Monday, March 14, 2016

A penny saved is a penny less

UC President Janet Napolitano’s proposal last week to cap pensions for new hires, part of a deal with Gov. Brown, has a less generous 401(k)-style supplement than a task force proposal to help attract top faculty...

Napolitano said in a letter to colleagues Friday her proposal (scheduled to be considered by the UC Regents on March 23) builds on the work of the task force and reflects comments she received in January and February...

To offset the reduced pension, the task force proposed giving the new hires a 401(k)-style plan for pay between the new cap and the IRS limit. UC employers would contribute 10 percent of pay to the 401(k) plan, employees 7 percent of pay.

In addition, new hires would be given the option of choosing to receive no pension, but instead a 401(k) plan covering all pay from the first dollar up to the IRS limit with similar contributions: employers 10 percent of pay, employees 7 percent.

Napolitano’s proposal follows the basic task force model, but reduces the employer contribution to the 401(k) individual investment plan. The employee contribution remains at 7 percent of pay.

For the gap between the pension cap and the IRS limit, the employer contribution is not 10 percent of pay but 5 percent for faculty and 3 percent for staff.* For the 401(k)-only option the employer contribution is 8 percent of pay for all employees...

Don't bother to ask:
*Note: The 5% starts from the beginning of employment.

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