UC administrators are advocating benefit cuts for employees and increased students fees. They have said they believe employee benefits are “too generous.” For those forced onto a cheaper “second tier” for either pension or retiree health, it maybe financially impossible to retire before age 65.

Here are some of the main changes for those on Tier 2:

• UC pays less and employees pay more. For Tier 2 of the pension plan, starting July 1, 2013 UC will contribute 4% less while employees will contribute 0.5% more than Tier 1.
  
  
• Minimum retirement age increases from 50 to 55. This will mainly affect employees who must leave UC earlier than they desire. If you are laid off or must leave for some other reason before you are 55, you will receive NO pension orretiree health benefits. For example, an employee with 20 years of service who gets laid off at age 53 will have no UC retiree health benefits. Currently, very few people voluntarily retire before age 55 because the age factor (one of the three multipliers that determine your monthly pension check) is still less than the maximum.
  
  
• Maximum benefit at 65 instead of 60. Because of a change in the “maximum age factor,” if you retiree at age 60 with the same number of years working at UC, you’d get 30% less in your pension. For example, an individual with a salary of $50,000 and 30 years of service credit would get nearly $1000 less per month.
  
  
• No lump sum cash out. UC wants to eliminate the option for a lump sum cash out of your retirement funds. The lump sum cash out benefits those who have another source for health benefits and do not need a reliable pension income. Currently, if you take this option you forfeit retiree benefits, but receive the money to invest on your own. This can be an attractive option for people who do not anticipate needing a steady source of income for a long period of time. Individuals will rarely make the same interest rate (7.5%) as the institutional investors managing the pension fund.
  
  
• UC wants to eliminate the subsidy for on-going pension benefits to surviving spouses. Currently, an eligible spouse or domestic partner automatically continues to receive 25% of the employees’ pension if their partner dies. UC wants to eliminate this benefit. Employees can additionally opt to receive a smaller pension benefit in return for a greater survivor benefit. This second option does not provide any additional funds and will still be available.

The criteria that determine which tier an employee falls into is complex. The table below details the eligibility criteria, costs and benefits of the proposed two tiers.           

You can use UPTE’s Pension Calculator to see how much Tier 2 reduces the monthly pension check for those on it.