University California reducing pension payout for contingent annuitants

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Fractalleaf
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Re: University California reducing pension payout for contingent annuitants

Post by Fractalleaf »

Sandi_k wrote: Sat Mar 30, 2024 11:47 am
Fractalleaf wrote: Thu Mar 28, 2024 5:56 pm The new factors to calculate pension options have been implemented, and more detail is provided in this message:
https://ucnet.universityofcalifornia.ed ... -2024.html

The examples provided in the link are only for spouses who are the same age. A younger contingent annuitant will result in a greater reduction in monthly income. Our pension will be reduced by 1.5% after July 1. Rather than retire before July 1 when the changes go into effect, we will probably elect to work another year or two to maximize the highest average compensation.
Fractalleaf, perhaps you can help my understanding of what's been loaded into the calculator.

Thanks to your original post, I relayed the information to my department, and to other managers on campus. Late this week, APO and the Vice Provost's office also circulated the news, and recommended that employees run the scenarios as noted below:

"If you are planning on retiring on 7/1/24, please run two different retirement estimates to see which is more financially advantageous for your particular situation:

One with a 6/27/24 separation date and a 7/1/24 retirement date
One with a 6/29/24 separation date and a 6/30/24 retirement date."


I did so, and the difference between the two is ~ a 1.2% increase for electing to stay into AY25. In other words, I get slightly MORE in the new calculations. I expected a decrease in the Option A 100% survivor benefits for my husband.

I understand that the mortality tables have been updated to reflect survivors' expanded ages, and that the model is based on employee and survivor at the same age.

Is the increase in payout because I am female, and two years younger than my contingent annuitant? Which means I really don't need to worry about a reduction?
I ran an estimate and saved it as soon as they made their announcement- before the new factors were implemented. I then ran the estimate again, using the same dates, after they introduced the new factors and my pension decreased by 1.5% for option A-full continuance. Oddly, when I use the dates suggested by your Vice Provost office, I also see that my pension is higher with the July 1 retirement date. I cannot explain that, unless the new factors are already in place and we do not have an option to "beat the clock". You should check one of your previous estimates, from a date before they announced the change. Those should be available once you log in to UCRAYS.

My lump-sum payout increased only slightly, so it is not as tempting to opt for that. One advantage of the lump-sum option that I don't see discussed anywhere is that once it is rolled into an IRA, payments can be deferred until 73 or 75, unlike the pension that must be taken immediately. For anyone contemplating Roth rollovers as part of an estate plan it can be very helpful to have some years of lower income to make conversions.

As @Mariezzz pointed out, the biggest issue to me is that this was done with little effort to inform employees and with insufficient notice. They should have provided at least 6 month's notice before implemented the new factors.
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Sandi_k
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Re: University California reducing pension payout for contingent annuitants

Post by Sandi_k »

Fractalleaf wrote: Tue Apr 02, 2024 11:47 am
Sandi_k wrote: Sat Mar 30, 2024 11:47 am
Fractalleaf wrote: Thu Mar 28, 2024 5:56 pm The new factors to calculate pension options have been implemented, and more detail is provided in this message:
https://ucnet.universityofcalifornia.ed ... -2024.html

The examples provided in the link are only for spouses who are the same age. A younger contingent annuitant will result in a greater reduction in monthly income. Our pension will be reduced by 1.5% after July 1. Rather than retire before July 1 when the changes go into effect, we will probably elect to work another year or two to maximize the highest average compensation.
Fractalleaf, perhaps you can help my understanding of what's been loaded into the calculator.

Thanks to your original post, I relayed the information to my department, and to other managers on campus. Late this week, APO and the Vice Provost's office also circulated the news, and recommended that employees run the scenarios as noted below:

"If you are planning on retiring on 7/1/24, please run two different retirement estimates to see which is more financially advantageous for your particular situation:

One with a 6/27/24 separation date and a 7/1/24 retirement date
One with a 6/29/24 separation date and a 6/30/24 retirement date."


I did so, and the difference between the two is ~ a 1.2% increase for electing to stay into AY25. In other words, I get slightly MORE in the new calculations. I expected a decrease in the Option A 100% survivor benefits for my husband.

I understand that the mortality tables have been updated to reflect survivors' expanded ages, and that the model is based on employee and survivor at the same age.

