OF RECORD
Retirement Plan Changes
To the University Faculty and Staff:
We are pleased to accept a set of recommendations provided to the University community for comment in Almanac on December 7, 1999, that represent an effort to improve and align retirement benefits throughout the University community. Retirement benefits are a significant component of the total benefits package offered by the University, and should be better appreciated and utilized by our faculty and staff. We believe that the recommended changes will provide the retirement savings opportunity and greater flexibility our employees have wanted. The redesigned retirement package will also be more consistent with IRS tax regulations and current best practices in benefits design.
The recommendations were finalized through a long deliberation and consultation period, working together with the Office of the Provost and the Division of Human Resources and the help of the Personnel Benefits Committee of University Council. Advice was also sought from experts and consultants in the retirement field who covered the legal and actuarial aspects and the impact of the recommendations on employee savings.
On the Tax-Deferred Retirement Plan we accept in full the recommendations.
The University will:
- Create a comprehensive Tax-Deferred Retirement Plan available to all employees who meet the requirements for participation, effective July 1, 2000.
- Provide employees with a basic age-based contribution from the University, which does not require an employee contribution. This contribution would begin after one year of service.
- In addition to the basic University contribution, provide a dollar-for-dollar University match for all employee contributions up to 5% of salary. Employees may begin to contribute immediately, and the matching contributions would begin after one year of service, as is currently provided in the TDA Plan.
- Continue to permit additional employee contributions up to the employee's maximum allowable contribution amount. Employees may begin these supplemental contributions immediately.
- Provide immediate vesting for all contributions.
On the Retirement Allowance Plan (RAP) we accept in full the recommendations.
The University will:
- Give all current RAP participants a one-time irrevocable opportunity to move into the Tax-Deferred Retirement Plan.
- No vested benefits will be lost to any individuals currently in the RAP.
- Those electing to remain in the RAP will see no change in that benefit.
- Discontinue the availability of the RAP to new employees effective July 1, 2000. Employees meeting the participation requirements will be eligible for the Tax-Deferred Retirement Plan.
We recognize that these changes are complex and will require an extensive educational effort. The University will provide employees with in-depth information--including group and individual counseling sessions--during the coming months. The dates, times and locations of these sessions will be communicated in the near future. There are three groups that will be specifically targeted:
- Employees currently in the RAP,
- Employees currently eligible for but not participating in the Basic Tax-Deferred Annuity (TDA) Plan, and
- Employees already participating in the Basic TDA Plan.
We believe that these recommendations are in keeping with Penn's goal of providing and maintaining a competitive total compensation package in order to recruit and retain excellent faculty and staff.
| Judith Rodin, President | Robert L. Barchi, Provost | John A. Fry, Executive Vice President |
Almanac, Vol. 46, No. 20, February 8, 2000