By Vic Cox

As UCSB’s approximately 5,000 career staff and faculty employees breathe a sigh of relief over gaining at least another fiscal year before pension deductions resume (see Sept. 24, 2007 issue), they might consider Human Resources analysts’ advice that pre-retirement planning can greatly benefit the retiree.

“It’s never too early to have a retirement estimate done,” says benefits analyst Lisa Romero, who has spent the last seven years counseling employees taking disability as well as service retirements. Beginning well in advance of the expected day of retirement, she points out, allows time to gather information specific to the employee, make savings strategies, and adapt to unforeseen changes.

Minimum eligibility for a standard retirement pension is age 50 with five years service credit in the $44-billion UC system, which is called UCRP (University of California Retirement Plan). Service credit is but one of the three pillars on which retirement pay is built. A person’s age, up to 60, and his or her highest 36 consecutive months of salary are the others.

While vested employees have the choice of a lump sum or a monthly pension check, the decision has higher stakes than many realize because it is irrevocable, caution the counselors. If a retiree has decided to set aside a portion of his monthly check to support a spouse or domestic partner, under current rules that choice cannot be altered after retirement.

That is true, explains Jerry Chung, a benefits counselor since 1987, even if the “survivor” dies before the retiree. “The retiree cannot reclaim the entire pension check or adjust how much he’s paid (after a spouse or annuitant’s death),” he says.

Switching from active employee to retiree status can be unsettling. It starts with deciding if an employee can afford to retire from full-time work.

“It seems like a complicated system,” agrees Steve Pulliam, a benefits analyst for most of his 22 years with UCSB HR. He notes that, depending on when employees become UCRP members, they may be entitled to several distinct pots of money besides the pension fund. The Regents, for instance, granted active members in the early 1990s and again in the early 2000s interest-earning Capital Accumulation Provision (CAP) accounts. Also, most employees are required to save a small amount from each paycheck through the Defined Contribution Plan (DCP).

“Some employees mistakenly think that DCP contributions are the basis of their pensions,” says Pulliam. But the DCP and CAP funds are separate from the source of employees’ pensions, which are primarily investment income based on employer and employee contributions before the 1990s. UC officials have warned for the past few years that the UCRP “contributions holiday” is coming to an end as liabilities increase and the plan’s surplus shrinks.

The UC benefits’ Web site, <http://atyourservice.ucop.edu/employees/retirement_savings /index.html> provides basic UCRP information and links to a benefit estimator, plan summaries, and the Retirement Handbook.

For example, unexpended sick leave converts into service credit. Knowing the rate of conversion may help an employee decide between using a sick leave day or vacation day.

Retirement Cost Of Living Adjustments (COLAs) are issued once every 12 months—on July 1—so it may be advantageous to retire on or before July 1. Since UCRP requires waiting a year before the retiree receives the first COLA, retirement after July 1 means that the retiree must wait more than 12 months for that first COLA.

To give a hypothetical example, Helga decided to retire on Oct. 1, 2007, the 20th anniversary of her date of hire. She would have to wait until July 1, 2009, for her first COLA—21 months after she retired. Henrietta, on the other hand, retired on July 1, 2007, and 12 months later received her first COLA.

However, if the extra months of service in the above example mean a substantial rise in salary or that the employee reaches age 60, it may be better to wait.