Is the increase in payout because I am female, and two years younger than my contingent annuitant? Which means I really don't need to worry about a reduction?
Fractalleaf wrote: Tue Apr 02, 2024 11:47 amI ran an estimate and saved it as soon as they made their announcement- before the new factors were implemented. I then ran the estimate again, using the same dates, after they introduced the new factors and my pension decreased by 1.5% for option A-full continuance. Oddly, when I use the dates suggested by your Vice Provost office, I also see that my pension is higher with the July 1 retirement date. I cannot explain that, unless the new factors are already in place and we do not have an option to "beat the clock". You should check one of your previous estimates, from a date before they announced the change. Those should be available once you log in to UCRAYS.
The new values are in place as of Thursday last week, according to the UCNET memo.
Fractalleaf wrote: Tue Apr 02, 2024 11:47 amMy lump-sum payout increased only slightly, so it is not as tempting to opt for that. One advantage of the lump-sum option that I don't see discussed anywhere is that once it is rolled into an IRA, payments can be deferred until 73 or 75, unlike the pension that must be taken immediately. For anyone contemplating Roth rollovers as part of an estate plan it can be very helpful to have some years of lower income to make conversions.
I am not taking the lump sum - I want medical coverage in retirement. :-)
Fractalleaf wrote: Tue Apr 02, 2024 11:47 amAs @Mariezzz pointed out, the biggest issue to me is that this was done with little effort to inform employees and with insufficient notice. They should have provided at least 6 month's notice before implemented the new factors.
Absolutely correct.
Thesaints
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Re: University California reducing pension payout for contingent annuitants

Post by Thesaints »

Fractalleaf wrote: Tue Apr 02, 2024 11:47 am I also see that my pension is higher with the July 1 retirement date. I cannot explain that,
Amounts post Jun-30 include a 2% inactive COLA adjustment for anyone who leaves service earlier than Jun-30. That was not included until the end of March, so comparing to previously saved estimates it looks like payments go up.
Paullmas
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Re: University California reducing pension payout for contingent annuitants

Post by Paullmas »

popoki wrote: Fri Mar 08, 2024 5:42 pm How sad for these employees who worked for less pay than their private-sector peers, with the pension benefit to themselves and their beneficiaries being the main reason to have worked in the system.
Myth. Public employees who did not have to compete for their careers.
Just say no to international.
Mishigami
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Re: University California reducing pension payout for contingent annuitants

Post by Mishigami »

Paullmas wrote: Wed Apr 03, 2024 5:37 am
popoki wrote: Fri Mar 08, 2024 5:42 pm How sad for these employees who worked for less pay than their private-sector peers, with the pension benefit to themselves and their beneficiaries being the main reason to have worked in the system.
Myth. Public employees who did not have to compete for their careers.
Whatever.
GAAP
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Re: University California reducing pension payout for contingent annuitants

Post by GAAP »

Paullmas wrote: Wed Apr 03, 2024 5:37 am
popoki wrote: Fri Mar 08, 2024 5:42 pm How sad for these employees who worked for less pay than their private-sector peers, with the pension benefit to themselves and their beneficiaries being the main reason to have worked in the system.
Myth. Public employees who did not have to compete for their careers.
If you haven't worked in, or at least been exposed significantly to both private and public sector employment, then you really don't know what you're talking about. Before you ask -- yes I have both worked in and been exposed to both.

The post itself is also insulting to public employees as an entire class.
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee
Topic Author
Fractalleaf
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Re: University California reducing pension payout for contingent annuitants

Post by Fractalleaf »

Thesaints wrote: Tue Apr 02, 2024 8:39 pm
Fractalleaf wrote: Tue Apr 02, 2024 11:47 am I also see that my pension is higher with the July 1 retirement date. I cannot explain that,
Amounts post Jun-30 include a 2% inactive COLA adjustment for anyone who leaves service earlier than Jun-30. That was not included until the end of March, so comparing to previously saved estimates it looks like payments go up.
Thank you! It would have taken me a long time to figure that out. The best comparison for the effect of the new factors is to look at an old estimate using the desired retirement date (in my case, end of 2025) and compare it to an estimate generated after they implemented the new factors.

My spouse and I both worked in industry before moving to academics. Our salaries were about 40% less than the industry salaries when we began our careers in academia. It's true that by retirement the compensation will have increased dramatically, but that probably doesn't compensate for the initial opportunity cost of low wages with nothing leftover to invest in the early years. We had one car and no cable TV for the first 10 years of our careers in academia.

This thread was never intended as a "poor me" lament, it was to inform others in the same situation and discuss consequences of the altered pension calculator.
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Sandi_k
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Re: University California reducing pension payout for contingent annuitants

Post by Sandi_k »

GAAP wrote: Wed Apr 03, 2024 10:57 am
Paullmas wrote: Wed Apr 03, 2024 5:37 am
popoki wrote: Fri Mar 08, 2024 5:42 pm How sad for these employees who worked for less pay than their private-sector peers, with the pension benefit to themselves and their beneficiaries being the main reason to have worked in the system.
Myth. Public employees who did not have to compete for their careers.
If you haven't worked in, or at least been exposed significantly to both private and public sector employment, then you really don't know what you're talking about. Before you ask -- yes I have both worked in and been exposed to both.

