Navigating Your Future: A Guide to UCLA Retirement Plan Options

The University of California Retirement System (UCRS) offers a comprehensive suite of retirement plans designed to help UC employees secure their financial future. Understanding the different components of UCRS is crucial for effective retirement planning, whether you're just starting your career at UCLA or preparing to transition into retirement.

Understanding the UCRS "Pie"

The UCRS encompasses several individual plans that collectively provide UC retirees with independent income streams. These plans include a pension plan [University of California Retirement Plan (UCRP)] and an assortment of retirement savings plans [Deferred Choice Program (DCP)/401(a), 403(b), 457(b)]. It is important to note that all payments to retirees from these plans are subject to ordinary income tax, unless otherwise indicated.

UCRP: A Strong Foundation

UC’s primary retirement benefits provide a strong foundation for your income in retirement, with costs shared by you and UC. However, if you’re represented by a union, your retirement benefits are negotiated between UC and your union and finalized in your bargaining unit’s contract. Retirement benefits for staff in certain police or firefighting positions are outlined in the UCRP Summary Plan Description for Safety Members PDF. Employees represented by American Federation of State, County and Municipal Employees (AFSCME), California Nurses Association (CNA), or University Professional and Technical Employees (UPTE) who were hired or became UCRP-eligible on or after July 1, 2013, are members of the UCRP Modified 2013 Tier.

Planning Resources

Whether you’re new to UC or nearing retirement, UC has resources to help you plan for your financial future. Preparing for a successful retirement is one of the biggest financial responsibilities you will face. If you are retiring soon and would like assistance with understanding the retirement process, please reach out to the Central HR Benefits Office to schedule a confidential one-on-one retirement counseling appointment.

Taking an Active Role

Whether you’re a long-term employee or just getting started in your career, it’s important to take an active role in planning for a secure retirement. UC offers retirement services and tools to assist faculty and staff in career-long financial planning. One-On-One-Consultation: Individual financial planning is available anytime throughout the year. You may schedule one-on-one retirement counseling with a Fidelity Investments Retirement Planner by calling (800) 558-9182.

UCRP Vesting and Age Factors

UCRP has a vesting requirement of five full years of UCRP service credit. An age factor is assigned to the retiring employee on his or her retirement date. The earliest age for an UCRP retirement is age 50; the age factor for age 50 is 1.1%. The age factor increases 0.14% for every year up to the maximum age factor of 2.5% (age 60) [see "UCRP Age Factors" under "Related Information"]. For retirements at age 60 or older, the age factor is 2.5%; it does not increase beyond 2.5%. For retirements pre age 60, the age factor is prorated to the birth month at retirement.

UCRP Service Credit

UCRP Service Credit differs from University Service Credit; University Service Credit is used for determining seniority, vacation accruals, and the like. UCRP Service Credit only counts hours on pay status in a "full-benefit" (formerly called Career) appointment; time worked as a student, a temp or other time is not eligible for UCRP Service Credit. For most employees, UCRP Service Credit will be the same as University Service Credit. For members who retire within 120 days of separation, accrued sick leave hours will convert to UCRP service credit.

Highest Average Plan Compensation (HAPC)

HAPC is a period of highest paid earnings. These earnings are an average over a 36-consecutive month period. Stipends are included, but over-time pay, bonuses and “summer 9ths”* are not (see “Eligible Covered Compensation” for specifics). They are the full-time equivalent salary for employees who work part-time. For most employees, the HAPC will be the final 36 consecutive months preceding retirement, but can occur at any time. For UC employees who are coordinated with Social Security from their UC employment, the HAPC will be reduced by $133. [Academics with a 9/12 appointment (work 9 months, paid over 12 months), summer salary (if summer 9ths as additional employment, if applicable) will not be included. For “x, y, z” School of Medicine Faculty, eligible covered compensation is your paid x (plus the health science scale a.k.a. APU, Academic Programmic Unit, if any) but not your y nor z payments. *IRC §401(a)(17) sets a dollar limit for earnings upon which retirement benefits may be based. The earnings limit for the Plan’s fiscal year beginning July 1, 2009, is $245,000 annually for employees who became members as of July 1, 1994, or later. For those who were active members before July 1, 1994, the earnings limit is $360,000.

Example Scenario: Josephine Bruin

Josephine Bruin, a UCLA employee, separates at age 50 with 15 years of UCRP Service Credit, a sick leave balance of 1,044 hours and an HAPC of $3,700. The earliest she can retire from UC (start receiving her UCRP pension) is age 50, however, she can retire any time after that.

