Thursday, February 16, 2006
1) Cusp Employees
I am a "cusp" LANL staff member. By that, I mean that I will be "just less than 50" on June 1st.
I will be 49 years and 9 months.
Questions were raised during Thursday's presentation about the sick-leave service credit being lost for transferring staff (inactive-vested).
In my case, I will be eligible for retirement from UCRP 3 months after the handoff (my 50th birthday). This is within the 120 days allowed under the UC system. Therefore, I SHOULD have the option of retiring from that system on my 50th birthday, including using my accrued sick-leave as extra service credit. Since I have accrued the better portion of a year of SL, this is not a minor matter.
As one staff member mentioned, this is currently an earned/promised/locked-in benefit that ANY transfer to LANS loses. This is a case of "not substantially equivalent." Indeed, the impacts of this are not factored into the decreases shown on page 21 of the briefing. In my case (18 years with UC, but only ~13.5 years of pension credit), the effect of losing 1 additional year would be a 7.4% reduction in retirement benefit. Since I am leaning at this time towards the inactive-vesting option, this is a real effect.
I would like to see an option for such "cusp" employees (those who are not quite able to retire, but would be within the UC 120 window from June 1st) to leave their sick-leave credit in the UC if they choose to go inactive-vested.
Such an option does not seem to harm LANS in any way and would allow me to exercise an option I thought I had earned through my service to the nation at the national laboratories.
Please do not penalize me for being a healthy staff member (one that did not need to use and did not abuse sick leave).
2) On the overall topic of substantial equivalency
Generall, TCP1 seems to be equal or LESS valuable in all aspects that are relevant to the large body of staff. Since the parts that are equal are indeed "substantially equivalent," the areas of less value count against equivalence "in the aggregate."
I believe the analysis presented on pluses and minuses is flawed (page 21 of the briefing).
It does not take into account the closure of the OPTION to save more. The presenter stated that only 450 people would have to cut back their current contributions, but no one would have the OPTION of increasing their total contribution beyond $44k in the future.
I believe the figures should be run as if everyone contributed to the pre-tax limit on either side (a factor of two) and look at the difference. That is the POTENTIAL difference in equivalency.
By the way, I do not recall hearing the phrase "in the aggregate" before in the discussion of equivalency.
The only such context for a similar concept in past discussions was in respect to the value of the entire compensation and benefits package, not averaged over the level at which current employee's excercise their options. Yet that seems to be how the analysts arrived at the current low estimate of difference.
By tying substantial-equivalence to the current level of participation, you add a factor that reduces the range of options for individuals. It sets the cap at or near the current average, not at the current max. Capping at the average means that around half the people are capped at less overall compensation and benefits than they take advantage of now. Such a result could not, in good conscious, be considered substantially equivalent
Larry J. Cox, LANL TSM
On another note, does anyone know if UC will be giving the COLA for folks retiring on July 1, 2006? They have done this in the past and last year it was an extra 2%. Do you think the new provisions allow an employee to become a "vested inactive" employee on 6/1/06 and then retire on 7/1/06 with the COLA? I'd also want to keep my accrued sick-leave as extra service credit since I'd be with in the 120 days after terminating employment with UC. I'm guessing I'd have to pay the full medical premium for June out of pocket.
My memory ain't as good as it ever was (never was?), but that COLA issue, in your case, is "2007 or 2008?" The idea is to retire BEFORE July 1 so that you don't have to wait 2 years before your first COLA. But I've been wrong on occasion.
If you retire from UC between now and July 1, 2006, the first COLA you will be eligible for will be on July 1, 2007. However, there is a provision in UCRP to adjust upward the HAPC of inactive members by the cost of living factor. This provision is colloquially known as "the glitch." It comes into play if you are inactive on or before July 1 (e.g., one or more days of separation from UC employment and otherwise eligible to retire), and you retire on July 1 or later (but if later, you lose next year's COLA, so most people choose to retire exactly on July 1). So your HAPC gets a COLA-like 2% boost which increases the retirement pay by 2% over what it would otherwise have been. And then one year later you get the normal COLA, etc. This HAPC boost is explained in the UCRP Plan document in section 5.11.
If LANS truly replicates all that it can about UCRP for Plan 1, this provision should stay in effect for that plan, too, but I wouldn't count on it.
If you want to retire on July 1, you can't quit LANL any earlier than about March 1 (you only get 120 days before you lose sick leave as service credit and health care coverage). Also, you need to carefully judge whether it's worth it to lose one (or more) month's retirement income waiting for July 1 (and the 2% higher income) to retire. And you will have to pay the full cost (i.e., including employer's contribution) of your medical coverage for the one or more months you'd be waiting. In my case, it takes 3-4 years to break even, but from then on it becomes increasingly advantageous to have chosen to not retire until July 1 (this assumes working until May 31 and then quitting and going inactive).