The post itself is also insulting to public employees as an entire class.
Thank you, GAAP.
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Sandi_k
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Re: University California reducing pension payout for contingent annuitants

Post by Sandi_k »

Fractalleaf wrote: Wed Apr 03, 2024 11:19 am
This thread was never intended as a "poor me" lament, it was to inform others in the same situation and discuss consequences of the altered pension calculator.
And you have done so!

As I noted, I circulated this alert to my campus managers, and they informed their folks, all over campus. And in the end, an announcement was sent out by the Academic Personnel Office and the Vice Provost for Faculty.

An informed decision is a better decision.
Maverick3320
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Re: University California reducing pension payout for contingent annuitants

Post by Maverick3320 »

mariezzz wrote: Fri Mar 29, 2024 10:39 pm
Jeepergeo wrote: Fri Mar 08, 2024 7:15 pm
popoki wrote: Fri Mar 08, 2024 5:42 pm How sad for these employees who worked for less pay than their private-sector peers, with the pension benefit to themselves and their beneficiaries being the main reason to have worked in the system.

I'm sure many of the beneficiaries didn't work outside the home due to caring for children, etc. knowing that they could rely on the stable income of the pension if their spouse pre-deceased. I'd guess that most of them are women who will outlive their husbands.

Hopefully, current employees are "grandfathered" out of this negative effect.

I don't know if UC employees pay into Social Security, but if not, that just makes the situation even worse.

What an embarrassing betrayal by the politicians, trustees, or whoever made this decision.
Please, provide the proof (studies, independent analyses) that these government employees were paid less than their private sector peers. Please don't include pieces that don’t factor in everything such as paid time off, holidays, years required before one can retire, and post-retirement benefits such as health care supplements, etc.
It's really a common misconception that university faculty don't work during the times that classes aren't in session. That's an absolute myth.
Tenured & tenure-track faculty typically work 50+ hours a week (some quite a bit more), including during holidays. Faculty responsibilities include teaching, research, service (committee work, etc.), advising students (and not just about classes), involving students in research, writing recommendations for students, helping students, including advising them about grad school, writing grants to bring in funding for research, or student research opportunities, and so on.
I left a tenure-track faculty position and went to the private sector, and worked far fewer hours, for far more money. And fewer headaches.

Non-faculty UC employees don't get any more holiday or vacation time than is typical in the private sector for similar jobs. There is quite a bit of research showing that these UC employees typically are paid less than similar jobs in the private sector in the same general area as each university; the UC itself has talked about how they lose employees because of this. Decent retirement benefits are part of the reason why people stay, even though pay is lower. The last couple of high inflation years have exacerbated the difference. It's not hard to find such information with an internet search.

The real issue of this thread is how the goal posts were changed for employees. (And with very little notice.)
People living longer are the real goal posts here.
rich126
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Re: University California reducing pension payout for contingent annuitants

Post by rich126 »

So previously was there no reduction if you wanted a payout to continue for a spouse?

I have two pensions, one from a private employer and one from the federal government and in both cases the payout is reduced in one way or another if I want my spouse to get something after I pass away.

For the federal pension, my amount was slightly reduced and once I pass my spouse only gets about 50%. For the private pension, my amount is reduced and it stays at the reduced amount if I pass away first.

In some pension situations you have people retiring too early and living too long so unfortunately things will have to change at some point.
In the private company world companies often change pensions and long time employees end up losing out big time. I know they did at one place I had worked.
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Re: University California reducing pension payout for contingent annuitants

Post by Pops1860 »

Please stay focused on OP's topic (a PSA and question regarding his pension):
This announcement caught me off guard, I never received any communication in the mail regarding the proposed changes to our pensions.
Judgmental discussions on the merits of various pensions, etc. are off-topic and risk derailing and/or locking this thread.

Thanks. Moderator Pops1860
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calwatch
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Re: University California reducing pension payout for contingent annuitants

Post by calwatch »

You have to look at the actuarial assumptions and experience reports for your pensions, which are usually published every three years or so, as well as the guarantees in law. As linked above, the actuarial report came out in July 2023 - https://regents.universityofcalifornia. ... ttach2.pdf

It's just that the UC pension system is so large, compared to local pension systems. My pension system has a default benefit in law of 65% for the eligible surviving spouse or domestic partner or minor child. If you name anyone else, be it an ex-spouse, adult child, or whomever, their age is factored into the benefit based on actuarial experience.

California law has always grandfathered in existing public employees as protected under property rights, but they never said assumptions for what isn't protected by law can't change either. The default option in law (Basic Retirement Income) is a 25% continuation to the eligible survivor. https://ucnet.universityofcalifornia.ed ... efits.html

Most married couples tend to want more than that amount, but they have to pay for that benefit by reducing what comes out when the retiree is still living. The assumptions have changed, no more than the cost of an SPIA may fluctuate due to actuarial experience or interest rates.
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Sandi_k
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Re: University California reducing pension payout for contingent annuitants

Post by Sandi_k »

rich126 wrote: Wed Apr 03, 2024 12:05 pm So previously was there no reduction if you wanted a payout to continue for a spouse?
Yes, of course there was. If you wanted 100% survivor option (as I do) there was ~ 12% reduction.

