December 14, 2001

CAP program instituted again

In an effort to mitigate this year’s salary shortfall, UC Regents voted last month to approve a modified deferred compensation program that will give all eligible employees additional financial reward by way of a special retirement account.

The special account, called a Capital Accumulation Provision, will be available to all eligible UC employees who are members of the University of California Retirement Plan. The CAP being proposed will put the equivalent of 3 percent of the employee’s salary into a separate retirement account in UCRP where it will earn a specified rate of interest (currently 7.5 percent) until the employee begins to draw on retirement funds.

This is not the first time UC has offered employees a CAP program. In the 1990s, when the state’s budget was also under severe pressure, eligible employees received CAPs to offset disappointing salary increases. During the last 10 years, UC has offered five separate CAP programs. Below are several actual employee examples from 1993:

Annual employee salary: $35,000

CAP Credit: 2.5% of salary

Interest Rate: 8.5%

Total amount earned to date: $1,727

Annual employee salary: $65,000

CAP Credit: 2.5% of salary

Interest Rate:8.5%

Total amount earned to date:$3,212

Annual employee salary:$100,000

CAP Credit:2.5% of salary

Interest Rate:8.5%

Total amount earned to date:$4,935

To be eligible to receive the CAP accrual credit, employees must be active UCRP members on April 1, 2002. This would include UCRP members on sabbatical or approved leave of absence. Disabled, retired and inactive members would be excluded.

For more campus budget information, see http://www.news.ucdavis.edu/budget/.