's 403(b) plan. IRC rules limit the amount employees may contribute each year, restrict access to the money, and may impose tax penalties if the money is withdrawn before age 59-1/2. Participants may borrow against their 403(b) contributions in the UC-managed funds through the Tax-Deferred 403(b) Loan Program.
Appointees hired on or after October 19, 1992, who are not members of UCRP are required to contribute to the Defined Contribution Plan-Pretax account in lieu of paying the Old Age, Survivors and Disability Insurance portion (OASDI) of Social Security taxes. Investment opportunities for this account are as described above. This group may also contribute to the Defined Contribution Plan After-Tax account and the Tax-Deferred 403(b) Plan, again, as described above.
Other Savings Opportunities
UC also provides other investment and savings opportunities, including U.S. Savings Bonds, Benham California Tax-Free and Municipal Bonds, and Individual Retirement Accounts (IRAs).