But they've now changed the calculations for that reduction.
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Re: University California reducing pension payout for contingent annuitants

Post by Paullmas »

GAAP wrote: Wed Apr 03, 2024 10:57 am
Paullmas wrote: Wed Apr 03, 2024 5:37 am
popoki wrote: Fri Mar 08, 2024 5:42 pm How sad for these employees who worked for less pay than their private-sector peers, with the pension benefit to themselves and their beneficiaries being the main reason to have worked in the system.
Myth. Public employees who did not have to compete for their careers.
If you haven't worked in, or at least been exposed significantly to both private and public sector employment, then you really don't know what you're talking about. Before you ask -- yes I have both worked in and been exposed to both.

The post itself is also insulting to public employees as an entire class.
Your post is infuriating.

I have worked in NGO. Wonderful. Fantastic pension. Longevity. I have relatives who have worked as firemen, police, and teachers. And I quote from the teacher "Best part-time job one can have." Public unions are wonderful, for their members.

Stop perpetrating myth that public employees make less than their private-sector peers.I do not get to retire after 20yrs with half-pay. But I do not ask anyone to feel "sorry" for me. How about feeling sad for the dozen of elderly who's private pensions went bust and are getting pennies on the dollar from PBGC.
Just say no to international.
GAAP
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Re: University California reducing pension payout for contingent annuitants

Post by GAAP »

Paullmas wrote: Sat Apr 06, 2024 5:13 am
GAAP wrote: Wed Apr 03, 2024 10:57 am
Paullmas wrote: Wed Apr 03, 2024 5:37 am
popoki wrote: Fri Mar 08, 2024 5:42 pm How sad for these employees who worked for less pay than their private-sector peers, with the pension benefit to themselves and their beneficiaries being the main reason to have worked in the system.
Myth. Public employees who did not have to compete for their careers.
If you haven't worked in, or at least been exposed significantly to both private and public sector employment, then you really don't know what you're talking about. Before you ask -- yes I have both worked in and been exposed to both.

The post itself is also insulting to public employees as an entire class.
Your post is infuriating.

I have worked in NGO. Wonderful. Fantastic pension. Longevity. I have relatives who have worked as firemen, police, and teachers. And I quote from the teacher "Best part-time job one can have." Public unions are wonderful, for their members.

Stop perpetrating myth that public employees make less than their private-sector peers.I do not get to retire after 20yrs with half-pay. But I do not ask anyone to feel "sorry" for me. How about feeling sad for the dozen of elderly who's private pensions went bust and are getting pennies on the dollar from PBGC.
The one pension I have fits in that category -- PBGC owned, nominal, and so small as to be meaningless. In fact, I don't even bother to include it in my planning other than to delay it to take advantage of Roth Conversion opportunities. Nevertheless, I was able to retire early on retirement savings in my 401(k) plus additional savings in Roth IRAs. Public pay for what I did was around 60-80% of what I made in a normal year, their 401(k) plans had no employer match, and they were trying to survive in VHCOL community. Good years for me included bonuses not available to public employees at all.

My wife is an attorney who spent years in public service going up against private attorneys making 10-20 times as much per hour and with far better support resources. Her pension covers the medical insurance and about half of the groceries each month. It has a 2% cap to the COLA -- not a good match to current conditions.

One of my children is a teacher, the other works as a biologist for a public agency. Neither one will have income in nominal terms (let alone real) that matches what I made in the private sector. Teachers all seem to have a side-gig because they need it to survive. My child certainly does -- and she has both a masters degree and additional certifications. She makes so much money that she has to live in a 500 sf apartment in a run-down part of the city where gunshots are a nightly occurrence. I used to work at a corporate technical training facility. Instructors there made pay comparable to senior engineers -- twice as much as the public school teachers, and with far better benefits.

If you still don't believe me, here's just one of many references on the subject: https://www.pewtrusts.org/en/research-a ... -on-record. That article shows that the relative difference varies over time, with private sector doing better since about 2010.
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Re: University California reducing pension payout for contingent annuitants

Post by crefwatch »

I don't see anything scandalous about making actuarial table changes based on real-life experience of the plan. The alternative is an unstable plan that ought to look ahead many decades.

TIAA (a directly comparable product) makes small actuarial changes all the time, and has made major table changes about four times just in my lifetime. Two big changes were in and out of gender-blind tables, versus tables for men and for women. That had huge negative effects on the disfavored gender, each time.
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