March 25, 2024: The article below has been updated with additional information and examples to clarify the potential impact of these changes on prospective retirees.
At the July 2023 meeting of the University of California Board of Regents, the Regents approved changes to actuarial assumptions that will impact the future UC Retirement Plan (UCRP) benefits of certain employees, depending on their retirement date and the benefit options they select. These changes will not impact the retirement benefits of current retirees.
The Regents approved modifications to the mortality assumptions used to calculate benefits, based on the findings that UCRP members and beneficiaries are continuing to live longer. The current investment return assumption (e.g., discount rate) of 6.75% will not change. The modifications to the mortality assumptions, informed by an experience study conducted by UCRP’s actuary, will go into effect on July 1, 2024.
These changes will not impact the calculation of Basic Retirement Income. However, for retirements on or after July 1, 2024, updated mortality assumptions will be used in the calculations of the UCRP lump sum cashout and UCRP monthly retirement income for members and contingent annuitants under Payment Options A-D. A contingent annuitant refers to an individual chosen by a retiree to receive monthly survivor benefits (known as a “continuance”). For more information about UCRP retirement benefit options, see the Retirement Handbook for UCRP MembersPDF.
What these changes mean to you
The impact of these changes depends on how old you are at retirement and what type of retirement benefit you choose, as explained below. This is complicated, so it’s a good idea to use the retirement benefit estimation tool on UCRAYS to understand how the change would affect you. If you’re close to retirement, estimate your benefits using retirement dates both prior to and on or after July 1, 2024 (for example, June 29 and July 1, 2024) to get a better idea of the impact of your retirement date on your benefits.
Changes in the calculation of lump sum cashout benefits
Due to the modification in the mortality assumptions, there will be increases (0.36% to 0.56% for ages 50 to 65) in the factors used to calculate the lump sum cashout for retirement ages through age 80. This means that people 80 and under will have higher lump sum cashout benefit amounts for retirement dates on July 1, 2024, or later.
For retirement ages over age 80, the factors used to calculate lump sum cashouts will decrease. This means that people over age 80 will have lower lump sum cashout benefits amounts for retirement dates on July 1, 2024, or later.
Changes in the calculation of pension benefits under Options A-D
The changes to the factors used in the calculation of benefits under Payment Options A-D will vary and depend on the ages of the member and contingent annuitant. There will be decreases at many common retirement ages for the member and contingent annuitant (ages 50 to 65). This will lead to lower benefits payable under these options for retirements on or after July 1, 2024.
The range of the decrease for each payment option at ages 50 to 65, assuming that the member and contingent annuitant are the same age, is shown below:
- Option A (100% continuance to contingent annuitant): factors used to calculate benefits will decrease by 0.8% to 1.1%
- Option B (66 2/3% continuance to contingent annuitant): factors used to calculate benefits will decrease by 0.5% to 0.8%
- Option C (50% continuance to contingent annuitant): factors used to calculate benefits will decrease by 0.4% to 0.6%
- Option D (50% continuance to eligible survivor/contingent annuitant): factors used to calculate benefits will decrease by 0.2% to 0.3%
The new factors have been implemented in UCRAYS and will apply to retirement dates on or after July 1, 2024. The current factors will continue to be used for retirement dates prior to July 1, 2024. Also, retirement benefit estimates for July 1 retirements now reflect the 2% inactive cost-of-living adjustment (COLA) for those members who are eligible.
Before making final decisions about when to retire and which retirement options are best for you, please consider the impact of your retirement date on other benefits, such as eligibility for No Lapse In Pay, retiree health benefits and annuitant COLA programs.