UCRP formula at age 50: [(1.1% x 15.5) x $3,567] = $608.17.
UCRP formula at age 60: [(2.5% x 15) x $4,289.90] = $1,608.71.

Since Josephine's age factor is determined by her retirement date (not her separation date), her monthly benefit is higher at age 60. On the other hand, she is not receiving income during the ten years between ages 50 and 60! And, she would not be eligible to continue health benefits in the second example, nor convert her accumulated sick leave because her retirement date is 120 days later than her separation date. There are many important factors to consider when deciding on the right time to retire, including other financial resources available, medical coverage and others. Employees who are ready to retire should contact the Central Benefits Office at (310) 794-0830 beginoftheskypehighlighting (310) 794-0830 FREE endoftheskypehighlighting for a Personal Retirement Profile (PRP).

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Sick Leave Conversion

Participants who elect a monthly benefit will have sick leave hours converted to UCRP Service Credit if they retire within 120 days of separation. Josephine Bruin’s sick leave converted to UCRP service credit when she retired at age 50 since she retired within 120 days of separating.

Survivor Benefits

UCRP does not have "beneficiaries" for the monthly pension benefits; instead, the plan names a survivor [spouse/domestic partner, child(ren), dependent parents, see SPD for details.] If the UCRP member has an eligible survivor at the time of retirement, the plan will pay the eligible survivor a lifetime monthly benefit of 25% of the member's Basic Retirement Income (for those members whose UC employment is coordinated with Social Security) or 50% of the member's Basic Retirement Income (for those members whose UC employment is not coordinated with Social Security). This lifetime survivor payment is provided at no cost to the member and is provided if the member predeceases the eligible survivor.

Example of Survivor Benefits

To illustrate just one example of survivor payments, let’s go back to Josephine Bruin. UCRP allows its members to provide a retirement benefit to another person, a contingent annuitant, of their choosing. This Payment Option provides a lifetime benefit payable upon the member's death. This payment option is paid for entirely by the member via a reduction in pension benefits - as opposed to survivor benefits that are provided at no cost to members. The contingent annuitant can be anyone: a spouse, child, sibling or friend. In Josephine Bruin's case, she might want to take a reduction in benefits to leave her husband, Joe, a higher benefit. If Josephine died at age 50 while still employed, before electing her retirement benefits, the plan would automatically pay Joe, her eligible spouse, payment option A benefits; $572/month. The plan assumes Josephine would have taken the greatest reduction in her benefit to leave her spouse the highest possible benefit.

Estimating Your Benefits

Please visit the "UCRP Retirement Benefit Estimator" to calculate potential benefits.

Cost of Living Adjustments (COLAs)

Once retired, there is an annual COLA every July 1 for eligible retirees. The retiree must have been retired for one full year on or prior to a subsequent July 1. COLAs are based on movement in the Consumer Price Index (CPI) and are not necessarily matched point for point.

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Health and Welfare Benefits

Health and welfare benefits are not accrued or vested benefit entitlements. The amount UC contributes towards the cost of coverage is determined by UC and may change or stop altogether. Only UCRP service credit counts toward eligibility for medical and dental benefits.

Health Benefits Example

Returning to Josephine Bruin's situation, she would be able to continue her health benefits if she retired at age 50; she was still enrolled in her medical and dental plans, and her retirement was within the 120 day restriction.

Death Benefit

At the time of death, a $7,500 benefit is provided by UCRP.

Lump Sum Cashout (LSC)

The Basic Retirement Income (BRI) is reduced by any offsets and then multiplied by a Single Payment Factor (SPF). Looking at Josephine’s information, let’s calculate what her lump sum cashout would be at age 50. A LSC can be paid in cash to the retiree in which case federal and state income tax would be due and possibly an early distribution penalty or a rollover can be elected. A rollover to a qualified plan would defer taxes and avoid any penalties.

Buying Back Service Credit

The plan allows active UCRP members to “Buyback” UCRP service credit to establish service credit for unpaid and/or partially paid leaves of absence, to re-establish service credit for previous UCRP membership or to eliminate a noncontributory offset. The buyback option is available only to active UCRP members. Buybacks are not allowed for time when an employee did not have an eligible appointment, i.e. during a separation. If an employee leaves UC service and then returns, any previously earned UCRP service credit will be re-established, assuming accumulations were kept on deposit with UC, when applicable. Costs for buybacks are taken from the employee’s paycheck on a pre-tax basis.

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